Ionis Pharmaceuticals Inc (IONS) 2004 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the Isis Pharmaceuticals' Third Quarter 2004 Financial Results 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 is being recorded, Wednesday, October 27th, 2004.

I will now turn the conference over to Stan Crooke, Chairman and Chief Executive Officer of Isis Pharmaceuticals.

Please go ahead, sir.

Thank you and thanks everyone for joining us on today's conference call to discuss our financial results and the highlights for the third quarter of 2004 as well as the results of Lilly's Phase III clinic trial of Affinitak in patients with non-small cell carcinoma of the lung.

Participating with me today are Lynne Parshall, Executive Vice President, CFO;

Mark Wedel, Chief Medical Officer, Beth Hougen, Vice-President of Finance; and Alison Trollope, Executive Director of Investor Relations.

Before we get underway, Alison will read our forward-looking statement.

Thank you.

Good morning.

The conference call includes forward-looking statements regarding our business, the financial position of Isis Pharmaceuticals and the therapeutic and commercial potential of our technologies and products in development.

Any statement regarding describing our goals, expectations, intensions or beliefs is a forward-looking statement and should be considered an at-risk statement, including those statements that are described as Isis's clinical goals.

Such statements are subject to certain risks and uncertainties, particularly those inherent in the process of developing technology and systems used to identify infectious agents, in discovering and commercializing drugs that are safe and effective for use as human therapeutics, and in the endeavor of building a business around such products and services.

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

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

These and other risks concerning Isis's research and development program are described in additional detail in Isis's annual report on Form 10-K for the year ended December 31, 2003, and quarterly report on Form 10-Q for the quarter ended June 30, 2004, which are on file with the US Securities and Exchange Commission.

Copies of these and other documents are available from the Company.

At this time, I would like to turn the call over to Dr. Crooke. (phonetic)

Thanks Alison.

First to Affinitak, today we reported the results of Eli Lilly and Company's Phase III clinical trial of Affinitak in combination with Gemzar and cisplatin in patients with non-small cell carcinoma -- cancer of the lung.

Findings from this trial are similar to the results of the initial Phase III study of Affinitak for inpatients with non-small carcinoma of the lung that we reported in 2003.

In Lilly study, patients in both treatment arms, those receiving Affinitak along with Gemzar and cisplatin and those receiving chemotherapy alone, experienced medium survivals of about 10 months.

Improvement in medium survival was the primary endpoint of study.

With regards to safety, the additional Affinitak to Gemzar and cisplatin was adequately tolerated with the safety profile that was consistent with the safety profile that's observed in the previous Phase III trial that we reported some time ago.

Although no final decision has been reached, given the outcome of both Phase III trials, additional investment in Affinitak is unlikely.

We and Lilly continue our broad antisense for discovery alliance and the relationship is very strong.

The partnership has been productive, already yielded two anticancer drugs that are in development and I will describe those drugs in more detail in just a bit.

We and Lilly are optimistic that additional antisense drug candidates may emerge from the alliance in cancer, in metabolic disease as well as inflammatory diseases.

In addition to our collaboration with Lilly, we continue to experience success in anti-cancer drug discovery and development is evidenced by the progress in our partners pipelines and the addition of a new anticancer drug ISIS 345794 targeting STAT-3 to our development pipeline.

We will share with you a bit more information of our progress in our cancer program towards the end of my prepared remarks.

Now, let me turn it over to Lynne to discuss the financial results for this quarter.

Thanks, Stan.

My comments today will be based on the financial press release that was put out earlier.

I will discuss the following financial aspects for the quarter, net operating loss, net loss, revenue, operating expenses, and our balance sheet.

Our loss from operations was $22.4 million and $66.1 million for the 3 and 9 months ended September 30, 2004 respectively compared to $19.1 million and $57.5 million for the same periods in 2003 according to GAAP.

Our pro forma loss from operations for the 3 and 9 months ended September 30, 2004 was $22.8 million and $66.7 million respectively compared to $18.3 million and $54.8 million for the same period in 2003 as adjusted from GAAP to exclude non-cash compensation related to stock options and in 2003 a restructuring charge.

We remain on track to achieve our projected net operating loss in the mid $80 million range excluding non-cash compensation.

