Ionis Pharmaceuticals Inc (IONS) 2018 Q2 法說會逐字稿

Good morning, and welcome to the Ionis Pharmaceuticals Second Quarter 2018 Financial Results Conference Call.

As a reminder, this call is being recorded.

At this time, I would like to turn the conference over to Wade Walk, Vice President of Investor Relations, to lead off the call.

Sir, you may begin.

Thank you, Cole.

Before we begin, I would encourage everyone to go to into the Investor section of the Ionis website to find the press release and related financial tables, including reconciliation of the GAAP to pro forma financial measures that we will discuss today.

We believe pro forma financial results better represent the economics of our business and how we manage our business.

We have also posted slides on our website that accompany our discussion today.

With me on today's call are Stan Crooke, Chairman of the Board and Chief Executive Officer; Beth Hougen Chief Financial Officer; Sarah Boyce, President of Akcea Theraputics; Brett Monia, Chief Operating Officer; and Damien McDevitt, Chief Business Officer.

I would like to draw your attention to Slide 3, which contains our forward-looking language statement.

We'll be making forward-looking statements, which are based on our current expectations and beliefs.

These statements are subject to certain risks and uncertainties that our actual results may differ -- and our actual results may differ materially.

I encourage you to consult the risk factors discussed in our SEC filings for additional details.

And with that, I'll turn the call over to Stan.

Thanks, Wade.

And good morning, and welcome, everyone.

Thanks for joining us.

We ended the first half in a strong financial position with a $9 million of pro forma operating income and we expect an even stronger second half of the year.

We're on track to deliver our third year of pro forma operating profitability, and we do that even while investing in the launch of TEGSEDI savvy and WAYLIVRA.

We are pleased that WAYLIVRA received a positive AdCom both in favor of approval, and the interactions with regulatory agencies continue to progress well.

IONIS-HTTRx received prime designation in the EU and paves the way for an accelerated European approval with -- in Huntington's disease.

We believe IONIS-HTTRx could be another transformational drug like SPINRAZA.

And our partner Roche remains on track to initiate a pivotal study of this drug shortly.

With the approval of TEGSEDI, the first RNA-targeted therapeutic approved for patients with hATTR amyloidosis.

Ionis is now a multi-product sustainably profitable company.

Looking forward, we expect to continue to meet the challenge of delivering transformative -- transformational medicines to patients while increasing earnings and shareholder value.

In the short-term, revenue and earnings growth will be driven by increased royalties from SPINRAZA, sales as Biogen broadens and expands SPINRAZA's use in the U.S. and around the world, by adding product revenues from TEGSEDI and WAYLIVRA and expanding and accelerating access to these 2 drugs into Latin American with PTC therapeutics.

As we previously said, we have a portfolio of more than 13 drugs that we believe may enter pivotal trials in the near-term.

Today, we will focus on 3 of the drugs that may enter pivotal trials shortly.

These drugs represent our next wave of commercial opportunities with potential to benefit additional patients and fuel substantial revenue in our earnings growth in the midterm.

Our long-term plan remains to bring life-changing drugs to patients while at the same time, capturing evermore of their commercial value.

We made substantial progress towards accomplishing this goal.

And as a result, we believe we'll increase value to shareholders and patients as we continue to deliver these important medicines to address serious illnesses.

Before I turn the call over to Ben, I would like to introduce the newest member of the Ionis executive team, Damian McDevitt, who joined us as Chief Business Officer in June.

Damian will lead the Ionis' corporate development activities and provide strategic guidance broadly throughout the company as we continue to advance our pipeline and maximize the commercial value of our drugs.

Damien has over 20 years of leadership experience in the pharmaceutical industry.

We had the opportunity to work closely with him in years past, seeing his skills first hand.

So please join me in welcoming Damien to our team.

And Damien, would you like to say a few words.

Thanks, Stan.

It's great to be here with a near-term agenda that includes the launch of 2 drugs with our commercial affiliate Akcea, multiple clinical milestones and continued expansion of our broad pipeline, it's a great time to join the team.

I look forward to applying my experience across the business to help as we execute on our goals to deliver shareholder value while delivering transformational medicines to patients in need.

Now I'll turn the call over to Beth.

Thank you, Damien.

We ended the first half of 2018 with operating income of $9 million, a net income attributable to Ionis' shareholders of $21 million, both on a pro forma basis.

Our strong results were driven by a 15% increase in revenue compared to the first half of 2017, including a more than threefold increase in commercial revenues from SPINRAZA.

We expect commercial revenues to grow and become an even greater portion of our total revenue as we add TEGSEDI and WAYLIVRA product sales to grow into SPINRAZA revenue.

