Ionis Pharmaceuticals Inc (IONS) 2007 Q4 法說會逐字稿

Welcome to Isis Pharmaceuticals' fourth quarter financial results conference call.

This call is being recorded.

Leading the call today from Isis is Dr.

Stan Crooke, Isis's Chairman and CEO.

Dr.

Crooke, please begin.

Good morning, and thanks, everyone, for joining us on today's conference call to discuss the financials for the fourth quarter and the full year of 2007.

Joining me today on the call are Lynne Parshall, COO and CFO; Jeff Jonas, Executive Vice President; Beth Hougen, Vice President of Finance; and Christina Lemonitas, Associate Director of Investor Relations.

The financials that we will discuss today demonstrate that 2007 was a transformational year for the Company, and that the momentum established in 2007 continues strong in 2008.

We have, as you all know, led the way to a new drug discovery platform.

We are the leaders of antisense technology and we have successfully executed the unique business strategy that's built on the efficiency and productivity of antisense.

As a result of all of these successes, we can confidently state that for the foreseeable future, we will not need to return to Wall Street to raise additional cash.

At Isis, we have pioneered the creation of RNA-based drug discovery and Ibis-based infectious organism identification technologies.

Antisense technology changes drug discovery and drug development.

Similarly, Ibis technology changes the identification of infectious organisms.

Using antisense technology, we can rapidly evaluate all potential targets to support a data-driven decision about which targets are likely to be the best for drug discovery.

Antisense-based drug discovery in early development or processes are more rapid, less expensive, and more likely to succeed than with other technologies.

Our drugs are more specific, more effective, better tolerated, and more predictable than other drugs.

So when partners engage in partnerships with Isis, they certainly are focused on the opportunities presented by our drugs.

But more than that, they're accessing our technology with the goal of enhancing the productivity of their R&D programs.

Similarly, when Abbott entered into a strategic relationship with Ibis, it was accessing the existing product opportunities, of course, but it was betting that Ibis technology would transform their molecular diagnostics business.

In a very real sense, in the past year, all the innovation, perseverance, and investment in creating these revolutionary platforms began to yield tangible results for our shareholders.

But the keyword there is began.

We're now confident that our financial strength coupled with the unique productivity of our platforms means that the momentum of 2007 will be manifested for years to come in increasing shareholder value.

So the main points that we want to make in this phone call are -- first, that we are now financially strong and we do not expect to need to raise money in the foreseeable future.

Second, our platform supports creating a large pipeline of innovative drugs with a small group of scientists.

Our business model, then, is to create an ever-growing pipeline of drugs in early development and license them at value and flexion points.

This assures that we will stay small, focused, innovative and cost-effective.

It also limits our need for cash.

Third, interest in our technologies remains extremely high, so you should look forward to additional deals in 2008.

Fourth, our pipeline is progressing nicely.

We expect to add at least two to four more drugs to the pipeline this year.

And we look forward to news about both the drugs that we are developing, as well as news about the drugs that we've partnered.

Additionally, we continue to make excellent progress on mipomersen.

And, of course, mipomersen is the most important asset in the Company.

Earlier this year, we announced our initiation -- the initiation of Phase III trials in patients with homozygous familial hypercholesterolemia.

Today, we are pleased to be announcing that we are initiating the rest of the Phase III program for mipomersen, including studies in patients with heterozygous FH.

One other point is that we do expect to report new clinical safety data on mipomersen, and we hope that will add strong support for the view that mipomersen is, in fact, well tolerated with regards to the liver.

Our new drug discovery and development collaborations are off to great starts, and you should be hearing good things from all of them.

And the Abbott and Isis relationship is off to a great start; we certainly look forward to more good news from Ibis and from Ibis Abbott in 2008 as well.

So, those are the main points that we hope that you take away from the conversation today.

And with that, I'm going to turn it over to Christina and Lynne.

Chris will review our forward-looking statement, and Lynne will review our accomplishments in the past year and summarize our financials.

After Lynne does that, I want to focus on our plans for 2008.

Christina?

Thanks, Stan.

Good morning, everybody.

A reminder to everyone, this Webcast includes forward-looking statements regarding our business, the financial outlook for Isis as well as its Isis Biosciences subsidiary and its Regulus joint venture, and the therapeutic and commercial potential of Isis's technology and products in development.

Any statement describing Isis's goals, expectations, financial or other projections, intentions or beliefs is forward-looking statement and should be considered an at-risk statement, including the statements that are described as Isis's 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 in human therapeutics, and in the endeavor of building a business around such products.