For [progravity] sake we typically limit our discussions of net operating loss and provide additional detail on net loss in our press release, I didn’t want to make a special note regarding one aspect of our net loss this quarter, specifically the impairment of our equity investment in Alnylam.

Our net loss applicable to common stock for the 3 year 9 months ended September 30, 2004 was $32.7 million and $85.3 million respectively compared with the net loss applicable to common stock of $22.4 million and $70.1 million for the same periods in 2003.

The increase in net loss applicable to common stock was the result of the increase in loss from operation as well as the non-cash loss on investments of $5.1 million, principally related to the impairment of our equity investment in Alnylam.

The impairment reflects the decrease in the market value of Alnylam stock which we believe is primarily a result of current financial market conditions related to biotechnology companies.

The impairment does not in any way reflect the change in our confidence that Alnylam will continue to be the center of excellence in RNAi or our belief that the combination of our intellectual property and research and development expertise in RNA therapeutics and Alnylam’s intellectual property and research expertise in RNAi therapeutics will make significant progress in developing promising RNAi drugs.

This alliance established in 2004 provides us with an opportunity to realize substantial value from our pioneering work in antisense mechanisms and oligonucleotide chemistry and this is an example of our strategy to participate in all areas of RNA-based drug discovery.

We licensed to Alnylam our patents relating to antisense mechanisms and oligonucleotide chemistry for double-stranded RNAi therapeutics in exchange for a $5 million technology access fee, participation in fees from Alnylam's partnering programs, as well as downstream milestones and royalty payments.

In the second quarter of 2004, we earned $500,000 license fee from Alnylam's relating to Alnylam's alliance with Merck.

This license fee was the first payment to us reflecting our participation in fees from Alnylam's partnering programs.

So as you can see, we have already benefited financially from our alliance with Alnylam and we look forward to our continued collaboration.

Onto revenue -- our total revenue for the 3 and 9 months ended September 30, 2004 was $99.1 million and $31.2 million respectively compared to $11.3 and $40.3 million for the same periods in 2003.

The decrease primarily reflects the completion of our Phase III clinical trial of Affinitak and an associated reduction in revenue, which is offset in part by increased revenue from our TIGER biosensor program, our strategic alliance with Alnylam, and our broad research collaboration with Lilly.

Our operating expenses were $31.5 million and $97.3 million for the 3 and 9 months ended September 30, 2004 respectively compared to $30.4 million and $97.8 million for the same periods in 2003 according to GAAP.

Included in operating expenses was non-cash compensation benefit related to stock options of $446,000 and $649,000 for the 3 and 9 months ended September 30, 2004 respectively compared to non-cash compensation expense of $804,000 and $936,000 for the same periods in 2003.

Variable accounting for stock options can result in significant increases and decreases in non-cash compensation related to stock options as a result of the variability in our stock price.

Our operating expenses on a pro forma basis were $31.9 million and $97.9 million for 3 and 9 months ended September 30, 2004 respectively compared to $29.6 million and $95.1 million for the same periods in 2004.

Operating expenses on a pro forma basis were adjusted from GAAP to exclude non-cash compensation related to stock options and in 2003, a restructuring charge.

Nominal increase in operating expenses on a pro forma basis was primarily due to increased spending to support TIGER biosensor program, partially offset by planned expense reductions in other parts of the Company that began the second quarter of 2003.

Please refer to the table in our financial press release for a detailed comparison of our operating expenses and loss from operations on the basis of both GAAP and our pro forma analysis.

These documents are also available on our website at www.isispharm.com.

We ended the third quarter with $125.6 million in cash and short-term investments and working capital of $116.5 million.

At December 31, 2003, we had cash and short-term investments of $215.5 million and working capital of $194 million.

Cash and short-term assessments and working capital decreased primarily as result of cash used in operations, our equity investment in Alnylam, and the retirement of partner debt.

In December 2003, we secured a $32 million term loan from Silicon Valley Bank, which we used to retire partner debt in 2003 and early 2004.

Going forward, we will use our resource to efficiently and judiciously move our antisense drug towards key development milestone as well as to advance our technology.

At the same time, we intend to exploit our multiple RNA-based business initiatives to generate revenue for managing our expenses appropriately.

