Ionis Pharmaceuticals Inc (IONS) 2003 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Isis Pharmaceuticals First Quarter Financial Conference Call.

During the presentation, all participants will be in a listen-only mode.

Afterwards we will conduct a question-and-answer session.

At that time, if you have a question, please press the “1” followed by the “4” on your telephone.

As a reminder, this conference call is being recorded Thursday, May 8 of 2003.

I would now like to turn the conference call over to Dr. Stanley Crooke, Chairman and CEO.

Please go ahead sir.

Thank you, Verona, and thanks everyone for joining us on today’s conference call to discuss the financial results for the first quarter of 2003.

Participating with me today is Lynne Parshall, EVP and CFO, Elizabeth Hougen, VP of Finance, Jon Holmlund, VP of Development, and Karen Lundstedt, VP of Corporate Communications.

During our call, Lynne will discuss our financial results as described in the press release issued earlier today and I will follow with the summary of the highlights of the past quarter.

Of course, we will then turn it open and answer your questions at the conclusion of our prepared remarks.

Before we begin, Karen will review our policy and forward-looking statements.

This conference call includes forward-looking statements concerned with financial position of Isis Pharmaceuticals, the therapeutic and commercial potentials of the compounds developed by the company, and the potential value of the company’s functional genomics and drug discovery technology platform.

Any statement describing a goal, expectation, intention, and belief of the company is a forward-looking statement and should be considered an at-risk statement including the statements that are described as Isis clinical goals.

Such statements are subject to certain risks and uncertainties, particularly those inherent in the process of discovering, developing, and commercializing drugs that are safe and effective for use of human therapeutic and financing such activities.

Actual results could differ materially from those projected in this conference call.

As a result, you are cautioned not to rely on these forward-looking statements.

These and other risks concerning Isis research and development programs are described in additional detail in Isis annual report on Form 10-K for the year ended December 31, 2002, which is on file with the US Securities and Exchange Commission.

Copies of this and other documents are available from the company.

Now here is Lynne.

Thanks Karen.

My comments today will be based on the financial press release that we put out this morning.

I will discuss the following financial aspects with our quarterly revenue, operating expenses, net operating loss, and our strong balance sheet.

Total revenue for the three months ended March 31, 2003 was $14m.

This was $4m less than total revenue in first quarter of last year, primarily due to Elan’s conclusion of this participation in our HepaSense and Orasense collaborations.

This resulted in our reacquisition of product rights to very promising programs in clinical development -- Isis 14803, our drugs for hepatitis C and the oral formulation of our TNF-alpha inhibitor Isis 104838.

While we no longer earned revenue from these affiliates, the first quarter of 2003 benefited from transactions that provided new sources of revenue not present in the same period of last year including the addition of new GeneTrove partnerships with Amgen, GlaxoSmithKline, Pfizer, and Pharmacia in late 2002 and early 2003.

The addition of a new contract with the US Army Medical Research Institute of Infectious Diseases, USAMRIID, in April 2002 which is advancing our small molecule antibacterial drug discovery program and the achievement of a second milestone in February 2003 in our antisense drug discovery collaboration with Amgen.

Our business model of diversified revenue sources reduces our risks and help to us set our cash needs.

Our operating expenses totaled $32.9m in the first quarter, up from first quarter 2002 by 19%.

This increase was due to cost associated with continued aggressive development of our pipeline including the Phase III clinical trials for Affinitak in non-small-cell lung cancer, and for alicaforsen, Isis 2302, in Crohn’s disease, as well as the numerous phase II trials for multiple products and developments.

Cost relating to our $100m multi-year research collaboration with Eli Lilly also contributed to the quarter-to-quarter increase.

Our net operating loss in the first quarter was $18.9m, which is higher than that of the same period of last year on both the GAAP and pro forma basis.

You should refer to the table in our financial press release or 8-K for a detailed comparison of our GAAP and pro forma net operating loss results.

Each of these documents is also available on our website at www.Isispharm.com.

The loss from this quarter is in line with our guidance for the year and which we stated our goal for net operating to be in the mid $70m range, excluding non-cash compensation expenses.

We have implemented the cost-cutting measures and restructuring activities that we announced last month.

The charges associated with these actions will appear in our second quarter financials as a restructuring charge.

Our plan is to use our resources efficiently to advance as many of our antisense drugs as possible to key development milestones and continue to advance the technology.

