Ionis Pharmaceuticals Inc (IONS) 2011 Q2 法說會逐字稿

Welcome to Isis Pharmaceuticals second quarter financial results conference call.

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

Dr.

Crooke, please begin.

Good afternoon, and thank you for joining us on today's conference call to discuss our second quarter financial results.

Lynne will discuss our financials and after that I will give a brief update on some of our recent activities.

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

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

I will.

Good afternoon.

A reminder to everyone that this web cast includes forward-looking statements regarding Isis's financial position and outlook, Isis's business, the planned commercialization of Mipomersen and the therapeutic and commercial potential of Isis's technologies and products in development including the business of Regulus, Isis's jointly owned subsidiary.

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

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

Isis's forward looking statement also involves 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 this 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 on Isis's annual report on form 10-K for the year-ended December 31, 2010, and its most recent quarterly report on form 10-Q which are on file with the SEC.

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

And with that I will turn the call over to Lynne.

Thanks, Kris.

We continued to make progress in the first half of 2011.

Highlighted by our announcement last week, that Genzyme successfully submitted the Mipomersen marketing application to the EMA and remains on track to submit our NDA later this year.

The Mipomersen European regulatory submission is a significant achievement and brings Mipomersen closer to patients at severe risk of dying from cardiovascular disease.

We hope Mipomersen will be the therapeutic alternative that will help them lead longer, healthier lives.

Also last week, the registered trade name for Mipomersen was unveiled so now we will get used to using the trade name, Kynamro.

As usual the purpose of the call today is to report our financial performance for the second quarter of 2011.

I'm assuming you've read the details of the financial results in our press release so I will just cover the highlights.

As always I will be happy to take questions at the end of the call.

We remain on track to meet our guidance for 2011.

We ended the first half of the year with nearly $400 million in cash and a pro forma net operating loss of approximately $24 million.

Already this year we have recognized a significant amount of revenue from our GSK collaboration including a $5 million milestone payment we received with the initiation of the Phase I study of ISIS-TTR Rx, the first drug to enter development under our alliance.

We also began amortizing the $3 million up front fee we received from GSK for the expansion of our collaboration.

This has been a very successful collaboration, and we look forward to selecting the next drug candidate to move into our pipeline.

Our revenue in the first half of 2011 was lower compared to the first half of 2010 principally due to the timing of milestones and other payments.

We anticipated this lower revenue, and it was offset by a new revenue we received from GSK this year.

The big milestone we plan to earn this year is the $25 million that we will earn when the FDA accepts the NDA filing for marketing approval of Kynamro.

We factored this milestone into our 2011 financial guidance.

Already this year we've made significance progress in many areas of our pipeline.

Just this quarter we initiated Phase I studies for our PTP-1B and TTR drugs.

We are about to begin dosing in the Phase II program for our CRP drug and of course we continue to make progress in all of our other ongoing studies, many of which will be completed later this year or early next year.

This progress translates into higher costs for these programs.

Offset by lower costs associated with the completion of the Mipomersen Phase III program that supports our initial regulatory filings.

As a result, our expenses for the first half of 2011 are essentially flat compared to the first half of 2010.

Although we expect our expenses to increase modestly in the second half of the year we remain on track to meet our guidance of an NOL on the low $40 million range.

As we move our drugs forward to more advanced stages of development including in the larger, longer studies, the costs associated with continued development of these drugs increase.

In addition this year, we expect to begin the next Mipomersen study to support additional regulatory filings.

Later this year we anticipate completing our obligation to spend $125 million on Mipomersen development.

You may recall that once Mipomersen expenses exceed $125 million we will share all Mipomersen development expenses 50/50 with Genzyme until Mipomersen is profitable.

So next year, we anticipate sharing Mipomersen development costs with Genzyme.

And remember Genzyme is funding all of the sales and marketing costs associated with the preparation for drug launches in both Europe and the US and will continue to do so until Mipomersen is profitable.

We remain on track to meet our cash guidance.

The only thing I'm going to focus on today is a new item that impacts our balance sheet.

As many of you know, our primary R&D facilities are spread out across three buildings which we lease.

