Ionis Pharmaceuticals Inc (IONS) 2010 Q1 法說會逐字稿

Welcome to the Isis Pharmaceuticals first quarter financial results conference call.

Leading the call today from Isis is Dr.

Stan Crooke, Isis Chairman and CEO.

Dr.

Crooke, please begin.

Thank you.

Good morning and thanks, everyone, for joining us on today's conference call to discuss our first quarter financial results.

Joining us on today's call are Lynne Parshall, COO and CFO, Beth Hougan, Vice President of Finance, and Kristina Lemonidis, our Director of Corporate Communication.

Now Kris, will you read our forward-looking statements, please?

Sure, Stan.

Good morning, everyone.

A reminder to everyone that this webcast included forward-looking statements regarding Isis' business, the financial outlook for Isis, as well as Regulus, its majority-owned subsidiary, and the therapeutics and commercial potential of Isis technologies, product and product and development.

Any statement describing Isis' goals, expectations, financial or other projections, intentions or beliefs is a forward-looking statement, and should be considered and at-risk statement, including those statement that are describes as Isis goals.

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

Isis' forward-looking statement also involves assumptions that have never materialized or proved correct, causes results to differ materially, and those expressed or implied by such forward-looking statements.

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

As a result, you're 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 31st, 2009, which on file with the SEC.

A copy of these and other documents are available from the Company.

With that, I'll turn the call over to Lynne to review financial results.

Thanks, Kris.

The purpose of the call today is to report our financial performance for the first quarter of 2010.

As usual, I'm assuming that you've read the details of our quarterly financial results in our press release.

So I plan to just cover the highlights.

Because we're conducting a series of conference calls to discuss our pipeline and we have continuing news flow and information, on today's call we'll primarily focus on our financial results.

The main points I plan to emphasize are, first, we're in very strong financial position and we plan to do better than our guidance for the year.

Second, we've completed the first of a new type of partnership with GSK.

This type of transaction is indicative of our New Deal paradigm and we're enjoying a high- level of interest from pharmaceutical companies in this new model.

Third, we're off to an excellent start in 2010 with successes in all elements of our business and we have many more important milestones ahead of this year.

As I said, we're off to a great start.

Because we think the GSK transaction is unique, and similar to other opportunities that we may consider, I'll spend a little bit of time reviewing for you.

The GSK transaction is what we've called a preferred partner alliance.

It's consistent with our business strategy, which is to retain our drugs through Phase 2 proof of concept and them license them as they reach this key value inflection point.

Benefits of this type of transaction are that we retain control of drug discovery in early development, and we have a knowledgeable partner at the time of the licensing decision.

For us and our partner, this means that we can move much more expeditiously and of course we gain immediate financial benefit.

Let me quickly remind you of the main provisions of this transaction.

Already GSK has paid us $35 million as an upfront fee for access to drug discovery programs for several targets.

We will amortize the upfront fee into revenue over five years, beginning in the second quarter.

We have given GSK the right to license drugs arising out of these programs when the drugs reach Phase 2 proof of concept.

Between now and then, we will earn a variety of milestone payments as the programs progress.

For example, when we identify development candidates, and when we initiate Phase 2 clinical trials.

The payments that we can earn before a drug is licensed, average $20 million per program, for a total of up to $155 million over the next five years, including the $35 million we just received.

So we will conduct the discovery and early development work on the programs through Phase 2 proof of concept.

At that point GSK can license the drugs from these programs on terms that are equal or exceed the typical terms for a drug at Phase 2 proof of concept, including tiered double digit royalties.

In due course, GSK will fund all development and commercialization for each right of licenses.

In total, the license fees and milestone payments in the transaction could approach $1.5 billion if drugs from all of these programs are successful.

In addition to the strategic benefits of maintaining control of our drugs through Phase 2 proof of concept, this transaction enhances our focus on rare, ocular, and infectious diseases.

And on top of all of that, it's obviously financially very attractive.

Now I'll move onto our first quarter financial performance.

Our financial results in the quarter continue to reflect the successes we've had in our business.

We finished the first quarter with a pro forma NOL of $1.5 million, which reflects a slight increase in operating expenses compared to 2009, and a slight decrease in revenue.