We anticipate increases in both commercial revenue and R&D revenue, will lead to increased operating income in the second half of this year.

Looking forward to the second half of this year, we are projecting SPINRAZA royalties to increase as global sales continue to increase and as we moved into the higher royalty tiers.

We also expect to add product revenues from TEGSEDI and potentially WAYLIVRA, this year.

With the addition of 2 full quarters of amortization from our expanded Biogen collaboration and numerous opportunities to earn milestone payments, we project our substantial base of R&D revenue to also increase in the second half of this year.

We expect to meet our operating expense guidance.

We're projecting R&D expenses in the range of $360 million to $390 million, and SG&A expenses in the range of $180 million to $210 million, both on a pro forma basis.

Importantly, we are on track to achieve our third consecutive year of pro forma operating income, while continuing to invest in commercializing 2 new drugs.

We ended the first half of 2018 with approximately $2 billion in cash, and we project to end the year with more than $1.8 billion in cash, making this cash accretive for 6 out of the last 7 years.

Our substantial cash balance increases our ability to advance and expand our pipeline, build a growing pipeline of drugs on our own account, and maximize the commercial value we retain for each of our drugs.

We earn our revenue in 2 ways, through sales of commercial products, which we call commercial revenue and from collaborations with our partners, which we call R&D revenue.

Our commercial revenue for the first half of 2018 was $99 million, and our R&D revenue was $163 million.

The primary source of our commercial revenue today is from SPINRAZA sales, which increased more than 250% compared to the first half of 2017.

Worldwide, SPINRAZA performance continues to be very strong with global product sales growing to $423 million for the second quarter.

The number of commercial patients increased by approximately 28% from the first quarter of this year.

And now, over 5,000 patients are on SPINRAZA, including in the EAP and clinical studies.

In the U.S., Biogen saw a 20% increase in the number of adult patients on SPINRAZA from the first quarter this year.

Adult patients represent a large underserved patient population accounting for approximately 60% of the prevalent SMA patient population.

But about -- only 10% of these patients today are receiving SPINRAZA.

Thus, this group of patients represents a significant opportunity for growth.

Biogen also saw meaningful revenue growth outside the U.S. as the pace of reimbursement increased particularly in Europe, Asia Pacific and Latin America.

Biogen expects to continue increasing access to SPINRAZA globally and as a result, we expect our royalty revenues from SPINRAZA, which are nearly all profit, to continue to increase.

We also anticipate potential growth in commercial revenue from TEGSEDI and WAYLIVRA.

Importantly, product sales from with -- from TEGSEDI and WAYLIVRA have the potential to generate significant operating margins, consistent with other rare disease drugs as sales ramp-up.

Our R&D revenue is comprised of 4 key components.

The first component is the amortization of upfront payments.

We typically amortize the upfront payments we receive from partners over several years.

We expect this component of our R&D revenue to grow in the second half of 2018 as a result of our expanded Biogen collaboration.

We will recognize $550 million of the upfront payment from Biogen over the next 10 years.

Specifically, we estimate we will recognize $38 million from this new collaboration this year with the vast majority in the second half of this year.

Beginning in 2019 and forward, we estimate we will recognize $55 million per year.

In total, our amortization of upfront payments will be approximately $130 million this year with the potential to grow in future years.

The second component of our R&D revenue is the milestone payments we earn when we or our partners achieve key events in our collaborations.

Typically, we achieve a milestone payment while performing services for our partner.

We will amortize the payment into revenue over the period of time we are performing those services.

For example, in the third quarter of 2017, we received a $10 million milestone payment from Biogen when we started the Phase I/II study for IONIS-MAPTRx.

Since we are conducting the study, we are amortizing the $10 million payment over the next 3 years.

When we receive milestone payments from our partners and we are not performing services, we immediately recognize the payments as revenue.

For example, we received a $50 million milestone payment for Biogen last year, when SPINRAZA was approved in Europe.

Because we were not performing services for Biogen under our SPINRAZA collaboration, we recognize the entire $50 million milestone payment when it was achieved.

The third component of our R&D revenue is the license fees we receive when we provide our partners with exclusive licenses to our drugs.

License fees are typically large payments that reflect the value we have created as we have advanced the drug through development.

As our pipeline matures, we anticipate that this component of R&D revenue will increase.

In the last few years, we have earned on average, more than $100 million annually from license fees.

Already, this year, we have earned $60 million from AstraZeneca.

In the second half of 2018, we expect to recognize revenues in the PTC licensing transactions.

And looking forward to 2019, we will earn a $150 million license fee for each of AKCEA-APO(a)-LRx and AKCEA-APOCIII-LRx, if Novartis exercises its option to license either of these drugs under its collaboration with Akcea.