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

Although Isis's 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's programs are described in additional detail in Isis's annual report on Form 10-K for the year ended December 31, 2006 and its quarterly report on Form 10-Q for the quarter ending September 30, 2007, which are on file with the SEC.

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

And now I'd like to turn over to Lynne.

Thanks, Christina.

As usual, I'm assuming that you've all had an opportunity to read the press release we issued this morning.

So I'm not planning to reiterate what's detailed in the press release, but I will be happy to answer questions at the end.

As Stan said, 2007 was a transformational year for Isis.

We reduced our net operating loss from our projected high $60 million loss to a loss of $29 million, and we've dramatically strengthened our balance sheet.

And we are predicting another 50% reduction in our NOL in 2008 over 2007.

We've already added approximately $270 million in new cash, and we're making great progress towards finalizing our Genzyme contract, so we'll add an additional $175 million shortly, bringing the total cash from our partnerships to nearly $450 million.

Based on our existing cash and committed cash -- including the $175 million mipomersen licensing fee due from Genzyme but not including the up-to $210 million we could receive from Abbott -- we expect that our 2008 year-end cash balance will be greater than $450 million and will last for at least five years.

Additionally, we are very encouraged about the Abbott/Isis relationship and are optimistic that Abbott will exercise its option to acquire Ibis.

That would give us the opportunity to receive up to an additional $210 million.

Furthermore, we expect our net operating loss, excluding non-cash compensation, to be less than $15 million in 2008, so all the positive financial momentum of 2007 will continue into 2008.

Mipomersen continued to perform very well.

Its performance is representative of the performance of all our drugs are capable of delivering.

It shows very strong activity, tolerability, and consistent, predictable performance from patient to patient across patient populations and in the presence and absence of moderate and maximal lipid-lowering therapy.

Mipomersen's performance completed the validation of antisense technology and facilitated a significant increase in the value of every one of our drugs in development, and of our antisense technology.

Not only did mipomersen exceed every objective we set for it, but we had excellent progress throughout our 18-drug pipeline.

This includes drugs to treat metabolic disease, cancer, Multiple Sclerosis and other diseases.

We had an extraordinary year in corporate partnering.

Transactions with major companies included our license of our PCSK9 program to BMS; the license of two diabetes drugs in preclinical development to J&J's Ortho-McNeil division; the successful auction that led to the very attractive license of mipomersen to Genzyme; and the strategic relationship between Ibis and Abbott.

Each of these transactions is unique and at the high end of value of what would be expected for programs at their stage of development.

When mipomersen had completed its initial Phase II program, we licensed it to Genzyme for $150 million in equity and $175 million license fee, and more than $575 million of near-term development milestone payments and additional milestone payments of more than $250 million.

We did this while retaining a 50% share of profits, allowing us to participate in future commercial upside of this very attractive drug.

We believe the deal provides a very good balance between short-term and long-term revenue, with added commercial milestone payments of up to $750 million, if the drug achieves more than base case projections of $2 billion in sales.

This is one of the biggest biotech deals in history for a Phase II drug.

Nevertheless, it's a fair deal, because mipomersen has such extraordinary potential.

The Abbott relationship with Ibis is similarly at the far end of economic value for a diagnostic company that achieved about $1 million in commercial revenue in 2007 from the sale of instruments and reagents.

An acquisition by Abbott of Ibis for $215 million to $230 million would be a very attractive deal, but what makes it of special value to Isis shareholders is the earnout opportunity to participate in the commercial upside of the business going forward.

Added to all of these deals are a host of smaller but strategically important transactions that reflect the success of our strategy, including the formation of Altair; the formation of Excaliard; the formation of Regulus, our joint venture with Alnylam, to focus on microRNA's; and the $26.5 million we received from Alnylam as part of our ongoing relationship.

Alnylam, ATL, Teva, and OncoGenex show the value of our maturing strategy.

Moreover, we repurchased our symphony partnership early in the relationship, resulting in a savings of $75 million.

Forgive me if I seem to be excited about our accomplishments, but frankly, I don't believe there's a biotech company that's achieved more success across a broader front in a single year than we've done this year at Isis.

But more importantly, our success in 2007 assures more successes in the years to come.

So we're focused on how to be sure to do the best deals and to make the biggest advances in our pipeline and technologies.