The slight increase in our operating expenses is due to planned increases in our research and development activities as we move more drugs forward into development.

Our revenue in the first quarter included a $6 million milestone payment, which we are in when BMS initiated a Phase 1 study on PCSK9, offset by the production revenue related to planned completion of amortization of the Ortho-McNeil funding.

Our balance sheet remains strong, as a results of our partnership strategy.

So part of this year we received more than $55 million in cash from our corporate partners, including the $35 million up-front fee from GSK which we received when the quarter ended, the $6 million milestone payment from BMS, and the $10 million from Teva's licensing of OGX-011, which we recognized as revenue in the fourth quarter of last year.

We finished the quarter with $519 million in cash, which no longer includes Regulus' cash of $30.7 million and also doesn't include the $35 million from GSK.

As we said in the release, we're no longer consolidating Regulus financial results because of a new accounting standard is that we adopted in the first quarter of 2010, which acquires us to use the equity method of accounting for Regulus rather than consolidating Regulus financials with ours.

Adoption of this new standard means that we no longer include Regulus revenue and operating expenses in our operating results.

Instead, our share of Regulus operating results appears below our operating results in a separate line in our P&L called Equity and Net Loss of Regulus Therapeutics Inc.

In addition, we're no longer including Regulus cash or debt on our balance sheet.

Rather our investment in Regulus is on a separate line on our balance sheet called Investment in Regulus Therapeutics Inc.

The change in how we account for Regulus does not have a significant impact on our financial results, either at the operating level or at the bottom line.

We hope that over time, the adoption of this new standard will help you to better understand Isis' independence financial performance.

And to make it easier for you to compare our year-over-year results, we have included a reconciliation in the press release that presents our 2009 P&L on a comparable basis to 2010.

In other words, the reconciliation shows what our 2009 numbers would have been had we used the same accounting standard last year that we're using this year.

We're confident that we will exceed our 2010 guidance of a pro forma net operating loss in the mid $50 million range.

We also expect to end 2010 with more than $425 million in cash that we provided in our guidance.

Our financial guidance for 2010 does not include contributions from significant new transactions.

As such, the $35 million up-front fee from GSK will be added to our cash, and the amortization represents upside to our annual guidance.

We plan to update our guidance formally in the middle of the year.

Let me review some factors that will impact our performance to help you understand how the first quarter financials fit into our financial picture for the rest of the year.

Our net operating loss for Q1 is significantly less than the NOL we expect to report for each of the remaining quarters this year for a number of reasons.

As you know, our revenue fluctuates based on the nature and timing of payments under agreements with our partners, including license fees, milestone-related payments and other payments.

In Q1, we had a significant revenue event in the PCSK9 milestone payment.

We may have other milestone events that we achieve this year, but in our projections, we significantly handicap these to make sure we provide conservative guidance.

Looking forward for the rest of 2010, there are quite a number of factors that will influence both our net operating loss and cash.

For example, we expect our operating expenses to increase slightly but continuously over the year as the drugs in our pipeline advance.

In particular, we expect to see an increase in development expenses related to -- as we and Genzyme complete the broad Phase 3 development plan this year, and prepare for the first regulatory filings for approval of the drug next year.

We also plan to begin broad Phase 2 programs on two of the drugs in our pipeline this year -- our CRP, EIF-4e drugs.

Once these programs get underway, they'll also contribute to the expenses.

In addition, we expect to move three to five new drugs into development this year, which will increase our expenses slightly this career, principally in the fourth quarter.

By next year we expect our development expenses to be roughly at steady state.

Over the past three years, we've brought in over $650 million in cash, demonstrating that our business strategy is working.

Our business strategy focuses on our strengths and drug discovery and early development.

This focus allows us to stay small, thereby limiting our cash needs.

As you know, because of our success in creating a very strong balance sheet, we're keeping our drugs longer and conducting more robust Phase 2 programs.

This allows us to maximize the value of our drugs by moving them efficiency to clinical proof of concept and then putting them in the hands of quality partners with late-stage development and commercialization expertise.