It's important to note that license fees fall directly to our bottom-line because we generally do not have to conduct work after earning a license fee.

Last, we earn R&D revenue from various services we provide to our partners, including manufacturing commercial and clinical supplies for our partners.

Since 2011, our R&D revenue has increased to more than fourfold, averaging $90 million per quarter over the last 10 quarters.

R&D revenue has become a growing and sustainable source of revenue for us, which is why we include this as a consistent and recurring source of revenue in our valuation model.

In summary, our growing commercial revenues from SPINRAZA and expected product sales from TEGSEDI and WAYLIVRA, together with our sustainable R&D revenue, should drive revenue and earnings growth in the second half of 2018 and beyond.

With that, I'll turn the call over to Sarah to provide a commercial update.

Thank you, Beth.

The team at Akcea is ready to launch both TEGSEDI and WAYLIVRA.

TEGSEDI is now approved in the EU.

It is the first product to be approved for patients with both Stage I and Stage II disease.

And it is the first approved drug for hATTR to show benefits in quality of life and measures of neuropathy.

The broad label include hATTR patients who have symptoms of neuropathy.

Together with patients and their families and the entire ATTR community, we are excited by this important advance.

The European team is now finalizing the last details for launch.

The TEGSEDI launch will begin in Germany.

Our team in Germany is fully staffed and ready for the post summer launch.

The EU launch will follow a typical sequence across Europe, and we have teams in place in these geographies to ensure that the launch continues as quickly as possible.

We plan to announce the EU pricing for TEGSEDI when we launch in Germany.

For both TEGSEDI and WAYLIVRA, we expect the price to reflect the rarity of hATTR and Akcea.

The burden of these diseases and the value that both drugs bring to these -- bring to patients.

We expect to price these drugs similarly to other life-changing rare disease drugs.

According to a 2017 article published in the rare disease report, rare disease drugs approved in the U.S. are typically priced within a range of $300,000 to $700,000 per year.

We plan to price responsibly, and it is our expectation not to be in the upper end of that range.

We will roll out our patient support services on a country-by-country basis.

In each market, the program will be tailored according to local standards, while staying consistent with our philosophy for support, which is to make the monitoring as simple and straightforward as possible for physicians, patients and caregivers.

We are investing in the highest level of patient and physician support for this allowed in each country.

And our market access team is working diligently to provide access for patients as soon as possible.

The review of TEGSEDI in the U.S. and Canada remains on track, and we are ready to launch in these markets as quickly as possible after approval.

In the U.S., we are continuing to have positive interactions with the FDA leading up to our October 6 PDUFA date.

Our U.S. TEGSEDI team is fully built, including field sales, medical, case managers and market access.

We continue to see strong progress from our field team's effort into these states education and patient identification as well as the growing interest in both our patient focused, hATTR Change The Course website, and our physician-focused hATTR guide website.

In addition, we recently launched hATTR Compass in the U.S. and Canada.

hATTR Compass is a confidential genetic testing and genetic counseling program for people with suspected hATTR.

This program offers rapid genetic testing results to bring a panel of over 85 potential genetic diseases resulting in neuropathy, combined with supportive and confidential genetic counseling.

Turning to WAYLIVRA, as a reminder, WAYLIVRA has a PDUFA date of August 30.

Our review process continues with EMA and Health Canada on WAYLIVRA.

In Europe, we anticipate our CHMP opinion with an approval late second half of 2018.

For both TEGSEDI and WAYLIVRA, we continue to enroll patients in our early access programs for each drug.

And we're seeing increasing level of interest in these programs from patients and physicians.

We have also accelerated our plan for global expansion into new markets with TEGSEDI and WAYLIVRA through our partnership with PTC Therapeutics.

We now plan to expand and accelerate access to these drugs in Latin America, which represents a significant market opportunity for both drugs.

In particular, for TEGSEDI, Brazil is a significant market with a large population of people living with hATTR.

One of the top enrollers in the neuro hATTR study is in Brazil, and we have great support for the KOL.

PTC has established a rare disease team with a proven track record of success in patient identification, physician and patient education programs, and in obtaining market access, making them the right partner for TEGSEDI and WAYLIVRA.

PTC plans to expedite our filings in Latin America including Brazil, late this year.

We are well positioned to launch TEGSEDI and WAYLIVRA upon approval.

We are excited about the progress we have made, and for the benefits these drugs may bring to people with hATTR amyloidosis and Akcea.

Now over to Brett, to review key highlights from Ionis' pipeline.

Thanks, Sarah.

We continue to make excellent progress in the first half of 2018 within our pipeline.

Focused on delivering high-value therapies in areas of high unmet need.

