Ionis Pharmaceuticals Inc (IONS) 2010 Q3 法說會逐字稿

Welcome to Isis Pharmaceuticals third quarter financial results conference call.

Leading the call today from Isis is Dr.

Stan Crooke.

Isis Chairman and CEO.

Dr.

Crooke, please begin.

You may go ahead, sir.

Thank you.

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

Joining me on the call are Lynne Parshall, COO and CFO, Beth Hougen, Vice President of Finance, and Kristina Lemondtis, Director of Corporate Communications.

Kris, will you please read our forward-looking language statement.

I sure will.

Good afternoon everyone.

A reminder to everyone that this webcast includes forward-looking statements regarding Isis business, the financial outlook for Isis, as well as Regulus, its jointly-owned subsidiary, and the therapeutic and commercial potential of Isis technologies, and products in development.

Any statement describing Isis' goals, expectations, financial, or other projections, intentions or beliefs is a forward-looking statement, and should be considered an at risk statement.

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

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

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

These and other risks concerning Isis' programs are described in additional detail in Isis' Annual Report on Form 10-K for the year-ending December 31st, 2009, and its most recent quarterly report on Form 10-Q, which are on file with the SEC.

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

With that, I will turn the call over to Lynne to review our financial results today.

Thanks, Kris.

As usual I will assume that you have read the details of the third quarter financial results in our press release, and I will of course be happy to take questions at the end of today's call.

We have continued to make excellent progress this year.

We have now completed four positive Phase 3 studies of mipomersen and we are on track to file for marketing approval in the first half of the year to bring mipomersen to our initial patient population.

These are patients at sever risk for cardiovascular events.

And we hope mipomersen will be the therapeutic alternative that will help them lead longer healthier lives.

This year we also established an exciting new alliance with GSK that we believe will be extremely productive for both companies.

Our existing partnerships also continue to be successful in advancing antisense drugs discovered by us.

Already this year we have received more than $65 million from our partners in up-front in milestone payments, including $40 million we have received from GSK.

We finished the third quarter with a pro forma net operating loss of $23.1 million for the first nine months of 2010, and we ended the quarter with nearly $500 million in cash.

Now let's take a few moments to compare our 2010 revenue to 2009.

As you probably heard me say, our revenue consists of several different components, including amortization of up-front fees we received from our partners, R&D revenue to support our collaborations, milestone payments, sub-license fees plus revenue we earn from other miscellaneous transactions.

Already this year we had new revenue from almost all of these sources.

Recognizing revenue from the amortization of the $35 million up-front payment we received from our new alliance with GSK, we received sub-licensing revenue from Regulus' new alliance with sanofi-aventis, and we have received $13 million in milestone payments, the most recent of which was $5 million from GSK for identifying a development candidate.

We keep most of these milestones in the middle of the year.

Although in the fourth quarter of this year we expect to achieve additional milestones, most of these milestones will not result in significant new revenue.

This means that our fourth quarter revenue will be lower than previous quarters this year.

We are in a position of financial strength, and we are now able to invest more of our internal resources to enhance the value of our drugs, and bring new drugs into our pipeline.

You have seen the affect of our implementation in this strategy reflected in our expenses this year.

In addition we and Genzyme completed mipomersen's Phase 3 program to support our first filings for marketing approval, and the expenses from this program are also reflected in our increased expenses this year compared to last.

As we look to the fourth quarter, we have a number of internal programs that are advancing.

We will begin Phase 2 programs for our CRP and eIF-4E drugs, which once completed should provide us with clinical proof of concept.

We will begin clinical development of our factor 11, FXI, and APOCIII programs, which we moved into our pipeline late last year.

And finally we will be adding to our pipeline.

All of these activities will continue to increase the value of our maturing pipeline and increase our expenses in the fourth quarter of this year.

You may recall that in August, we announced revised and improved financial guidance of a pro forma net operating loss in the mid to high-$40 million range, and year-end cash of over $450 million.