Because the leases on our R&D buildings expire at the end of this year we explored several options that would allow us to avoid costly renovations to the aging buildings we currently inhabit and to consolidate the majority of our operations into a single facility.

We chose to lease a new facility built by BioMed Realty.

We are moving into the new facility later this month, and will begin paying rent on January 1 of next year.

In order to make our move as efficient as possible we requested access to the new facility prior to completion of construction so that we could install the specialized lab equipment and IT systems required to support our activities.

To gain early access we agreed to modify our lease and accept additional responsibility.

As a result accounting rules required us to record the cost of the facility as a fixed asset on our balance sheet with a corresponding liability.

We will depreciate the building over the term of the lease and its extensions.

And our rent payments will reduce the liability.

Although this does not look significantly different from accounting for a capital lease, I wanted to explain it to you because the building and the liability are now on our balance sheet.

We are obviously very excited to move into a new facility that will support our unique and innovative culture.

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

Thanks, Lynne.

As Lynne said, 2011 has been a productive year.

Our primary focus remains Mipomersen.

Our job is to work with Genzyme-Sanofi to assure that the three key tasks are accomplished.

That we gain approval for Mipomersen in Europe and the US and the rest of the world, that we complete a successful initial commercial launch for Mipomersen, and that we complete the development of Mipomersen so that we can submit registration dossiers for approval for additional patient populations.

With the submission of the filing for marketing approval in the EU we have taken an important step.

Genzyme and we are now hard at work on finalizing the US submission.

We have had productive interactions with both the US and the EU regulatory authorities that give us confidence that our filings are appropriate for the indications we seek and that Mipomercen or Kynamro should be approved.

The Genzyme Isis team has done a tremendous job in completing the development work and putting together the regulatory dossiers.

And now we have the added strength of Sanofi to the launch and continued development of Kynamro.

As someone who has been responsible for drug discovery and development for many years I have confidence that Kynamro should be approved.

I have that confidence because we thoroughly answered the key questions that should be answered about a new medicine when seeking approval.

First, there are well defined patient populations with a clear, unmet medical need.

Patients we plan to treat are all at severe cardiovascular risk.

They all have a fatal cardiovascular disease.

Second, the efficacy of Mipomercen has been shown in four randomized double blind placebo-controlled trials that robustly met all primary, secondary and tertiary end points.

Mipomercen has been shown to lower all atherogenic lipids with no negative affects on HDL.

No other drug has that profile.

Long-term studies demonstrate that Mipomercen continues to work well providing the same benefit seen in six-month studies with longer term treatment.

Third, the dose has been identified.

And all four Phase III studies were performed at the dose of 200 milligrams per week, the commercial dose.

The 200 milligram per week dose was selected after a thorough Phase II program that explored a range of doses.

Lastly Mipomercen has an acceptable safety profile for the indications we are pursuing.

Mild to moderate injections site reactions are the most common side effect.

These types of reactions are consistent with subcutaneous administered drugs, but Mipomercen's ISR's are much more tolerable than many.

Only 8% of the patients treated in Phase III studies experienced modest changes in liver enzymes.

Changes in these markers correlate with rapid and significant changes in lipid levels.

Those ALT effects are related to the basic pharmacology of Mipomercen, and not evidence of liver toxicity.

They are easily monitored, and should be easily manageable.

In a small fraction of patients moderate increases in liver fat were observed with no evidence of liver toxicity, such as super high ALT, evidence of inflammation in the liver on biopsy, [highslaw] or any other liver dysfunction.

In fact, long-term dosing experience demonstrates that with continued dosing, liver fat stabilizes or reduces.

Importantly the mechanisms by which the liver accommodates to Mipomercen had been carefully studied in animals and the predictions made by studies in animals have now been realized in man.

Additionally Mipomercen has the strong support of key opinion leaders in lipidology.

In just the past two years, approximately a dozen positive reviews of Mipomercen have been written by lipidologists.

I think the sheer number of reviews demonstrates how important Mipomercen is to the people who are taking care of these patients.

And while each one of the reviews emphasizes the need for continuing longer term studies, I think the enthusiasm for the drug is quite apparent.