We are extremely pleased that we now have the financial strength to focus solely on executing our plans to realize the full value of what we've created.

What we find remarkable is that in 2008, we will continue to advance mipomersen and the rest of our pipeline, add new drugs to our pipeline, fully commercialize Ibis, advance our technologies to make progress in our satellites companies and regulates, with a net operating loss of less than $15 million projected.

Of course, that means we can do all of this without the need for further dilution.

I'll now turn the call over to Stan, who will give you more specifics on our goals for 2008.

Thanks, Lynne.

2007 was a great year and we have an equally aggressive and exciting agenda for 2008.

Let me begin with mipomersen.

We are initiating other components of our Phase III program, including studies in patients with heterozygous FH.

We also plan to report important new safety data that we hope will support our belief that mipomersen is well-tolerated by the liver.

These data will include an update on the experience we're gaining in our open label extension study.

In this study, we are acquiring important data in patients treated with mipomersen for actually quite prolonged times now.

Further, we plan to report data from our MRI study, designed to evaluate the effects of mipomersen on fat levels in the liver.

While these are safety data, they are key data because they address the sole remaining question about mipomersen, and that is, is it going to be tolerated with long-term treatment.

We look forward to presenting those data from both of those studies this year.

We also expect to have progress to report with the rest of the cardiovascular pipeline.

Our CRP inhibitor, ISIS 353512, should enter clinical trials in the middle of the year, and we expect to select a development candidate for PCSK9 with our partner BMS.

I believe we have the most exciting pipeline in metabolic disease of any company, large or small.

It's comprised of a novel insulin sensitizer; a dual-acting glucagon receptor inhibitor that increases glucagon and preserves pancreas function; a liver selective corticoid receptor inhibitor; and an SGLT2 inhibitor that increases glucose excretion in the urine.

Four drugs, each unique and each complementary in terms of mechanism to the other.

We expect to report results from an important Phase II study in which our PTP-1B inhibitor and insulin sensitizer, Isis 113715, is added to sulfonylureas in patients with established Type 2 diabetes this year.

We are completing a Phase I study of our glucagon receptor inhibitor 325568, in which we are evaluating its effects in subjects within a glucagon challenge.

So we'll have a very real, very early opportunity to determine if it works in man like it does in animals.

Of course, this drug is licensed to Ortho-McNeil, so what we will be able to present will be defined by our partner.

We're making progress in our glucocorticoid receptor program as well, and of course, this too is a part of the Ortho-McNeil relationship.

Finally, our SGLT2 inhibitor, ISIS 388626, is progressing in toxicology studies.

We hope to have it in clinical trials very late this year or early next year.

We expect all four of our anti-cancer drugs to make significant progress in 2008.

OncoGenex has already reported encouraging data with OGX-011 and hopes to start Phase III studies in patients with prostate cancer shortly.

OGX-437 is beginning Phase II trials in patients with a variety of cancers.

Eli Lilly is advancing our survivin drug, LY2181308, and our eIF-4E inhibitor, LY2275796, both into Phase II trials.

In other diseases, perhaps the most important event will be the completion of the Phase II trial of our VLA-4 antagonist in patients with Multiple Sclerosis by our partner, ATL.

One other area that deserves your attention is the progress we're making in creating antisense drugs to be administered locally to treat severe CNS diseases.

We hope that our first CNS drug, Isis 333611, supported by the ALS and Muscular Dystrophy Association's and designed to treat amyotrophic lateral sclerosis, or ALS, will enter clinical trials this year.

We received a grant of nearly $10 million from the CHDI Society -- that's the Cure Huntington's Disease Society -- to discover a drug to treat Huntington's disease.

And we expect to announce progress on this later in the year.

Additionally, we hope to add at least two drugs, perhaps as many as four new drugs to our development pipeline this year.

As I mentioned, the Abbott/Ibis relationship is off to a great start.

We look forward to placing at least eight new Ibis instruments this year.

We also hope to expand our service business and continue to increase revenues, while meeting the milestones that will increase the price at which Abbott may acquire Ibis.

We expect Regulus to continue to make excellent progress in creating antisense drugs that target microRNA's involved in a number of diseases.

And many more of our satellites companies or associated companies will report important progress this year.

For example, Altair intends to initiates clinical trials on our first aerosol drug, AIR645, that targets IL-4 receptor alpha for the treatment of asthma.

On the business development front, although I can't promise quite as spectacular a year as we just completed, I can assure you that interest is high and we have high hopes to complete important new transactions in 2008.