Based on our current operating plan with reasonable assumption to our new sources of revenue in cash, we believe that our available cash, cash equivalents, and short-term investments as of September 30, 2004, when combined with investment income, committed contractual cash payments from our partners and anticipated future payments, will be sufficient to meet our anticipated requirements through at least the end of 2006.

Stan, now I will turn it back to you.

Thanks, Lynne.

At Isis, we have three significant assets from which we are driving value.

First and foremost is our robust pipeline of 12 antisense drugs, a pipeline that allows our multiple short-term goals to succeed and lots of opportunities in various diseases. 2004 has been a year that has been a time of significant clinical momentum.

We have been particularly pleased with the progress we've made in our second-generation antisense drugs which are performing as well or in fact, I think, significantly better than we hoped.

In the third quarter of 2004, we announced particularly exiting data on ISIS 301012, our proprietary cholesterol-lowering second-generation antisense drug, and I will describe those data for you in just a little bit.

While we are disappointed in the Affinitak results, it gives what we have expected and what we have been telling shareholders to expect based on the earlier trial, so we targeted well on these results in light of the amount of exiting second-generation data that we have reported already this year, recent highlights of which I will discuss in just a moment.

In addition, we are looking forward to the results of several additional clinical trials that will come to fruition before the end of the year and again I will describe those for you towards the end the call.

Our second key asset is our TIGER biosensor program.

We have recently received 3 new contracts from the government to provide up to an additional $10 million in funding for the advancement of the technology and developing its applications.

Together with prior awards, Ibis or TIGER has received contracts for up to $65 million in funding from multiple government agencies.

In a few minutes I will come back and review the achievements of TIGER and add some detail about the government contracts and TIGER’s potential.

Finally I will just -- third asset is our industry-leading patent estate including the expansion of our strong intellectual property position in RNA-based drug discovery by licensing core IP regarding therapeutic uses of microRNA and a patent licensing agreement recently with Dharmacon.

I will come back in just a little bit and describe that as well.

Now, to our specific achievements across these three areas of our business.

First, our pipeline and TIGER, and then our patent estate.

The product pipeline that we have and the pipeline and price of our partners of drugs continues to advance in development as well as expand by the addition of exciting new drugs.

First, let's talk about the Lilly collaboration.

As I mentioned earlier in the call, our Lilly collaboration is strong and both companies have a solid commitment to antisense technology.

In the third quarter we were extremely pleased we have added a new second generation drug candidate to Lilly’s oncology portfolio.

This drug, LY227596, targets eukaryotic initiation factor or called eIF-4E, which is a protein that’s involved in tumor progression, involved in angiogenesis and it's involved in metastases.

Based on the scientific literature, there is a strong indication that this protein may act as a critical switch in cancer progression.

As Lilly licensed this candidate from our collaboration, we earned $750,000 payment and Lilly will fund the continued development of the drug.

Under the terms of the Company's alliance, Lilly will pay us development and regulatory milestones and royalties on potential product sales.

You may remember that's the first drug to emerge from the Lilly collaboration with LY2181308, this is a second-generation antisense drug that targets a very exciting cancer target called survivin.

Lilly plans to initiate Phase I trials of this compound later this year.

Survivin is the molecule that allows the survival of cells that should normally undergo programmed cell death. eIF-4E and survivin represents drug targets that you could say are in the sweet spot of antisense.

Both those targets that has been of great interest to the pharmaceutical industry and to the oncology community at large, yet are considered undruggable with traditional small molecule compounds.

However, using our proprietary second-generation chemistry and the base of understanding that we have about antisense, our collaboration with Lilly readily identified selected protein inhibitors of these targets.

In conclusion, we look forward to continuing to update you on the progress of these drugs and our collaboration with Lilly and we are optimistic that additional drug candidates will emerge from our collaboration with Lilly.

Now as to our pipeline -- the Isis pipeline of antisense drugs has had a very good year and continues to move forward.

In the third quarter we announced exciting preliminary results of the Phase I trial of ISIS 301012, our second-generation antisense inhibitor of apoB-100.

We believe ISIS 301012 represents substantial market opportunity for us and it has a potential to be new type of cholesterol-lowering drug with unique characteristics.

ApoB-100 is synthesized in the live and is essential for the assembly of all of the atherogenic lipoproteins including LDL -- that is bad cholesterol.