Even with slightly less revenue in the fourth quarter than we averaged over the previous quarters this year, and an increase in our R&D spending in the fourth quarter, we expect to do better than this improved guidance.

As we look toward next year we anticipate reaching the point where we and Genzyme will share development spending on mipomersen.

We will use these savings from mipomersen to increase our investment in other programs we have in development.

While we haven't completed our budgets for next year, we would expect our 2011 R&D expenses to be similar to this year's.

Of course as usual we will give 2011 financial guidance at our year-end call in 2011, in early 2011.

And with that, I will turn the call back over to Stan.

Thanks, Lynne.

Well, we are now well on the road toward the commercialization of mipomersen, that is the most important news.

We have completed all of the necessary studies for our first regulatory submission for marketing approval in the first half of next year in the US and Europe for mipomersen.

The efficacy we have seen with mipomersen has been consistent across the entire mipomersen program.

All 4 Phase 3 trials have been positive with significant reductions in all forms of bad cholesterol.

Mipomersen is more than just LDL.

The safety profile that we have observed for mipomersen clearly supports our initial market focus, and of course we are continuing to build our safety database, as we and Genzyme implement plans to expand the patient populations in Europe and elsewhere.

So let me just spend a minute to characterize the first patient population that we are targeting.

These are patients with severely high levels of bad cholesterol, despite all that medicine has to offer today, and they are patients at extremely high cardiovascular risk.

These patients have two options.

They can either get apheresis, or they can wait for their next cardiovascular event.

In the two Phase 3 trials we conducted in these very, very sick patients, mipomersen reduced their LDL cholesterol on average more than 100 milligrams per deciliter.

That reduction may translate to a greater than 50% reduction in cardiovascular risk, and of course, in addition to lowering LDL, mipomersen has a broad profile that lowers all forms of atherogenic lipids, as well as LDL.

These are the patients that we will be targeting as our first submission.

Now the commercial opportunity to this patient population is significant.

In just the US, Europe and Japan, Genzyme estimates that there are about 35,000 of such patients.

This group alone provides a significant and clearly attainable commercial opportunity for mipomersen.

And of course, Genzyme is actively formulating their commercial plans to include significant marketing efforts for this patient population globally.

We believe that the efficacy and the safety profile that we have seen with mipomersen, is clearly more than acceptable for this very needy patient population, and that the benefits of mipomersen far outweigh the risks.

Of course our success goes beyond mipomersen.

We are getting ready to initiate Phase 2 trials in cancer patients with our eIF-4E drug, a drug that could provide significant therapeutic benefit in multiple types of cancer.

Because eIF-4E regulates the expression of quite a number of proteins that are essential for cell survival, inhibition of eIF-4E in tumor cells should affect tumor survival, angiogenesis proliferation, and metastasis, as well as resistance to chemotherapy.

It can be very broadly useful.

Our Phase 2 program will enable us to evaluate eIF-4E in patients with metastatic prostate cancer, non-small cell lung cancer, and liver cancers that typically overexpress eIF-4E.

In these studies our eIF-4E drug will be added to standard first line treatment, and results will be compared to standard therapy alone.

That is, they will be randomized comparative trials that should teach us quite a bit.

As we near completion of our Phase 1 study on our CRP drug, and in fact we have completed all of the dosing, we are preparing to start a broad Phase 2 program to evaluate whether lowering CRP can provide benefit to patients.

Now there are numerous diseases in which chronically elevated CRP is associated with worse outcomes, such as Rheumatoid Arthritis.

We will also be determining the role of our CRP inhibitor in diseases where acute elevations of CRP are associated with distressing constitutional symptoms, like flu-like syndromes.

Such as patients with multiple myeloma following autologous bone marrow transplants.

The initial studies in our Phase 2 program in Rheumatoid Arthritis and multiple myeloma will provide us important information about the potential therapeutic benefit of reducing CRP in diseases with both acute and chronically elevated CRP.

Later in the program we plan to evaluate the potential benefits of reducing CRP in patients with other diseases, such as end stage renal disease.

