Ionis Pharmaceuticals Inc (IONS) 2006 Q4 法說會逐字稿

Welcome to the Isis Pharmaceuticals conference call.

Today's call is being recorded.

Leading the call today is Dr. Stan Crooke, Isis Chairman and CEO.

Dr. Crooke, please go ahead.

Thank you, Char, and welcome, everyone.

Thanks to all of you for joining us on today's conference call to discuss the financial results and highlights for the fourth quarter and the full year of 2006.

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

Dr. Jeffery Jonas, our new Executive Vice President; and Kate Corcoran, our Vice President of Corporate Development.

Also sitting in with us is who is Vice President of Finance.

As you know, Jeff Jonas joined Isis in February and is responsible for all the development.

Jeff brings valuable drug development experience to Isis at a time when our pipeline is progressing rapidly and at a time I think when he brings just extraordinary value.

We're pleased that he's a part of the executive leadership of Isis.

He's already hard at work -- he tells me that every day -- and making a real difference.

2006 was a great year for Isis. 12 months ago we had Phase I data supporting our lead second generation candidates, Isis 301012 for high cholesterol and Isis 113715 for diabetes.

Since then we've announced Phase II data on Isis 301012 that demonstrate truly an extraordinary and exciting profile.

We've also reported encouraging Phase II data on Isis 113715 and we advanced and expanded our partner pipeline.

We continue to advance Antisense technology, and we continue to build our leading R&A intellectual property position.

Additionally, we've moved the ibis T5000 Biosensor System into commercialization and we've significantly strengthened our balance sheet.

So we've had a year I think in which we had a very clear strategy, we've executed against that strategy and we've had progress absolutely across the board in the technology and in the drugs and we're pleased about that.

And of course that progress in 2006 sets the stage for an exciting 2007.

I will lay out the 2007 milestones for you after Lynne reviews our progress in a bit more detail.

One of the first key events of the year will be at the American College of Cardiology meeting in a couple of weeks from now in New Orleans.

At the ACC we plan to present quite a bit of new data on Isis 301012.

Because we're planning a webcast to share the details of our Isis 301012 clinical data and to present development plans in some detail later this month, we won't focus on Isis 301012 today.

But I do want to be clear about this -- we continue to be thrilled by the performance of this drug.

We are excited to be presented the data at the American College of Cardiology and we believe that the safety profile continues to be very encouraging.

Later in the call I'll provide more information about our ACC participation.

At the end of our prepared remarks I'll be happy to answer any questions that you have and now let me turn the call over to Kate to review our forward-looking policy.

Thank you, Stan.

I'll add my welcome and just remind you that webcast includes forward-looking statements regarding our business, financial outlook for Isis Pharmaceuticals and Ibis Biosciences and the therapeutic and commercial potential of Isis' technologies and product development.

Any statement describing Isis' goals, expectations, financial and other projections, 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 and projections.

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 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 judgment of its management, these statements are based only on fact or 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 September 30, 2006 which are on file with the SEC.

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

Some of information discussed today reflects preliminary financial results as Isis' 2006 audit has not yet been completed.

Under section 404 of the Sarbanes-Oxley Act of 2002 new integrated audit requirements will not be met until Isis has completed all of the steps necessary to file its 2006 audited financial statements with the SEC.

So with that resounding intro here's Lynne.

I'm assuming that you've all had the opportunity to read the press release we issued earlier this morning, so I don't plan to reiterate what is detailed in the release.

Please feel free though to ask any questions at the end on any points from the release that you would like clarified.

Today I'm going to briefly address three topics -- first, recent partnership activity; second, our financing activities over the last 12 months; and finally, I'll give you an update on the Ibis Biosciences commercialization activities.

As you know, since we discover and validate many more drug candidates than we can advance ourselves, we license candidates outside our areas of strategic therapeutic focus to partners with disease area expertise.

We're focusing our internal leverage on cardiovascular and metabolic diseases; our partners are developing drugs for cancer, inflammation and a number of other indications.

In the fourth quarter of 2006 alone four of our partners advanced Isis discovered drugs and are into development.

Lilly announced plans for a broad Phase II program for their anticancer drug targeting surviving;

Merck started Phase I studies on a hepatitis C drug discovered with Isis in a prior research collaboration and we earned a $1 million milestone payment from Merck for this;

ICo Therapeutics filed an IND iCo 007 targeting c-Raf kinase for diabetic macular edema for which we also received a milestone payment; and our partners at Antisense Therapeutics Ltd. advanced a second antisense drug, ATL1103 targeting growth hormone receptor in the development for growth and site disorders.

Today we reported that we've added Atlantic Healthcare Ltd. to our roster of development partners.

Atlantic has licensed alicaforsen, an antisense drug been developed for the treatment of pouchitis, an ulcerative colitis indication, and part of a larger set of gastrointestinal conditions.

Ulcerative colitis is clearly outside of Isis' current strategic focus, but our partner, UK based Atlantic Healthcare, has been formed specifically to develop alicaforsen and target ICAM-1 for the treatment of ulcerative colitis and other inflammatory diseases.

Atlantic is led by CEO [Allen Cambridge], and CFO [Toby Wilson Waterworth].

Allen and Toby have successfully founded and built several biopharma companies in the UK.

They have strong experience in gastrointestinal disorders, particularly inflammatory bowel disease which includes ulcerative colitis.

As a result we're confident that Atlantic Healthcare will be an excellent and very focused partner for the development of alicaforsen.

As Atlantic provides us additional details of its development plans we'll keep you posted.

Like other partnerships with emerging companies, we'll receive an upfront payment from Atlantic Healthcare in the form of equity valued at approximately $2 million and we'll earn milestones and royalties as the drug progresses through development.