It is yet another drug target that has been of significant interest to the medical research community that has been to-date undruggable with traditional drug development approaches.

The data we presented are compelling, they were the first to show rapid prolonged dose-dependent reduction of apoB-100 in humans.

In addition, they showed that the reduction of apoB-100 was directly associated with rapid and prolonged decreases in LDL, VLDL, total cholesterol, and other measures of lipids in the blood, normal volunteers with borderline elevated cholesterol.

LDL and VLDL cholesterol are, of course, the bad lipids that are involved in heart disease.

But very exciting is that as we continue to gather the data on additional subject, the data become even more encouraging, and certainly we are enthusiastic -- more enthusiastic about the potential of the drug to eventually make a significant impact on the management of cardiovascular disease.

In fact, Rick Brown, our Vice President of Business Development is presenting data later today at the Rodman & Renshaw conference on additional volunteers enrolled in the study.

For those of you who are not attending the conference, a webcast will be available on Isis website at www.isispharm.com.

Also in the third quarter we added ISISI 345794, a second-generation antisense drug that targets STAT-3 to our pipeline.

STAT-3 is a protein that regulates cell division and growth and prevents cell death.

Preclinical studies have shown that antisense inhibition significantly delayed tumor growth and increased the rate of cancer cell death in multiple cell and animal models of cancer.

We intend to rapidly move this drug into clinical development and we anticipate initiating clinical trials in patients with cancer in 2005.

As we talk about our broad pipeline of drugs in development, it's important to note that due to the efficiency of antisense technology in the creation of [other] drug candidates, Isis has the potential to have many more drug candidates that we can take forward on our own.

This is a very high quality problem to have and we plan on continuing efforts to partners or license our right to develop of some drug candidates on terms that allow us to retain significant portion of the drugs' opportunity.

At the same time, we will continue to make strategic investments in other promising drug candidates by developing them to [key impression] points before partnering.

In this way, we are able to drive a robust pipeline of antisense drug candidates forward and [inaudible] very well ensuring that we benefit broadly in the success of our drug discovery efforts.

Now on to TIGER, recently our TIGER program achieved 3 new government contracts valued at up to $10 million for the continued development of our TIGER biosensor technology and for creating a variety of applications of the biosensor.

Together with prior awards, Isis has received contracts for up to $65 million in funding from several government entities including DARPA, the CDC, the NIH, the FBI, the NIST and USAMRIID.

Particularly important aspects of these new brands is our contract with the National Institute of Allergy and Infectious Disease, part of the NIH.

You are aware, of course, of the current flu vaccine shortage due to concerns about safety.

The NIAID grant funds the development of an application for TIGER to identify potential infectious agents that could contaminate vaccines or other biological products during the manufacturing process.

Using TIGER, we will develop protocols and procedures for vaccine screening that provide meaningful, relevant information to regulatory agencies on vaccine manufacturers in real time and provide a mean of assessing the risk that vaccines may be contaminated and assess the risk of vaccines produced by different -- in different cells.

Successful development of an application to simultaneously identify a broad array of infectious agents in vaccine cell substrates will create a new commercial prospect for the TIGER biosensor.

This reward also marks the significant milestone in TIGER’s development towards commercialization because it is the first grant to fund the development of an application of TIGER biosensor rather than simply continue to advance the core technology.

As with all of TIGER’s government grants, government funding of this revolutionary technology has been mutually beneficial.

The government agencies funding TIGER receive the access of our technology that is designed to address unmet need, we receive the resources to pursue development of an asset that we could not have otherwise reported and we retain the rights of commercial applications and technology, all of this brings near-term and short-term -- near-term and long-term value to the Company as well as to government agency.

Now on to the third asset, our strong intellectual property position.

Unlike most biotech companies, our substantial patent estate of 1,400 patents, not only protects our inventions, but it provides us with opportunities to generate revenue and participate in broadly in the success of RNA-based drug discovery and development.

Recently we entered into a patent license agreement with Dharmacon, a wholly owned subsidiary of Fisher Scientific International.

As an innovator in RNA-based drug discovery and development, our patent portfolio covers numerous aspects of antisense that is relevant to RNAi, including specific chemical medications of oligonucleotide being used to create RNAi therapeutics for use in animals and in humans.