And then all of these Phase 2 studies will come together, to further inform dosing as we move toward cardiovascular applications.

We will do that as we gain experience with dosing and gain safety experience.

Since last year, we have moved several new drugs into our pipeline that expand our therapeutic reach into new and exciting areas.

Our selective triglyceride lowering drug that targets APOCIII, and our first clotting drug targeting FXI, are the next two that will begin clinical trials.

And of course we will continue to expand our pipeline by adding new drugs.

On the partner front, OncoGenex and Teva initiated the second study in a broad Phase 3 program for OGX-011 in patients with prostate cancer.

This study is evaluating OGX-011 as an additive treatment to first line chemotherapy in patients in approximately 800 patients with metastatic prostate cancer.

Primary end point of this study is to determine whether these patients survival is prolonged with the addition of OGX-011.

In 2009, OncoGenex reported results of a Phase 2 study that demonstrated clear survival benefit for these exact same types of patients treated with OGX-011 in combination with chemotherapy.

OncoGenex has also initiated a Phase 2 study with another of our drugs OGX-42, again7 in patients with prostate cancer.

On a different but equally exciting note, our partner Excaliard continues to make progress in completing three Phase 2 studies evaluating the ability of EXC-001 to reduce scaring in patients with elective reconstructive surgery.

This fall, Excaliard reported the first data from these studies, demonstrating that treatment with EXC-001 significantly reduced scaring in patients with elective abdominal surgery.

We are very, very excited about the results with this drug.

Regulus, a microRNA company that we jointly established with our partner Alnylam, has continued to make progress scientifically in the basic understanding of the role of microRNAs in disease.

And progress on the business side.

Just this week Regulus announced that it received two federal grants worth nearly $500,000 to support research for the development of novel approaches to treat Hepatitis C and Fibrosis.

Regulus is on its way to identifying its first clinical development candidate targeting microRNA 122, which is the lead program in the collaboration with GSK.

And last week Regulus announced that its new partner, sanofi-aventis, has invested $10 million in Regulus, in return for approximately 9% equity ownership.

This means that we now own approximately 45% of Regulus.

That is Isis owns 45% of Regulus.

This stock purchase by sanofi values Regulus at greater than $130 million, and it is the first external establishment of the significant value of our Regulus ownership.

We believe that the value of Regulus will continue to increase as the company brings novel antisense drugs to the clinic that targets microRNAs.

On the other hand, our partners at Altair completed a Phase 2 program for AIR645 in patients with mild asthma.

In this study the drug was well tolerated and appeared to be pharmacologically active.

That is, it lowered its target.

However, the drug did not sufficiently improve signs and symptoms of asthma sufficiently for Altair to continue further development.

So that drug is going to be discontinued.

While disappointed with Altair's results, many of our satellite companies have been very successful this year in advancing other drugs in our pipeline.

Our satellite company strategy is designed to mitigate the risks in development of drugs that are outside our key areas of focus, while enabling us to benefit from successes of these drugs such as we are benefiting from Excaliard and OncoGenex.

Finally last quarter we announced the extension of our collaboration with BMS to develop a follow on drug for PCSK9.

This extension builds upon a very successful collaboration we have with BMS for the past two years.

You may recall we received a $6 million milestone payment from BMS earlier this year for the initiation of Phase 1 studies with that drug.

BMS has now decided to focus on the identification and advancement of an even more potent PCSK9 inhibitor, and we believe based on the work that we have done, it is very clear that PCSK9 is a very good target, and we look forward to continuing development of drugs to treat it.

With that, I will just spend a few minutes to recap our near term milestones.

Mipomersen, we and Genzyme continue to advance mipomersen toward the first market in patients with severe high cholesterol and significant cardiovascular risk.

With the, we expect those filings to be submitted in the first half of 2011, and clearly as we progress there, we will keep you informed.

We will report the full data from the two mipomersen Phase 3 studies in patients with high cholesterol, at high risk for coronary artery disease, and in the patients with severe hypercholesterolemia.

