Ionis Pharmaceuticals Inc (IONS) 2005 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the First Quarter 2005 Financial Results Conference Call.

During the presentation, all participants will be in listen-only mode. [Operator Instructions].

And as a reminder, the conference is being recorded, Thursday, May 5th, 2005.

I would now like to turn the conference over to Dr. Stanley Crooke, Chairman and Chief Executive Officer at Isis Pharmaceuticals.

Please go ahead, sir.

Thanks, Jennifer and thanks, everyone for joining us on today's conference call to discuss our financial results and highlights for the first quarter of 2005, as well as to update our programs.

Participating with me today are Lynne Parshall, Executive Vice President and CFO, Beth Halgen, Vice President of Finance, and Claudine Prowse, Director of Investor Relations and Corporate Communications.

The format for today's conference will be just a bit different from what we typically do.

In the financial portion of the call, Lynne will provide a summary of the financial information that you've already read in our press release, and then put these financial elements into a more strategic context.

I'll take advantage of the time that we have, to have a relevantly focused conversation on several key opportunities that we're pursuing, rather than reviewing every program in detail.

I think what I'd like to do is just provide more detail about just a few programs.

Because this format is a bit atypical for us, we certainly would appreciate your feedback afterwards and any other thoughts that you have about making better use of the time we have together.

Of course, at the conclusion of our prepared remarks, we will be happy to answer your questions.

Now, before we begin, Claudine will review our forward-looking statement policy.

This 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 describing our goals, expectations, intentions or beliefs is a forward-looking statement and should be considered an at-risk statement, including those 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 as human therapeutics in developing and commercializing technology and systems used to identify infectious agents 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' research and development programs are described in additional detail in Isis' annual report on Form 10-K for the year ended December 31st, 2004, which is on file with the US Securities and Exchange Commission.

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

Now, I will turn the call over to Lynne to discuss our results for this quarter.

Thanks, Claudine.

This morning, I would like to discuss the financial highlights of our first quarter.

I am assuming that you've all had an opportunity to review our first quarter earnings release, which we issued earlier this morning, so rather than repeating the details in the release, what I plan to do is review the financial highlights and then focus on putting our financial results in a strategic context.

Earlier this year, we completed the corporate restructuring to allow us to focus our resources on advancing our most promising second-generation drugs, while reducing our expenses and our cash use.

As a result of the measures we took, our cash burn decreased significantly over the first quarter to $21.2 million in the first quarter this year, compared to 34.6 million in the first quarter last year.

Additionally, our first quarter pro forma operating expenses were more than 20% lower than our operating expenses for the first quarter of 2004, if you adjust for restructuring costs and non-cash compensation expense.

As the year progresses, we expect to realize further operating expense savings and reductions in our cash use as a result of our cost containment measures.

And we remain on track to achieve our projected net operating loss in the low $50 million range.

While the reorganization was a painful process, it is now firmly behind us.

We've consolidated into fewer buildings and everyone is now fully functional and back aggressively making forward progress.

While we are keenly disappointed about our stock price from the financial markets evaluation of ISIS, when we survey our assets, we continue to be very enthusiastic about the value that we're building.

With 11 drugs in our and our partner's pipelines including our newly announced asthma drugs, we have numerous commercial opportunities.

We are aggressively pursuing the exciting short-term commercial opportunity for ISIS 301012 and familial hypercholesterolemia or FH to provide another short-term revenue opportunity along with the alicaforsen enema from ulcerative colitis.

Later in the call, Stan will discuss our plans for ISIS 301012 and FH in more detail.

Our TIGER biosensor system continues to progress with the announcement of $1.5 million in new government contracts this quarter.

We'll soon be rolling out our TIGER commercial business plan.

We are also very excited about the opportunities for the Tiger biosensor to add to our bottom-line and to provide value for ISIS shareholders.

Our intellectual property continues to generate value both in licensing deals and in supporting our satellite company strategy.

You'll recall that the satellite company strategy allows us to continue adding more drugs to our pipeline, and therefore, more commercial opportunities moving forward.

