Ionis Pharmaceuticals Inc (IONS) 2006 Q2 法說會逐字稿

Ladies and gentlemen thank you for standing by and welcome to the Isis Pharmaceuticals Second Quarter Results 2006 Conference Call.

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

Afterwards, we will conduct a question-and-answer session. [OPERATOR INSTRUCTIONS].

As a reminder, this conference is being recorded, Thursday, August 3, 2006.

It is now my pleasure to turn the conference over to Dr. Stanley Crooke, Chairman and CEO of Isis Pharmaceuticals.

Please go ahead sir.

Thank you and welcome everyone to our conference call today; leading -- we will of course discuss the financial results and highlights for the second quarter of 2006.

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

Beth Hougan, Vice President of Finance; as well as, our new Vice President of Corporate Development, Kate [Wilfred] Corcoran.

After we run through some of the business at hand, I will of course take a moment to appropriately introduce Kate to you, all of you.

Earlier this year, I shared with you in some detail, the goals for the year.

We believe we've had a great first six months and absolutely everything appears to be on track to meet the objectives that we articulated for the rest of the year.

As you know, 2006 is an important year for our most advanced assets;

ISIS 301012 for patients with high cholesterol;

ISIS 113715 for patients with type 2 diabetes; and our Ibis T5000 biosensor system.

Our mission in 2006 is to move the assets toward the key value inflection points that we set for them, in a very aggressive yet efficient and prudent fashion.

Last quarter, we reported positive Phase 2 data for both ISIS 301012 and ISIS 113715, in studies, in which they were used to single-agent to treat patients either with high cholesterol or with type 2 diabetes.

As we are -- in the second half of the year, we are looking forward to presenting a great, deal more information about ISIS 301012, both as a single-agent and in combination.

In addition, 2006 is the year in which we are transitioning our Ibis T5000 biosensor system from a -- from development [to] commercialization.

You'll recall, that establishing a partnership to manufacture the instrument component of Ibis T5000 was a major objective for the year and we are particularly pleased that we have achieved this with Bruker.

Bruker is a worldwide leader in mass spectrometry, manufacturing and sales and has been a long-term supplier of the components of the Ibis T5000 instrumentation.

We believe Bruker is the perfect partner for the commercialization of the Ibis T5000.

This alliance is also important to us, because we benefit from Bruker's investment in instrument manufacturing and field service support, while we can invest in creating the [multiple] product opportunities and manufacturing the [multiple] product opportunities that are -- as a part of the high margin consumable business, that's associated with the Ibis T5000 system.

This deal was one of major, one of several major achievements we had planned for our IBIS division this year, as we implement our commercialization strategy.

We also completed financial transactions that enabled us to move forward aggressively, while retaining control of our key assets until they reached stages of development from which they can return the greatest value to our shareholders.

As you know, the Symphony GenIsis partnership was established to fund the advancement of ISIS 301012, as well as two new second-generation antisense drugs targeting the glucagon receptor and the glucocorticoid receptor for the treatment of patients with type 2 diabetes.

In addition, we've put in place, an equity line of credit with Azimuth Opportunities, to provide us ready access to capital markets when we choose.

We have just drawn down our first $5 million of the $75 million that's available to us through this instrument.

Given market conditions and anxiety about the future, we felt that it was prudent to take this small amount down.

But, we of course intend to be very cautious about the use of this financial instrument, until our stock price is at a better place.

So on that note, let's get started with the business of the day.

I'll be turning the call over to Lynne, who will briefly review our financial results, as described in the press release that we issued earlier today; followed by a review of recent business highlights that I'll take care of.

I am sorry, that Lynne will take care of.

I will then discus the current status of our most important programs and focus on the goals and events to look forward to for the remainder of 2006.

We'll then be happy to answer your questions.

Before we have Kate review our policy on forward-looking statements, I would like to take just a moment to introduce you to our new Vice President of Corporate Development.

Kate [Wilfred] Corcoran, as you may know, Kate comes to us having spent the last several years as a sell-side biotechnology analyst, and we're extremely happy that she accepted the offer to join Isis.

I feel very confident, that her skills and knowledge base will add tremendous value to our management team and assure that we continue to keep our shareholders well informed about our activity.