One of our key goals as we entered 2006 was to improve our balance sheet to ensure we had sufficient resources to advance 301012 aggressively and to properly fund our drug development programs for cardiovascular and metabolic disease.

I'm pleased to report that we've been very successful at meeting this goal.

In April of 2006 we completed a strategic financing agreement with Symphony Capital out of which was created Symphony GenIsis, capitalized with $75 million to fund development of Isis 301012 through Phase IIb studies for general high cholesterol patients and registration supporting clinical studies for Familial Hypercholesterolemia.

This funding also pays for us to aggressively advance two new diabetes drugs through proof of concept in human clinical trials.

The funding provides the resources that are allowing us to continue to create value in Isis 301012 and retain control of the assets while we evaluate potential licensing opportunities.

The diabetes drugs are also moving forward well as we've initiated IND supporting toxicology studies on the first and just announced a development candidate in the second program.

Late last year we also raised $75 million by completing drawdowns of our equity line of credit with Azimuth Opportunity and by issuing approximately 8 million shares at an average price of $9.41 a share.

As you may recall, we set up the Azimuth line as an insurance policy.

Our plan was to take down the credit line opportunistically in small increments as required to fill funding gaps and to ensure financial strength.

We've been doing just that, but during November we capitalized on the favorable markets for our stock following our presentation of strong clinical data for Isis 301012 and drew down the remaining $55 million at a price of nearly $11 a share.

Although we added $75 million -- altogether we added $75 million to our balance sheet on very favorable terms under the Azimuth line.

We fully utilized the line and have no current plans to put another one in place.

One of our 2007 financial goals was to refinance our 5.5% convertible note to extend maturity of the debt efficiently in advance of its mid 2009 due date.

Early in the year we decided to take advantage of the attractive terms for debt offerings that were available to achieve this refinancing.

Our stock price was at a point where given the estimated interest savings of $2.6 million a year compared to minor reductions in the debt conversion price we could achieve our goal of significantly extending the maturity of the debt at prices that would be antidilutive.

So in January we completed a very successful private placement of 2 5/8% convertible subordinated notes due in 2027 with a put feature starting in 2014.

The placement was significantly oversubscribed and our net proceeds were approximately $157 million.

The total amount of the placement was $162.5 million, significantly more than the $125 million of outstanding debt reflecting the fully exercised overallotment option which is a typical feature required by the investment bankers in any of these types of transactions.

We already have repurchased over $44 million of the 5.5% 2009 note and we used a portion of the remaining proceeds to repurchase the balance of the outstanding notes after May 1 when there's a drop in our redemption premium.

Because of the full overallotment option exercised we will have some proceeds left over after the repurchase which will increase our cash balance and fund our operations.

Following the repurchase and based on reasonable assumptions for new sources of revenue and cash we believe we have sufficient resources to meet our anticipated funding requirements through at least the middle of 2010, achieving our goal of substantially strengthening our balance sheet going into 2007.

Before I give the call back to Stan I want to talk briefly about Ibis. 2006 was a pivotal year for Ibis Biosciences.

In 2006 we booked our first commercial revenue for the Ibis T5000 Biosensor System and thoracic services.

We also formed an important strategic alliance with Bruker Daltonics under which Bruker will provide instrument manufacturing along with global installation and support services.

This partnership is important because not only does it provide third party validation from an industry-leading instrument manufacturer who's willing to invest alongside of us in the commercial success of the Ibis T5000, but it also means that our customers will be buying instruments from a trusted organization with which they may already have relationships for sales and support of instrumentation.

It will be difficult for a small company to create the infrastructure that Bruker already has in place for worldwide sales and service support.

We're pleased to be able to work with this quality organization for the benefit of the Ibis T5000 launch.

Meanwhile we're nearly done building out our new facility for manufacturing Ibis assay kits which we'll be selling directly to our customers and to Bruker for resale into its installed base.

Our plans to manufacture assay kits are consistent with our strategy to focus on the high-volume high margin consumables and we're confident that we'll be successful in this straight forward operation.

Consistent with our intent to transition Ibis into becoming more independent of Isis given its distinct business characteristics, we've just reorganized it as a wholly-owned subsidiary and we continue to evaluate strategic partnering and financing alternatives for the business.

We have two key Ibis milestones for the year.

First, we expect to complete transfer of all instrument manufacturing to Bruker, and for Bruker to begin shipments of commercial Ibis T5000 biosensor systems.

And as you know, we expect to place at least eight new systems in 2007.

Now I'll turn the call back to Stan.

Over the years as we've created antisense technology we've developed a deep understanding of how antisense drugs work mechanistically inside the body; we've invented ways of improving antisense oligonucleotide drug properties when they're administered either locally or systemically; and based on the information that we have we're able to model the pharmacological behavior of the pharmacokinetic and toxicological behavior of these drugs with impressive accuracy.

We use that information to inform all of our drug discovery and development programs and it provides a basis for thoughtful choices that we can make as we choose how to invest our funds.

We now have 17 drugs in our development pipeline including five drugs in Phase II.

These drugs are distributed across several disease areas including our growing cardiovascular and metabolic disease programs as well as cancer and inflammation.

This is really remarkable for a company our size and it underscores the potential of Antisense Therapeutics to modulate the activities of a wide range of targets including those that were previously characterized as undruggable and it demonstrates the ability of antisense to improve the productivity of drug discovery and drug development.

From the standpoint of clinical development 2006 was a very remarkable year for Isis 301012.

Isis 301012 is our second generation antisense inhibitor of ApoB; it is targeted for the treatment of patients with high cholesterol.

The Phase II results continue to be extraordinarily encouraging.