So in conclusion, we feel we completed a transformational year that establishes a momentum to assure years of growth and value for you.

The size and diversity of our pipeline and the momentum we established make it likely that 2008 will be an important -- another important and eventful year, so, hope you stay tuned.

And with that, I'm going to open up the conversation for questions.

[Mahala], if you'll set us up for questions, I'd appreciate it.

(OPERATOR INSTRUCTIONS).

Salveen Kochnover, Jefferies.

Thank you for taking my questions.

Stan, it looks like you initiated more than one Phase III heterozygous FH trial with mipomersen.

Could you describe the design of these trials as well as provide timelines for the Phase III mipomersen data releases this year?

Thanks.

We are initiating the entire Phase III program, and that does include trials in heterozygous FH.

And the trials are focused on patients with heterozygous FH who have coronary artery disease that -- and the treatment period is -- the efficacy evaluation period is 26 weeks of treatment.

The dose is 200 milligrams per week and, of course, then there will be followed -- there will be continued treatment after the evaluation is completed.

We do have additional trials that we plan to get underway.

And our plan, once we complete the joint development plan with Genzyme, is to have another conference call and go over the plans and the timelines in some detail with investors.

And so I'd like to leave it there, if I may.

Okay, so you're -- so, at that point, will we find out when you're initiating the trial in the polygenic population as well?

Yes.

But suffice it to say here, we are encouraged by what we are hearing with regard to everything about mipomersen, including our opportunity to move our polygenic program along aggressively.

Okay.

And are we still on track to see data from PTP-1B inhibitor in the second quarter of this year?

We are on track to see those data, yes.

Thank you.

I should add, Salveen, that it's always an issue about when the data will be available, because if we try to make it into a specific meeting and we think it's important to try to do that, we're at the mercy of the meeting date and the meeting organizers and submission dates, and so on.

So, I think the important thing I'd say to you is the trial is going well.

It is finishing on time and we will have the data available.

Mark Monane, Needham.

Thank you.

Good morning.

And I have Alan Carr as well with me.

The first question we have is dealing with the mipomersen.

You mentioned the Phase III program.

Can you outline for us the Phase 2b program in polygenic disease?

Now, what should we expect in terms of the timeline and what kind of outcomes are you going to be looking for before initiating the Phase III trial with Genzyme?

Well, you mean after finishing the Phase III, I suppose.

But to answer the last question first, we think LDL will remain the end point that's approvable.

Obviously, there's a lot of discussion at the FDA and elsewhere about additional questions to be asked of lipid-lowering drugs.

I think it remains to be seen how those conversations will go.

But one thing's for certain -- LDL is the most proven end point in medicine, so I believe it will stay.

Will there be other questions that should be answered, such as do you improve carotid IMT or do you improve mortality or morbidity?

Those are all questions that will be answered eventually with mipomersen.

And, of course, it has been -- and it is our plan to try to get answers to those questions as early as possible on the history of the drug, because we think they're going to be tremendously positive and enhance the pricing and the value of the drug.

With regard to the program on high risk polygenics, we are encouraged about what we're going to be able to do and when we're going to be able to do it in all of the indications.

And what I'd like to do is save a more specific answer to that question until we finalize our plans with Genzyme and we can have a detailed conversation about all that, if I may.

Jeff, do you want to add or subtract anything from that?

No, Stan, I think you've described it quite well.

I just want to reiterate, I think that LDL lowering remains the primary end point for the trials.

The other outcome studies I think, as Stan says, we believe we can institute expeditiously, not only from a -- as well to enhance the commercial value.

And [it's IIb delacofil], Jeff, and the IIb program, we have it starting this year 2008.

Do you expect that to be delayed?

Or do you believe that they will start the polygenic trial as well this year?

I guess what I'm trying to say is you should be very encouraged.

The polygenic program will be getting underway very, very shortly.

I don't want to get into whether that program should be called a IIb or a III or whatnot at the moment.

Very good.

And Alan Carr has a question.

There's a little bit of, I guess, a staggered start for the heterozygous and the homozygous FH trials, and I believe that was due to some continuing discussions with the FDA.

I was wondering if you could characterize that for us?

And the other part to the question is you mentioned that you'll probably be starting two to four new candidates this year.

I was wondering if you could give us a sense what disease areas they might be -- if there's a focus for those.

Yes, thank you.