Some of our highlights include, publication, of the Phase III neuro TTR study of TEGSEDI in the New England Journal of Medicine.

This publication highlighted the early sustained and highly significant benefit seen in TEGSEDI treatment in patients with hereditary TTR amyloidosis and polyneuropathy when compared to placebo in both co-primary endpoints.

Those endpoints being the mNIS+7, a measure of neuropathic disease progression and in the Neuro-QoL quality-of-life questionnaire.

Publication in such a prestigious journal highlights, of course, the importance of TEGSEDI to the medical community.

Ionis-HTTRx also known as RG 6042, partnered with Roche, was granted PRIME designation by the European Union.

PRIME designation is important because it accelerates towards these timelines and streamlines interactions with the EMA, which can help bring this potentially disease-modifying drug to market faster for people with Huntington's disease.

Another highlight is our IONIS-MAPTRx program.

This drug was granted Orphan Drug Designation in the EU for the treatment of people with frontotemporal dementia or FTD.

MAPTRx is partnered with Biogen and is currently in the clinical study in patients with Alzheimer's disease.

And we completed Phase I studies with 4 new LICA programs.

In each of these programs, we demonstrated substantial target reduction and very low doses with excellent safety profiles, which is consistent across all of our LICA programs.

So now let's look at some upcoming events in the pipeline.

We have 13 drugs that have a potential to advance into late-stage studies in the near term.

And we remain excited about all of them.

Today we want to focus on 3 drugs that we expect would advance into pivotal study shortly.

Starting with Huntington's disease.

What we plan is to start pivotal study of IONIS-HTTRx in patients with Huntington's disease soon.

This drug is the first and only drug to demonstrate a substantial lowering of the mutant Huntington (inaudible).

Along with this achievement, we also reported trends in clinical benefit in these patients.

These results support disrupt the potential of the slow or perhaps halt progression of this devastating disease.

And these results were in large part the phases for the program's PRIME designation.

Assuming Novartis licenses, Akcea like a drug to treat patients with high LP(a) levels, they plan to advance the drug into Phase III in patients with high LP(a) in cardiovascular disease.

Elevated LP(a) is a genetically determined in cardiovascular risk factor and is present in approximately 20% of the worldwide population, and is becoming increasingly recognized as a major contributor to cardiovascular disease.

There are currently no treatment options available that specifically and sufficiently target LP(a) levels.

Another anticipated Phase III start is actually its LICA version of TEGSEDI, AKCEA-TTR-LRX, which is advancing rapidly.

We plan to start clinical studies this year with the potential to enter pivotal studies before the end of 2019.

Based on preclinical data and the results from our other LICA programs, we believe Akcea's TTR LICA will be an attractive option for people with TTR amyloidosis due to its potency, which we expect will translate into very low doses demonstrated monthly or even less frequently.

We're targeting all forms of TTR amyloidosis with our TTR LICA, including both hereditary and wild-type cardiomyopathy.

As mentioned, we have made excellent progress in building and advancing our LICA program.

In the near term, we are pursuing disease areas as diverse as cardiovascular disease, infectious disease, ophthalmic disease, NASH and a range of rare diseases.

Our LICA technology enables monthly or less frequent dosing with -- dose is much lower in our non-LICA generation 2.0 drugs.

In clinical studies, our LICA drugs consistently demonstrate substantial increases in potency with great safety in tolerability profiles, suitable for large patient populations such as those with cardiovascular disease like in patients with elevated LP(a) or cardiac amyloidosis due to wild-type TTR.

In a few months, Akcea plans to report data from the Phase II study of AKCEA-APO(a)-LRx in approximately 270 patients, receiving weekly and monthly doses over 6 to 12 months.

As the longest and largest study of a LICA drug to-date, this study represents a key milestone for our LICA pipeline.

Now let's turn our attention to over a neuro pipeline.

Neurological disease drug discovery at Ionis continues at a rapid pace for diseases with large unmet medical needs, reinforcing our leadership position in this disease area.

We are advancing a number of new potentially disease modifying medicines for a broad range of neurological diseases, each of which could bring substantial benefits to patients.

In partnership with Biogen, we have advanced a total of 8 Ionis discovered niacin drugs for neurological diseases into development, including IONIS-MAPTRx, currently in Phase I/II study, in Alzheimer's disease and IONIS-SOD1Rx, which is in the Phase I/II study in patients with SOD1-related ALS.

Data from the SOD1 program is expected early next year.

Beyond these drugs, have 3 more drugs nearing clinical trials and more than 20 programs in late-stage research and drug discovery.

We also continue to build and advance our own neurological disease pipeline in parallel.

We currently have 5 Ionis-owned programs to rare neurological diseases.

These include, 2 Akcea drugs, TEGSEDI and its LICA follow on.