So, Kate, welcome, and now you get to give your first forward-looking statement.

Thanks Stan, it's great to be here.

Now for the exciting part of the call, which certainly is a role reversal for me to reading the following statement.

This webcast includes forward-looking statements regarding our business, the financial position of Isis Pharmaceuticals, and the therapeutic and commercial potential of Isis' technologies and products and development.

Any statement describing Isis' goals, expectations, intentions or beliefs is a forward-looking statement and should be considered an at-risk statement, including those statements that are described as Isis' 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, and developing and commercializing systems to identify infectious organisms that are effective and commercially attractive, and in the endeavor of building a business around such products.

Isis' forward-looking statements also involve assumptions that if they never materialize or prove correct, could cause its results to differ materially from those expressed or implied by such forward-looking statements.

Although Isis' forward-looking statements reflect the good faith judgment of its management, these statements are based only on facts and factors currently known by Isis.

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

These and other risks concerning Isis' programs are described in additional detail in Isis' annual report on Form 10-K for the year ended December 31, 2005, and its quarterly report on Form 10-Q for the quarter ended March 31, 2006, which are on file with the SEC.

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

Now here is Lynne.

Thanks a lot Kate.

I am assuming that you have all had an opportunity to read the press release we issued earlier this morning, and you know, as it is typical in our calls I won't reiterate what's detailed in the release, but I will focus on several key highlights.

Please feel free to ask questions at the end on any points from the release that need clarification, in addition to the things that I am going to focus on in the call.

Due to the implementation of our restructuring and recapitalization plans, we are now in a run-rate that we believe is both stable and sustainable.

We've enhanced the productivity commitment and enthusiasm of our organization, while substantially reducing expenses.

Consistent with the guidance we gave earlier in the year, we are still predicting a net operating loss excluding non-cash compensation expense and restructuring activities in the high $50 million range, and pro forma operating expenses approximately $88 million.

Our guidance anticipates increases in spending during the second half of 2006 on ISIS 301012 and the two new metabolic disease drugs in the Symphony GenIsis collaboration.

Further, we ended the second quarter with $138 million in cash and investments, including $64 million from Symphony GenIsis.

I'd like to take a moment here to go over how we are accounting for the Symphony GenIsis transaction, since this is the first quarter in which it appears in our consolidated financial statements.

Under the terms of the collaboration, we maintain control of the development activities of ISIS 301012 and the two diabetes projects, and we have exclusive rights to reacquire the intellectual property for these three drugs by purchasing the common stock of Symphony GenIsis.

Therefore, because we are considered the primary beneficiary of Symphony GenIsis, we are required to consolidate the financial results of Symphony GenIsis with our own.

As a result, our financial statements now include the cash and cash equivalents held by Symphony GenIsis.

Additionally, our financial statements include line items called Noncontrolling Interest in Symphony GenIsis.

On our balance sheet, this line item initially reflected the $75 million of proceeds contributed into Symphony GenIsis, less $4.1 million of structuring and legal fees and $18.6 million fair value of the warrant issued to us by Symphony Capital.

As we and Symphony GenIsis progress through our collaboration this line item will be reduced by Symphony GenIsis expenses, which were $13.6 million in the second quarter, and they will continue to be reduced until the balance becomes zero.

The reductions to the Noncontrolling Interest in Symphony GenIsis is reflected in our statement of operations, using a similar caption, and improve our reported net loss.

In exchange for the exclusive purchase option to acquire Symphony GenIsis equity, we granted to Symphony Capital, a 5-year warrant to purchase 4.25 million shares of common stock, at an exercised price of $8.93 per share, which was a 25% premium over our prior 60-day trading average.

Current accounting guidance requires us to determine the fair value of the warrant, and record that value on our balance sheet.

We use the Black-Scholes option pricing model that considers a number of complex and subjective variables, including our estimated stock price volatility, over the term of the warrant and this analysis resulted in $18.6 million valuation.

In addition to our Symphony transaction during the second quarter, we entered into a second important financing work arrangement.

We established a $75 million equity line of credit with Azimuth Opportunity.

This agreement gives us flexible access to the capital markets, allowing us to choose when and how often we will draw it down on the equity line.

As Stan mentioned, we recently completed our first draw down of $5 million, selling roughly 872,000 shares at an average price of $5.73.