I think we've been pretty clear that we have had -- we've had a desire to have meaningful conversations with the FDA for some months and that there have been delays in having those conversations.

I think that's what we've said and what I want to repeat; there have been delays in having the conversations.

Not that there have been difficulties in the conversations; delays in having the conversations.

And we now believe we have sufficient clarity to and answers to a number of the questions that we asked, that we can get our full Phase III program underway.

The areas where we expect to add new drugs this year are in cardiovascular and possibly -- and CNS; possibly cancer and possibly obesity.

Eric Schmidt, Cowen and Company.

(OPERATOR INSTRUCTIONS).

Stan, when might we see the additional safety experience from the mipomersen studies with the Phase II extension as well as the MRI study?

I show the -- the open label extension study, of course, is open label and it's a small group of patients.

But it's very important because these are the first groups of patients to be treated for prolonged periods with mipomersen.

It's a study that really doesn't lend itself to a publication or a presentation at an AHA or something like that, because it's just an open label extension study.

I think you should expect to see the results from the next set of analyses from that study because it's continuing very soon.

The MRI study you should expect to see later in the year.

We would hope we can get that in the AHA, but we don't know that for sure, obviously.

And in terms of your business development goals, you mentioned that you have high hopes for some new transactions in 2008.

Is there any focus or priority or can you further define what types of transactions might be appealing to you, given all the progress you've made over the past 12 months in this area?

Yes, well, I guess the first thing I'd say is the price has gone up -- a lot.

And it went up fairly dramatically last year and it's going to continue to go up.

Second, we are clearly interested in partnerships for some of our earlier stage technology opportunities, such as Regulus.

Remember, Regulus is focused in microRNA's and microRNA's is an exciting new area, but it's an area where there's a lot of work to be done.

And so that's an interesting place far partnership.

And we're looking at some innovative transactions that will take advantage of the technology.

One of the things that we've always -- we've done and wanted to interest partners in, is to be able to use the technology to rapidly move from concept to clinic.

And so we're considering options such as that.

And then there are specific targets that we believe will come to value inflection points this year, that we would be willing to consider licensing.

So I think those are the general categories.

I wouldn't want to get more specific than that.

And Lynne will probably tell me I got too specific.

Do you want to subtract anything from that, Lynne?

Yes, could we just delete that whole thing you just said?

Lynne, on the revenue side, do you have a better understanding now of the amortization schedule for Genzyme and the other programs, that you can help us with some maybe overall revenue guidance for 2008?

Sure.

The Genzyme collaboration we are amortizing revenue over four years.

And that includes the premium on the stock, too.

Yes, it includes the premium on the stock as well as the license fee.

Okay.

Do you want to provide a total revenue guidance figure for the year?

We don't.

What we always do is give net operating loss guidance, which is, as we've said, is in the approximately $15 million net operating loss, not including the non-cash stock compensation, et cetera.

And the other guidance that we're providing this year is that we expect -- not including the $210 million from Abbott -- to end 2008 with at least $450 million in the bank.

Now, on the expense side, given that you're going to be offloading the mipomersen costs over the course of the next 12 months, would you expect R&D to increase much off of the Q4 run rate?

We wouldn't expect it to increase very much in the key areas.

Mipomersen, as we transition through the remainder of this year, should remain roughly the same, because we will be transitioning as we go through the year to Genzyme.

And a lot of those studies we're getting up and running and will continue to run.

The primary areas of increase are going to be in Ibis, as they continue to work to expand the commercial operations of the business and to meet the milestones that we and Abbot have mutually agreed on, which are key milestones to really get the Ibis technology ready for the diagnostics opportunity, which is the large opportunity.

And then, of course, with our joint venture Regulus, that is a brand new opportunity and there will be growth and expenses associated with that.

But we do expect modest expense growth with, obviously, substantial increase in revenue.

And one last question on mipomersen and heterozygous FH in the Phase III program you started up there.

I think Stan mentioned that this would enroll patients with coronary artery disease.

Is this patients post-MI?

Or how is CAD defined in this centric criteria?

It will be CAD including post-MI or evidence of other macro -- [basis] macro vessel disease.

So, all of these folks will meet the high risk definition.

All the folks in all of the studies will meet the high risk definition from framing and score.

And in the heterozygous study, of course, we want to get the heterozygous that have significant disease.

And so they are obviously high risk and they have coronary artery disease as defined by previous revascularization angina evidence of vessel block or a previous MI.

I think that pretty much covers how it works.