In order to sell chemically-modified RNA [for the certifiable] purposes, Dharmacon, a leading global provider of innovative RNA-based products, licensed from us certain chemistry [in method of] use patents and return for an upfront licensing fee and loyalties on their reagent sales.

Through this agreement, we are able to provide to access to our state-of-the-art technology to a wide array of academic labs, research institutions and companies practicing this technology while participating financially in Dharmacon's success.

Consistent with our commitment to cutting-edge RNA research, our strategy of acquiring fundamental intellectual properties is a part of the strategy.

Last week we announced that we and our partner Alnylam had obtained a co-exclusive license to core intellectual properties relating to all therapeutic uses of microRNA from the Max Planck Society.

It is increasingly believed that microRNAs play a simple role in the regulation of gene expression in mammalian call and abnormalities in their function may play a role in human diseases.

As a result, we're very enthusiastic about potential of this new class of drug targets and of course as RNA they are precisely on target for us.

Our main microRNA research effort in fact is based on Singapore lab, which is focused on discovering new microRNA drugs for cancer and blood diseases.

We're also awaiting the potential approval of Macugen.

This is a drug for age-related macular degeneration that's being developed by Eyetech.

Macugen is an investigational non-antisense oligonucleotide or aptamer for the treatment of our ophthalmic diseases including AMD and diabetic macular edema.

In 2002, Eyetech licensed from us specific patents necessary to develop manufacture and commercialize Macugen and Macugen is currently under priority review to satisfy the FDA.

At this product going forward, we may earn additional milestone and royalty payments from Eyetech.

These transactions are further validation of our strategy to encourage and facilitate the biotechnologies' interest in RNA-based technologies and participate broadly in the success of the multiple companies that we can provide access to our patents and facilitate entering this area.

Before reviewing the pipeline events that we anticipate before the end of the year, let me just review just a few accomplishments thus far this year.

We and our partners have reported positive results from four second-generation antisense drug, that continue to move forward in development, and that's four out of four.

These include 301012 and apoB-100 inhibitor which lowered bad cholesterol, ISIS 104838 which improved the treatment of rheumatoid arthritis, OGX-011 designed to treat prostate cancer and other cancers and ATL-1102 to treat multiple sclerosis.

We have also accelerated our oral delivery program, we are making very good progress there.

We have announced data on several interesting preclinical compounds and added a promising anti-cancer drug that targets STAT-3 to our development pipeline.

We have extended our Lilly alliance more broadly in to cancer.

We have established broad alliance with Alnylam, a leader in RNAi therapeutics, which was described by Lynne earlier in the call.

In conjunction with this alliance, we have already received $5.5 million.

We secured up to an additional $29.8 million in funding from various government agencies to move our TIGER biosensor forward in development.

We have received our first milestone from Eyetech related to Macugen and, of course, those are just the highlights.

Now, let me just review the upcoming clinical milestones.

We and our partners plan to report data from several clinical trials by the end of 2004, specifically we plan to report results of two Phase III trials of alicaforsen and patience with Crohn's disease; two phase II trials with studies of alicaforsen in ulcerative colitis, that's with the enema form of drug; preliminary Phase II data on ISIS 14803, this is the drug that targets hepatitis C in combination with current therapy in patience with HCV infection who have failed current therapy; additional data from our normal volunteer trial with ISIS 301012 which targets apoB-100 in which we are actually measuring the drug's ability to reduce cholesterol safely in volunteers with elevated cholesterol will also be reported.

Also in 2004, we and our partners plan to initiate a Phase II trial of ATL-1102, that's a VLA-4 antagonist in patients with multiple sclerosis, that will be conducted by our partner ATL; a Phase I trial of Lilly’s drug LY2181308, which is the survivin drug in patients with cancer; additional Phase II trials with ISIS 113715, this is the drug that targets PTP-1B and has acted in models of type 2 diabetes and for which we already reported positive glucose tolerance test results in human being earlier this year; and additional Phase II trials of OGX-011 in combination with hormone therapy and chemotherapy in patients with breast, prostate cancer and lung cancers and those studies have been conducted by our partner OncoGenex.

So in the next couple of months we still have a lot of significant clinical events to come.

In summary, we had a good year.