This equity line, along with the Symphony GenIsis collaboration greatly strengthens our ability to maintain control of our key assets and drive them to inflection points that will bring the most benefit to our shareholders.

The $150 million we gained access to through Symphony and Azimuth transactions, strengthen our ability to continue to develop our growth aggressively, and advance our technology towards commercialization as demonstrated by the important recent achievements related to our key assets;

ISIS 301012, ISIS 113715, and the Ibis T5000 biosensor system.

We announced exciting Phase 2 data from the lower dosage cohorts of routine high-cholesterol patients, taking ISIS 301012, as a single-agent.

And the drug received orphan drug designation by the FDA for the treatment of patients with homozygous familial hypercholesterolemia.

At the American Diabetes Association meeting in June, we presented positive Phase 2 data in treatment naïve diabetic patients, taking ISIS 113715 as a single-agent.

And most recently, we entered into a strategic alliance with Bruker Daltonics, for instrument manufacturing and distribution of our Ibis T5000 biosensor system.

We are thrilled to have this agreement with Bruker.

With them we met one of our most important strategic goals for the year for the IBIS division, and it enables us to take the next important step in commercializing the Ibis T5000.

This alliance allows us to take advantage of Bruker's market leadership in scientific instrumentation, while focusing on the higher margin proprietary consumable kit business ourselves.

With our strong financial position, and recent accomplishments, we're confident that we will continue to achieve our 2006 objectives.

And we are looking forward to additional progress with each of these assets, as well as the rest of our clinical pipeline and that of our partners.

I'll now turn the call back over to Stan, so he can update you briefly on where we are today and what we are looking forward to accomplishing during the remainder of the year with our key development compound and the Ibis T5000.

Thanks Lynne.

So if we focus on what we intend to accomplish in the second half of the year, let me set the stage for that by updating you with, as to what we've accomplished to-date with our most important assets.

Well, clearly the most important drug in our pipeline is ISIS 301012, and we are aggressively developing ISIS 301012 as a new treatment for patients with high cholesterol.

You have already seen exciting data from normal volunteer studies and this year we presented Phase 2 data from the lower dosage cohorts that were used in patients with high-cholesterol, in whom we administered 301012 as a single-agent.

Since, we've discussed these data in some detail, in fact in May at the Analyst Presentation, New York.

I will just briefly remind you that in patients who received 200 milligrams a week for just three months, we saw spasm like 42% reductions in LDL, and most excitingly concomitant 47% decrease in triglycerides.

Keep in mind, that we saw efficacy at of all of the doses that we looked at and that these doses are what we consider the lower end of the dose response curve.

Certainly they are at the lower end of what we believe will be a very safe dose range.

We're currently dosing the 300 milligram cohort in this single-agent study.

So, 300 milligrams for three months in patients with high-cholesterol on no other treatment.

I am pleased to tell you that that experiment is going very-very well and [indiscernible] safety analysis that we look at weekly, we certainly are very encouraged by the safety that we are seeing.

So 300 milligrams as a single-agent is clearly very well-tolerated.

We are also evaluating 301012 in combination with statin therapy both in patients with routine high cholesterol as well in patients with genetic disorder, familial hypercholesterolemia.

Both of these studies are progressing well and demonstrating again a very positive safety profile for 301012 in combination with statins.

That includes, in combination with statins, in the routine high-cholesterol, in the homozygous familial hypercholesterolemia and the heterozygous hypercholesterolemia.

Based on the excellent safety that we are seeing in these studies, we have felt comfortable to expand our dosing in patients with routine high cholesterol, to include both higher and longer-term dosing in combination with statins.

We think that's going to substantially increase our experience with 301012, in combination and is going to get it done quite a bit faster than what we expected to do.

So what I just told you was a bunch of great news.

The studies are enrolling well and the drug with regard to blinded safety analysis is outperforming any expectation we might have had and is performing at a level sufficient to allow us to be even more aggressive about the use of the drug in combination with statins.

Remember that the initial trial in combination with statins was just five weeks.

We are now able to expand that trial at the higher doses and to treat patients for 12 weeks.