Equally importantly, Isis 301012 has been well-tolerated and is demonstrating a positive safety profile.

So what should you expect from our pipeline in 2007?

Well of course, to begin with you'll be hearing a lot more about Isis 301012.

This is clearly the most important drug in our pipeline and it is the program to which much of our energy is focused and we clearly are focused, as a management team, on Isis 301012.

We will be reporting Isis 301012 Phase II results for the two high dose cohorts, that is the 400 mg per week cohorts, in two studies later this month at the ACC.

The first study is a three-month monotherapy study and the second is a five-week statin add-on trial.

At the ACC we will also summarize our Phase II experience in toto in routine or polygenic high cholesterol patients as well as our overall Phase II safety experience in randomized placebo-controlled trials.

We'll discuss our development plans in more detail for Isis 301012 to help you put our current activities in context and to consider the path to market.

I'll just take a moment here to provide a few details of our plans.

ACC takes place in New Orleans later this month.

During the conference on March 25th Dr. Evan Stein will present a poster with results through 400 mg per week of three-month monotherapy of Isis 301012 in patients with high cholesterol.

The most important new data will be the data from the 400 mg cohort, but there will be a summary of all of the data from this clinical trial and we think that will be important.

The next afternoon on March 26th Dr. John Kastelein will present results through the 400 mg per week dose group of the five-week statin add-on trial in an oral session.

Again, in this presentation all of the data from that clinical trial will be summarized.

Then on Tuesday morning March 27th we'll host a webcast to discuss the Phase II results of Isis 301012 and our development plans for the drug.

In that presentation of course we'll have more time to provide more detail about the efficacy and safety data in both trials and to provide a fairly detailed summary of the safety results that we have in these Phase II experiments.

We hope that you'll make plans to join us either in New Orleans or on our webcast for that.

Back to our development milestones for Isis 301012, later in the year we'll report results from the three-month statin add-on study and for two studies in Familial Hypercholesterolemic patients, these are two Phase II trials in FH.

The FH studies are progressing well, both the studies in homozygous FH and the randomized placebo-controlled trial in patients with heterozygous FH.

We had originally planned to have reported data from these trials by now, but with the excellent safety that we've observed we extended each of those trials to include a 300 mg per week cohort dose for three months rather than just five weeks.

That has extended our timeline a bit, but we think that was a very good set of decisions and the extended timeline is extended for all the very best reasons.

We certainly are enthusiastic about moving forward and we're planning the pivotal registration trial for FH that we expect to initiate in the second half of the year and we are looking forward to telling you about the FH data later in the year.

We're also planning later this year to start a key longer duration Phase II statin add-on trial in the polygenic patient population and we believe that trial will be the final trial needed to set the stage for the Phase III program for the large market comprised of patients not achieving their target LDL levels with statins alone.

Because we've had some questions I want to explicitly remind you that our plan is to engage a high-quality pharmaceutical partner to work together with us on the Phase III development commercialization of Isis 301012 for this very large polygenic high cholesterol indication.

As you can imagine, Isis 301012 has generated lots of interest since we reported new data at the AHA meeting in November.

One of the advantages of our Symphony GenIsis arrangement is that it allows us to be very selective in choosing the right partner for further development and commercialization of Isis 301012 we are certainly in no hurry.

Nevertheless Isis 301012 is clearly a valuable asset.

We do intend to license 301012 sometime in the next 18 months or so and to do that with a partner that has substantial resources and appropriate experience in both development and marketing in this area.

We look forward to selecting the best partner on very attractive terms for this important asset over the next period of time.

So now to continue with our milestones for 2007, we have a second cardiovascular drug, Isis 353512, which targets C-reactive proteins.

C-reactive protein is a controversial but important target that may be involved in a wide range of cardiovascular diseases as well as inflammatory diseases of a variety of sorts.

We plan to advance this drug into IND enabling toxicology studies in 2007.

This will then be our second cardiovascular drug in development.

We have three diabetes drugs in our metabolic disease program in development.

Each of these has distinct attributes and potential therapeutic roles.

In 2007 we expect to advance Isis 113715 which targets PTP-1B in a clinical trial -- a randomized placebo-controlled Phase II trial in which we're adding it to stable sulfonylurea dosing in patients who are on stable sulfonylurea doses but aren't achieving adequate control of their disease with sulfonylurea alone.

As you know, PTP-1B is an insulin sensitizer; it acts by increasing the activity of the insulin receptor in response to insulin.

The drug presents us a unique opportunity of being the first PTP-1B inhibitor, the first novel mechanism of this nature and the first opportunity to enhance insulin signaling and therefore diabetes control without significant increases in the side effects associated with many of these drugs.

And it is also demonstrating the potential to be an anti-obesity agent and has already demonstrated in Phase II trials with patients with diabetes that it lowers both total cholesterol and LDL in contrast to many of the drugs that are used to treat Type II diabetes that actually increase that cholesterol.

For this reason we are excited about the drug and the most logical first place for Isis 113715 is in the treatment of diabetes, in fact as an adjunct to insulin therapy.

And we think it can be used in a variety of other places in the treatment of diabetes and certainly that's a first place for it.

So for this reason then we're evaluating 715 in combination with sulfonylurea.

Since sulfonylureas increase insulin secretion in the body and therefore they offer the best approximation of a combination of insulin therapy in a milder disease setting appropriate for this first combination experience with the drug.

This was a study that we had to restart at new centers due to the political situation in Israel where the trial was originally started.

And that has cost us some time, but the study is back up and running and we are looking forward to updating you about its progress.

Later in the year we're planning to initiate a Phase I study of Isis 325568 and a second generation antisense drug targeting the glucagon receptor or GCCR.

Unopposed glucagon action needs to increase glucose production by the liver.