Remember that we reported the top line data for these two studies in August of this year.

We completed our Phase 1 study of our CRP drug, and we will be getting our Phase 2 program under way here in the very near future.

We are about to begin a broad Phase 2 program for our eIF-4E inhibitor in patients with prostate and non-small cell lung cancer.

We expect our partners at Excaliard to complete all three of the Phase 2 studies that have been in progress, and to report those data.

And we expect to start Phase 1 programs our APOCIII and FXI drugs in normal volunteers.

We will add to our pipeline before the end of the year an additional drug or more.

And on the technology side, we plan on selecting generation 2.5 chemistry, to further enhance the potency of future antisense drugs.

We believe that generation 2.5 chemistry will give us a greater than 5, probably 10x improvement in potency compared do the current drugs.

And now I want to thank everyone involved for joining us, and we will open up the call for questions and answers.

Jennifer, if you can take care of that, please

Absolutely.

(Operator Instructions).

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

Please proceed.

Hi, Good afternoon.

It is Laura on behalf of Salveen.

I was just wondering if you could provide any clarity on how confident you are that you will be able to file in the severe heterozygous population next year?

Have you had your meeting with the FDA?

We are very confident.

And what would happen to the filing timelines, if things progress with sanofi and Genzyme?

Do you have a back-up plan to ensure that they would be filed in the first half?

Well, of course no one can predict what happens in mergers.

What I can tell you is that everything we know is that this drug is terrifically important to Genzyme, and very important to sanofi.

And the progress and getting the submissions ready is gratifying, and we expect it to happen right on schedule.

Great, thank you.

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

Please proceed.

Thank you very much for taking my question.

Looking forward to seeing the CRP data, give us a sense when we can expect that, and also what kind of Phase 2s might you be exploring?

I am sorry, Ted, can you repeat the last part?

Yes, what kind of indications would you expect to evaluate in Phase 2?

The CRP data from Phase 1 are that we have gone up to 600 milligrams a week dose, and the drug was extraordinarily well tolerated.

So it is sort of classic Phase 1.

It really looks good.

The Phase 2 program, the first two studies will be in patients with Rheumatoid Arthritis who have elevated CRPs, and people with multiple myeloma where elevated CRPs are associated with a very significant poorer outcome.

We also will be looking at reducing CRP in subjects who get autologous bone marrow transplants.

Once we those, as we gain experience there, then we will begin to move to some of the other diseases that are of interest to us, including end stage renal disease and a variety of other circumstances in which CRP is elevated acutely, like apheresis, and the like.

As I said in the prepared remarks, all of that will, we expect to get the first of those studies, the Rheumatoid Arthritis and the multiple myeloma started in the very near future, and as we go along and we gain more experience in dosing and safety, then we will migrate toward the cardiovascular indications that are of interest, and for which we feel we would like to have some substantial clinical experience before we move into those very sick patients.

Very helpful, thank you.

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

Please proceed.

Mr.

Monane, your line is open.

You may ask your question at this time.

Please check the mute feature on your phone.

Hello, it is Mark Monane, can you hear me?

Yes.

Good afternoon Thanks very much.

Thanks for taking my question.

Thanks for the comprehensive review.

I know that you had previously mentioned there may be alternative dosing schedules that might be available for mipomersen going forward.

Have any of those trials started?

Are you able to talk about any plans going forward?

Well, we completed the initial study, and I think we have discussed it.

That was a study in which we looked at 30 milligrams daily, 70 milligrams three times a week, and compared that to 200 milligrams.

That study went wonderfully.

We got exactly what we expected in terms of efficacy and tolerance, and so that set the stage then for additional studies that we will be doing looking at those alternative regimens.

I want to reiterate our commitment is to the 200 milligram a week dose.

It is extremely effective, and certainly well tolerated sufficiently for the indications that we are contemplating.

Our belief is that what we want to do long-term is to provide patients options.