So this study will provide our first look at what we hope will be a very big part of the future of 301012, that is as a once a week injectable that combines with oral statin therapy to bring plasma LDL down to desired levels of hypercholesterolemics, who are not achieving target levels with statin alone.

We are also hopeful that the familial hypercholesterolemia studies will provide an accelerated pathway to commercialization because of the unmet medical need in this desperate patient population.

Again, we are pleased that 301012 was granted orphan drugs status for this indication, and we're certainly pursuing this as aggressively as possible.

So we do expect an eventful second half of the year for ISIS 301012, and everything that we're seeing encourages us to be very bullish about this drug.

What's particularly important again, is that based on the safety, we are, sooner than we expected going to expand our experience into patients treated with higher doses of 301012, and for longer durations of time.

And again, in combination in patients who have obviously more significant disease.

Now moving on to ISIS 113715.

In June we presented Phase 2 data from a study in which we treated treatment naive type 2 diabetic patients for three months with doses of 200 milligrams weekly of ISIS 113715 as a single-agent.

Again, we've discussed these results in detail in our June Analyst Meeting, so I won't reiterate them.

But, to summarize, we saw a significantly, statistically significant improvements in multiple measures of glucose control; accompanied by a very positive safety and side-effect profile.

At the same time, we saw what for a diabetes drug were quite meaningful reductions in cholesterol.

Since presenting those data, we've had some people who are perhaps less familiar with what might be expected in feeding this type of patient population for just 12 weeks and those people have commented that the reduction in hemoglobin A1c was disappointing, because it did not reach statistical significance.

We disagree.

First of all remember that we reported an intent-to-treat analysis and if we looked at a subset of patients in which we excluded very substantial placebo responders, five of whom -- five of those people were in that group two [in placebo three in treated], we actually did see statistical significance.

But more importantly, we and all of our advisors are pleased with the efficacy that we saw in the short-term trial in these treatment naive patients and we believe that statistically significant measures of efficacy that we achieved, and the positive trends that we saw on hemoglobin A1c in this ITT analysis are really quite encouraging.

And you add to that the fact that we also saw reductions in cholesterol.

We believe that's a tremendous profile enhancement for the drug.

And what's even more encouraging is that we achieved this efficacy with the positive safety profile that we hoped for.

Even at doses as high as 600 milligrams per week, which is three times the intended therapeutic dose.

Not only was the drug well tolerated, and this is consistent with what we are seeing across the board, in all of the second-generation antisense drugs including ISIS 301012.

But there were none of the side effects typical of other antidiabetic drugs.

Patients taking ISIS 113715 experienced no weight gain, no metabolic acidosis, no hypercholesterolemia, in fact there were improvements in LDL and cholesterol level.

No hypoglycemia and no nausea and vomiting, and that last point no nausea and vomiting I think is quite important.

The continued development of ISIS 113715 includes our ongoing trial, examining 715 in combination with standard diabetic therapies.

Because these trials are being conducted in Israel, the recent political situation does concern us and we have taken actions to assure that the trial will be completed on time.

So we do believe that we will be able to report the data on schedule in 2007.

Let me also say that the rest of our development pipeline, both those products that we are developing ourselves as well as the many products that we have partnered, is progressing well, and we look forward to sharing with you new data that will be coming from those programs during the remainder of 2006.

OncoGenex should have new data on our clusterin inhibitor OGX-011, in lung cancer, to present later this year, as well as continuing information from their four Phase 2 trials.

Lilly is advancing towards initiating Phase 2 development of its antisense drug, targeting survivin and is moving the development of its antisense drug targeting eIF-4E along -- also at a solid clip.

The preclinical diabetes compounds funded by Symphony GenIsis collaboration also moving along nicely with IND enabling toxicology studies getting underway for the glucagon receptor that we [hope to have in the funding] next year.

Now, finally, let me draw your attention to our IBIS division and the Ibis T5000 biosensor system.

We expect IBIS will command more of your attention in the months to come, as we rollout the details of the strategic plan for the commercialization of the biosensor systems, and the value of this division if Isis becomes more tangible for those [view] on the outside.

Kicking off the eventful second half of 2006 that IBIS has in store for all of us, is the manufacturing and distribution agreement that we just signed with Bruker Daltonics.

We are very happy to have a partner of Bruker's caliber, formally joined with Isis to transition the Ibis T5000 to commercialization.