Therefore by reducing glucagon action we expect this drug to cause robust reductions in blood glucose levels.

This of course is justification enough to pursue it as a therapeutic target.

But in addition, we have shown in preclinical studies that this drug actually increases the levels of glucagon-like peptide 1, or GLP-1, which is a hormone that helps preserve pancreatic function leading to potential disease modifying affects.

So we think of this drug as a dual action drug -- it reduces the glucagon affects in the liver because it reduces glucagon receptor levels and it has the potential to preserve pancreatic function because it increases GLP-1 in the blood.

Remember also that the Phase I study that we're planning is a proof of concept study in which we will have the opportunity to evaluate the pharmacological effects of the drug.

We also plan to advance our newest development candidate, Isis 377131, that targets the glucocorticoid receptor, or GCCR, into IND enabling toxicology studies this year.

With this drug we inhibit glucocorticoid signaling in liver and fat tissues.

Remember with antisense drugs, without any formulation work these drugs accumulate in liver, kidney, bone marrow, fat sells and spleen.

They don't get into the brain and they don't cause affects on the hypothalamus or the pituitary.

So we have, because of the technology, in effect a liver selective glucocorticoid antagonist and this is something that practitioners and the pharmaceutical industry have been looking for for a long time.

So we don't then with this drug affect the central nervous system or the adrenal glands and so we don't have the side effects are associated with inhibiting glucocorticoid receptors with small molecules.

Preclinically we've shown that the drug has a broad therapeutic profile, that certainly includes reduction of blood glucose levels, a dramatic and favorable affect on lipid levels including cholesterol and triglycerides and a net reduction in body fat.

Thus we think with its lipid lowering activities this drug may prove to have an attractive profile in treating diabetes as well as the diabetic dyslipidemias that occur in these patients and perhaps even obesity, which of course goes hand-in-hand with Type II diabetes.

These three diabetes drugs demonstrate the remarkable productivity of our drug discovery process.

With only a few people and in only a few years we have screened in animals more than 120 metabolic targets using our antisense technology and selected among them the optimal targets to invest in for further discovery and ultimately development work.

Complementing our cardiovascular metabolic disease franchises, our external partner pipeline has 11 development candidates across a range of diseases that include cancer and inflammatory disease as well as infectious viral disease.

Three of these -- ATL1102, alicaforsen, OGX-011 -- are already in Phase II.

We expect our partners to make progress and advance many of these drugs during 2007.

And today's press release provides more detail about our milestones for our partner pipeline.

On the topic of our pipeline achievements in 2007 milestones, I'd like to tell you a bit more about Jeff Jonas who joined us to spearhead our pipeline development activities.

Jeff is a neuropsychiatrist trained at Harvard Medical School and he spent over a decade in clinical practice before moving into the pharmaceutical industry.

Initially at Upjohn where he was involved in research and then directed seven compounds through clinical development and into registration.

Following success at two startups including a medical device company that he founded, Jeff joined Forest Laboratories leading clinical development of all psychiatry, neurology and pain products and then he was ultimately promoted to Executive Vice President of Development where he was responsible for all development activities including regulatory, medical and scientific affairs.

We are very fortunate to have Jeff join the team; he comes at a key moment in our history and brings great value at a time when I think the pipeline is mature enough to benefit greatly from his experience.

Before signing off I'd just like to have Jeff say a few words and then we'll be ready for questions.

Thanks, Stan, and good morning to all of you listening in.

I'm truly thrilled to be here at Isis and immensely excited about Isis 301012 as well as the rest of the pipeline.

I frankly have never been associated with a company that has as rich an asset portfolio as Isis.

Whether the RNA discovery platform, the intellectual property, the deep pipeline of multiple franchises, our lead drug candidates, or Isis Biosciences -- I can tell you that the more diligence I did on Isis the more excited I became about the business.

And now that I'm here I'm even more enthusiastic.

Of course we're all excited about the development path for Isis 301012 and I'm looking forward to meeting and speaking with many of you, not only at ACC, but at other venues throughout the year.

Thanks, Jeff and welcome again.

So to close, we are executing on our strategy.

We have screened scores of targets selected from among those new drugs to populate our internal and external pipelines.

Our second generation antisense drugs have given us the luxury and patients the benefit of specificity and long half-lives, translating into significant activity and excellent safety profiles and the convenience of lower doses and less frequent subcutaneous doses.

We're excited about the progress we've made with the technology and to be creating this new class of drugs for tomorrow to add to the small molecule and antibody therapeutics that are available today.

It's going to be an important year for Isis and we look forward to sharing our progress with you as the year unfolds.

And so now we'll be happy to take your questions.

Char, if you can please review the procedure with listeners and set us up?

(OPERATOR INSTRUCTIONS).

Mark Monane, Needham & Co.

Lots of news in 2006, congratulations.

A couple questions.

In 301012, this final trial that you're looking for that you're planning to start, what are your outcomes that you're looking for in this trial?

Is it more patients; is it a different outcome confirmation?

How are you envisioning this final Phase II trial?

All of the Phase II trials that we've done to date are basically looking at induction doses; that is of the early period of time in which we're accumulating drug and tissues.

They've been remarkable in that we've been able to explore a full dose response curve.

It's just amazing to me really the performance of the drug and efficacy and safety has allowed us to go to 400 mg per week where we certainly hope that we're going to see stunning efficacy.

The next step is to take that information and perform longer-term trials that will define the maintenance dose.

We estimate that the maintenance dose for 301012 will be about half of the induction dose, but we have to prove that.

So our thoughts are that if a patient wanted to have his or her LDL reduced by 45% or so we would tell them to take 200 mg a week for three months and then move to a maintenance regimen that would be perhaps a little bit more than half of that weekly dose.