A program for Alexander's disease, which recently entered development, and 2 additional programs expected to enter development next year.

In addition, we expect to add several more Ionis-owned programs to this list over the next 12 to 18 months.

So we're preparing for a catalyst rich second half to 2018 and early 2019.

As Sarah mentioned, our most important near-term catalyst are the approvals and launches of TEGSEDI and WAYLIVRA.

Some additional key events we are expecting, including -- include the Phase II data from AKCEA-APO(a)-LRx in patients with high LP(a) levels and cardiovascular disease, clinical data from Danvatirsen in patients that have neck cancer.

Clinical data from our Phase I/II study in patients with SOD1-related ALS and many important clinical trial starts, including the expected in initiation of Phase III pivotal studies.

We look forward to sharing these results with you as the year progresses, and in particular, at our upcoming Investor Day, which we will be hosting on Friday, November 9 in New York.

At this event, we will provide a more in-depth presentation on our business and pipeline and discuss exciting advances we're making with our technology.

We hope you can join us.

And with that, I'll turn it back over to Stan.

Thanks, Ben.

The approval of TEGSEDI in the EU is, of course, an important event.

With the EC's decision, TEGSEDI is now the world's first RNA-targeted therapeutic approved for patients with hATTR amyloidosis.

Now patients suffering with this systemic, progressive and fatal disease have hope for a better future.

And with the approval of TEGSEDI, Ionis is now a multi-product sustainability profitable company delivering transformational medicines to patient.

Looking ahead, we believe we're positioned for substantial growth in the second half of this year and in the years to come.

This growing -- with a growing pipeline of products to treat patients in need, Akcea is ready to launch TEGSEDI in EU and as quickly as possible after approval in the U.S. Akcea is also ready to launch WAYLIVRA upon approval in the U.S. and quickly after approval in the EU.

We expect that the transaction with PTC is going to deliver real value, and this is an important step in accelerating access to TEGSEDI and WAYLIVRA in Latin America.

SPINRAZA global sales continue to grow, and we anticipate that it would be the standard of care for treatment of patients with SMA for quite a long time.

We plan to have at least 3 drugs in the pivotal trials before the end of 2019.

These represent our next wave of commercial opportunities and a part of the engine for growth in the near term.

And we're profitable.

With the flexibility to design commercialization strategies, to maximize commercial potential for each of our drugs and maximize the participation -- our participation in the commercial value.

And with that, I'll turn the call over for Q&A.

Can you set us up for Q&A call?

(Operator Instructions) And our first question comes from Chad Messer from Needham & Company.

A couple, if I may, on your deal with PTC.

A general one and then a more specific one.

So starting with the general one, can you walk us through sort of the thought process you used as you decided to go with a partner for Latin America versus building on your own?

Seems on your own certainly would've been a possibility with the talent you have at Akcea.

And I guess, my -- if you can answer that question kind of with what I'm leaning with, which is my thoughts to how you might be thinking of other geographies that aren't yet covered?

And then, more specifically, wondering if you could comment on the size of the PTC, sort of, ground force in Latin America and whether they need to expand or do more postlaunch of your 2 drugs.

Thanks, Chad, I'll take the first one, and Sarah can amplify on that, and then Sarah, if you'll answer your second question.

I think our logic for the PTC collaboration includes the fact that of course we are moving as rapidly as possible to prepare for launch in the U.S. and the EU for both drugs.

And we certainly have our hands full with that, we've made great progress but it's a very busy time for the Akcea team.

With Latin America, if we were to do it ourselves, we would be doing it a little later.

So PTC provides a great opportunity to accelerate sales in Latin America for both products.

We think that's a big win for us and PTC.

And remember that we have not included in the transaction the LICA form of TEGSEDI or WAYLIVRA.

And so we believe that we have plenty of opportunity to build our Latin America force when -- after we successfully launch these drugs in the U.S. and Europe.

And Chad, I wouldn't read any more than just exactly what I said into the fact that we did the PTC transaction.

The other territories, will be made on a territory-by-territory basis, and as a function of how fully ready we are to take full advantage of the opportunities in these other markets.

And Chad, just to add onto your question around PTC and the size in Latin America.

They have a fully built-out organization there, they have actually been extremely successful in commercialization in Latin America.

In particular, in Brazil, one of the key drivers, as Stan said, around partnering with PTC with time and allowing that rapid acceleration to provide TEGSEDI and WAYLIVRA to patients as quickly as possible because they already have that infrastructure in place.

Certainly, it is both the TEGSEDI and WAYLIVRA, they are significant opportunities.

So it's first to expect past some expansion of PTC's Latin America organization, but the infrastructure, the leadership and the people that are really needed to drive that success are already in place, and we're really thrilled with the people that we met.