Bruker's is one of the worldwide leading manufacturers and distributors of mass spectrometry instruments.

In addition to worldwide manufacturing responsibilities of the instrument component of the Ibis T5000, Bruker will be marketing the Ibis T5000 in European and Middle Eastern markets, playing into its strengths, since it already has an established European business unit selling into chemical and biowarfare detection markets in those areas.

Additionally, the IBIS division received just very recently, a new contract for up to $1.9 million from the government agency to analyze government samples, using the Ibis T5000 biosensor system.

Ahead, for Ibis, for the second half of 2006, there are more milestones associated with the Ibis T5000 transition to commercialization, which will support the transfer of instrument manufacturing responsibilities to Bruker, we're continuing to expand our menu of infectious disease organism detection kits, making the instrument and the system even more attractive to many more prospective customers.

We continue to expect to deliver additional Ibis T5000 systems this year, and we are continuing with collaborators to generate data demonstrating the performance and the versatility of the system in a variety of applications related to infectious organism identification and forensic applications.

We will be sharing a great deal more about our Ibis T5000 commercialization plans with you in the next couple of months.

As we said, we are still anticipating that in 2006, we will place our first commercial system and by that I mean, placement of a purchased instrument rather than one delivered under government grant funding.

So to sum up, we've had a great start to 2006 with positive Phase 2 data for our two key development programs, ISIS 301012 and ISIS 113715, and the second half of the year looks even more exciting.

We expect to share the first of the ISIS 301012 combination data with you, and we continue to -- we will continue to execute on our Ibis T5000 commercialization plans, among other important news that we think we'll have for you.

We look forward to keeping you updated on our progress.

We certainly appreciate your continued support and now we will open it up for questions.

Tommy, if you can just do that for us, we would appreciate it.

Thank you very much. [OPERATOR INSTRUCTIONS].

And our first question comes from the line of Mr. Mark Monane of Needham & Company.

Please go ahead.

Thank you.

Good morning and thank you for taking my call, a question on the call, couple of questions.

In regards to the milestone and would you be kind enough to review for us the update and timeline for a 301012 in combination with statins, when we might expect to see some data there?

And in terms of the diabetes project, we only saw some patients with 12-week follow-up and we know it takes some time for these drugs to work and affect hemoglobin A1c?

When can we expect to see the follow-up data? [Maybe there] will be a nice venue for that as well.

We will be reporting combination data on 301012 this year and we are continuing to follow the patients with ISIS 113715.

There are no surprises.

It continues to perform as we saw earlier.

And we haven't decided when we will present the final analysis of all of those data yet, that's something we will decide in the next [little bit].

It's all good with 715.

Right, that's fair.

I have a question for Lynne please, on the income statement, we saw a line loss attributed to Noncontrolling Interest in Symphony GenIsis, and I know you addressed this.

What we see here is a positive number.

Can you go over again how this is treated on the income statement you mentioned in the balance sheet?

Can you talk about how it's treated on the income statement?

Yes.

Mark, that represents the expenses in Symphony that we incurred for the Symphony GenIsis programs for 301012 and the glucagon and glucocorticoid receptor programs and that basically those expenses are up above in the expense line and then they get netted out in the loss attributed to the Noncontrolling Interest.

Oh.

So, you know [it’s in the] losses, is recorded at -- is the netting out of it earlier --

The earlier expenses that are up above that we incurred.

Very good, that's very good.

And then last question for Stan again.

Can you go back, Stan, and talk about how you believe these antisense medicines will fit in to the world of today.

I mean clearly we have seen in diabetes and in cholesterol some new advances, we have Vytorin, which is a combination therapy, we have Byetta which is a subcutaneous preparation.

We have oral.

Can you just talk about how you would think the antisense in general, and specifically 301012 and 113715 will fit in to the regimen potentially into what we have to offer patients today?

Yes, thanks Mark.

First of all, with 301012, our principal long-term objective is to have it available to patients who are unable to achieve target LDL levels, who are at significant cardiovascular risks, so, secondary prevention.

There are about 18 million of those patients in the US that cannot achieve their target levels, based on earlier guidelines of a 100 milligrams per deciliter and those guidelines go down to 70, which they seem likely to do, then the number of patients who can't achieve target, who are at cardiovascular risk is substantial.