Of if the patient wanted to have 60% reduction in LDL, they might take 300 mg a week and then move to a maintenance dose that would be perhaps half of that dose.

The next experiment then is to define the maintenance dose.

So it needs to be a longer-term treatment, at least six months, and we need to move from induction to maintenance.

Once we have the maintenance dose then we're set for Phase III trials.

And so our endpoints will of course be ApoB reduction and LDL reduction, all the endpoints that you've seen already, at the end of the induction period.

And then defining the maintenance affects and the maintenance dose in the longer-term treatment period.

Did you say, Stan, that it will be six months follow-up, is that correct?

It will be six months and we may consider open label extension.

The trial is still in planning stages, Mark, and so I don't want to get into a great deal more specifics yet.

But we will be describing the trial in some detail for you later in the year.

But what's left to learn about safety in your opinion?

I'm sure we're going to hear something at the ACC as well.

I think what we have learned so far is that the drug, at least in three-month dosing, both the single agent and in combination, is well-tolerated.

We know that in animals and in man it does not have the toxicologic profile to the liver that NTP inhibitors had and that was of course a question that we had to resolve both in animals and man as soon as possible.

As we finish the 400 mg dose group we will have explored doses -- the full dose response range which is very, very important.

It sets us up for Phase II trials -- for more Phase II trials and the Phase III trials with the full bit of data about how exposure correlates with both efficacy and safety.

I think the remaining things that we need to accomplish then once we've finished this are just to get more experience with longer-term treatment.

We believe all of the evidence that we have in animals and in humans says that this drug will be well-tolerated as we move to longer-term treatment, but of course we can't know that until we get that experience.

That was helpful.

Last question, also on cholesterol.

There was a recent publication in Nature on the PCSK9 correct approach, RNAI, addressing this target which also lowers ApoB.

Could you comment on how that might fit into the therapeutic modalities available for managing cholesterol patients (multiple speakers)?

Actually I don't think PCSK9 data have been published in Nature and not siRNA.

The data on PCSK9 that have been published that I'm aware of came from us in which we published in the Journal of Lipid Research.

And what we demonstrated was that PCSK9 -- that we could reduce PCSK9 selectively, that in doing so we lowered LDL and athrogenic lipids.

And that if we move to LDL knockout mice as theory predicted the drug didn't work because it requires LDL receptors.

PCSK9 is an interesting target; it comes out of work by the University of Texas Southwestern and was identified from genetic screens in which patients were identified that had very low lipid levels and had no liver problems.

So it's an interesting target and it demonstrates I think one of the strengths of antisense technology in that we could rapidly evaluate the target and present the data.

We have not made a decision to move PCSK9 into development yet.

We think there's more work to be done before we do that.

Our partner, Alnylam, is also working on PCSK9 and they have reported some data in investor presentations and scientific presentations and have announced that they would like to develop an siRNA product for it, but I don't think those data have been published yet.

Thanks for the added information.

Eric Schmidt.

Stan, are we going to be seeing at the ACC meeting just data in combination with 40 mg statin or are you going to be dosing statins at higher doses?

The combination trial is the same commendation trial that we've reported up till now.

And the patients that we've reported up to now had an average of about four years on statins and the average dose was 20 mg, the maximum dose allowed was 40 mg, but the average dose was 20.

We expect in the 400 mg dose group that those patients will be roughly the same as the patients we saw in the lower dose groups, but of course we won't know until we unblind the data and present them.

So will the next trial, the Phase IIb, if you want to call it, will that also look at higher doses of statins?

No, probably not.

We think that the high dose statin experience that we'll get will come from the FH trials where we expect that most of these patients to be on 80 mg of atorvastatin.

I actually think that the majority of physicians and patients really don't like 80 mg of atorvastatin and what we ought to do is be able to demonstrate that with reasonable doses of statins, 20 to 40, we can dramatically reduce their ApoB and LDL levels and maybe mean that many fewer patients have to go to 80 mg.

But we'll get our 80 mg experience in the patients who need real lipid reduction, the FH patients.

And we haven't finalized our plans, Eric.

There may come a day when we do a small study where we look at high dose statins in polygenics, but I don't think that that's a requirement in the initial series of studies that we would do.

Okay, that's helpful.

And then second question, I believe at one point you had alluded to doing an MRI-based study for fatty liver in 2007.

Is that still -- initiating that study, is that still a goal?

It's in progress.

It's become far less important to us because we're not nearly so concerned about the liver safety of the drug as we were before we had all the Phase II data.

It's in progress, it will be a long-term trial because it's tough to enroll people and get them to commit to serial MRIs.

So I can't tell you when we'll actually have data, but I can tell you we have enrolled some patients in the trial.

And last question is on Ibis.

Can you just help us out with your visibility on the eight to 15 system placements in 2007, where you might be in terms of contracts or discussions, what sort of lead-time is required before you place an instrument and book sales, that sort of thing -- sales cycle questions I guess?

We're very confident that we have the demand for eight to 15 without any problems.

Our challenges are to be sure that we can deliver the instruments and the test kits where the demand is.

So we're very pleased with the demand.

And as with any relatively high capital cost initial outlay the sales cycle time is relatively long so you probably want to think 12 to 15 months or so.

So you have that visibility already on orders is what you're saying?

We do.

We are very confident of the demand and we are moderately confident of our ability to meet it.

Thanks very much.

Geraldine O'Keefe.

Thanks for taking my call.

Stan, two short questions for you.

The first one on Ibis.

You have said that you need about 10 to $15 million cash to reach profitability.

I'm just wondering, is that excluding all committed government grants and if so about how much do you still have in committed grants at this point?