This has been one of the -- these patient definitions for our trials, both in heterozygous and polygenics, have been one of the questions that we've been trying to engage the FDA in and get resolved.

And I guess what we're saying -- not guess, I know -- what we're saying today is that we feel we have clarity from the FDA about those patient definitions.

[Ted Tenthoff], Piper Jaffray.

I guess shifting gears just a little bit and looking at some of the upcoming diabetes data in the second quarter with 715, I believe our understanding is that the trial should complete in April.

Can you give us any better timing on when we should be expecting data?

How it will be presented?

And also, can you put in perspective what we should be expecting with respect to hemoglobin reductions?

I think that's had a three-month end point.

So, this is a study in established diabetics.

That's the first and most important point.

In our previous work, we studied newly diagnosed diabetics.

And in newly diagnosed diabetics, you get a fairly profound initial benefit just because it's the first time they've watched their diet and had a lot of attention paid to just managing their health.

And in those studies we did get a very substantial placebo effect.

So it's a study in patients with established diabetes.

It's a study in patients who are on stable sulfonylureas.

And it's a study divided into two parts.

In the first part, the patients received either placebo or 100 milligrams per week of 715.

And then once that dose group was completed, and the drug performed -- and the drug was deemed to perform adequately with regard to safety, we then initiated the 200 milligram dose group.

We will -- we are looking for a significant reduction in hemoglobin A1C.

I don't remember -- and perhaps Jeff does -- what it was powered to C with regard to reduction of hemoglobin A1C over sulfonylureas, but certainly I think we're expecting greater than 0.5.

It was powered for 0.6.

And if you remember from the earlier study, we did have significant reductions in glucose.

And the effect -- the change from baseline for the hemoglobin A1C was 1.1, which was a nice effect.

It hadn't achieved statistical significance, simply because the placebo response, as Stan had said, was so pronounced.

But in all the measures, we looked pretty good.

So the data that we can look forward to and will be presented according to the statistical analysis plan, because we don't want to have any issues with alpha spend or significance issues.

And those will be -- those are the data that will be looked at in mid-year.

The 200 milligrams cohort would be by the end of the year, if things continue well.

So, back to your question, then.

The initial report on 715 will be the first look at the low dose.

We can't comment on where and when that will be, because obviously we're at the mercy of meeting schedules and what we can submit and so on.

And we'll just have to see where we stand as the data come in and we have them analyzed with regard to meeting submissions and all of that.

And I just can't get more specific than that, I'm sorry.

I think that's helpful.

Thank you very much.

Debjit Chattopadhyay, Boenning & Scattergood.

Thank you for taking my question.

I'd say most of them have been answered, but would you care to elaborate a little bit more on the miR-122 program at Regulus?

Well, Regulus is just getting underway.

As you know, we've brought in [Clay Anthus] and we've hired Peter Linsley as the head of research.

The programs in Regulus are just being formed, but we expect that they will focus in cancer, inflammatory disease, and to some extent, infectious disease.

One of the interesting targets that is being pursued right now is miR-122.

miR-122 is interesting because it appears to be involved in hepatitis C infection and inhibiting miR-122 also appears to reduce cholesterol.

Add it's hoped that both the reduction in cholesterol and the reduction in hepatitis C growth will improve liver function in patients who have hepatitis C.

We have a lot left to learn about miR-122 as a therapeutic target, and we're in the process of learning that.

For example, why does it cause cholesterol to go down, we need to learn.

And we're learning more about its ability to inhibit hepatitis C.

So it's an important target in the Regulus portfolio and one that we're actively pursuing.

And we expect to provide more information for you about how we feel about that target and whether it's going to be a lead drug candidate for us, just a little later in the year.

And the SGLT2, you suggested that it could potentially enter the clinic late '08 or early '09?

Yes.

What do you need to demonstrate before you take that to the clinic?

I understand the [doc] studies have gone well so far?

We've demonstrated everything we need to -- how it works, to beat the band, it's extremely potent.

It works through the mechanism that we'd hoped it would, which is inhabiting SGLT2 in the renal proximal convoluted tubules; increasing glucose excretion in urine.

It works in combination with other anti-diabetes drugs.

So all the pharmacology is done.

We're just waiting to finish the tox studies and get the tox reports and get it in demand.

In Phase I, we will have, again, as we have had with mipomersen, glucagon receptor, expect to have with the glucocorticoid receptor and PCSK9, the opportunity in Phase I to see if we can replicate the data that we see in animals in man.