We have a robust pipeline of promising antisense drugs with multiple opportunities for success, our TIGER biosensor program continues to grow in potential commercial value driven by government funding and our rich patent estate has enabled to cure over $42 million from funding, funding which supports the aggressive development of our pipeline.

And as interest in RNA-based therapeutic continues to grow and to broaden, we see the opportunities for taking advantage of our innovation of patent estate programs .

So, we appreciate your support and we look forward to updating you on our progress.

We will now answer your questions.

So, again, Lila (phonetic) if you can set us up for questions and answers, I'd appreciate it.

Absolutely.

Ladies and gentlemen, if you'd like to register your question, please press “1” followed by the “4” on your telephone.

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

Our first question comes from George Fulop of Needham, please go ahead sir.

Thank you for taking my question, thanks for the update.

Can you please elaborate on what you can say are the lessons learned from the first-generation trial that you believe are applied to the second-generation compound under development?

I think the most important lesson that we learned is that we need to optimize dose.

I think if you look at the totality of our experience with first-generation drugs is the -- as we gained experience we recognized that we can give significantly higher doses than we might have thought.

And we've applied that to the alicaforsen trials that are in progress right now; in fact, what we did in the alicaforsen Crohn's trials is simply take the dose up about 2.5 times the that we use.

And what we have done with that key lessons is, of course, it's an obvious statement, but what we have done to try to mitigate that risk is with second-generation drugs because of their improved property, we can pick targets in diseases where we had very crisp end points and what we've reported this year is results with four different targets that are expressed in different tissues and we have been able to demonstrate on a [clinical] antisense activity in human beings at specific dosage, given the common properties, that is these [inaudible] share seminal properties, we can use that information to help guide those in for all targets whether they're -- whether we have a good biomarker or not.

I think that is one of the most seminal accomplishments of the year and I think it reduces our Phase II, Phase III risk substantially, at least it allows us to be sure that we're dosing in the pharmacological range in each and every study that we participate in with second-generation drugs.

All right.

I also want to just briefly follow-up with the TIGER biosystem, I was intrigued by the real-time monitoring, could you elaborate on whether in some ways you can actually have a station monitoring actual production line or is it going to be sampling, if you can elaborate on that, it'd be appreciated.

The TIGER biosensor has attributes that make it unique.

It first can identify any infectious organism.

It can do it without knowing what you are looking for, without having the sequence or without having sequence.

And it can do it very, very rapidly.

And so it has applications across the field of infectious disease identification or infected organism identification.

The fact that it can be used to both identify and quantitate the amount of infectious organism available, then mean that it can be used in the process of vaccine manufacture on line, if you like.

And of course we have a lot of development left to do before we know precisely how it will be used and exactly what way, but certainly I can envision circumstance in which during vaccine manufacture, the apparatus is used online.

I can also certainly envision circumstance in which as companies are thinking about moving from one cell line to another, may be moving from eggs which is very cumbersome means of producing flu vaccine to cell lines.

They can exclude the potential of carrying cell DNA and other sorts of the problem and infectious agents, and so it will be used to help identify the substrates that would be appropriate to grow the vacancies on.

So there are lots of different ways that it can be used in just that applications.

Last quick question, kindly, the funding from the government recently 10 million addition, I believe you mentioned later that there was a total -- I might have misheard, 29. plus million and what do you anticipate ballpark in the future in terms of government funding for the TIGER biosystem?

Well we continue to have great interest from our core partner at the government which is DARPA and the transition partners.

I jut earlier named a whole slue of acronyms and so we are very optimistic that we will continue to generate many opportunities to provide good services to the government and those be on track towards developing the broader commercial applications into technology.

Thank you.

Our next question comes from Mark Monane of Needham.

Please go ahead.

Hi, thank you and a couple of follow-up question from George.

Let me start with a concrete question.

Quite a number of events expected, it sounds like, in the fourth quarter and may be even the beginning of next year in terms of the clinical milestones, can you help us set the stage of what the order of these announcements might be and whether we will see them at scientific meeting or will they come out in conferences or potentially what platform will be best in order to present the highlights of the Isis pipeline?

Yes, all of the above.

What I think is going to help the most is -- let me just talk about alicaforsen because those are -- that's the most material set of events.

Sure.

We have just -- the guidance we have given is at alicaforsen all four trials will be unblinded and available to discuss with investors before the end of the year.