This strategy allows to us build a broad base of license fees, milestone payments and royalty income, with the goal of optimizing long-term value for our shareholders.

2010 will continue to be a very busy year for us, as we move drugs in our pipeline forward.

We started the year with 22 drugs in our pipeline and we plan to add three to five new drugs this year.

We believe that investing in our pipeline is the best investment we can make.

So we will continue to do so while we also continue to prudently manage our expenses.

I'll stop there so Stan can talk about the things we have to look forward to throughout the rest of the year.

Stan?

Thanks, Lynne.

Before I discuss the milestones, we hope to achieve in the rest of the year, I do want to spend just a minute discussing the accomplishments we have under our belt.

With regard to business development, in December, Teva licensed OGX-011 from our partner OncoGenex, and we received our portion of the initial payment.

During the first quarter, GSK broadened its relationship with our joint venture, Regulus.

Of course, Regulus and itself, the original partnership and the expansion are all based on technologies that were developed by Isis.

We also announced our preferred partner alliance with GSK.

And then finally we received $6 million milestone from BMS associated with approval to initiate clinical trials with our PCSK9 drug.

Now focusing on mipomersen, our Phase 3 program continues to advance with outstanding results announced from our heterozygous FH clinical trial.

We also published the complete results of our homozygous FH trial in the Lancet, and we have already made very significant progress in getting ready for our US and EU registrations.

The rest of our pipeline is continued to mature at a good pace.

Our partner Excaliard initiated three proof of concept Phase 2 studies in wound hailing.

We began the 13-week dosing portion of our Phase 1 study with our SGLT-2 inhibitor.

We also reported positive Phase 1 results with a glucagon receptor antagonist.

And we initiated a Phase 1 study in patients with ALS for our SOD1 inhibitor.

Finally, late last year we broadened our pipeline with the addition of development candidates for three new programs, each of which is unique and exciting -- ApoC-3, Factor XI, and SMN.

As you can see, we've had lots of progress in the business across the board.

Now let's focus on the busy agenda that we have for the remainder of the year.

First, mipomersen.

For mipomersen we report data from two additional Phase 3 studies in the middle of the year.

The first evaluating mipomersen in patients with severe high cholesterol, and the second of evaluating mipomersen in high cholesterol patients at high cardiovascular risk.

We're also report the full data set from the Phase 3 study evaluating mipomersen in heterozygous FH patients for which we've already reported the positive top-line data in February.

Looking at the rest of the pipeline, we'll complete and report the data from our Phase 1 study on the CRP inhibitor and began a broad Phase 2 program this year.

And that program will include indications that are not yet cardiovascular, things like multiple myeloma and other indications like that.

Our partner Altair plans to report data from its Phase 2 study with AIR645 in patients with asthma.

Our partners OncoGenex and Teva plan to initiate two Phase 3 trials on OGX-011 in patients with advanced prostate cancer.

Our partner iCo plans to report data from the fourth and final cohort from its Phase 1 trial in patients with diffused macular diabetic edema.

And a plan to initiate our broad Phase 2 program in patients with cancer with our eIF-4e inhibitor.

Also, as we mentioned on our metabolic call, we'll have a busy American Diabetes Association scientific session meeting this year, with oral presentations on our PTP-1B drug and our glucogen receptor drugs, on which we have reported positive clinical data.

Also, as we mentioned on our metabolic call, we'll have a busy American Diabetes Association scientific session meeting this year, with oral presentations on our PTP-1B drug and our glucogen receptor drugs, on which we have reported positive clinical data.

In addition, we'll have several poster presentations, including posters focused on our obesity targets.

We think they are particularly interesting as that's where the program is moving towards in the future.

We'll report as I said, Phase 1 data on the glucagon receptor drug, where we saw statistically significant reduction of glucose during the a glucagon challenge study and good tolerability, which adds more support to the pursuit of this opportunity, which we certainly are engaged in.

We'll also report the full data on our Phase 2 study with our PTP-1B drug.

Late last year, we reported the top-line, where we saw a reductions in multiple measures of glucose control and LDL, cholesterol, as well as increases in adiponectin, or a hormone that's associated with body weight loss.