So the drug will be used in combination with statins to treat those patients.

We think it's an ideal agent to do just that.

Second, long-term area that's quite important, is of course is the patients who are unable to take statins because of concerns of side effects.

Those numbers depending on what study you look at, range from 6 to 18% of potential patients, when you consider that percentage of such a large market, that's a very big opportunity.

And then finally, the first market that we hope to enter with 301012, is in the familial hypercholesterolemic population; and there again we have a highly motivated patient population in desperate need and we think 301012 has the potential of being a great value.

So you look at all of those market opportunities, and we then also consider those patients who have hypertriglyceridemia of the type 2 diabetics for example and that's a new market opportunity that we didn't contemplate until we were able to show that we produced reductions in triglycerides that are equal to the product reductions that are in cholesterol.

So we are [against] -- this drug's market potential is enormous and its place in therapy is very clear as a subcutaneous agent given weekly.

Now with 715, we are entering a marketplace in diabetes that's even more dynamic than the marketplace in high cholesterol, with new GLP-1 inhibitors and DPP4 inhibitors, they are coming along, as well as of course [PPRS] of one sort or another.

We've looked at that very carefully, and we believe a drug that can lower hemoglobin A1c in combination with metformin sulphonyureas and the glitazones that can be administrated weekly, is a very attractive agent in a variety of places in the treatment of type 2 diabetes.

And we believe that the profile of the drug that we see today which is improved glucose control with none of the side effects that the other drugs are experiencing, including nausea and vomiting, and the reduction of cholesterol, means that it is going to be a competitive agent, that will be used in a variety of combinations at a variety of sites in the evolution of type 2 diabetes within a given patient.

So as we look at it, again another great market opportunity and obviously that market opportunity gets better as the epidemic of type 2 diabetes continues to grow.

Next question please.

Thank you.

And our next question comes from the line of Mr. Bruce Turner of [Gaico].

Please proceed with your question.

Hi thanks a lot.

I have questions for Lynne.

Lynne, can you talk, in the press release you talk about cost savings programs and focusing resources on key programs.

Could you sort of run through that with us in what programs perhaps were not funded to the level they have been in the past.

And could you talk about sort of where the headcount is and where it's going and where it has been?

Thank you.

Sure Bruce.

I am happy to.

You know, a year and half ago, when we initiated our reorganization and restructuring, we announced with our -- one of the primary goals in doing that was to focus our efforts on key assets -- our most important key assets.

And, as you have seen from -- in most of the things that we've talked about, between then and now; our key assets are ISIS 301012 and secondary behind that, ISIS 113715.

The IBIS division, as you know, has been almost entirely self-supporting from a financial point-of-view because of our strong success in obtaining government contracts and those government contracts have been beneficial not just because they pay for the work that IBIS is doing but they support in a variety of scientific as well as financial ways, the development of numerous application, applications focused on government programs, you know, almost all of which can be turned around and used for non-government commercial applications as well.

So, IBIS has been very close to being self-sustaining and the access to government funds have really enabled us to make the significant progress that we have and set that division out to be poised for commercialization.

On the development side, you know, as a rough estimate I think 90 plus -- more than 90% of our resources are focused on 301012 and 715 as they should be, because those are our two most important resources.

Right now, our headcount is roughly 250 employees and we think that's a good size for us to be.

And where it is -- where has it been?

A year and half ago, it was around 500.

So, we are about half the size we were before we did our reorganization.

That's great.

And you said 90% of the resources are on these two key compounds -- if you had to --

Our development resources, yes.

If you had to split those between the two molecules, how would that roughly split?

This is not a precise number, but I would say over two-thirds of our development resources are probably focused on 301012.

Great.

And if you look at just the number of different studies that we are doing, looking at both, homozygous or heterozygous FH populations as well as our combination studies and then our plans to move forward into larger studies the polygenic population, as well as potentially registration [directed] studies, in both of the FH population.

You can understand that the very significant focus by sheer numbers of patients in studies is on the 301012 program.

That's great.

And in terms of the burn going forward over the next six months.

How do you think that will look like as compared to the burn during the past six months?