At the same time, we intend to explore a multiple RNA-based business initiatives to generate revenue and control losses.

In terms of cash, the company’s is very well positioned as evidenced by the continued strength of our balance sheet.

We ended the first quarter of 2003 with cash balance of $269.5m in cash and short-term investments.

We reported working capital of $227.5m for the period.

With reasonable assumption for new sources of revenue and cash, we believe we have the resources to fund our activities for more than three years.

Our goal was to add 2003 with more than three years worth of cash.

Overall, we are very pleased with the financial strength of the company as we have adequate resources to implement our operating plan as we described last month.

Now, Stan, I will turn it back over to you.

Thanks Lynne.

We are fortunate to have the financial resources to invest in programs that provide meaningful opportunities to move drugs towards commercialization within the next three years, and we are fortunate to have the pipeline that we have to invest in, that is so exciting for us.

We believe the strategy of investing in this pipeline best enhances the potential for the value of our company.

I will now summarize the key events here to date in the areas of clinical development, antisense drug discovery, and GeneTrove, and provide a brief review of our nearest clinical milestones.

In March, we reported disappointing results for the phase III trial of Affinitak.

Results from the analysis of this trial will be described at ASCO.

Lilly is continuing to follow patients' current man role in the second phase III study of Affinitak in combination with Gemzar and cisplatin.

Lilly is not enrolling additional patients in Affinitak studies.

Isis and Lily will make decisions about the development of Affinitak upon the review of the results of the second phase III trial.

We recently reported progress with the other late-stage product, alicaforsen.

In April, we initiated another phase II clinical trial of alicaforsen in patients with acute ulcerative -- with active ulcerative colitis or UC.

We are particularly encouraged and enthusiastic about the ulcerative colitis indication for alicaforsen based on the strength of the early data.

This second study, a 100-patient study, will compare the efficacy and safety of different dosing regimens of the animal formulation of alicaforsen and placebo.

Also in progress is a 170-patient phase II trial comparing alicaforsen enema to mesalamine enema.

We plan to complete enrollment of these two trials early next year and report efficacy data and define our NDA strategy in the first half of 2004.

We have also made exciting progress in drug discovery.

Two achievements that I want to highlight for you in recent weeks.

First, the development milestone in the Lily antisense drug discovery collaboration, and second, the formal addition of the cardiovascular antisense drug door pipeline.

These two events are evidence of the productivity and the breadth for potential for antisense drugs.

We recently achieved the significant milestone in the development of an anti-cancer drug that is licensed to Lilly, that's Isis 23722.

This second-generation antisense drug is included in the expansion of our broad antisense drug discovery collaboration.

We had a cancer as a research focus less than a year ago.

Isis 23722 targets survivin, a molecule that allows the survival of the cell that would normally undergo programmed cell death, and it is the first compound from the partnership to be selected for clinical development by Lilly.

As a result of the achievement, Isis will receive a $1.5m payment from Eli Lilly.

We have added the company’s first cardiovascular drug candidate to this as well, Isis 301012 to our development pipeline.

Isis 301012 is an antisense inhibitor of a target called ApoB 100.

This is an exciting target in lipid lowering that is undrugable by traditional drug discovery methods.

In pre-clinical studies and a mouth antisense inhibitor of ApoB100 normalized or lowered cholesterol level in multiple animal models of cardiovascular disease.

These actions were observed in total cholesterol, VLDL, LDL, and triglycerides level overall good things to do, and our goal is to initiate clinical trials of this drug for cardiovascular disease in the first half of 2004 further enriching and expanding our pipeline.

To date this year in our GeneTrove business, we have completed two significant transactions.

We entered into a target validation agreement with Pfizer.

Under this agreement, Pfizer will obtain an access Isis antisense inhibitors and acquire a license to specific Isis patent.

Additionally, we've licensed specific functional genomic patents to atugen providing rights to practice Isis antisense-based functional genomics technology.

We are encouraged by the continuing level of industry interest in our technology platforms, and we have focused on making our partnerships successful, defending our intellectual property position, advancing both the diagnostic and therapeutic opportunities that are present in Isis, and of course advancing the development of our antisense drug products according to our newly implemented operating plan which is design to facilitate achievement of multiple key clinical development milestones in the very near term.

