Ionis Pharmaceuticals Inc (IONS) 2012 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Isis Pharmaceuticals second-quarter financial results conference call.

Leading the call today from Isis is Dr. Stanley Crooke, Isis's Chairman and Chief Executive Officer.

Dr. Crooke, please begin.

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

Lynne will walk you through our financials for the second quarter of this year.

After that, I will give you a brief update on what we've accomplished so far this year and then focus on the important events in the second half of the year.

Joining me on today's call are Lynne Parshall, COO and CFO; Beth Hougen, Vice President, Finance; and Wade Walke, Executive Director of Corporate Communications and Investor Relations.

Before we begin, I'm pleased to share with you that Kristina has continued to advance her career in Isis and has taken on new responsibilities.

She'll continue to be an integral part of the Isis team in a new role, leading our patient advocacy relations group.

While we will miss Kristina's efforts in our Investor Relations activities, Kristina's science and nursing backgrounds, coupled with her vibrant and caring personality -- Kristina, obviously, wrote this -- make her a great choice to spearhead this new endeavor.

(laughter) Actually, I agree with all that.

So with that, I'd like to introduce the newest member of our Investor Relations team.

Please join me in welcoming Wade Walke, who will head up our Corporate Communication team.

Wade holds a PhD in biochemistry from the University of Michigan and completed post-doctoral training at Saint Jude's Children Research Hospital and the Scripps Research Institute.

Many of you may know Wade from his previous position at Lexicon Pharmaceuticals, where he was head of Corporate Communication and Investor Relations department for the past six years.

So please welcome Wade.

And Wade, your first formal task is to present our forward-looking language statement.

Thanks, Stan; good morning, everyone.

A reminder to everyone that this webcast includes forward-looking statements regarding Isis's business, the financial outlook for Isis, and the therapeutic and commercial potential of Isis's technology and products in development.

Any statements describing Isis's goals, expectations, financial or other projections; intentions or beliefs, including the planned commercialization of KYNAMRO, is a forward-looking statement and should be considered an at-risk statement.

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 in the endeavor of building a business around such drugs.

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

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

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

These and other risks concerning Isis's programs are described in additional detail in Isis's annual report on Form 10-K for the year ended December 31, 2011, 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.

Now I'll turn the call over to Lynne.

Thanks, Wade, and welcome.

Good morning, everyone, and thank you for joining us.

As usual, I'm assuming you've read the details for our quarterly financial results in our press release, so I plan to just cover the highlights.

Consistent with our projections, we ended the quarter with more than $335 million in cash, and pro forma net operating income of $6.2 million.

We also reported the year-to-date pro forma net operating loss of $10 million.

The significant improvement in our financial results for this quarter and the first half of the year was driven primarily by the $25 million milestone payment we earned from Genzyme when the FDA accepted the KYNAMRO NDA filing.

Let me spend a few minutes discussing how this affects the rest of our year.

As you've heard me mention before, our revenue fluctuates from quarter to quarter based on the timing of payments from our partners, as the Genzyme milestone in the second quarter of this year clearly demonstrates.

In our 2011 year-end call in February, we projected 2012 revenue of $112 million, including more than $40 million from the amortization of up-front payment.

In the first half of this year we've earned more than $30 million in revenue from the amortization of up-front payments, which is most of what we projected for the year.

This includes $28 million from the amortization of Genzyme up-front payments, which ended on schedule in the second quarter of this year.

As a result, that will not be a component of revenue in the second half of the year.

In addition to the $28 million we earned from Genzyme, we have earned $7 million from the amortization of up-front fees from our GSK collaboration and our Biogen Idec collaboration for SMA, and we expect to earn the same amount found these two collaborations in the second half of the year.

We'll also earn new revenue in the second half of this year from the amortization of the $12 million up-front payment we receive from Biogen Idec for a recently established myotonic dystrophy collaboration.

I'll spend some time on this new deal in a few minutes.

The nature of our business strategy and partnerships ensures that we have a steady stream of milestone payment opportunities each year.

In February we projected we would turn $50 million in KYNAMRO milestone payments, and consistent with each of the past several years, in the $15 million range for non-KYNAMRO milestone payments.

The most significant milestone payment so far this year was of course, the $25 million milestone payment through Genzyme for the acceptance of the NDA.

As we mentioned in May, with the January 2013 PDUFA date, we now expect to earn the $25 million KYNAMRO NDA approval milestone next year.

Because we use a conservative projection of our financial results to set our guidance each year which does not include any significant new transactions, any new alliance we establish will have a positive effect on our guidance, and as such, it is still too early to predict how the shift of the approval milestone will affect our guidance for the year.

As we move into the second half of this year, we also expect to earn revenue from non-KYNAMRO milestone payments as our other partnered drugs advance in development.

For example, we plan to initiate a phase III clinical study for our TTR drug in patients with familial polyneuropathy, for which we would earn a $10 million milestone payment.

We continue to support the KYNAMRO commercial launch, and in the first half of this year we've received more than $6 million from Genzyme for the sale of drug to support this launch.

We expect to earn a similar amount in the second half of this year as we continue to supply Genzyme with drug.

Our expenses for the first half of 2012 were moderately higher than our expenses from the first half of 2011, but are right on target to meet our projected guidance.