We think there may be some patients who prefer taking low doses daily, and others that might prefer taking 200 milligrams on Sunday night.

And our objective is to provide those options over time, and we are moving along nicely on track toward being able to provide those options to patients.

That was very helpful.

And then I have a big picture business model question.

I know you have been thinking about antisense therapeutics for a while, and we like your model of bringing things to late stage and then having a partner bring it to the commercialization stage, and that is rather straightforward for cholesterol and maybe even for CRP, as the readouts are pretty quick, and one can evaluate the efficacy early in the clinical development process.

But with cancer, Stan, do you agree that it might be a little bit more challenging for this model?

The readouts in Phase 2 are often not that helpful unless you are able to do a very good randomized control trial.

I was hoping to get your thoughts about how the business model works with these, with cancer, which I think is a little bit different than the other programs you have in further detail?

I think every indication varies a bit.

In cardiovascular medicine and metabolics, you have precise readouts that are in fact the end point for registration.

In other diseases, inflammatory diseases and cancer to name two, neurodegenerative diseases, to name a third, the end points are less clear cut.

I think our plans for cancer are very straightforward, and they are designed to generate sufficient data to convince ourselves and partners that the drug has the opportunity, has a meaningful potential to work in Phase 3.

And so the studies that we would be doing are very much like the studies where the OncoGenex studies, where they did a randomized comparative trial, and looked at survival in patients with prostate cancer, compared the two drugs.

What that nets out to, is that the studies may be slightly larger than you might see in a cardiovascular study where you have a crisp end point.

But the model works pretty much the same.

I think there has been a lot of progress in cancer clinical trial thinking.

A Phase 2 evaluation that work in our favor, and I think that progress is epitomized by the information that OncoGenex generated in Phase 2.

Each one of the trials is different, and the analysis of each trial, of course is complicated, and the objective of each of those trials, is to generate enough information to support an effective partnership.

In cancer your key problem is determining whether you have sufficient efficacy, and in cardiovascular metabolic disease, it is more on the safety side.

So all of these things have lots of tradeoffs.

But yes, I think the model works eminently well in all of the disease areas that we are working including cancer.

Thanks for the added information.

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

Please proceed.

Thanks for taking my question.

I want to know what kind of learning from the mipomersen program you will use in designing your Phase 2 CRP program, what kind of things have you learned, and how will you be running this program differently, or any additional precautions?

I don't think we have any additional precautions.

I think they work wonderfully.

And I think mipomersen worked wonderfully, and I think mipomersen is working wonderfully, and the experts I talk to tell me they can't wait to get their hands on mipomersen to use it on their patients.

I don't subscribe to the view on Wall Street.

I subscribe to the view of the experts I talk to, that say mipomersen is going to be a great drug.

I think the single most important thing for me out of the development plan for mipomersen, is the success of building a staged development program.

I think that is an optimal way to develop new drugs where you seek an earlier indication in the most needy patients, and then as you gain experience expand the use of the drug.

So I think one of the things that you will see reiterated in multiple of our programs is the stage development process.

A great example will be APOCIII, where I think our initial indication might be patients who have triglycerides in excess of 500, and therefore at risk for pancreatitis.

And then we will advance to patients who have lower but still elevated triglycerides, and then we will move to patients with diabetes, and so on.

Similarly with CRP, we are looking at diseases initially where the evidence that CRP worsens outcome is extremely compelling.

Rheumatoid Arthritis is a perfect example.

Where we believe we can demonstrate a solid efficacy if it is there, and good safety, and as we gain experience with the Rheumatoid Arthritises and the multiple myelomas, where you don't have people who are acutely desperately ill, like somebody who has just had an atrial fibrillation or an infarction, as we gain that information then we will march to those new indications.

I don't know if that answered your questions, Shiv, but I think the most important lesson I got out of the mipomersen development program, is the value of the stage development program that focuses the drug initially on the patients who need it most, and allows you to gainexperience on the market and in further development, before you seek approval for patients who have less obvious need.

That us fair enough.