And of course those long term studies in larger numbers of patients are exactly the studies we're conducting.

And finally we have pursued a prudent, staged development program in which we are seeking initially approval to treat the patients who at the greatest need and a continued comprehensive development program will data supporting Kynamro's value and safety with longer term treatment and larger number of patients before we seek broader indications.

I could go on, but I think you get the point.

Kynamro is a unique new medicine that we believe can prolong the lives of patients with fatal cardiovascular disease.

It has been carefully and thoroughly evaluated.

Our continuing development program will provide additional safety data and better understanding of the drug while supporting its expanded use.

We believe Kynamro is a great drug that has been comprehensively studied and can bring real benefit to desperately needy patients.

We are confident that the initial indications will make Kynamro a commercial success and we think there is a great opportunity for significant long-term commercial growth as well.

We have the right commercial partner in Genzyme Sanofi.

Their launch plans are right on target, focusing on earlier diagnosis and treatment of FH patients and referral of these patients to lipidologists, the physicians who already know Kynamro well.

We and we have the wind in our sails with the National Lipid Association's new guidelines and recommendations regarding diagnosis and treatment of FH patients as well as the strong support of the KOL's.

Genzyme continues to focus on enhanced presentations of Kynamro that are physician and patient education about how to optimally use the subcutaneous drug and better explanation of the benefits of Kynamro's profile.

All of these efforts should enhance patient convenience and compliance and understanding of the importance of Kynamro.

Finally we are excited about the continuing development of Kynamro.

We know what we need to do in the US and Europe to achieve expanded patient populations.

The required studies are straightforward and we are about to begin them.

We have an exciting year ahead for Kynamro.

However with 24 drugs in our pipeline we have many other events to look forward to.

This has already been an exciting year.

Over the next year we plan to build on Kynamro's success and the clinical successes we have already announced this year.

We have a large number of clinical trials coming to completion.

We will continue to report clinical data where we have the opportunity to demonstrate proof concept for many of the drugs in our pipeline over the next six months.

We will continue to advance our pipeline such as we have with the initiation of Phase I studies with the PTP-1B inhibitor, Factor XI and TTR.

In fact, we expect to initiate clinical trials on three or more drugs during the remaining half of the year.

We will also add three or more novel drugs to our development pipeline as the year progresses.

So this is going to be an exciting year.

Registering Kynamro is of seminal importance.

But what adds to my excitement is all of the drugs that I think have a good likelihood of working and showing proof in the clinic.

And we expect to be able to tell you about those in the coming months.

So with that I thank you all for joining us today and we will open up the call for questions and answers.

Chanelle, if you can set us up for Q&A, please.

Thank you.

(Operator Instructions).

And your first question comes from the line of Salveen Richter of Collins Stewart.

Hi, it is Laura Ekas on behalf of Salveen.

I just wanted to ask, I guess, first of all if we can talk about Mipo pricing in the EU and given that you are filing in a broader population in the EU than in the US, how should we think about the pricing differences in the two different geographies?

Laura, Genzyme is responsible for pricing and they have not yet set prices.

And I don't think there is any particular reason to believe the pricing is going to be dramatically different in the US and Europe, but we will get more information of that as we go forward.

Most of our analysts are using the cost of aphoresis as a surrogate for price, both for the US and Europe.

And you know, aphoresis is much more commonly used in Europe than it is in the US.

And that's in the range of $100,000 a year annual cost of therapy.

I just want to reiterate it is up to Genzyme to set the price and they haven't done it yet.

Okay, and then where do you stand on the 12-month exposure study that you were running for the severe group in the US?

Well, we are very excited about it.

The study continues to perform very well.

We have about 141 -- are you talking about the open label -- the extension study or the beginning of the one-year trial?

The beginning of the one-year trial.

I'm sorry.

I misunderstood.

We are progressing really well.

We should be getting that effort underway here in the next little bit.

Okay, great.

We are very pleased with the responses and in general very pleased about where we stand with knowing what we need to do to get to the next patient, the next indications.

And then I guess one last question, what is Sanofi's plan for Mipo in the EU beyond the homo and severe heterozygous group?