No, that's 10 to $15 million added cash including our projections from existing and future government grants.

So that's almost completely covered by the government grant commitments at this point, isn't it?

No, what we're saying is that our revenues, government grants and so on will leave us about 10 to $15 million short of achieving profitability.

Okay, that's clear.

And the other question I had for you was on the diabetes drug, Isis 113715.

This target PTP-1B has been looked at in the past by other companies, but I'm just wondering if you can tell me -- none of them have succeeded this far in the past and I'm just wondering what side effects have been associated with previous efforts to target PTP-1B?

And would you have seen those side effects already in a small member of patients if they were there?

Or if not, at what point would you expect to see those side effects?

PTP-1B is a member of about a 60 gene phosphatase family.

In that phosphatase family are genes like [P10] which is an [antionca] and many other phosphatases.

And so the classic challenge for small molecules has been to identify a molecule selective enough for PTP-1B that it doesn't influence these other phosphatases.

And most if not all the programs in small molecules have failed because even though they thought they had some selectivity, as they moved into animals they encountered one or more side effects and those side effects varied depending on which of the phosphatases they might have inhibited.

But the potential side effects range all the way from any cardiovascular or metabolic problem that you can think through to causing cancer.

The answer to the second part of the question is that we know that we have very high selectivity for PTP-1B and we've observed in animals no evidence of toxicities associated with the other phosphatase members of the family.

And in man to date the drug has been well-tolerated.

We would not expect the side effects that we will see with 715 to represent effects on other phosphatases; they would be more related to target related affects with PTP-1B or the class generic effects of antisense drugs which tend to be Pro inflammatory at high doses.

We haven't seen any of that yet.

About how many patients have received 113715 at this point?

We treated I think about -- I think we're close to 100 subjects in total.

Don't hold me to that number, I haven't added it up, but I think we're in that range.

And you haven't reached any dose limiting toxicities?

Not yet.

Now remember that we dosed up to 600 mg per week for six weeks only.

So our high dose experience of 400 and 600 mg per week is only six weeks and our longest experience with 200 mg a week is three months.

And we do have some combination experience at that dose as well.

So we're still early days, but we're encouraged by the safety profile we see and we're encouraged by the signs of pharmacological activity if not efficacy that we see at the present time.

Thank you very much.

Thanks for the update.

Shiv Kapoor.

Thanks, guys and congratulations on a great 2006.

Thank you.

I've got three questions.

I'll start with one on Isis 301012.

With regard to your preregistrational trial, if you're using lower maintenance doses than the induction dose, accumulation in tissues will start happening at a slower rate resulting lower levels of the drug in body tissues in the maintenance phase.

Is my thinking right and can you confirm that we've already seen the highest levels that we will see of this drug in human tissues?

Your thinking isn't quite right.

The goal of the maintenance therapy is exactly that, to maintain tissue levels.

And the way we will prove that is very simple.

We know that by measuring trough levels in blood and multiplying basically by 5000 we know that's the liver level.

So we will measure trough levels in blood serially and then we'll measure pharmacologic effects with ApoB, LDL and so on.

And what we want to find is the dose that maintains the liver concentration of the drug that we achieved at the end of three months.

With regard to the second question, once we have defined the maintenance dose then we'll know that tissue concentrations will never be higher than at the end of the induction phase.

Now remember that we've gone up to 400 mg a week, a dose that we never dreamt we would be able to study, and we have no intention of ever using even during induction.

So the maximum induction we have in mind is 300 mg a week, certainly the more likely common dose will be 200 mg a week.

And then our maintenance doses will be about half.

So that's a long winded way of saying the tissue concentrations, the doses and the pharmacological effects which include of course liver effects and probably some slight increases in ALT are certainly at the largest level that we would expect to see in future studies.

400 mg at three months is probably the highest that we will see?

Not probably.

It's a dose that we -- I can't tell you, but I predicted when we started the 400 mg dose group, and I stand by the prediction, that we at that dose may reduce people's ApoB levels to undetectable levels.

And that's a level that you certainly wouldn't want to impose on people except as you're exploring the very top dose response curve.

Fair enough.

My second question is on your balance sheet.

You've strengthened your balance sheet quite well and you have enough cash you said until mid of 2010.

So when you're considering a deal for 301012 will you then consider higher royalties in exchange for a smaller upfront which you might not need because of your (indiscernible) cash flow?

Back end will matter a lot.

My guess based on the level of interest that we have in 301012 is we won't have to make too many trade-offs.

Wonderful.

My last question, have you had any meetings with the FDA about the regulatory path for 301012 and can you share with us any information on that?

When will the heterozygous trial registrational trial begin?

We have not met with the FDA in 2007.

That's planned and we chose to wait a little bit because we wanted to get the 300 mg 12-week data in the both homozygous and heterozygous patients before we met with the FDA.

We plan to meet with the FDA as soon as we have those data ready.

And that should be fairly sent.

Okay.

Thanks.

Hamed Khorsand.

My question was could you provide more information on your collaboration with Atlantic Healthcare for alicaforsen?

Are they taking full control of this drug development phase now?

Yes.

I'll ask Lynne to give more details about the transaction.

What I want to do just is two minutes worth of background.

Remember that we've been trying to license this drug for about a year -- maybe a little longer.

And the real issue in license in the drug is basically the same reason that we've chosen not to invest in it.

It's difficult to know whether the ulcerative colitis pouchitis market is $25 million a year or $250 million a year.

And I don't think we had any difficulty with potential partners with regard to does the drug work and is it safe.

That I think is a given.

It really boils down to what is its potential market opportunity.

And so that's what we've spent our time trying to sort out with people is are they willing to take the risk to invest, hoping that the market will be $250 million when I think it's difficult for any of us to predict exactly what that market is.

