IONIS PHARMACEUTICALS INC (IONS) FY 2022 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, 2022, and our financial condition as of December 31, 2022.
Refer to our 2021 Form 10-K for our results of operations for 2021 compared to 2020. 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 included in Item 8 of Part II of this report.

Overview

As noted in our Business Overview in Part I of this report, we were founded over 30 years ago to deliver innovative new medicines for
diseases with great medical need. Today, we are building on our advancements in RNA-targeted therapeutics with a vision to be the leader in genetic medicines. We believe our genetic medicines have the potential to pioneer new markets, change standards
of care and transform the lives of people with devastating diseases. We currently have three marketed medicines: SPINRAZA, TEGSEDI and WAYLIVRA. We also have two medicines, eplontersen and tofersen, that will add to our commercial portfolio this year,
assuming positive regulatory outcomes. In addition to our commercial medicines and medicines under regulatory review, we have a rich innovative late- and mid-stage pipeline primarily focused on our leading cardiovascular and neurology franchises. We
currently have seven medicines in Phase 3 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 2022 compared to 2021. Refer to our 2021 Form 10-K for our results of operations for
2021 compared to 2020. The following table provides selected summary information from our consolidated statements of operations for 2022 and 2021 (in millions):

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Revenue

Total revenue for 2022 was $587.4 million compared to $810.5 million in 2021 and was comprised of the following (in millions):

Our 2022 revenue continued to be derived from diverse sources, with just over half coming from commercial products and the balance from
numerous partnered programs. SPINRAZA royalties, the largest contributor to our commercial revenue, increased each quarter in 2022. Total SPINRAZA product sales increased six percent in the fourth quarter of 2022 compared to the third quarter of 2022
and also increased four percent compared to the same quarter in 2021. The increases were driven by stabilization in the U.S. and growth in Asian markets, partially offset by competition in Europe. Total SPINRAZA product sales decreased six percent
year-over-year driven by foreign currency exchange and competition in Europe, partially offset stabilization in the U.S. and growth in Asian markets. Our TEGSEDI and WAYLIVRA revenue was also lower year-over-year due to the shift to distribution fees
in 2021.

Our R&D revenue for 2022 included $112 million from Biogen for advancing several neurology disease programs, $77 million from
AstraZeneca for its share of the global Phase 3 development costs for eplontersen and $64 million from Roche for licensing and advancing IONIS-FB-LRx, among other partnered payments. R&D revenue was higher in 2021 compared to 2022 driven
primarily by the $200 million we earned in the fourth quarter of 2021 from AstraZeneca to jointly develop and commercialize eplontersen.

Eplontersen Collaboration with AstraZeneca

Our financial results for the year ended December 31, 2022 reflected the cost-sharing provisions related to our collaboration with
AstraZeneca to develop and commercialize eplontersen 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. In the year ended December 31, 2022, we earned $77 million in joint development revenue and recorded $147M of R&D expenses related to Phase 3 development expenses under this collaboration.

As AstraZeneca is responsible for the majority of the medical affairs and commercial costs in the U.S. and all costs associated with
bringing eplontersen 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. In the year ended December 31, 2022, we recognized $2.0 million and $2.6 million of medical affairs expenses and commercialization expenses for eplontersen, respectively, net of
cost-share funding from AstraZeneca. We expect our medical affairs and commercialization expenses to increase as eplontersen advances toward the market under our collaboration with AstraZeneca.

The following is a summary of the financial impacts on our statement of operations for the year ended December 31, 2022 of the joint
development activities under our eplontersen collaboration with AstraZeneca:

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Operating Expenses

Our operating expenses were as follows (in millions):

Our operating expenses, excluding non-cash compensation expense related to equity awards, increased in 2022 compared to 2021. Our R&D
expenses increased in 2022 compared to 2021 due to our investments in advancing our late-stage pipeline, including the expanded number of Phase 3 studies we are conducting, which doubled from three to six studies in 2021. Our R&D expenses also
increased in 2022 compared to 2021 due to $80 million that we recognized in 2022 for licensing Metagenomi’s gene editing technologies. Our SG&A expenses decreased in 2022 compared to 2021 as a result of savings we realized from integrating Akcea
and restructuring our commercial operations for TEGSEDI and WAYLIVRA, partially offset by the increase in expenses related to our go-to-market activities for eplontersen, donidalorsen and olezarsen.

Our non-cash compensation expense related to equity awards decreased in 2022 compared to 2021 as a result of the decrease in our stock
price in 2022 compared to 2021 and reduced headcount due to restructuring our commercial operations in 2021. We anticipate our non-cash compensation expense related to equity awards to increase in 2023 due to increased headcount and an increase in our
stock price when we granted annual equity awards to our employees in January 2023 compared to January 2022.

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

Cost of Sales

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

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

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Research, Development and Patent Expenses

Our research, development and patent expenses consist of expenses for drug discovery, 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):

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.

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

Drug discovery expenses, excluding non-cash compensation expense related to equity awards, increased in 2022 compared to 2021 primarily
due to $80 million that we recognized in 2022 for licensing Metagenomi’s gene editing technologies. In 2021, we incurred certain licensing expenses, including $35 million for licensing Bicycle Therapeutics’ peptide 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):

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Our development expenses, excluding non-cash compensation expense related to equity awards, increased in 2022 compared to 2021 primarily
due to our advancing late-stage pipeline, including the expanded number of Phase 3 studies we are conducting, which doubled over the course of 2021 from three to six studies.

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 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 managing
publications planning, funding and coordinating investigator-sponsored trials and communicating scientific and clinical information to healthcare providers, medical professionals and patients.