We had great chemistry and very much -- very similar attitude around sense of urgency and patient focus.

Thanks, Sara.

And our next question comes from Tyler Van Buren from Piper Jaffray.

I guess, the first question would be -- so without giving any specifics of course, have the label discussions with WAYLIVRA begun?

Well, we're well along in the process -- in the regulatory process with the FDA, and I think that's the maximum of that would be appropriate to say today.

Great.

That's helpful.

And then, I guess, with respect to the TEGSEDI and WAYLIVRA launches, what early metrics should we look at to determine commercial success?

And I guess, just following-up on that with respect to the cardiologist, we're looking at the cardiomyopathy patients who have symptoms of polyneuropathy, how do you expect to reach those patients specifically for that TEGSEDI launch?

So starting with the back part first, with cardiologists.

Our field's team is already engaged and calling cardiologists as well as neurologists and some hematologists for a disease education perspective and patient identification.

One of the things that we've very clearly found in our discussions with physicians and in particular, cardiologists, is they absolutely have these patients, they have many of their patients who have cardiomyopathy also have symptoms of polyneuropathy and would be covered by for example, in Europe, the broad label that we were able to achieve.

But will also need to be a close partnership between cardiology and urology and that's one of the things that we're also working on quite closely.

In terms of tracking on launch metrics, so one of the things that you are -- distribution system is fully in place, we're using a specialty pharmacy, so the drugs typically want report and through IMS when going down that route.

For us, we'll be looking at our metrics such as things like patient identification as well as looking at as we have patients start forms and then, we look at conversion times from a start form over to reimbursed drug.

So there'll be the types of metrics that we're looking at, and we'll fully flush that out as we get closer to the launch and give more guidance around that.

But typical types of things that you look at in the orphan space.

Thanks, Sarah.

And I do think that Sarah and Paula and the teams with Akcea have put together a really remarkable patient services system.

And I think patient that service system will be substantially helpful in both identifying patients, getting them through the process so they can get their medicines, helping practitioners take care of these patients, certainly handling all of the paperwork and everything or helping them handle it.

And then, we think that will also contribute to excellent retention.

And so we'll be looking at all the performance of all those systems very carefully here at Ionis and Akcea.

Great.

And just one last question, I just want to get your updated expectations for tafamidis data at the end of the month.

There's some talk among KOLs that regardless of the mortality benefits, they'll use it in wild-type patients, despite other options potentially being available, which is kind of confusing given the fact that it hasn't done well abroad based upon the lack of efficacy.

So what do you guys think they need to show in terms of a mortality benefit to be able to carve out maybe their own segment in the near term and perhaps, over the long term?

Sure, Tyler, let me take that.

This Is Brett Monia.

So tafamidis as you said, has had a bit of a struggle in reaching the polyneuropathy Stage 1 population in which would've -- has been approved for -- in some jurisdictions, not the U.S. of course.

They did increase the dose in the Phase III study and they did report significant -- for us statistically significant topline data on cardiac outcome.

So we are expecting statistical significant when they present at ESC.

What we don't know is whether or not that -- whether or not they will have significant benefit in both populations hereditary as well as wild-type.

Whether or not it will impact the same way on mortality versus hospitalizations, and whether they'll be a dose response.

So there's so much we don't know, and we'll learn more about it later this month.

As for the wild-type population that you asked about, there is no other treatment for wild-type today.

So the bar isn't very high.

If they show statistical significance for wild-type cardiomyopathy, I suspect that patients will be treated with that.

And that's something we will deal with as we develop our LICA for that population.

We believe our mechanism is superior, and whatever we learn from the design of their study will only help us design a better study in Phase III.

And we like our mechanism, so we'll look at their data and move on from there.

Sarah, I don't know -- do you want to add anything?

One thing to add, of course, the 2 mechanisms are potentially complementary.

We think that great benefit will be brought by getting rid of the protein that causes the trouble but the remaining protein could also benefit from a stabilizer.

So we could imagine very easily that patients might be treated with both drugs.

Sarah?

I don't (inaudible).

I think, been answered well.

And our next question comes from Jim Birchenough from Wells Fargo Securities.

A couple of questions for me, just first on the revenue line, when you think about the 4 contributors to R&D revenue, and what's feeding those contributors in terms of the science and some of the products, is this a revenue line that you grow over the next year?

Or next several years?

How far does the visibility go on that line when you think about that continued growth sustainably?

Tim, it's Beth.

So we think that it will continue to grow.

The pipeline continues to grow, it continues to mature, and so we believe that R&D revenue, as it has done in the last 6, 7 years, will continue to grow.

And it'll grow substantially.