So that's been our challenge and Atlantic is the transaction that we think meets the challenge and meets the needs of the drug.

Lynne?

Atlantic actually -- I agree with Stan -- sort of represents the perfect opportunity for this drug.

It's a company that has just been newly founded, whose focus is to in license and develop and commercialize late stage GI drugs, particularly focused on IVD including Crohn's and ulcerative colitis.

The two founders, Allen Cambridge and Toby Wilson Waterworth, both come from the pharmaceutical industry.

They have substantial expertise in starting and building young biotech companies in the UK including Alizyme, which is another small biotechnology company that's got three GI products in development.

So we think their goals for the Company, their aggressive pursuit of development opportunities, and their focus on GI disease makes it a great opportunity for this drug.

But to answer your question directly, they are responsible for all costs and all development activities with the drug.

Okay.

And my other question was related to the timeline for 369645.

What should we expect in '07?

Which one is that?

Is that the glucagon?

Yes.

Sorry.

I don't know how we expect you guys to remember these numbers if I can't.

But glucagon will go into Phase I trials this year.

And remember, the Phase I trial in normal volunteers is an opportunity to look at the pharmacology with glucagon infusions.

And so we have the opportunity to evaluate real pharmacology.

Now I figured out, it's not that one at all, it's IO4, I'm sorry.

Well, that was glucagon.

The number you asked for is the IO4 receptor alpha drug which is the aerosol drug for asthma and COPD and rhinitis and stuff like that.

It's finishing tox studies.

We'll get the tox studies finished this year and I'm not sure exactly when we'll get into Phase I.

Okay, great.

Thank you.

[Pia Calegafor].

Just wanted to ask regarding the Phase III studies, could you comment on the types of patients or the number of patients that you expect to be enrolled for those studies, the Phase III for 301012, please?

With regard to Phase III, we can't be too explicit because we're clearly not anywhere close to having a Phase III plan outline.

But the initial patient group I think we're pretty clear about.

These will be people who are on stable statins and possibly [azetamide], who can't get to target who are at high risk.

They may be at high risk or moderate risk but they will be unable to get to target and we will simply add as we have in the Phase II trial an induction and then maintenance dose of 301012 to that.

Numbers of patients to demonstrate efficacy will actually be very modest.

The real challenge in Phase III is to gain longitudinal experience in dosing and accumulate the 1000 or 1500, or whatever it is, patients necessary for safety.

Thank you very much.

In Phase III we will probably do some specialized studies in different patient populations and other things, but I think it's just a little early to get into more detail than what I've just done.

Jim Birchenough.

A few questions.

The first question falls under the category of what's left to learn from 400 mg.

I know you can't speak to the specific data, but maybe you can remind us what we've seen with lower doses in terms of percent of patients getting to goal, how much further you can really push that with a higher dose.

And the offset is obviously liver enzyme elevations and what's an acceptable rate of liver enzyme elevations above three times normal?

I guess as a preface, it's a legitimate question to ask.

We spend a lot of time asking whether we ought to even go to 400 mg.

And the logic for going to 400 mg was that we had great efficacy and we had sufficient safety to support going to 400 mg.

And by going to 400 mg we will have completed the almost ideal Phase II program where we've gone from the minimum affective dose to what in theory is the very maximum effective dose without running into dose limiting side effects.

And so our justification for doing it was that it is the right experiment to be done at this stage if you have a drug that's safe enough to support that.

Our expectations after three months of treatment, and I've been very clear about this from the very start of the trial or before we started the trial, was based on the predictability of the drug, the linear dose response curve, the fact that at 300 mg we had more than 60% reduction that we would see somewhere in the range of a 70 to 75% reduction in ApoB.

If we were to get that we would have a significant fraction of patients who might have ApoB levels below the limit of normal and many that might have ApoB levels that are undetectable.

And I've been -- it doesn't take a lot of knowledge to make those predictions.

All you need to do is look at the dose response curves.

So our expectations based on -- or at least I won't speak for us, I'll say my expectation based on the 60% reduction we had at 300 mg was that we would have a very large fraction of patients who would be at target.

Those are expectations that I spoke about at the AHA.

What we're actually going to get of course we're not going to know until we unblind and we present the data at the ACC.

Now with the combination data, remember we're only dosing for five weeks.

And at five weeks at 300 mg we added a 51 or 52% reduction of ApoB and LDL to what was achieved with the stable those of statins that we were on and we expect -- I've said we expect to see the same sort of dose response curve with combination that we saw with single agent and exactly what that will be of course is difficult to know, but certainly that's what our expectation was.

With regard to ALTs, we have a liver active agent.

We know we're remodeling lipids in liver.

So we expect some ALT increases.

The key issue is not whether you have ALT increases, the key issue is do you have any evidence to suggest the drug has potential to produce severe liver toxicity.

The kind of evidence that leads you to that are very high ALT levels, 10X, or ALT levels that are substantial, greater than three times that are associated with increases in bilirubin or ALT elevations that are high and associated with GI distress.

And today at no dose have we seen any evidence for that.

So my answer to the ALT level question is that it's not be ALTs that we're watching, it's whether there is the potential of drug to produce severe liver toxicity and to date we've seen no evidence for that.

Of course, when we unblind the 400 that's a new game and we'll report the data and we'll address that issue at the ACC.

So you're still blinded to the data today?

We'll be reporting the data at the ACC.

Okay.

And so it sounds like obviously if the linear dose response is maintained through 400 you could get a greater percent of patients getting pushed below 70.

That doesn't necessarily seem to be necessarily what you need in a polygenic population.