Our medical affairs expenses were as follows (in millions):

Medical affairs expenses, excluding non-cash compensation
expense related to equity awards, increased in 2022 compared to 2021 due to increased costs we incurred as we built our medical affairs function to support our late-stage pipeline.

Manufacturing and Development Chemistry

Expenditures in our manufacturing and development chemistry function consist primarily of personnel costs, specialized chemicals for
oligonucleotide manufacturing, laboratory supplies and outside services. Our manufacturing and development chemistry function is responsible for providing drug supplies to 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):

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Manufacturing and development chemistry expenses, excluding
non-cash compensation expense related to equity awards, increased in 2022 compared to 2021 due to increased R&D-related manufacturing costs we incurred in preparation for our near-term commercial launches of eplontersen, olezarsen and
donidalorsen. 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, informatics costs, procurement costs and waste disposal costs. We call these costs R&D support expenses.

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

R&D support expenses, excluding non-cash compensation expense related to equity awards, increased in 2022 compared to 2021. The
increase was primarily related to increased occupancy and personnel costs to support advancing our pipeline and our technology. In October 2022, we executed a sale and leaseback transaction for our headquarters in Carlsbad, California. As a result,
beginning in the fourth quarter of 2022, our occupancy costs increased because we began incurring rent expense for these facilities.

Selling, General and Administrative Expenses

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

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

SG&A expenses, excluding non-cash compensation expense related to equity awards, decreased in 2022 compared to 2021 due to operating
efficiencies achieved from restructuring our commercial operations for TEGSEDI and WAYLIVRA, partially offset by increased expenses for our go-to-market preparations for our near-term commercial opportunities. Non-cash compensation expense related to
equity awards decreased in 2022 compared to 2021 as a result of restructuring our commercial operations for TEGSEDI and WAYLIVRA in 2021.

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Investment Income

Investment income for 2022
was $25.3 million compared to $10.0
million for 2021. The increase in investment income was primarily due to an increase in interest rates during 2022 compared to 2021.

Interest Expense

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

Gain (Loss) on Investments

We recorded a $7.3 million loss
on investments for 2022 compared to a $10.1 million gain on investments for 2021. The period-over-period fluctuation in our gain (loss) on
investments was primarily driven by changes in fair value of our investments in publicly traded biotechnology companies.

Gain on Sale of Real Estate

In October 2022, we concurrently entered into two purchase and sale agreements with a real estate investor. Under the agreements, we sold
and leased back the facilities at our headquarters location in Carlsbad, California and will sell, subject to meeting certain closing conditions, two lots of undeveloped land adjacent to our headquarters. We sold the facilities at our headquarters for
a total purchase price of $263.4 million and recorded a gain of $150.1 million in the fourth quarter of 2022, resulting in income tax expense of $8.8 million.

Other Expense

In 2022, we recorded a $7.7 million net expense to settle a litigation claim.

In 2021, as a result of a debt offering and debt repurchase, we recorded an $8.6 million loss on early retirement of debt, reflecting the
early retirement of a portion of our 1% Notes. 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 expense of $11.7 million for 2022 compared to an income tax benefit of $0.6 million for 2021. Beginning in 2022,
the Tax Cuts and Jobs Act of 2017, or TCJA, requires taxpayers to capitalize and amortize research and development expenditures pursuant to Internal Revenue Code, or IRC, Section 174. Our 2022 tax expense relates primarily to the impact of this new law
and to federal and state tax on the gain from the sale of our headquarters facilities that closed in October 2022.

Net Loss and Net Loss per Share

We generated a net loss of $269.7
million for 2022 compared to $28.6
million for 2021. Our net loss increased for 2022 compared to 2021 primarily due to decreased revenue and increased expenses year-over-year,
as discussed in the revenue and expenses sections, respectively.

Basic and diluted net loss per share for 2022
were each $1.90. Basic and diluted net loss per share for 2021 were each $0.20.

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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, 2022, we have earned approximately $6.4 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, 2022, 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 decreased from 2021 to 2022. In 2021, we issued $632.5 million of 0% Notes (due in April 2026) and we used a portion of the proceeds to repurchase $247.9 million of our 1% Notes in April 2021. We paid the remaining
principal balance of our 1% Notes with $62.0 million of cash at maturity in November 2021. In 2022, we sold the facilities and related land at our headquarters for a total purchase price of $263.4 million and used a portion of the proceeds to
extinguish our mortgage debt on these facilities of $51.3 million. At December 31, 2022, we had $2.0 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 2022,
our working capital decreased because our cash and investments decreased as discussed above.

The following table summarizes our contractual obligations as of December 31, 2022. The table provides a breakdown of when obligations become due. We provide a more detailed description of the major components of our debt in Note 4, Long-Term Obligations and Commitments.

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. 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 Part IV, Item 15, Note 1, Organization and Significant Accounting Policies, and Note 4, Long-Term Obligations and Commitments, in the Notes to our consolidated financial statements for the significant terms of each convertible debt instrument.

Operating Facilities

Refer to Part IV, Item 15, Note 4, Long-Term Obligations and Commitments, in the Notes to our consolidated financial statements for further details on our operating facilities.

Operating Leases

Refer to Part IV, Item 15, Note 4, Long-Term Obligations and Commitments, in the Notes to our consolidated financial statements for further details on our operating leases.

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Royalty Revenue Monetization

In January 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 4, Long-Term Obligations and Commitments, in the Notes to our 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, 2022 for the purchase of services, capital
equipment and materials as part of our normal course of business.

We may enter into additional collaborations with partners that 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.

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:

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.

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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.

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 are recognized immediately or amortized 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 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.

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, 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.”

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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, 2022, 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 $11.6 million.