We are very enthusiastic about the addition of Sarissa to our high quality partners this quarter, as well as the continued progress in OncoGenex collaboration with the addition of a new antisense inhibitor of heat shock protein 27 to vary anti-cancer development program.

Although the partnering environment seems nearly as difficult as the financial markets, we are very pleased with the high level of interest we're seeing from pharmaceutical companies in our drugs and technology.

We are confident that this will bear fruit this year.

While we believe that our presence at significant upcoming meetings, such as the American Diabetes Association in San Diego in June and the American Thoracic Society, this month in San Diego, as well as our recent presence in the American Association for Cancer Research in Anaheim in April will continue to increase the level of visibility of our exciting programs.

In summary, we believe that the operating plan we have implemented earlier this year leaves us poised to successfully execute our goals for 2005.

Now, I'll turn the call back to you, Stan.

Thanks, Lynne.

As you can see, we are focused on weathering this difficult environment, and we do believe that we have the tools to do it.

And rather than reviewing all the events of last quarter which was summarized in the press release, I just want to focus on a few key items about which we are particularly excited.

We now have two drugs in the pipeline that we think represent potential commercial opportunities, possibly as early as 2008.

I'll discuss the development plans for both those drugs in more depth in just a minute.

Then, I want to describe a new addition to our pipeline, the first of our aerosol drugs to reach development.

It's a drug that is designed to treat asthma.

Finally, I'll spend a moment discussing our TIGER biosensor system and the business funding process to commercialize it.

Now, let me just turn first to the near-term opportunities in clinical development.

Recently, we have taken an important step to contentionally accelerate our early product launches and reduce time to profitability.

We have added a new near-term development opportunity, which is ISIS 301012 for familial hypercholesterolemia.

This means we now have two opportunities in the near-term to put products on the market, alicaforsen for ulcerative colitis and ISIS 301012 for familial hypercholesterolemia.

Both of these drugs are working in clinical trials and we are moving them forward with a high level of optimism.

Let me first describe the new relevantly short-term development opportunity that we have created through ISIS 301012 in these patients with the genetic disorder called familial hypercholesterolemia.

Then, I'll discuss how that fits into our overall development strategy for ISIS 301012 and then move onto to the other topics.

ISIS 301012 is second-generation antisense inhibitor of apoB-100.

ApoB-100 is the molecular carrier of LDL cholesterol, it's necessary for the synthesis and transport of LDL and VLDL.

If you can't make apoB-100, you can't make LDL, and you can't make VLDL, those are the bad cholesterols.

We've had a spectacular six months with ISIS 301012.

We have demonstrated a compelling profile for the drug, and just in brief, here are the highlights.

In normal volunteers with just one month of dosing, ISIS 301012 lowered LDL, VLDL, total cholesterol in apoB-100 within one week of beginning treatment and with significant reductions over time as dosing continued.

In fact, the overall reduction in apoB-100 was more than 50% at 200 milligram per week dose.

And the combined reductions of LDL and VLDL equaled that.

We showed that 301012 reduces cholesterol through a unique mechanism and that it is likely to be complementary to the statins.

ISIS 301012 produced very prolonged dose-dependent reduction in cholesterol in both animals and mans, suggesting that we can dose very infrequently.

We have shown in man that this drug has a 33-day elimination half-life and in man, the duration of effect after only a month of dosing was more than two months.

To date, 301012 has produced none of the side effects that have caused other cholesterol drugs to fail in animals or in humans, and we believe that we have just published a paper in which we think provide answers as to why it doesn't do that.

Finally, we have shown that ISIS 301012 is orally active in animals, not only does it -- are we able to measure drug getting into the animal, but we're able to demonstrate that we can lower cholesterol with an oral 301012 formulation.

These exciting results that have led to a 3-pronged development path for ISIS 301012 and we are moving toward that -- on that path aggressively.

We have initiated a development plan for 301012 in familial hypercholesterolemia, as the first prong of our 3-prong development path.

Now, FH is a genetic disorder.