We think the guidance that we have given for expenses, not including the non-cash stock compensation, is going to be about $88 million for the year and that number is -- if you take the last two quarters of last year and annualize them that's the target that we set for ourselves.

That's where we set for ourselves, that's where we think we are going to be.

That obviously represents an increase in expenses over the first half of the year, and that increase is reflective of just the growing number of patients in our 301012 study principally.

That's a major thing that's increasing our expenses in the second half of the year as compared to the first.

Yes.

And the current problems in the Middle East, with respect to 113715.

How much added cost do you think that will add to that Phase 2 program?

You know, I don't think it’s going to add lot of extra costs.

It will add a little burst, because as you know, when you have more studies -- more centers, things are a little bit more expensive.

But the principal costs in clinical trials is a per patient cost.

So, what we are trying to do is ensure that we don't obviously spend more money than we mean to, but we also make sure that we get the data, in an important -- in a relevant timeframe to help us make good development decisions about that drug.

That's great.

So, I don't expect it's going to add a lot of costs.

That's great.

And the final question for Stan.

Is there a chance that we will see some of the combination data or the higher dose single agent data on 301012 at the AHA in the fall?

Yes.

Great.

Thank you very much.

One, just addendum to Lynne's comments.

Remember that with 715, we are really on it right now, because we have completed the bulk of the Phase 2, we are only spending on that single combination study.

And over the next couple of years, spending on glucagon receptor drug and glucocorticoid receptor drug would go up as you expect, with the funding that we are getting from Symphony GenIsis.

Sure.

Thank you.

Thank you.

And our next question comes from the line of Mr. Shiv Kapoor of Montgomery and Company.

Please proceed.

Thanks for taking my questions.

I have a few on ISIS 301012 and then I'll jump back in the queue.

First, it was good to hear that you are confident enough to expand the combinations well with statins from 5 weeks to 12 weeks.

And since you are expecting five-week trial results this year, could we assume that we will see three months data by the first quarter of '07 and could we also assume that you are not seeing any steatosis and the [fat] [recombination] trials?

Let me answer the last question first.

We are seeing a remarkably positive safety profile.

And that includes weekly analysis of liver enzymes.

So we have no manifestation of liver toxicity.

Obviously, you can't comment on steatosis itself, without biopsies of liver.

But we certainly don't have the outward manifestations of fatty liver.

The second, with regard to the timing of the 12-week combination data with 301012, I think it's a little early in the process to give you a precise prediction of when we will be able to present those data.

But I will tell you that the enthusiasm for the drug in the field is good.

And we expect that it normally can be as aggressive in the 12-week studies as it has in 5-week combination work.

Next question please?

Thank you.

And our next question comes from the line of Mr. Larry Rifkin of Cumberland & Associates.

Yes hi.

Can you hear me?

Yes.

Hi.

Two quick questions, I don't know if you mentioned it during the formal remarks.

In terms of the two highest doses of your single-agent cholesterol study, the 300 and 400 milligrams, I just wanted to sort of clarify, because at least one sell-side report had given the impression that there might be a way to report out results at one dose, maybe when it’s ready, and then wait and then report out the results of the -- higher 400 milligram dose.

You know, have you thought about how you are going to do that, are you going to wait for both doses to complete, or might you report out each one separately?

Thanks.

We are free to report each dose group separately.

We haven't made a decision yet of exactly how we will report the two dose cohorts and intended venue and timing.

But we are free to report the 300 data as a separate cohort.

Okay.

Great, thank you.

Thank you. [OPERATOR INSTRUCTIONS].

And we do have another follow-up question from the line of Mr. Shiv Kapoor.

Please go ahead.

I've got a couple of more questions on ISIS 301012, following up on the previous question, on the 300 and 400 mg doses.

Given that you might see a substantial lowering in the cholesterol with a 300 mg dosage, will you still plan to go on to the 400 mg doses and how's that coming along should we expect results this year?

We probably will do the 400 -- the key test for us about whether to do the 400 was whether the 300 milligram cohort was as well-tolerated as the 200; and we believe it is.

So we probably will do the 400 and we certainly will not have the 400 milligram data this year.

Okay.

Another thing you said today in the conference call was, once a week dosage in combination with statins is probably going to be a substantial opportunity for you.