Obviously that's an exciting ADA for us.

It is, of course, much more difficult to predict business development milestones.

But I will tell you, that we are enjoying tremendous interest in our technology and our drugs as much interest as I can ever recall in our 20-year history.

So we look forward to those opportunities as well.

Now before I end the conversation, I just like to remind you of two additional items.

First, as you know, we've initiated a series of four calls to review the strategic and tactical reasoning behind each one of our drugs in our pipeline.

We've completed the cardiovascular metabolic pipeline discussions and in the coming weeks we'll discuss our cancer program, our neurodegenerative program, as well as several other drugs in our pipeline.

If you missed either of the first two calls, you can still access them from our website.

We hope that you'll be able to participate in the upcoming calls.

Second, we've mentioned on several calls that our annual meeting will be held this year on June 2nd.

During our annual meeting, we'll be doing something a little different.

The scientific session of our annual meeting will not only be comprised of a scientific poster session with our lead scientists, but we'll also host a mipomersen panel comprised of three expert physicians, knowledgeable in cardiovascular medicine, hepatology.

Dr.

William Cromwell, Dr.

Willis Maddrey and Dr.

Joseph Witztum.

These senior physicians will each bring his own perspective to bear on mipomersen.

Dr.

Joseph Witztum is a cardiologist and lipidologist is the editor of Journal of Lipid Research.

Dr.

William Cromwell is also a cardiologist and lipidologist interested in particle science, and Dr.

Willis Maddrey is an expert on liver, liver fat and the safety of drugs in liver.

So they'll be able to discuss mipomersen and answer questions, each from their own particular point of view.

And to broaden the discussion, we've also chosen to include a Wall Street perspective, so the panel will be moderated by Dr.

Bruce Turner, who is a health care fund manager at Bank of America and knows mipomersen well.

Additionally, we're pleased that John Butler, Senior Vice President at Genzyme and president of Genzyme's cardiovascular and renal business, will be joining us at the meeting to present the mipomersen commercial plan.

We hope that you'll find these additions to the meeting very interesting and helpful.

And we hope that you can attend the meeting in person.

What's really nice about attending in person is that the poster session is very casual.

And you can interact with a lot of people at Isis who are actually doing the work.

And, of course, you'll have an opportunity to talk in a more informal setting to all of the members of the panel as well.

So we hope we'll see you there.

If you can't attend, of course, the whole meeting will be webcast.

So with that, I think we're going to bring the call to a close.

And open it up for questions and answers.

We certainly think this is going another important and exciting here for us.

Nikita, if you can set us up for questions.

Please.

(Operator Instructions) Please stand by for your first question.

Our first question comes from the line of Salveen Kochnover with Collins Stewart.

Please proceed.

Thanks for taking my questions.

Stan, when we look at the two upcoming Phase 3 mipomersen trials, how should we think of these populations as compared to the heterozygous and homozygous FH populations in terms of baseline, lipid-lowering therapy that they're taking?

You should think of these populations as very similar.

Remember that everyone in all of these patient populations has high to severe cardiovascular risk and everyone is taking maximum dose, maximum tolerated lipid-lowering therapy.

So there might be slight differences in the exact amounts of patients are taking.

Okay.

In terms of the full Phase 3 mipo data in heterozygous patients, when should we expect that?

We are committing for a scientific meeting.

And as soon as we know where it's accepted, we'll let you know exactly where and when.

Perfect.

Thank you.

Sure.

Our next question comes from the line of Mark Monane with Needham & Co.

Please proceed.

Good morning from New York City and thanks for taking my call.

Congratulations on your progress.

I have a couple of questions for the team on today's comments.

One is on the mipomersen.

Could you -- would you be kind enough to review with us how many patients are in the current trials and we'll see data on?

I don't see the trial that I like a lot, which is the statin resistant, statin intolerant patients.

If you could also update us on that.

There are 58 patients in the high-cholesterol, high-cardiovascular risk -- I'm sorry, there's 58 patients in the severe study.

And 158 patients in the high-cholesterol, high-cardiovascular risk.

And I think the statin intolerance study is progressing along nicely.

And I'm not sure that -- Lynne, have we provided guidance when we're going to provide those data?