Our clinical goals over the next 12-18 months are numerous, they are ambitious, and as we presented in detail on our April 2nd press release, they are important.

Today, I will just briefly remind you of some of the more near-term events.

We plan to report the results from the small Phase II study of alicaforsen enema and ulcerative colitis paltritis at the upcoming Digestive Disease Week meeting.

We are quite excited about these results.

We finally report results from two Phase II studies of Isis 2503 and review the Phase III Affinitak result at the upcoming ASCO meeting.

We will be initiating Phase II trial of Isis 14803 in combination with current therapy and report also final results of ongoing Phase II study of Isis 104803 with a single agent in patients with hepatitis C.

We will initiate very shortly our first clinical trial Isis 113715, this is the exciting growth that enables target PTP-1B and we hope it will be useful in the treatment of type II diabetes.

We will initiate Phase I trial on at least one additional preclinical drug this year as well.

Later this year, we will report results of Isis 104838 Phase II investigation in patients with rheumatoid arthritis.

Isis 104838 is an inhibitor of TNF-alpha, and it is the first of the second generation drugs that entered the clinic.

I might remind you that it is also the drug that we recoded last year, we had achieved significant oral bioavailability in [inaudible].

And given the beginning of trial of Isis 113715 or PTP-1B inhibitor in type-II diabetes, we expect to report at least some of the initial results on that drug later this year and to initiate a Phase II trial in patients with diabetes.

Our pipeline is obviously our most important asset, and our clinical progress will give us an opportunity for steadying these flows across a number of products and a variety of therapeutic areas and formulations and reach delivery over the next 12-18 months.

Our numerous shots on goal help us diversify risk of clinical development and enhance the potential for achieving commercial success.

We are optimistic that our investment in this pipeline will be rewarded, our programs continue, we continue to be excited and working hard towards finishing the development in these products.

We appreciate your support of Isis as we work to accomplish these goals, and we -- of course we will updating you as we progress.

And with that, we have completed our prepared remarks, and we will now open it up for questions.

Verona, if you can set us up for questions, I'd appreciate it.

Thank you.

Ladies and gentlemen, if you would like to register for a question, please press the "1" followed by the "4" on your telephone.

You will hear a three-tone prompt to acknowledge your request.

If the question has been answered and you would like to withdraw your registration, please press the "1" followed by the "3".

If you are using a speakerphone, please lift your handset before entering your request.

One moment please, for the first question.

Our first question comes from the line Mark Monane with Needham.

Please proceed with your question.

Hi good morning.

Thank you.

Well, financial and then clinical questions please.

Lynne, could you again characterize your expected operating loss for this year, and then please review for us the current debt obligations that are -- that you expect this year?

Yes, Mark, I would be happy to.

Our projected net operating loss is in the mid $70m range, and we talked about that in our April conference call.

That does not include non-cash compensation expenses.

Our outstanding debt really falls into a couple of primary areas.

As you know, most of it is partner debt, and our convertible partner debt right now totals $85m that debt converts the significant premiums and carries varying interest rates.

The Lilly research loan is the largest of these loans, and that is the zero interest loan.

We have non-convertible partner debt of $15.4m which represents our Lilly manufacturing loan.

Our convertible bond, which we issued last May, totals $125m and has a 5.5% interest rate, and it is not due until May 2009.

And then we have roughly $15m worth of standard operating debt, which includes our mortgages, our equipment loans, and a variety of standard operating debts.

Terrific.

Thanks for the update here.

Some clinical questions; could you outline for us again, what would be the presentation of Affinitak?

Will we see more data at the ASCO meeting, and when will -- when should we expect this presentation?

Jon, perhaps you can answer that.

Yes, hi, Mark.

We will be presenting rather more detail on the -- around the analysis that we have already discussed including some -- probably some pharmacokinetics relationships.

But the presentation is on Sunday morning in the lung cancer's oral session.

The data will be more complete, of course, but I think if the data as you would expect will simply confirm the conclusions that we have already reported.

We will also be reporting studies on Isis 2503, the ras inhibitor in breast and pancreatic cancer in the meeting., and I think that's on Monday and Tuesday, Mark.

Last question, you have done a nice job outlining for us the current programs in clinical testing.

Can you go over any of the pre-clinical results that you have or other activities outside of the rheumatoid arthritis, for example, in infectious disease?

Do you have any information for us here?

Yes.