Are they planning to try to go into the broader HEFH population?

Yes, absolutely.

Our plan -- the plan that we have advertised all these years has not changed.

We are proceeding exactly on course and I think there is some substantial excitement here and in our partner.

Do you know when the studies might start?

We -- very shortly.

Great.

Thank you.

Yes.

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

Thanks for taking my question.

First, when do you expect acceptance of this filing?

Will it be in the fourth quarter or in the first quarter next year?

You mean the US filing?

Yes.

All that we are willing to comment on right now, Shiv, is that the US filing will be filed later this year, and we are working very hard to get it done as quickly as possible.

Second question, what kind of pre marketing activities is Genzyme/Sanofi doing?

Genzyme actually has a great marketing plan that we are really excited about for Mipomercen.

They have had a very important presence at all of the major cardiovascular meetings at EAS.

Last year at AHA, last year at ESC, coming up at ESC.

So all of the major meetings they are doing continuing medical education, sponsoring symposia, and really doing all of the things that one would expect them to be doing at this point.

The keys to the Genzyme marketing focus I think are very important.

They are focused on the physician population -- the treating physicians, the lipidiologists, who treat these high risk, very high cholesterol patients.

They are also focused on educating referral physicians, who -- the internal medicine specialists and cardiologists who may have these patients and not know that they are actually FH patients and need more aggressive treatment.

So patient and physician education is a key element of the Genzyme marketing strategy.

And they are already beginning working with patient advocacy groups, working with the National Lipid Association and partnering with all of the important groups that will contribute to Mipomercen's success when it is launched.

Shiv, I think in addition to the work that Genzyme is doing, to me the most important thing that is going on right now is the buzz in the cardiovascular community.

The level of interest in Mipomercen, really is impressive.

The number of reviews that have been done is really nifty.

I think, in common with any drug at this stage, there are differences in understanding depending on whether the physician has used the drug in clinical trials or whether he hasn't.

And making sure that Mipomercen is better understood by people who haven't used it is a key step that needs to be taken.

And in very many ways the fact that the experts are reviewing Mipomercen so frequently and positively is the most important component of all of the activities that are taking place.

Okay.

Stan, one for you.

Over the next 12 to 18 months what are you most excited about beyond Mipomercen?

In addition to what we have already announced this year, which is EXCOO1 and CRP, APOIII, Factor XI are really exciting and what is particularly exciting about them is that I believe we will have the opportunity to show more than proof of concept -- proof of value in initial clinical trials.

We will complete SGLT2 in the next little bit.

Obviously that's a complicated environment.

And then on -- so near term events obviously come to mind immediately.

TTR is another molecule that we should be able to evaluate for proof of concept very quickly.

And then we have some big events coming up with our cancer pipeline.

EIF IV getting underway, Survivin, we should have data from Lilly here before long.

And OGX 011 are continuing.

So pay attention to APOCIII and Factor XI in particular.

Well, best of luck and looking forward to all the proof of concept.

It looks like there is going to be a lot of those.

I think so.

Thank you.

Your next question comes from the line of Carol Werther of Summer Street.

Thanks for taking my question.

Stan, can you just give us a little bit of an update of how the other dosing trials with Mipomercen have been going?

Yes, remember that we compared daily to thrice weekly to weekly dosing in an initial trial and the results there were very positive.

That was also a trial that we looked very carefully at the potential for Mipomercen to produce systemic increases, systemic markers of inflammation and showed that it didn't.

So we have all of the basic data from animals now and man, saying pretty much what you would expect, that once a day dosing at 30 milligrams per day or thrice weekly dosing at 70 milligrams a dose should be equivalent to 200.

In our studies that we are getting ready to move forward we will be comparing the -- at least two schedules.

We are also working on presentations for the daily dosing being -- we want to have the final presentation before we begin a daily dosing study.

So we are quite enthusiastic about it, but again I want to put it into context that I have always tried to put these experiments in.

We don't -- we believe -- what we are setting out to do is provide patients options.

We think there are going to be patients who would much prefer taking once weekly, and there are patients who might like taking daily and there may be patients who prefer smaller, three times a week injections.