There we will not wait for a scientific meeting, Mark, we will present the results of those 4 trial as roughly the same time in -- and in enough detail that investors will be able to make up their own mind about how -- whether they are [profitable] or not via the press release and conference call.

There simply isn’t an appropriate scientific meeting at the time and given the importance of those data we don’t feel that we can delay.

With regard to many of the other events, there will be combinations of pres releases and some scientific presentations; for example, the update of the apoB-100 data is actually being made or was made at Lipid Conference in Italy just this week by one of our clinical scientists, Shelly Bradley (phonetic).

Last question is a more general question, right now we have microRNA, siRNA, we have [abgermic] technology, we have [equal] technology.

We have antisense and we have direct limitation by mRNA.

Can you talk about how Isis's technology is spread across these different areas, you know, using your experience, what areas you see the most promising for real therapeutics in the world today?

Well, we pioneered all areas and all mechanisms and all chemistry that relate to RNA-based drug discovery.

And any RNA-based drug discovery whether you are targeting RNA or using nucleonic acid that are modified must go through our chemistry.

The chemistry patents are just broad enough, so aptamers -- it control our participation aptamers and E. colis which are fundamentally same sort of things, scans from the core work that we have done in the medicinal chemistry of oligonucleotide, that is a seminal accomplishment; we in effect helped invent a new medicinal chemistry and together with our own inventions and those patents that we acquired, we believe we have substantial control of that chemical space.

And in the end drug development is about chemistry.

So, control of chemistry is crucial.

Second, we have explored all of the potential mechanisms by which an antisense drug could work and that lead us to our participation in siRNA which is an antisense mechanism.

Third, we are active participants in the search on the RNA world and the RNA world is a rich and important world, it defines how cells work and therefore it will determine of a lot of what happens with regard to disease.

MicroRNAs just represent a new area of search and what is interesting about microRNA is that these are little RNAs that are 20 nucleotides long, that sounds [like] something you might expect because we've been talking about antisense drugs being 20 nucleotides long.

It looks as though evolution uses antisense drug as a part of biology and all 20 nucleotides long.

MicroRNAs play very important roles and so -- in managing how genes are used, and so for us to be involved in that is simply just a natural process for us, and we do think that's going to be important.

So, we have a broad provision in the RNA world, thanks to investing in basic research to create the broader opportunities that come from the RNA world that begins to chemistry, includes biology, thanks to that pharmacology and deals with all of the other elements that are necessary to make a chemical drug.

I think the most near-term product opportunities are obviously RNase H-based antisense drugs and aptamers such as Macugen.

Longer-term, other mechanisms by which antisense drugs work are potentially very exciting, may include double-stranded RNase's, RNAi, [slicing] and then perhaps slightly longer-term from there, opportunities in microRNA.

So my order of immediacy and breadth are antisense drugs in general, aptamers and new mechanisms by which antisense drugs work and then finally taking advantage of the advances in microRNA.

Great, thanks for the added information.

Thanks.

Our next question comes from Hui Shao of Mehta Partners.

Please go ahead.

Hi, good morning everyone for taking my questions.

First, I would like to say finally you and Lilly are able to conclude Affinitak program and move on more exiting programs.

My question is related to oral formulation of your cancer drugs.

I try to understand, you know, because, you know, oral formulation for large size molecule has been very challenging, what make Isis feel, you know, you have vary optimistic feel on oral formulation for antisense drug?

We are optimistic because of the data.

First remember that these aren't large drugs.

These are 20 nucleotides, so there is 6000 [governments] and so, and people think about large drugs, they kind of think about proteins and genes and so on, these are nowhere close to that.

The challenges of making these orally bioavailable were 2.

First, stabilizing them because they -- so that they can survive the acid and very high nuclei concentration into the gut, that's the highest nuclei concentration you have.

And second to take advantage of the mechanism that we leaned that they use to be taken up from the lower valve and as such a paracellular mechanism absorbed along with water.

So we took 2 steps, we stabilized the drugs, that [low] chemistry, and second we used penetration enhancers which were basically [biologic] cell sort of materials.

Now, in animals as a slurry, we are able to achieve anywhere from 15-25% oral bioavailability.

And that's been reproduced by us and many others in wide range of animals.