Well, let me just summarize the therapeutic areas in which we are actively involved at the research level.

As you know, we have a very significant program in metabolic disease that includes diabetes and obesity, and we have significant collaborations there, of course Lilly being the largest.

We are also involved in inflammatory disease, and that runs the gamut from such things as rheumatoid arthritis, ulcerative colitis, Crohn's to aerosol administration for asthma and diseases of the lung in general.

We have an expanding cancer research effort, Survivin is the first example of our reinvigorated cancer drug discovery program, and that drug is I think tremendously exciting to Eli Lilly and to us.

And we have initiated about a year or 18 months ago, a cardiovascular program.

You will be hearing a lot more about our cardiovascular efforts, and the first product that's coming from there is of course the ApoB-100 product opportunity, which we just described as adding to our pipeline.

So, in summary, we are focused in cancer, metabolic disease, inflammatory disease, and cardiovascular disease.

And our principal organs of focus are the organs where we know these drugs concentrate, liver, kidney, bone marrow, spleen and so on.

And our roots of delivery include IV, subcu, oral, as well as aerosol and enema.

So it is a very broad endeavor that I think has the potential to generate many, many product opportunities.

I know that you are involved in infectious disease.

Well, with hepatitis C, do you have any more information regarding either the antisense program or the Ibis program regarding biowarfare or potential for treatment in SARS that you can discuss with us?

I can only discuss what we are doing with regard to biowarfare in very, very general terms as you can imagine, and what I can tell you is we are making extraordinary progress.

The method we believe is an extraordinary advance in diagnosis of infectious disease and represents a very significant breakthrough.

We have both diagnostic and antisense opportunities in SARS, and we are pursuing work in both of those areas for SARS.

We will be describing some of those activities in more detail when it's appropriate.

Terrific.

Thank you, Mark.

Very helpful.

Thanks very much for the update.

Our next question comes from the line of R.K.

Ramakanth(ph) with Rodman and Renshaw(ph).

Please proceed with your question.

Hi good morning.

Can you please comment on the Phase two studies which are going on in the ulcerative colitis?

Are you asking just for more detailed description?

Yeah some comments and if you have more details?

Well, the predicate for the two ulcerative colitis trials and it is actually a third trial which is Cholhepatitis is -- it was reported quite some time ago.

Now I guess more than a year ago when we reported exceptionally positive Phase II data in the randomized double bond placebo control trial in which we administered Isis 2302 or alicaforsen as an enema for 4 weeks, and patients with ulcerative colitis.

It demonstrated highly sophistically significant benefit, long duration of activity.

In fact duration of activity that rose was up to a year.

Based on that, we initiated two significant trials.

The first to get underway was 170 patient trials in which we compared a couple of doses of alicaforsen -- dose levels of alicaforsen to mesalamine inpatients for ulcerative colitis.

Again these patients are dosed a standard time which is 6 weeks and then they are followed through a period of time to determine how longer duration of benefit that we achieve.

The second trial is underway and that's a 100 patient trial in which we are comparing alicaforsen to placebo.

Thirdly, we will be reporting a steady in offsetting Cholhepatitis.

Cholhepatitis occurs in patients with ulcerative colitis who have had new types of surgery in which colectomy is performed and then the remainder of the gut is anastomosed through the rectum and a pouch is created.

Unfortunately, people often develop inflammation that it is ulcerative colitis in the pouch.

And so we've been looking at that disease as well and as I say we will be reporting results of that with CEW.

Jon, do you want to add anything to that?

No I don’t think so unless they are interested in the details of the trial.

The trials are progressing well at this point.

Okay good.

Thank you.

We are really very excited about it and if you didn’t get a chance to see the press release and the presentation of the original data on the first Phase II trial, we will be glad to send it to you.

Thank you that will be very helpful.

The other question is, you guys reported about a new contract with the US Army regarding the small molecule antibacterial drug discovery program.

Can you give us little bit more details on what this contract is about and how much work goes into this program?

This is a continuation of quite -- of several years of work.

It's our Ibis technology.

The Ibis technology has identified methods of rapidly first identifying important structures in RNA and then identifying molecules to find those structures.

It is a mastec-based method, in fact it’s an FTIR mastec-based method.

It's been the subject for quite a number of publications and of course very broad patterns.

All that have issued in another applications.