We haven't.

And the study is going just according to plan, Mark and -- you know, we just have -- you know cue these things.

Our team is working really hard to get the NDA filed.

So, you know, it's all the same people doing all of these study.

So our focus is making sure we get the data in for the pivotal Phase 3 studies.

But that study is going along just fine.

Oh, that's great.

I spoke -- I recently was at a lipid conference and there was a lot of emphasis, not on LDL, but rather on non-HDL cholesterol.

Saying that may be the new focus going forward.

The is that something you're familiar with, and how would mipomersen do in a world, instead of LDL, putting all of the particles together?

You have just HDL and non-HDL cholesterol.

We completely subscribe to that.

And what we've reported that mipomersen causes a reduction in all atherogenic lipids.

And so it reduces LDL and triglycerides and DLDL and LPa.

And so in every -- one of the reasons that mipomersen so excites people in the cardiovascular community is that it lowers every atherogenic lipid that's at least known today.

So if you start -- if you look at non-HDL versus HDL, mipomersen shines even better.

One of the mistakes that I think has made really is focusing solely on LDL reduction.

Mipomersen does a lot more than that and it's all good.

That's very helpful.

And then in terms of the cancer program, I guess we're going to have an update on the cancer program, is that coming up?

Yes.

Have we sent out the note yet, Kris, about when it is?

Yes.

And we'll send out a reminder shortly.

Will there be any data at the upcoming ASCO or AHA meetings?

I think so, yes.

Okay.

Terrific.

All right.

Thanks for that information.

I'll get back into the queue.

Okay.

Thank you.

Our next question comes from the line of Ted Tenthoff with Piper Jaffray.

Please proceed.

Great.

Thank you so much.

Just to clarify.

When it actually comes to responsibility for filing the NDA that rests in the hands of Genzyme if I'm not mistaken.

Do you see foresee any issues with the recent challenges, with the FDA, you know, spilling over into the mipomersen filing?

The responsibility does reside with Genzyme and we don't see significant likelihood of issues spilling over.

Remember, the problems that they are having are related to biological manufacturing.

We manufacture mipomersen.

And mipomersen is in the drug division, you know, is clearly different division.

And a different set of issues.

Excellent.

That's very helpful.

And then when it comes to some of the other studies and apologize if this was asked, such as the less frequent dosing and things along those lines.

What's the status there?

We're not looking at less frequent dosing.

We are comparing -- yet.

Eventually will we probably look at less frequent dosing.

But the strategy has been from the time I first talked to you about mipomersen, is that we filed the first NDA with as simple a set of data as possible -- 200 milligrams a week, injection once a week, all patients treated that way.

As soon as we felt that we had a solid evidence of efficacy in Phase 3, we then began looking at different dose schedules, so we can offer patients options.

After all, this is a sub-q drug, and some patients might like giving is in the thigh better, some might like getting it in the abdomen.

Some like giving small doses daily, some might like it weekly.

And so we've now begun that program and it's going really well.

We are looking at small daily doses, three times a week dosing versus weekly dosing.

We're confident that those other regimens will be -- will work, and will be nice alternatives to add -- to offer to patients.

And so that program was moving along and we would expect to be offering those alternative doses to patients in supplemental filings, that could happen, you know, fairly rapidly after our initial filing.

Great.

Excellent.

That's helpful clarification.

And just have to add, I've been enjoying the pipeline update calls.

I think that's a really unique idea and very helpful to go through in detail all the different drugs and areas that you're working on.

Thanks, Ted.

It's -- it's a great problem to have when you have 22 drugs and you're too complicated to deal with on a single call.

How many companies do you follow that have that problem?

Not many.

Thank you.

Our next question comes from the line of Eric Schmidt with Cowen and Company, please proceed.

Hi, this is Craig Gordon for Eric.

Just a couple questions.

First, I was hoping you could let us know when you might provide the next safety update in terms of the mipomersen data on hand?

We haven't really talked about that.

Lynne, do you want to comment on that?

Yes.

We haven't -- we don't really have a particular time when we would do that.