I want to confirm that you are still planning on looking at lesser frequent doses, like once a month?

Yes we will do that, Shiv.

We still haven't really come to the conclusion, what is the most attractive dose schedule for patients other than once a week.

How attractive once a month or once a quarter dosing is if you have to go in and have a nurse do it, or if needleless injectors once a week is more attractive.

What our goal long-term is, is to provide patients all of those options, and we will be looking at developing those options as the drug progresses.

Our principal Phase 3 experience initially will probably be weekly dosing, but we are certainly going to be looking at all those other things.

Okay.

My final question on ISIS 301012.

Can you give us an update on the FH study?

Just back on the dosing schedule, remember that this drug has a 30-day plus half-life.

So we do not have to develop new formulation devices, this is not a research problem, it's really just a matter of learning the trial and administering this monthly at the appropriate doses to treat patients.

So, it is a very straightforward process to get to monthly dosing with this drug.

The FH trials are progressing very well, they are [enrolling] crisply.

We have had no safety issues, and so we believe we are on track for all of the guidance that we have given you on the FH trials.

Great.

And perhaps I have one question that's not related to 301012, but I can perhaps ask now instead of getting back in the queue.

And that is what's your current timeline for commercialization for Ibis?

Well, we expect to have a commercial sales this year that as we have projected and we expect to be describing our business plans, strategic plans and commercialization activities in quite a bit more detail in the next couple of months.

But this instrument is currently only available for research purposes, correct?

It's being sold -- it's being provided to government -- [IRS] as part of research contracts that we have done with the government.

The commercial sales will be different in the sense that they won't be a part of research contract with any entity, whether it's a government or not, and therefore we will represent real purchases of the instrument without an antecedent research relationship.

The instruments that we will be placing -- the system that we'll be placing will be -- will mirror the source of activities that we have going with various government agencies.

That is the infectious disease surveillance, even biodefense of various sorts, forensic activities, both in terms of biodefense and human forensic, and infectious disease control.

All of those areas can be described in some census as research applications, because they are not FDA regulated diagnostic applications.

Great.

Thanks a lot.

Thank you.

And we do have another follow-up question from the line of Mr. Mark Monane of Needham.

Please go ahead.

Thanks very much.

I'm sorry, must have gotten cut off before, it's pretty hot here, pushed the wrong button.

Could you talk about, Stan, to any partnered programs and can you outline Isis's strategy concerning future partners and how important it is at this point in the growth and development of Isis?

Well, to answer the first question, the OncoGenex programs continue to go well and they appear to be on track with the guidance that they have given and we have given with regard to the announcement of anti-clusterin data.

Obviously any prediction about what partners may do is more difficult for us, because they are in control rather than we, but we are very pleased with what OncoGenex is doing.

ATL is now back in the clinic with the VLA-4 antagonist and so they are progressing in Phase 2 studies in patients with multiple sclerosis and appear to be on track to meet their reporting guidance, which is in 2007.

And Lily, with both of its product opportunities is moving very nicely, and we hope that there are others that Lily will be developing as well.

Our partnering strategy has changed just a bit.

We continue to believe that one of the great advantages of antisense technology is its efficiency and so we are continuing to generate many more product opportunities than we can afford and for those, we are looking for partners.

And those by and large are earlier stage, but they also include [allocaportion], and we are still working hard toward finding a solution to fund [allocaportion] other than funding it ourselves.

With regard to 301012, we can afford to be more precious, thanks the Symphony GenIsis transaction and we continue to entertain interest in 301012, but we feel no pressure to undergo, to undertake the transaction until we have a transaction that's attractive and that assures that the drug is going to be well cared for.

Certainly with glucagon and glucocorticoid we have continuing interest in those products, but we believe getting them through Phase 1 proof of concept will increase their value tremendously.

And so, we are not certainly pressing hard to get transactions done for those drugs.

Thanks very much, Stan, for the added information.

Yeah.

Thank you.

Dr. Crooke, there are no further questions at this time.

I will now turn the call back to you.

If there are no further questions I want to thank everyone for your attention and support and we look forward to the latter half of the year and continuing the progress that we are making.

Have a great day.

Thank you very much ladies and gentlemen that does conclude the conference calls for today.

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

Have a great day.