Those -- each one of those elements that I spoke about has the potential to increase as the pipeline grows and as the drugs get later in the development process and reach the market.

So we see that being very sustainable and on a significant growth trajectory.

And Jim, just to add to that, and to remind everyone, we have built a very sizable pipeline of drugs that we intend to commercialize ourselves through commercial affiliates.

But we also judiciously partner after proof-of-concept those drugs that we think really require a very large infrastructure both for development and commercialization like APO(a)-LRx and APOCIII-LRx.

And even with those, we're retaining a much greater fraction of commercial revenues today.

So that combination of continued strong interest from potential large-company partners for those drugs that really, we believe, require those kinds of resources, the adding the increased number of drugs in our pipeline that are both available for partnering and are unavailable for partnering, and the fact that the value of the technology in drugs grows, assures that those -- all of those types of revenue will continue to grow for the foreseeable future.

Certainly, that's our plan.

And then, maybe, Stan, on TEGSEDI and WAYLIVRA, you highlighted the high-margin nature of these orphan drugs.

Do you expect both those drugs to be profitable next year of, off your the -- your own revenue expectations?

Is this a profit driver next year as well?

This is -- So Jim, this is Beth.

I think it's too early for us to be saying before the drugs are actually launched.

But we'll certainly be watching and expect successful launches.

And in inappropriate time, the drugs, we believe could be substantial contributor to our earnings.

I think what we're really proud of is that we're advancing a pipeline of 40 novel first-in-class or best-in-class drugs and launching 2 drugs through Akcea, and remember we consolidated all of those expenses, and even so we remain sustainably profitable and the profits are going to grow.

So I think that's the thing that I would focus of -- investors' attention on, which I do think is really quite an important position and an attractive position for us to be in and a product with the technology in the business model.

And just one last one for Brett, perhaps, on the PTR LICA, obviously, an opportunity to expand into the wild-type and some cardiomyopathy opportunity.

But is there a fast market strategy that might focus on the neural TTR population as a follow-on to TEGSEDI?

And do think in that population TTR reduction alone could be sufficient to get the LICA to market quickly for patients?

Yes, sure, Jim.

Happy to take that.

So as you know, we're going to start our clinical study -- first clinical study with the TTR LICA this year.

And then, we're working towards a rapid development strategy for both the wild-type cardiomyopathy patient population as well as the hereditary patient population that we expect to start Phase III studies for next year, for both.

We believe that the in neuropathy indications specifically, really the TEGSEDI label, if you will, pursuing that label with TTR LICA will be a fast-track -- will be a fast path to get there.

We're not necessarily -- have not necessarily concluded that we will focus on a TTR lowering mechanism, we're still working through that with Akcea and with the regulators.

But we do think it'll be a rapid path, whether it's a biomarker or whether it's a smaller version of the neuro TTR study, that's to be determined, but we do believe it will be a faster-track -- faster path to get there.

The wild-type cardiomyopathy patient population, I suspect, will look something like Pfizer did only an optimized -- maybe a somewhat optimized version based on the learnings that we get from the results of their Phase III study.

That'll be a longer -- probably an outcome-type study in those patients.

I suppose, you'd say Brett, that we would expect a path similar to that Alnylam has announced for their drug, would that be fair to say?

We certainly have that option, Stan, as you know.

And working with the -- Sarah and the Akcea team, we're definitely discussing that option.

It's definitely available to us, we want to do it, and so it's under consideration.

So absolutely.

The other another thing that I can remember that -- is that the drug truly is formally a prodrug, has the same sequences as TEGSEDI and the GalNAc, the LICA is used to direct delivery to the hepatocyte and then removed.

So it is in fact a prodrug and could be treated as a prodrug.

Certainly, we think of it that way.

And our next question comes from Ritu Baral with Cowen.

Two questions in one the Phase II data read out for angiopoietin 3, the Akcea program as well as the DGAT2 program in NASH, can you remind us how those things change cost structure?

And what efficacy end points, especially for NASH, that'll be produced at the end of the trials?

I'll take that, Ritu.

So the actual populations in the 2 studies are slightly different but the primary endpoint is MRI assessment of liver fat for both DGAT2 and angiopoietin-like 3 LICA.

And we expect the DGAT data in the near future certainly, this year, and we expect the angiopoietin-like 3 data a little later.

So what we are looking for, of course, is the safety and tolerability and reductions in liver fat.

We'll also be evaluating a number of other plasma markers, triglycerides and a variety of other things, and we have some quite a number of secondary endpoints in looking at metabolic characteristics.

Stan, the MRI, that's the standard I guess, PDFF that we've seen in the recent -- most recent generation of the [HT] matched trials?

Yes.