And there again, all you really need to do is to give the drug and measure how much glucose ends up in urine.

And we certainly hope that it will increase the glucose in urine.

So we will -- when we get into Phase I, we should very rapidly have an answer about whether we're seeing the pharmacology in man that we hope to.

And last question regarding the heterozygous FH trial.

In terms of the number of patients, will you shed some light on the number of patients generally in the trial?

Or you plan to?

We have -- I think we are expecting in total -- in terms of total heterozygous FH patients in all trials, probably a couple hundred.

Don't hold me to that number, because all of these things are being adjusted in response to the clarifications that we've gotten.

And so, we'll get more precise with you and be much more forthcoming as soon as we finalize our plans.

So if you can bear with me just a little bit and take a couple hundred as sort of the general number that I think is in our head today.

Aaron Reames, Wachovia.

Thanks for taking my questions and congratulations on a solid year.

I was wondering if you could provide us with a little bit more clarity on what to expect, when you do report initial results on the MRI study?

And then just a general overview on the progress of that trial and where it stands now?

Yes.

The MRI study is designed to evaluate the effect of mipomersen on fat levels in the liver.

And in the initial cohort, we did normal volunteers.

In the cohort that we will be reporting, we actually studied heterozygous FH patients.

And what happens in that study is the drug is given for 13 weeks; the patients are given an MRI that measures liver fat before they come in, at week four and at week 15, if I remember correctly, Jeff.

And what we're asking is do we see any significant increase in liver fat?

Remember that MRI is a good tool but it's a relatively blunt tool.

I think 30% liver fat is considered steatosis.

And so we will be reporting data that relate to heterozygous FH patients treated with mipomersen for 13 weeks at 200 milligrams a week, with three different MRI evaluations that determine what happens to their liver fat.

There will be other cohorts of patients that will be enrolled in that study.

As we progress from that study being a more or less defensive proof that the drug isn't toxic, to a more offensive study where we're looking to see if we can reproduce in man what we've seen in animals, which is the drug is capable of actually reducing liver fat in animals that have fatty liver.

Did -- does that answer your question?

Yes, it did.

And then as far as the end points for the heterozygous FH trial -- so the -- we should expect the primary end point to be LDL-lowering and then similar secondary end points to what we've seen in prior studies?

Yes.

We believe that the evidence is overwhelming that mipomersen lowers all atherogenic lipids, including LDL, VDL, IDL, it has a positive effect on particle size and particle number.

It also lowers Lp(a) and it lowers triglycerides.

And we've not done any study in any animal or human subjects where we didn't show that.

So we would be very surprised if we didn't reproduce all those data in our coming trial.

Okay.

And then can you provide just a little additional clarity on what the definition of in-development is?

So, if you're going to take two to four compounds into development, maybe at what point do you feel that you've got validation, so that we can have a better understanding?

And maybe how long before those compounds would be expected to enter the clinic, as we start to think about the pipeline growth?

We've always been fairly rigid and used sort of big pharma definitions of development versus research.

And so our definitions have been -- they haven't changed.

That is, to enter development, a drug has to have sufficient pharmacological data to support that it works; that it works in an attractive and commercially potentially successful level.

We have to have preliminary tox so that we believe that the target is a safe target.

And that's a big decision for us.

And typically, we have a lot of data; it's not a single experiment where you give a single-dose of drug and call it a development candidate.

And so when we talk about a development candidate, we're talking about a drug that's had all of the early work that you would expect from a large pharmaceutical company and is now entering formal pre-IND toxicology and pharmacokinetic studies.

Typically, from the start of development to our filing an IND, it's about one year, roughly, because we typically do a three-month study, three-month tox studies in two species.

And that whole process of making the drug, doing the tox studies, analyzing the data and everything, generally consumes nine months to 12 months.

Okay.

And then so, the compound that BMS in-licensed, was that considered to be in development then?

Absolutely not.

They did not license the compound; they licensed a research program.

And what we've been doing since then is sorting through scores of PCSK9 inhibitors, looking at lots of different animal models and picking the best PCSK9 inhibitor that we can find.

We believe that we'll get that done here pretty soon and we'll tell you about that when it's done.

I hope we were really clear.

They license a research stage program, for which we did not have a development candidate.

And the first goal of that collaboration was to identify the very best PCSK9 inhibitor from our library of PCSK9 work.

And that's what we've been trying to do.