And so this is just a continuation of that work and I really can’t get into more detail about what we are doing with regard to bio-warfare defense.

Thank you very much.

Yes.

Our next question comes from the line of Joy Michele(ph) with CCL Partners(ph).

Please proceed with your question.

Hi good morning, can you hear me okay?

Yes thank you.

Great.

I just wanted to ask regarding the trial of the Affinitak trial that Lilly was conducting.

How many patients were enrolled before enrollment was stopped?

Well we haven’t been given precise enrollment numbers.

They enrolled a sizeable number of patients and they are following those at this point and continuing treatment.

Okay and then when do we expect to -- when does Lilly and Isis expect to look at that data and how -- are you having a problem with dropout or precisely they no longer want to be on the trial?

You know, as it can be precise on either of those -- the timing of the results is going to depend on the completion of treatment and on those follow-up in the collection of data and you know sometime after the first of the year.

Of 2004?

Yes and obviously we are not in control of trial that’s Eli Lilly and that would remind you of course this is survival trial and the average number of cycles completed on one of these trials usually is four out of the six and so far as we know the performance of the trial continues to be as projected.

Okay.

And then for the ApoB-100 compound; did you find that your planning in the first half of 2004, would that be within oral formulation or an IV formulation?

Neither.

The first study will be sub Q and you know this is the second generation anthrax drug so we assume that we will be able to dose between once a week to once every two weeks.

And based on animal's data the duration of activity is very long.

And we will almost certainly either in parallel or shortly after follow with oral studies as well but that’s not been fully defined yet.

Typically in these kinds of affairs what you do is administer the drug primarily, get a sense of what the dose primarily is so you can use that as a benchmark for your all studies.

Okay and then one last question on the data that’s coming up in the digestive disease league meeting.

How many patients you have in that [inaudible] trial?

It’s small number of patients of 12 patient trials.

Okay.

But I think what’s -- I think the data are for a small number of patients going to be reasonably compelling.

Thank you very much.

Once again ladies and gentlemen if you do have a question please press the "1" followed by the "4".

Our next question comes from the line of BillBill Strong with Strong Management Company.

Please proceed with your question.

Thank you.

Hi Stan, everybody.

Hi Bill.

I got three just kind of quick questions.

Number one, whatever -- what happened to Andy Dorr I missed that he is no longer with you?

That’s correct.

How does it happened to the -- did he resign or quit?

I mean did you reduce the department or what happened?

No not at all.

This was a process or planned process over time; we have been developing successors to Andy and he has become COO of an Anti-Capture(ph) Drug Development Company and so we are very pleased for Andy, that he is has progressed to a new position that is certainly wasn’t available at Isis and more importantly we are very pleased with the way the development organization is working and that this was basically a planned evolution that’s worked out well for everyone.

Good, well that sounds great.

Secondly in the Affinitak first Phase trial that you just reported on, are there any patients continuing on the regimen with Isis drugs or have all the patients been taken off that?

All patients completed treatment on that study quite sometime ago.

So there is no continuation of their treatment after the termination of that program, right?

No other treatment, no.

No.

What’s happening is, of course, there are still a significant number of patients who are alive and they continue to be followed until unfortunately they succumb to the disease.

So there are still significant numbers of patients on trial.

They are just not receiving drug, the trial is designed for six cycles.

I see.

So, the six cycles are over but they continue to be followed to see whether did any -- had any effect or not?

That’s correct.

Okay and when is it -- everybody said these meetings Monday, Tuesday, and Wednesday when in -- are they 2003, 2004, 2005?

Yeah, we assume knows that we know. -- DDW is again about…

May 6.

May, you can go ahead.

I am sorry.

May 22nd.

Yes, the actual meeting is May 31st to June 3rd and so the lung cancer presentation is on Sunday, June 1st, the breast cancer and prostate 25 ’03.

This is a general session on Monday June 2nd.

The pancreatic cancer posted discussion session on Tuesday morning June 3rd in Chicago.

Okay, good.

Thank you very much.

Thank you.

Okay.

Once again, ladies and gentleman to register for questions, please press the “1” followed by the “4”.

If there are no more questions then I think we will bring the conversation to a close.

We very much appreciate your interest and we will be updating you about our progress over the next month.

Have a good day.

Ladies and gentleman that does concludes your conference call for today.

We thank you for your participation and ask that you to please disconnect your line.