We learned first with KYNAMRO how effective MRIs are and I think they have become standard in assessing liver fat.

They were highly -- they have a high precision, can detect relatively small differences in liver fat, and what we've learned over the course of time we've been doing work in this area is that the changes in liver fat are fairly rapid.

So we have a high degree of confidence in MRI, liver fat measurements are a highly effective measure for these drugs.

And the other NASH drugs that we have moving along.

And can you talk about the [actual] mechanism in relation to sort of the different pathologies within NASH, inflammation, hepatocyte (inaudible) and fibrosis.

Where do you think there's a direct benefit and what may be downstream?

Ritu, one of the luxuries we have with our platform is the ability to examine the role of multiple targets within a pathway, and we did that with which -- looking at triglyceride synthesis pathway and determine which would be the best target.

We looked at targets like fatty acid synthesis DGAT1, DGAT2 and so on.

Based on extensive preclinical data we've determined that DGAT2 was by far the most attractive target for not only NASH but also it's impacting some plasma lipids like cholesterols, like glycerides and those kind of things.

We saw a reversal in preclinical models that we did get to that we didn't see.

With other targets in that pathway, reversal of liver fat as well as markers of inflammation, that of course will lead to full-blown NASH.

So it's a mechanism which were blocking triglycerides pathway, and as I think you may be aware, there's good evidence that as we lower the liver fat not only will we impact NASH, we'll also improve glucose homeostasis, improve glucose -- insulin sensitivity and those sorts of things.

So it was a real evaluation of the various targets within the triglyceride synthesis pathway that lead us to DGAT2.

But Brett, I think she also is trying to compare the mechanisms of the DGAT2 angiopoietin-like 3 and why we're pursuing both.

We think that liver -- the accumulation of liver fat is a very complicated process that and that there are multi-factors that lead to increases in liver fat and then a second hit that's responsible for progression to steatohepatitis and fibrosis and the like.

So, yes, targets across the gamut of both the triglyceride formation pathway and to -- and in earlier development of factors that contribute to inflammation and fibrosis.

And so our DGAT2 of course inhibits an enzyme in the glucose pathway angiopoietin-like 3 is really quite different.

We suspect that there will be patients who're driven by one inappropriate behavior, one arm of those pathways and others.

And so what we want to do is explore all of these targets that puts all of these drugs that we have in Phase II, pick the ones that seem to work the best, and then find the patient populations that are most attractive.

It may be the case that we find one that fixes everybody, but that's typically not the way this is used before.

Typically, these kinds of diseases are multi-factorial and have -- and different factors have different (inaudible) in the given patient.

So we like being able to bet on several pathways and in an important disease category like NASH.

And as I say, we're not strictly simply focusing on triglyceride metabolism and general metabolic processes, we're also looking at inflammation and fibrosis as well.

And the next question comes from I-Eh Jen with Laidlaw & Company .

I'm just going back to the TTR a little bit for the sort of next gen product.

Alnylam has announced that they're going to potentially start a pivotal study towards the end of this year and the -- you had just mentioned that you will start a pivotal study next year.

Just maybe, give us some sense of your thoughts in terms of these timeline differences?

Do you think it has any major impact in terms of -- to reach the market?

Or any other colors on this regard?

I think that your question was about TTR LICA versus...

LICA (inaudible)

I'm sorry.

So they are ahead and we are -- we will be developing the LICA form of TEGSEDI within an extremely aggressive clinical pathway that is designed to reduce the lead that they have.

And in the end, we think time-to-market certainly does matter, but what will matter most is profile, and we are excited about the profile we think our LICA form of TEGSEDI will have, and we think it's going to be a great performer in the market place.

Okay, that's helpful.

And then just another question it's on the WAYLIVRA launch, if I recall -- remember correctly, there is a significant patient potentially located in Canada.

So I'm just curious, what would be the timeline for the potential approval in Canada?

And what type of marketing effort at this point have geared towards that specific -- to that region?

Yes, you certainly are correct as there is a meaningful population of FCS patients in Canada.

And the dialogue with the Canadian regulatory authorities is in progress, and but I can't give you a date by which that's going to finish yet.

I think, in the near future we should be able to do that but I can't do that today.

And Sarah, and team are fully ready to launch in Canada and have an excellent team in place.

So when we get approval we will certainly be ready to take advantage of that opportunity.

Thank you, and thanks everyone for your interest and participating in the call.

We -- as Brett mentioned, we will be holding an Investor Day on Friday, November 9, in New York at which we plan to provide a comprehensive update on the business.

Details about this event will be announced soon but if you have questions before the details come, please give Wade a call, and I'm sure he'll be able to answer them for you.

So thank you very much, and talk to you again soon.

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