Individuals with disorder have extraordinarily high lipid levels, if they are homozygous, and as a consequence they die very early of cardiovascular death.

There are both homozygous and heterozygous and all of these patients have real problems with high cholesterol and with the consequences of high cholesterol -- cardiovascular disease.

FH patients are not adequately controlled on even combinations of the highest possible doses of currently available lipid lowing medications, such as statins.

And many of these patients, then, end up requiring apheresis.

Apheresis is a medical procedure in which the patient must be treated in a specialized clinic often several times a week.

The treatment involves having ones blood cleansed, taken out and put into an instrument and then having the cholesterol and other lipids removed from the blood and then having the blood returned to the patient.

Such treatments are time-consuming, they're costly, they are, obviously, very disruptive to a patient's life.

And frequently, these treatments are the only options these patients have to lower the cholesterol and delay cardiovascular disease.

And even that treatment fails to lower cholesterol adequately to aggravate the risk of cardiovascular disease.

Now, because 301012 directly inhibits the production of apoB-100, the protein that is necessary to make LDL and VLDL, it has a novel mechanism and it has the potential to have significant effects on lipid levels in patients with this disease.

Remember that in animals, we were able to lower LDL by approximately 90% with a modest dose of ISIS 301012.

Because 301012 then works through an entirely different mechanism from statins, it should add to their activity in a very significant way.

Furthermore, we have shown that 301012 can lower lipids without liver toxicity in animals treated for extended periods of time.

And in man so far the safety profile of ISIS 301012 looks extraordinarily attractive.

If you add to this the fact that 301012 does not interact with cytochrome P450 and it has been shown not to negatively interact with other drugs, does not enter skeletal muscle and therefore is not expected to produce skeletal muscle toxicity, and of course, doesn't enter the blood - doesn't cross the blood brain barrier and, therefore, is not expected to produce effects on the central nervous system.

You can see why this drug is so exciting as a therapy for these very sick people.

ISIS 301012 has the potential to lower cholesterol in this desperate patient population and the result to decrease cardiovascular risk and prolong lives.

We believe that we can file an NDA for ISIS 301012, for FHA relatively rapidly, and we are completing the development plan to do so, assuming our clinical data are positive.

And by the way, this is a well trod path; the FDA has made fairly clear guidance about what is required to get approval in this patient population.

An early initial product launch of ISIS 301012 for FH will be an important step forward in the path to commercial success for the drug, and we certainly plan to initiate trials of ISIS 301012 in patients with homozygous familial hypercholesterolemia as rapidly as possible this year, and of course we'll keep you posted on our progress with this new development opportunity.

Now the second development path for ISIS 301012 is in the traditional polygenic hypercholesterolemia population, in other words, patients with high cholesterol.

These patients comprise most of the $18 billion statin market.

This year we plan to begin two Phase II trials or begin Phase II trial - Phase II studies to optimize dose and schedule the 301012 as a single agent, as well as to begin combination studies with atorvastatin and possibly other commercially available lipid-lowering drugs in order to move 301012 toward this much larger commercial opportunity.

As you know, a large percentage of the population with high cholesterol cannot meet their target lipid levels even with high doses of statins.

Long-term, high doses of statins also represent a significant safety risk.

As a result, we believe the market for a drug that can be safely added to statins, worked by different mechanism and help patients to achieve target lipid levels is significant.

We believe 301012 has the potential to be just such a drug and that's how, of course, we're going to be positioning it for the market.

We are also developing 301012 as an oral agent.

That's the last prong of our 3-prong development path.

Obviously, the breakthrough in convenient -- patient convenience represented by an oral drug is significant and we are delighted about this follow-on opportunity.

We recently initiated our first oral trial with ISIS 301012.

This trial, essentially, is an oral replica of the successful Phase I pharmacological study that we just have completed with the subcu formulation.

Subjects receive one month of the dose - one month of dosing at an oral dose that we expect to be certainly pharmacologically active.

In this trial, we'll be looking at drug levels in blood, of course, after oral dosing, but for the first time, we will be examining the ability of an oral antisense drug to unequivocally demonstrate pharmacological effect in man.