So, when we talk about a development candidate, we really mean it.

We mean a drug that's been evaluated very thoroughly in many animal models and appears to be commercially attractive, pharmacologically effective, and at least safe in short-term treatments, ready for pre-IND development.

Joseph Schwartz, Leerink Swann.

I was wondering if you could give us your thoughts on a couple of recent developments as they relate to mipomersen and the Ibis opportunities.

First of all, the FDA has issued some draft liver guidance for drug-induced liver injury.

And then the recent [JAM] article suggesting that routine screening for staph infections in hospitals isn't warranted.

I was wondering if either of those impact the future development of either of these programs?

Well, the draft liver guidance from the FDA is a restatement of the FDA's position that it's had for many years, as far as I'm concerned.

And we discussed it several times last year.

It's great news for us.

It reasserted that Hy's Law is a key thing to watch.

And if I recall correctly, Hy's Law, of course, is any elevation of ALTs greater than three times upper lim in the normal coupled [to] an increase in bilirubin.

It re-stated that minor -- that ALTs themselves are not the issue; the issue with ALTs is that you want to see if there's a potential for relatively idiosyncratic non-dose-dependent severe liver toxicity.

And if those things that seem to predict that were Hy's Law, or any ALTs that were in the five to 10 to 20x.

In all of the dosing that we have done with mipomersen -- now thousands of doses -- we have never seen a Hy's Law and we have never seen an ALT that was one of these super high ALTs.

So we were greatly, greatly, greatly comforted that the FDA continues to believe that the attributes to watch for are things that mipomersen does not appear to have.

Jeff, do you want to add to that?

No, I think the only other point I'd make that historically, we've monitored -- if you look at the monitoring schedule in the guidance, that we've monitored well in excess of what the FDA is suggesting.

And the only other point to make is that with respect to the types of drug that are most of concern, Stan already indicated, it is [encratic] nature of the effect is one warning sign.

[The other is] most of the drugs that are of concern to the agency are substrate for cytochrome P450 and of course, mipomersen is not.

With regard to the routine monitoring of staph, here's what I -- I don't want to respond specifically to that report, because I haven't read it.

Here's what I believe, Joe.

I think Ibis is a game changer.

It makes the monitoring of hospital-acquired infections feasible and actionable because of its cost and time effectiveness.

And there are multiple studies -- many of them done at Northwestern University, one of the places where we do have an instrument -- that demonstrate effective monitoring of hospital-acquired infections and action rate in response to them, does lead to reduced morbidity, mortality and costs in hospitals.

So we continue to believe that that is a major opportunity for Ibis.

I don't know if I answered your question directly, but I haven't read the report that you're talking about, so I wouldn't want to comment in more detail.

That's very helpful.

Thanks.

Carol Werther, Summer Street Research.

Thanks for taking the question and congratulations on your balance sheet.

It's really amazing progress from a year ago.

I have two questions.

One is can you just update us on the homozygous pivotal trial that started earlier this year in terms of how enrollment is going?

And are you planning to file with -- for homozygotes before the heterozygote trial is done?

The development plan and the filing strategy really haven't changed from what we've reported now several times.

Homozygous, heterozygous, polygenics at high risk are the first three indications that we're pursuing.

Think of a triangle of value in pricing and numbers of patients -- homozygous, heterozygous, polygenic -- that still is very much the plan.

The precise timings for each one of those filings may change a little bit as we digest the clarification that we've been provided by the FDA and adjust the plan accordingly.

Jeff, do you want to --?

The enrollment for the study is going well.

And as you probably know, we already -- we have -- I don't want to give you specific numbers, since it's a pivotal trial, but we have patients both being treated and under screen.

And so we are very encouraged by the progress of the trial.

Great.

And my second question is -- how many patients are in the open label extension trial?

About 20 patients right now.

Okay, great.

Thank you very much.

And they're all homozygous or heterozygous FH patient, treated initially in one of the dose -- you know, those escalating dose efficacy studies, CS8 or CS9, and then rolled over to receive, most of them, 200 milligrams a week of mipomersen.

Thank you.

And Dr.

Crooke, there appears to be no further questions at this time.

I would like to turn the conference back over to you for any additional or closing remarks.

If there are no other questions, we want to thank you for your interest and we look forward to continuing to update you on our progress as the year progresses.

Thanks.

Ladies and gentlemen, that does conclude today's conference call.

We appreciate your attendance and have a great day.