You know, every time we announce a Phase 3 study, I think we're providing quite a lot of detail and you know we have two Phase 3 study sets of data that are coming up in the middle of the year, the two studies that Stan talked about.

So there is no current plan to talk about, you know, safety in our ongoing studies, because we feel like we are presenting it on a pretty regular basis as we hit these Phase 3 events.

Well, one thing that I would -- I think the best answer we're going to give you is not so much about numbers, but what do the numbers mean.

And with regard to liver safety, what I hope we can do is, in our panel conversation at our annual meeting, help people understand how to think about ALT elevations and not by what we say, but what real experts think, all putting the dilly rules together, and that's Willis Maddrey and who deal with these patients on a regular basis.

We think the overall profile continues to look about the same as it always has.

And we think what's really been missing from a lot of thinking on Wall Street is the context when you think about ALT elevations.

That's something we're going to work very hard to do at our annual meeting.

Great.

And if I may, I just have two more questions.

Lynne, why are you guys waiting until mid-year to restate guidance?

There any particular reason you don't want to do it now?

Because we could do it now and we could do it mid-year again.

We want to make sure we have a very clear picture of events that may happen for the rest of the year so that we can give you the best update, the best update that we can.

Okay.

That's helpful.

And if I may, just one last question for you, Lynne or Stan.

As you guys begin to work on -- or as you begin to think about the NDA filing, have you and Genzyme given thought to what a REMS program you guys might suggest if you do plan on suggesting the REMS program and if you could just update us on your thoughts there?

Lynne, why don't you take that?

The answer is, of course, that's something that we're actively thinking about.

And it's really premature at this point to share our thoughts on it.

We've got a significant team focused on that.

Great.

Thank you very much.

Thanks a lot.

Our next question comes from the line of Carol Werther with Summer Street Research.

Please proceed.

Thanks for taking my question.

I was just wondering if there's any update on when you might start the outcome trial with mipomersen?

We're making great progress.

The things that we are learning really relate to long-term compliance with the drug.

That's the single most important thing that we need to do now, that we're confident we have an efficacious drug and we believe it's going to be safe.

And there we're -- we've completed some work that helps us understand various approaches that physicians can take to mitigate injection-site reactions.

We are also looking at the alternative dose schedules and, in addition, we're getting our first experience with dose adjustments that we're allowing in our long-term dosing experience.

So all of that is feeding into the outcome study planning.

And so we feel we're making very good progress toward that outcome study.

So the different doses might decrease the skin reactions, is that what you're saying?

Well, they might -- they do seem to decrease skin reactions, lower dose gives you a little less per injection.

The important thing is it gives patients different options to use, different patients will like different things.

So in an outcome study, the thing that we want to do, we want to avoid an outcome study that fails because of a poor study design.

So we are taking the lessons that we're getting from all of these trials, including looking at long-term compliance in very long-term follow-up and incorporating that information in our planning for outcome study.

And we think that that's the most important thing that we can do.

And that's what we've been talking about for the last, oh, nine months or a year.

Lynne, do you want to add anything to that?

Nope.

And in terms of the injection, do the patients have to mix it up now?

And would some of these other doses be like a fancy kind of pen?

The patients don't mix it up.

It's a pre-fill.

It's a -- it's in solution.

It's just drawn up into a syringe.

We -- and as we look at different dosing solutions, we are also now beginning to look at different administration devices.

The first NDA will have simply a 200 milligram a week dose and vials.

In subsequent filings, we expect different dose schedules, as well as different presentations of the drug, pre-filled syringes, needle-less injectors, all of these things are being developed and all of them will improve compliance over the long-term.

And so we want as much of that information before we start a three or four-year outcome study to help us design the study properly.

Do you have any timeline on what we might see some of the results of the different dosing trials?

We haven't -- we don't have a timeline yet.

We have to talk with Genzyme about it.

I can tell you that we're very pleased with the progress we're making.

We had a meeting with our team and Genzyme yesterday.

So, Lynne, I don't suppose that was discussed, was it?

No.

We don't have any particular timing yet.

But, you know, and this is a Phase 1 study and it's showing us exactly what we need to go onto the next sets of studies that Stan described.

But we're very pleased with the progress.