And can you tell us what is the regimen currently of the CRP program and what it will likely be in the Phase 2 program?

Well, it is true that the CRP drug looks a little more potent that mipomersen, but I think you would be perfectly within range to assume that the dosing will be in the range of a couple hundred milligrams a week.

All of these drugs have basically the same properties.

But it will be weekly not necessarily monthly is what I was thinking?

No, weekly is our dose schedule.

And in particular with some of the diseases where CRP is an issue, in people who are having elective cardiac surgery, for example we predose, we pretreat.

And as we progress with any one of these drugs, we will begin to explore alternative dose regimens just like we are with mipomersen, and those regimens can be daily, they could be weekly, or if the drug supports monthly doses, and higher doses.

So all of those are options, but our basic program for all of our drugs boils down to weekly dosing as our base effort.

Great, thanks a lot.

You bet.

(Operator Instructions).

And our next question comes from the line of Charles Polsky with William Harris Investors.

Please proceed.

Hi, Stan, thanks for the update, and congratulations, good progress.

You mentioned in your prepared comments, just a word on the advent of generation 2.5, and speaking more generally, how far off are we in terms of Isis bringing in oral candidates?

It seems as potency goes up, it is just a matter of time.

I just wondered where it was on your internal --?

We expect to be 2.5 to be orally active at a commercially reasonable dose, and commercially reasonable price, and commercially reasonable presentation.

The major reason that we are moving to 2.

5 is to enable a commercially attractive oral administration of antisense drugs.

And just to walk us through the timing, so without putting too fine a point on it, let's say that you are now coming up with some chemistry that you are calling 2.5, and it is somewhere between 12 and 18 months on the aggressive side to get that IND filed?

I think that is pretty good, what we are doing right now is we are finalizing the data package that we have, and we have been working on this for quite a number of years, but in the last 18 months we have invested tremendously in understanding the new chemistry.

And we are starting to put the 2.5 into programs now.

Our initial focus since this is new chemistry, will be in diseases where safety is, where the need is great.

So the first programs that you should expect to see 2.5, will be things like cancer and some of the rare diseases, we will gain experience there, and then as we gain experience you will begin to see 2.5 make its way into our metabolic and cardiovascular programs.

I certainly think that the timeframe that you laid out is a reasonable timeframe.

Probably leaning more toward the 18-month than the 12-month.

And just for the sake of argument where Isis came up with the a mipomersen 2.5, does Genzyme have some call on that, or if it is a new chemical entity, is that all open for negotiation?

No, it belongs to Genzyme.

We partner around targets and programs, and we don't think it is ever a good idea to separate follow on and back up products from that partnership.

So Genzyme would have access to 2.5 just like they have access to the back up molecules that we have today, that are about three times more potent that mipomersen.

We have some molecules that aren't generation 2.5, but just better screened and identified, that run from three to five times more potent than mipomersen right now.

Thank you very much.

You bet.

And that concludes our Q&A session.

I will now turn the call back over to Dr.

Stan Crooke foreclosing remarks.

Thanks very much, and thanks so much for being on the call.

I know this is a busy earnings afternoon.

In summary, I think the most important thing we said today, is that we are on track for initial filing for marketing approval of mipomersen in our initial patient populations, and we are very confident that its risk/benefit profile and net patient group is compelling.

These are patients with severe high cholesterol and extremely high cardiovascular risk.

We look forward to bringing mipomersen to these patients, who are clearly in need of additional therapies for reduced cardiovascular risk.

And added to that, I think our pipeline continues to progress extremely well, and I think this call demonstrates the value of the satellite company's strategy in ways that we haven't shown before, where we have very positive outcomes, that are going to generate real value for shareholders in Isis over time I believe.

And they are disappointment that cost Isis shareholders very, very little.

Dr.

Crooke, do you have any additional remarks?

I am finished.

Thank you.

Okay.

Ladies and gentlemen, that concludes today's conference.

Thank you for your participation.

You may now disconnect.

Have a great day