So the goal is to provide options and let the patients then decide which approach they like better.

I don't believe that we have an injection site reaction problem that needs to be fixed.

We have an opportunity to enhance the acceptance of Mipomercen.

And then could you also just tell us if you know when some of these other pivotal trials are going to be published in a peer reviewed journal?

The severe has been submitted, and I think the heterozygous has been submitted, so they are in the review process now.

They are in top tier journals, so the review process is consuming.

But they are well along the way.

And the high risk is not quite as far along.

Okay.

Thank you.

We also are continuing our long-term open label study and look forward to presenting the information from that study.

We think it is really -- we have really important information there.

Thanks.

Yes.

(Operator Instructions.) Your next question comes from the line of Lucy Lu of Citigroup.

Hello this is actually Anton on behalf of Lucy.

Thanks for taking the call.

I was just wondering if, given what happened today in the market with the (inaudible) do you see any (inaudible) Mipomercen with this respect, and does it change any at all your expectations for the launch projection of the product?

Thank you.

I'm sorry, I'm going to have to ask you to repeat it a little more slowly for me.

I really couldn't understand it.

Sure, no problem.

My question is that given what happened today in the market with the (inaudible), they missed their sort of launch trajectory and adoption curve for the product was a little bit slower than expected.

Do you think there read through to Mipomercen and does it change any expectations for you?

No.

I don't think the adoption of the Dendreon drug is terribly slow.

I think what was -- what's different is the expectations Dendreon set versus what is reality.

I think the expectations on Wall Street are grossly under what I believe Mipomercen will do and the uptake of Mipomercen will be dependent on the need of the patients, the acceptance of Mipomercen by the doctors and the efforts of our partner.

And we haven't provided any Mipomercen projections so we can't do worse than them, yet.

I think -- again I think there is a real temptation to confuse Wall Street expectations, which are set by a variety of things, with what is reasonable and what is reasonable for Mipomercen I think is a lot better than what Wall Street's expectations are today.

I was just wondering maybe can you give us like key indicator that we should probably follow for our modeling purposes that would help us to estimate how far the range would be.

Would there be like any reimbursement concerns or anything like that?

I think the only guidance that makes sense is that we have provided guidance about the patient numbers in the US and Europe.

We estimate 3,000 [and] 18,000.

We provided as much guidance as we possibly can about pricing range.

I have told you that there is tremendous enthusiasm in at least the people I talk to and the people I don't talk to who write these reviews.

There is an urgent need so I don't know if there is anything more than that that we can say today.

We are still quite a few months away from getting the drug to market.

In addition I would add that the National Lipid Association's guidance is seminally important because it urges much more aggressive treatment, the need for new drugs and a much more aggressive pursuit of diagnosis of the very potentially large numbers of patients who remain undiagnosed with FH.

I don't know if I've even come close to answering your question, but that's about as much as I can say today.

Lynne, do you have anything that you want to add?

The only thing I was going add is that subject to getting the regulatory timelines working Genzyme is planning on launching the drug next year.

As we get closer to that we will have more clarity on pricing and issues like that which will help you build your model better, but where we are today I think is exactly where you would expect us to be this far in advance of a launch.

Great.

Thank you.

That's very helpful.

Thanks.

And your final question comes from the line of Andy [Shultes].

Private Investor: Yes, Good afternoon.

As a follow-up to this, Stan and Lynne, when you originally announced your deal with Genzyme in the early part of 2008, I believe, part of that deal was a $5 million share offering at $30 a share.

And I remember the excitement that was created on that announcement.

Lynne, I'm curious to ask you, have those shares ever been registered for sale, or do you know whether they have been retained for investment purposes by Genzyme?

Genzyme still owns those shares.

Thank you.

Ladies and gentlemen -- (inaudible - multiple speakers.) No, there are no further questions, Dr.

Crooke.

Great, well again, thanks everyone for your attention and we look forward to talking to you again in the near future, and we will bring the call to a close.

Thank you.

Ladies and gentlemen, that concludes the presentation.

Thank you for your participation.

You may now disconnect.

Have a great day.