Everything is on schedule, and moving along well.

Thanks for taking my questions.

Our next question comes from the line of Pamela Bassett with Cantor Fitzgerald.

Please proceed.

Good morning.

Thanks for taking the question.

Congratulations on the progress.

The GSK preferred partnership really to me highlights the ability that Isis has to leverage the platform and really monetize the platform sooner rather than later.

And I'm wondering how many of these types of partnerships can the organization manage and integrate?

Well, thank you.

We agree with you.

And we think that the level of interest that we have is reflective of what real skeptics in the pharmaceutical industry now think about what we've accomplished.

And these are no longer early adopters, betting on, you know, a future.

These are people looking at the data, the technology and saying, we need to use this to fill our pipeline.

I think that's -- there are -- that's a very big difference.

And we are highly selective these days about what transactions we'll consider.

And this preferred partnership-type transaction is what we consider the ideal solution for us and our partners.

And we can contemplate quite a number.

It depends on scale of the particular partnership.

And, of course, we're not willing to do partnerships that take us into areas that we don't want to go.

So there are some areas that we're not interested in and there are partners interested in those areas.

That's not something that's strategically of interest to us.

So we have a very clear strategy that assures that the deals that we get are going to be strategically contributory and help us move in directions that we think are right for the Company and are the scale that fits with the size organization that we want and the size organization we have.

And we think that and we can manage quite a number.

Great.

And just remind me whether the ideal structure includes R&D payments in addition to the milestones?

No.

We -- the ideal structure from our perspective is one in which we are accountable for the early discovery and early development.

And so it -- what's crucial is we don't have a whole series of joint committees that we have to manage through between the discovery and when we offer the drug to license.

And so typically it's not going to have a lot of R&D payments, rather it will have access payments and funding in other ways.

And all of that process assures that we can proceed relatively independently on a course that's mutually agreed.

Lynne , do you want to add anything to

Yes, I think just a little bit of color.

It may be obvious.

In the deals that many biotech companies do and we've historically done, where you have a detailed budget that the other company pays in the form of R&D payments, as you would expect, they're keenly interested in where every single dollar is going and not just understanding that, but in controlling that, which takes away the type of autonomy that is our goal in these transactions.

Once you say, you know, we'll give you an option on these drugs, we're going to go develop them.

This is the package that we're going to give you to consider to make your licensing decision.

And you don't have to pay us for every experiment we do.

We get to decide what those experiments are.

It really supports the operating model that we're developing here, which is -- it is much more hands-off.

Our partners are showing the confidence in us that we can conduct the discovery and development in ways that are effective and efficient and that meet the goal of having a high-quality Phase 2 package.

And so, you know, the -- you know the detailed R&D budget, R&D planning control aspects of traditional deals is exactly what we're moving away from and we're happy that our partners are showing the confidence in us to agree with that model.

That's great.

So that type of agreement then basically convinces -- potentially convinces development timelines by minimizing interaction with a variety of committees, as well as maybe pushing up the potential royalty payments?

You're not receiving cash from them.

Well, no.

We get -- one way to think about it, we could license at Phase 2 or we can give an option to a company to have a license at Phase 2 on terms that are agreed.

And when we do the option, we trade away the opportunity to run an auction like we ran for mipomersen, our partner gained from that.

On the other hand, we get money now and we also -- as in the GSK deal, we get money all along the way and we get a partner that's ready and trained and knows the drug when it's time to license.

So it's a trade-off.

And so the simplest way to think about is, is the money and the autonomy must be right for us to do one of these transactions or we simply wait until Phase 2 and run an auction.

Great.

Thanks for the discussion.

Our next question comes from the line of Shiv Kapoor with Morgan Joseph.

Please proceed.

Thanks for taking my questions.

I want you guys to discuss dropout rates and compliance going forward.

And the reason obviously I'm interested in this is because the success of mipomersen will depend upon the outcome trials eventually.

And the outcome trials, the biggest risk I see there is compliance, because the higher the compliance is, we know the drug works.

So are there some steps that you're taking to improve the dropout rate?

Or do you expect in the current studies to -- for the drop rate to be?