And we'll do it, we'll assess that by measuring apoB-100 levels of blood, cholesterol, LDL, VLDL and all the other sorts of things that we measured in the initial trial of the subcu product.

Well, we will be reporting at the ADA, at the American Diabetes Association, the final results of the initial trial with the subcu product in patients -- in normal volunteers with ISIS 301012, and we're very pleased with the results that we are observing.

Now, let's move onto our second near-term commercial opportunity.

That's Alicaforsen for the treatment of ulcerative colitis.

Now, this, of course, is the enema formulation.

In late December we reported findings from three Phase II clinical trials of Alicaforsen enema.

In these trials Alicaforsen enema was well-tolerated, improved signs and symptoms of disease in patients with ulcerative colitis, and produced very prolonged durations of remission.

Alicaforsen enema outperformed both placebo and the standard of care in enema management of ulcerative colitis.

We believe this drug has the potential to achieve 100 to 300 million in annual sales, and we believe that the development can be completed relatively rapidly and relatively inexpensively.

We're preparing for an end of Phase II meeting with the FDA.

Our plan for Phase III includes two relatively modest sized placebo controlled trials, which we believe can be conducted fairly rapidly and inexpensively.

And then we will fully flush out the profile of the drug in Phase IIIB and IV studies.

Then, of course, we'll be considering other possible indications in addition to ulcerative colitis, such as pouchitis.

We are in discussions with potential commercial partners for this drug.

While I can't discuss this in detail, we're optimistic that we will find an appropriate partner.

Beyond these two relatively near term product opportunities, we have an exciting pipeline and an exciting research program that will continue to create new exciting products for the pipeline.

Let me just highlight one important and exciting achievement that we announced in the recent weeks.

That's the addition of the very first aerosol product, that is, an antisense drug -- second-generation antisense drug delivered to the lung by aerosol.

The product opportunity is ISIS 369645, and it is a second-generation second antisense inhibitor of the alpha subunit of interleukin 4 receptor or IL4-receptor-alpha.

As I say, it is the first, but not the last drug from our relatively new lung-directed inflammation program in development.

ISIS 39645 also shows how rapidly antisense technology enables the screening, validation and prioritization of gene targets in pre-clinical profiling of potential drug candidates.

Isis has created a significant data portfolio that supports ISIS 369645 as an attractive local treatment for asthma in pre-clinical studies.

And to-date we've shown in animal models that the drug works, it potently reduces IL4-receptor-alpha levels, it reduces cytokine production, it reduces inflammation in the lung, it reduces airway hyperresponsiveness, and these are all announced models of asthma.

The drug is safe.

When delivered by inhalation it rapidly distributes to the airways and achieves therapeutic concentrations in molecular cells with little systemic exposure, and the drug is convenient.

Inhaled antisense has the potential to provide highly specific potent effective therapies for the treatment of asthma and other chronic pulmonary inflammatory diseases, with the convenience of daily, weekly, or perhaps, even less frequent dosing.

Moreover, this drug will have a very attractive cost of goods due to its potency combined with the stability of second-generation drugs.

Our IL4-receptor-alpha drug is one of the numerous candidates that we're examining for inflammatory diseases of the lung, and it's simply the first to enter development, and we expect it to be in the clinic in the near term.

Behind it, we have many compounds that demonstrate unique pharmacological profiles that -- they are on both asthma and chronic obstructive pulmonary disease.

We'll be describing much more of our work in more detail at the American Thoracic Society Meeting, which starts on May 20th in San Diego.

Now, let me move on to our diabetes drug, ISIS 113715, which is a unique new agent for the treatment of type-2 diabetes.

Because it selectively enhances the response of cells to insulin by reducing a specific protein PTP1B that inhibits responses to insulin, it is the first of a new class of insulin sensitizers.

It is a selective insulin signal enhancer.

In animal studies we have show that ISIS 113715 reduces glucose without many of the side effects associated with other drugs.

To-date, ISIS 113715 is performing in man in a fashion that is similar to the way it performed in animals.