The challenge then was to convert that to something to a formulation that patients would actually take.

And to do that, of course, we had to create a number of different kinds of solid dose forma that would allow the release of the penetration enhancement drug at the right place in the right time in the gut.

And our optimism about the opportunity there is based on all, I think, 5 or 6 different clinical trials that we've done at different formulations.

I don’t remember the exact number of when they, but I think it's in that range.

And if we compare the bioavailability with solid dose forms that are commercializable in human beings to the bioavailability subcutaneously, which of course is the route that we use for pharmacology, we have about a 12 or so percent oral bioavailability, which is not great, but good enough.

We do think we will be able to do somewhat better over time and have studies in progress that will support that.

And finally, with 301012, we have the opportunity in the very near future to ask not only can we measure drug in blood which we know we can do, but can we measure blood effect because we will be able to measure cholesterol.

Remember that a 10-12% oral bioavailability measured in plasma is underestimating what we really think we are going to have in the organs where we want the drug mainly delivered.

So, we have a lot of data that supports our optimism and we have a lot more work to do, but it's all database.

Okay, thank you.

And last question is I know you have been very successful in receiving funding from the government, can you, Lynne, comment on your current financial situation and the burn rates looking forward?

The guidance that we have given for the year is that our net operating loss to be in the mid $80 million range and we don't give guidance on particular components that will add up to that.

We also will have enough cash at the end of this year together with a reasonable business plan and reasonably anticipated sources in uses through at least through the end of 2006.

Okay, looking forward to the clinical results in the next couple of months.

Thanks.

Our next question comes from Barney Sagman (phonetic) of CCL Partners (phonetic) please go ahead.

Good morning, Stan, Lynne and Alison.

Just a follow-up question on the ISIS 14803, if you can give us some color as to what kind of data we are going to be expecting in the fourth quarter?

Yes, 14803 is the first-generation antisense inhibitor for hepatitis C, we have reported in the past that this drug was capable of reducing viral titers in patients who were drug-resistant, type-1 genotype, high viral titers and so on.

But we did not see clearance in virus, which if, of course, the gold standard, that’s what you need to do.

The trial that we have in progress is examining the drug in combination of Peginterferon and Ribavirin in patients who have failed to respond after the first three months of Peginterferon and Ribavirin.

And so, our goal in that trial is to see in these drug-resistant patients a reduction of virus to zero and a fraction of those patients actually 10% would be sufficient to be -- to make it an exciting drug.

And so either later this year or in the first quarter of next year we will ask a question does that happen, are we getting any fraction of these drug-resistant patients to go to zero virus.

If we do, then the drug I think will be licensable and we will progress in development and if we don't then we'll terminate this development.

Thank you very much.

Once again, ladies gentlemen, to register for question, simply press the "1" followed by the "4" on your telephone.

Our next question comes from Bill Strong with Strong Management Company.

Please go ahead sir.

Hi, Stan, Lynne, good to talk to you.

Just a question when do you expect to have a second product on the market, after [vetrovine] making money and demonstrating the antisense technology by selling products?

Thanks, Bill.

I think the product -- the drug that's closest to commercial is alicaforsen.

We believe that the Phase III results that we have in Crohn's disease are positive on that what we will -- what our plans then are to sit down of the FDA, see what additional requirements the FDA might have for submission, but we will hope that we would be able to submit an NDA in that indication very rapidly.

If the data are positive also in ulcerative colitis, we think a relatively brief, relatively short Phase III problem would support an NDA.

So the next drug that could be a commercial opportunity for us is alicaforsen in Crohn's disease and we will have you -- we will know by the end of this year whether that’s a likely commercial opportunity.

Obviously, there will be time required and work required before an NDA is submitted and then there will be time for the NDA to be approved and we don't comment on how rapidly the process is taking place.

Yeah, good, thank you Stan.

Good luck, I hope it works.

Thanks, is it snowing in Cleveland yet, Bill?

No, it's not, but it's getting closer.

Well, go to Florida.

Okay, we will, thanks.

Dr. Crooke, there is no question at this time, I will turn the call back to you.

Thank you.

As there are no further questions we appreciate your interest and support and we look forward to updating you as our progress continues.

Have a good day.

Ladies and gentlemen, that does conclude the conference call for today.

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