And with all the new stuff you're doing with new regimens, are you focusing on dropouts?

Yes.

So the current studies are all rigid.

Remember all these Phase 3 studies are designed exactly the same.

The patients must take 200 milligrams a week, it has to be at a sites.

It has to be administered, most injections have to be administered at the clinical trial site.

So none of the work that we're doing to mitigate is really contributing to the dropout rates or lessening the dropout rates in any of the Phase 3 trials.

All of the work that we're doing looking at mitigation and alternatives is designed for the future, commercial success of the drug.

And the things that we are doing are, first, we're trying to learn about things to lessen in injection-site reactions once they happen.

(Audio difficulties), topical steroid, and things like that.

And we've learned a lot and that's going to be incorporated.

We have also learned that allowing patients to inject themselves helps.

And we've learned that allowing patients to select the site they prefer helps.

Is it in the thigh or the abdomen or the arm?

In addition, we're looking at different dose schedules as we planned, to see whether to give people the opportunity to see I'd rather give myself a small daily doses or a larger weekly dose.

We think people will sort out into different types of people who want to use all that.

So all of that is in progress, and all of that will contribute to the commercial success of the drug.

And all of that will contribute to reducing dropouts in the -- in the outcome study.

But we should expect similar dropouts in the current studies?

We certainly aren't incorporating any of these things to reduce dropouts in the ongoing Phase 3 study.

Okay.

Thanks.

(Operator Instructions).

Our next question comes from line of Steven Willey with Thomas Weisel Partners.

Please proceed.

Hi.

Thanks for taking my question.

Also want to echo the appreciation here of these focus calls.

Wasn't able to participate last week.

So I hope you don't mind if I ask an SGLT-2 question.

Just a couple of things.

One, can you maybe talk about some of the potential advantages that we've seen emerge with respect to hitting SGLT-1 as well and maybe what your thoughts are there?

And then secondly, it sounds like your drug is actually able to clear more glucose through the kidneys.

I know we've seen a fairly high rate of urinary tract infections with the first-generation of drugs.

So wondering how you think about those infections with respect to pushing more glucose through the urine as well?

Thanks.

I think those are all questions that we are going to try to answer as soon as possible.

Here are the potential advantages that we think our drug has.

First, small molecule drugs adjust the KM of the affinity of the glucose transporter for glucose.

As such, the maximum effect is maybe 50%.

We lower SGLT-2 levels as much as we want.

So if we want SGLT-2 to go to 90%, we can do it.

We can make it go 95%.

We think our maximum glucose clearance should be higher.

Second, we think specificity is important.

We are certainly aware of the argument that SGLT-1 may be contributing to the performance of some drugs in the clinic.

We think long-term inhibiting SGLT-1 in the gut may produce some meaningful problems.

It may in the short-term benefit efficacy, but in the long-term we think it may be associated with problems.

And so we think there should be some safety benefit that comes from being as selective as we are.

As we increase glucose in urine, we expect just like the other SGLT-2 inhibitors to have an increase in urinary tract infections.

We think that will be a class issue.

We think that it's mostly not whether you have X concentration in the urine, but that you have a meaningful amount of sugar in the urine.

So we are certainly hopeful that we will not see a dramatically greater increase in urinary tract infections, because it's the presence of glucose, not the absolute amount of glucose in urine that we think is the factor there.

That's helpful.

Thank you.

Okay.

A lot of questions.

One of the things -- one of the points that we made on our call is that we understand that this drug is the exception and proves the rule.

This is the only drug that we've chosen to move forward, where there is small molecule competition.

And we've done it eyes open, because we think the target is interesting, because it expands us into the kidney, because our drug is so potent and interesting.

And the fact that in Phase 1 and early Phase 2, we're going to able to judge whether we get the benefits that we hope for the drug or not.

And if we do, we'll proceed.

If we don't, then we'll move onto something else.

It appears there are no additional questions.

I'll now turn the call back to Dr.

Crooke for closing remarks.

Well, Thank you very much for all of the interest in the questions.

And we look forward to chatting with you in the near future.

Thanks very much.

Bye.

This concludes today's presentation.

You may now disconnect.

Good day.