We plan to report initial results from our Phase II trial in patients with type-2 diabetes on June 14th at the American Diabetes Association Meeting.

In this study, we are evaluating doses of 100 to 400 milligrams per week in patients with type-2 diabetes.

These patients are newly-diagnosed diabetes and are treated with only 113715 or placebo for six weeks.

If it's successful, this study then sets the stage for the key 12-week study, and given the half-life of hemoglobin A1C, we would expect to see significantly improved results with 12 weeks of study and 12 weeks of evaluation.

This year we also plan to define the optimal dosing schedule for future clinical trials, advance into 12-week trial with the drug, and initiate combination trials with other anti-diabetic agents.

Remember that this drug has been shown to be active in all the animal models with type-2 diabetes that we've studied, never produced at any dose hypoglycemia, no metabolic acidosis, no weight gain.

In fact, weight loss.

Remember that it is additive in animals to Rosiglitazone, Metformin and other traditional anti-diabetic agents.

So, it is an agent that has could be slotted for treatment of diabetics in many, many different positions in the treatment paradigm.

Now, just a moment on our partner pipelines.

As we've shown, antisense technology is extraordinarily efficient.

With it we can make many more drugs than we can afford to develop ourselves.

In the last year, we provided our partners Eli Lilly, OncoGenex and ATL, 3 additional drugs for their pipelines.

Our objective is to participate with our partners in advancing new products in the clinical development process toward commercialization.

Just let me highlight two drugs for you in this section.

Lilly - or LY2181308 is an anticancer drug that targets an important target called survivin.

This drug is currently in Phase I trials.

It's, of course, being developed by our partner Eli Lilly.

And, we continue to support Lilly's ongoing development program for this drug.

We look forward to continuing progress here, and reports from Lilly about the progress of the drug.

OGX-011 is an anticancer drug that targets clusterin.

Clusterin is an anti-amphipathic molecule that prevents program cell death.

This drug is also in Phase I, II trials.

Data from the first Phase I trial was previously reported in patients with prostate cancer, and the data demonstrated that the drug concentrated to achieve good concentrations in prostate, lower target clusterin level, and increased apoptosis in these patients in the prostate cancer cells, which, of course, is what you're hoping for.

In addition, the Phase I trial in which OGX-011 is evaluated in combination with Taxotere in various solid tumors will be presented by clinical investigators at the American Society of Clinical Oncology or ASCO Annual Meeting this year -- this month.

OGX-011 is, as I said, being developed by our partner OncoGenex.

Moving forward, our goal is to support OncoGenex ongoing development plans with OGX-011 through the initiation of Phase II trials in patients with a variety of solid tumors.

Last month, we announced expansion of our drug discovery and development collaboration with OncoGenex.

This broad relationship allows for the development of two additional second-generation antisense, anticancer candidates.

OncoGenex will be solely responsible for the pre-clinical and clinical development of the anticancer drugs.

Recently, OncoGenex selected its first drug candidate under this expansion.

That drug is OGX-427.

It targets a heat shock protein called heat shock protein 27.

It is a protein that's over expressed in numerous tumor types and is associated with treatment resistance through its ability to help cancer cells survive stress-induced injury, such as produced by a cytoxic drug.

Today's first quarter financial press release summarizes the goals for our products in development, so I'll move on from this now.

Of course, we'll be pleased to answer your questions about any of the drugs in the pipeline in the Q&A.

I want to just finish by spending a few minutes discussing our TIGER biosensor system.

In as much as we'll be hosting a separate webcast that will describe TIGER, its status and our plans for TIGER in detail within the next month, I will keep my comments here very brief, but I certainly want to encourage you to participate in that conference call.

I think you'll find the opportunity that TIGER presents really exciting, and the progress that we made and where we stand with the development of TIGER really rather remarkable.

TIGER is a revolutionary new means of identifying and quantitating infectious organisms.

TIGER can identify any infectious organism in essentially any sample.

You needn't culture, you needn't know what you're looking for, and you needn't even hope that it's a previously existed known organism.