But is 400 mg a relevant dose to consider in the familial population or should we just think about this as it's the far end of the dose spectrum, not really clinically relevant because you're not going to be really pursuing it with any clinical programs in the future?

That's the way I think of it at the moment.

I think even in the FH I think it's more likely that we would dose at 300.

We certainly are not contemplating even in FH patients a 400 mg induction dose.

At some point we would like in the FH patients to do a dose titration within patients where you might see within patients an effort to get lipid levels down to as low as you could get at whatever dose was relevant to that patient.

But we're a long way from doing an intrapatient dose titration study.

And the reason it's difficult of course is the very long half-life of the drug.

Let me do the short answer, 400 is the top end of the dose response curve and the data that we get on safety and efficacy will be instructive but not relevant to the kind of doses that we'll be using in our routine clinical trials.

Great, thanks for that answer.

Just a follow-up question for Lynne.

Lynne, just with regards to the guidance that cash on hand should suffice till mid 2010; maybe you could speak to some of the assumptions underlying that in terms of whether any partnership revenues are contemplated, what the assumptions on Ibis are, and how we should think about Symphony GenIsis within that thinking that you can have cash till 2010?

Sure.

We do every year when we do our projection model out for a number of years we use very conservative assumptions about sources of new cash, but of course every year we do different types of deals and we have different sources of partnership oriented cash.

We have not included in that the type of money that we would expect to get or the type of value we would expect to command from a large 301012 licensing deal if that's sort of your explicit question.

Because that would be an event that is highly binary so it's hard to handicap it and would probably let us give you guidance that would be difficult to parse through.

So it does not include that, but it does include the types of transactions that we routinely do on a year-by-year basis.

With regard to Ibis, the guidance that we've given is that with Ibis we expect profitability in the late 2008, 2009 time frame.

So in the in years, this year and next year we're not seeing a lot of positive cash contribution from Ibis.

We also have not included revenue in those projections for a strategic alliance from Ibis.

Although as you know, as we go forward with that business a strategic alliance is one of our goals for the Ibis business.

So I guess what I would say is that our projections in terms of new sources of revenue are pretty conservative.

Great.

Thanks for taking the questions.

Aaron Reames.

Just a little bit more on alicaforsen.

I was wondering if Atlantic actually has cash on hand to start registrational studies or if they will have to do an equity raising process before they can get started.

And then secondly, you had previously mentioned that it would most likely -- the registrational program would most likely include two Phase III studies not compared to [mizalomine] with about 250 to 300 patients in each study.

Is that still the general consensus and thought?

If you could just start there that would be wonderful.

Sure.

Atlantic has raised some money; they've raised their initial financing but they will need to raise more money and that is their plan, to continue to develop not only alicaforsen but the other drugs that they plan to acquire.

Their initial development plan is a more rapid registration plan in pouchitis and then moving forward into ulcerative colitis, so they view their initial registration to be in pouchitis.

Their plan is to have discussions with the FDA as rapidly as they can now that they've got the drug, to flesh out exactly what the clinical studies will be.

And obviously as we get more information from them and work together with them on that we'll let you know, but their plan is a little bit different from what ours had been.

They're starting what they think is a -- and we agree -- is a more rapid route to registration than following on with the [UC].

And then on Ibis, I know that Bruker will be launching in Europe at some point in time.

I was wondering if that starts after manufacturing is fully transitioned to them.

And then does the guidance for having eight to 15 systems include systems being placed in Europe?

The answer is yes, after the manufacturing is complete (indiscernible) Bruker will start selling in Europe.

At the bottom end of the range it doesn't include any Bruker systems, and at the top end of the range it does.

We certainly are anticipating Bruker marketing and selling this year as are they.

And there are five systems in the field right now?

Yes.

Okay.

And then last question, just in regard to kind of the R&D and SG&A run rate.

Should we look at a trajectory off of what we saw in the fourth quarter or are those the levels that we should expect going forward?

I was wondering if you could just comment on that?

G&A should stay relatively flat.

The R part of R&D is also staying relatively flat.

As you can see from our plans and actually as we go through them at ACC you'll see that we are accelerating and increasing the size of our development on 301012 and then a little bit with these new drugs moving into the clinic.

So we will expect the D part of R&D to be going up some, but we don't expect a significant increase in our expenses over what we projected for this year.

As you'll notice, we actually came in below our expense projections for 2006, but our 2007 projections aren't going to go up a whole lot from our fourth-quarter actuals in terms of run rate.

Okay.

And then last question on Ibis regarding the strategic alliance with a diagnostic partnership.

I was wondering if he could just give a little bit more clarity and color as to when we might see something come to fruition.

What are you considering in making your final decision and what type of partner you're looking for in that?

March 14th -- that's a joke.

I retract that statement from Stan.

We're working on it, Aaron.

And I can't give you a prediction of when we'll actually get a deal done.

What we have in mind for a transaction is a significant partner involved in the broad array of product opportunities, not just diagnostics, and for that significant compensation.

Lynne wants to add something.

Aaron, you might remember that we said in the context of our -- when we rolled out the Ibis business plan that our goal was to have a partner in place before we approach diagnostics.

Which really means sort of 2008, even the second half of 2008.

That being said, as Stan mentioned, having a partner involved sooner could have a lot of benefits.

But we are perfectly prepared to scale up in market and sales in the nondiagnostic markets on our own while we're preparing the data portfolio to support entering diagnostics.

Okay.

And then just a last question.

The amortization period for each system in which you're recognizing revenue, did you say that was 12 or 18 months?

It's 12 months.

Okay.

All right, thank you.

If there are no other questions, I want to thank everyone for participating in the conference call.

We appreciate your interest, look forward to talking to you again around the ACC.

Thank you very much.

That concludes today's call.

We appreciate your participation.