It can identify new organisms, it can characterize them relative to previously known organisms, and it does it rapidly.

First results in less than five hours with today's methodology.

Thanks to the investment of several agencies and the Federal Government, the TIGER system is now fully developed.

In fact, we are in the process of pulling the first of our TIGER systems together with customers as we speak.

We plan to sell TIGER products, which are specifically for design -- for defined applications, in addition to the TIGER instrument and software.

Our products can incorporate identification of all bacteria, and we are making progress in expanding our coverage of the viral world.

So, the next month we plan to provide much more detail about this extraordinary opportunity, but we are well on our way to achieving the ambitious goals we set for TIGER for 2005.

Some of these included presenting our plans for the TIGER system, which we'll do as I say in the next month.

Second, is deploying our first instruments to government customers and beginning to sell products to these customers, which, as I said, is happening as we speak.

Third, adding new contracts from the government and other sources to support the development of additional applications.

We've already announced progress this year with two new government contracts worth $1.5 million.

And, finally, we wanted to publish additional papers demonstrating the value of the TIGER system and diagnostics epidemiology, infectious disease control.

And we've done that, and we have exciting papers coming out that we'll be telling you about.

Rather than go into more detail about TIGER just now, I hope with that teaser you will decide to join us on our upcoming conference call when we discuss TIGER as a separate item, and what our plans are.

So with that as an overview, I want to open up the call for questions.

Jennifer, if you can review the procedures and set us up to deal with questions, I would appreciate it.

[Operator Instructions] One moment please for the first question.

Our first question comes from the line of George Fulop of Needham & Company.

Please proceed with your question.

Thanks for taking my question, and I appreciate the progress to-date.

A couple of questions please in terms of the restructuring charges this quarter.

Can you give us indication of are there more to come in the magnitude of the restructuring charges?

Lynne, if you'll take that.

Yes.

George, we don't anticipate many more restructuring charges to come, and the only ones that we anticipate would have to do with the sales of buildings that we own that -- for which negotiations are in progress.

Thank you.

On the clinical front, quite interesting developments.

Stan, would you elaborate please on the typical development and regulatory path for familial hypercholesterolemia indication?

As you know, George, the homozygous form of the disease is a rare, very severe disease, but there are large numbers of heterozygous.

Both homozygous and the severe heterozygous often end by being forced to have apheresis 3 times a week.

There is substantial interest in the medical and regulatory community to see new treatments for these patients because, clearly, the current treatments are inadequate.

Historically, single trials that involved very small numbers of patients have been considered to be sufficient to gain approval for this indication.

Clearly, what you need to show on those trials is the ability to reduce cholesterol, in addition to the current treatments that those patients are on.

Very straightforward endpoints that we believe 301012 will meet easily.

I should add that we have met with clinical investigators in this area, and the level of enthusiasm for 301012 is really, really gratifying.

So, we believe that the study can be performed and performed well and performed fairly rapidly.

Very good.

Other questions.

Yes, one other please.

Can you just describe with regard to Alicaforsen enema partner potential?

What are the key characteristics you are looking for, or do you anticipate partnerships to that to make this work well?

Well, the universe of potential products for the product of this sort, with a commercial potential of 100 to $300 million, it does not include the major pharmaceutical companies.

And so, the ideal partner is especially pharma with knowledge and experience in smaller niche products in the gastrointestinal disease population.

And it's those companies with whom we are speaking.

Well, thank you for the update.

Thank you.

[Operator Instructions].

I am showing no further questions at this time.

I will turn the conference back to you.

Thank you very much.

If there are no further questions, please stay tuned.

We think we're going to have a really exciting quarter two here with lots of exciting data that will be reported at upcoming meetings on a variety of drugs.

First, at the American Thoracic Society, then at the American Diabetes Association.

Those will be followed by reports from the oral study that we're doing with ISIS 301012, which ultimately will be a seminal moment in the history of the development of antisense technology.

So, we think we have an exciting year ahead with lots of milestones that even in this environment should be recognized with improved stock performance.

Thank you very much.

That does conclude our conference call for today.

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

Have a great day.