In February we had predicted a 7% increase, or $10 million, in our operating expenses to support our later-stage drug development programs.

We have many drugs that are already in late-stage development or will be entering into late-stage clinical studies this year.

These studies are designed to support rapid routes to the market or to support attractive new partnerships based on robust phase II data packages.

Our increase in development spending for internal programs is offset in part by a decrease in KYNAMRO-related expenses, because we are now sharing KYNAMRO development expenses 50%/50% with Genzyme until KYNAMRO is profitable.

Ongoing development expenses for KYNAMRO are primarily related to the FOCUS FH study, which is well underway.

Also, Genzyme is paying all of the marketing and selling expenses for KYNAMRO.

In summary, while our profitability this quarter was primarily driven by a one-time milestone payment, it does illustrate the fact that because of our cost structure and revenue base from partnerships, it will not take significant revenue to move us to profitability on a sustainable basis.

With KYNAMRO approvals on the horizon, we're looking forward to that possibility.

Now I'd like to switch gears and discuss how our investments in our pipeline and our partnership approach have enabled us to remain financially strong.

Last quarter I reviewed several drugs from our pipeline that we believe represent potential product launches over the next five years or could be very valuable licensing opportunities over the next two years.

Today I'd like to spend a few minutes discussing how our severe and rare disease franchise and our latest alliance with Biogen Idec fit into our business strategy.

Severe and rare diseases are often genetically-based, hard-to-treat diseases that have been underserved by pharmaceutical companies.

As such, there is a tremendous unmet net medical need for these patients and potentially rapid routes to market for effective and safe drugs.

In just a few years, we been able to expand our severe and rare disease franchise and maintain a broad research program in which we're evaluating many different diseases that could be treated with a antisense drug.

Of these diseases, myotonic dystrophy type I, or DM1, is characterized by progressive muscle atrophy, weakness, and disabling muscle spasms.

Currently there are no treatments available for patients with DM1, even though this disease is thought to affect more than 150,000 patients in the US, Europe, and Japan combined.

DM1 is caused by toxic RNA, not a protein, making it very difficult to treat using standard drug discovery technologies, such as small molecule.

Because antisense technology targets RNAs, we have a unique opportunity to develop an effective drug for these patients.

Our new collaboration with Biogen Idec to develop an antisense drug to treat DM1 is structured similarly to our earlier collaboration with Biogen Idec for our SMA drug, albeit from a much earlier program.

We provided Biogen Idec with an option to license in the future an antisense drug to treat DM1.

Biogen Idec will provide discovery and development milestone payments to us as we advance the program, discover a drug, and move it into clinical development.

At the time of licensing, after we have evidence of value with clinical studies, we will have a knowledgeable and invested partner.

Additionally, Biogen Idec's expertise in neurodegenerative diseases and their strong commercial track record for moving new drugs to the market rapidly for these diseases is the perfect complement to our strong drug discovery resources.

Together we plan to identify a development candidate to move into clinical study soon.

By partnering programs like DM1 with partners who bring substantial expertise and experience to the development program, we can add more drugs to our pipeline and advance these drugs more rapidly than we would be able to do on our own.

We retain the right to attractive licensing terms and maintain control over the early development of the drugs.

We also continue to benefit after licensing with an invested partner and substantial development in regulatory milestones and royalties on these drugs.

So in short, 2012 has been very productive thus far.

As you can see, we continued to successfully execute our business strategy to new partnerships and accomplishments in existing partnerships while maintaining our expenses at a consistent level, supporting our strong financial position.

So far in this year we have already received more than $85 million from our partners.

We move into the second half of the year in a very strong financial position, with many opportunities for continued growth.

With that, I'd like to turn the call back over to Stan to wrap up with the accomplishments we've already achieved this year.

Thanks, Lynne.

As Lynne said, the first half of 2012 has been very busy and very productive.

Our most important achievement so far this year was the successful filing of the KYNAMRO NDA.

With this filing, we're one step closer to bringing KYNAMRO to the market for patients who are at significant cardiovascular risk.

In fact, patients who have a fatal cardiovascular bleed.

Our development program for KYNAMRO provided a solid and robust filing package, with data from more than 800 subjects, dosed in 20 clinical trials, including 4 phase III studies.

In addition, we recently reported data in patients who have been treated with KYNAMRO for more than three years.

In these patients KYNAMRO continues to demonstrate consistent reduction to all atherogenic lipids and a consistent safety and tolerability profile that we believe support our initial commercial markets for KYNAMRO.

These data give us ever-greater confidence that compliance with patients taking KYNAMRO will be very good once the drug gets to the market.

Together with Genzyme we continue to make progress on the regulatory front.

European review is progressing as scheduled, and we look forward to KYNAMRO being approved in Europe this year.

We're also looking forward to the FDA advisory committee panel on KYNAMRO, which is now scheduled for October 18.

And of course, we look forward to approval in the US thereafter.

Finally, we're pleased to announce that the European Medicines Agency has approved our manufacturing facility, which is making drug substance for KYNAMRO commercial launch.

The successful completion of a preapproval inspection is an important milestone for us, and validation of the high standards in excellence that we engage in in manufacturing antisense drugs.

It's all great news.

With the potential for KYNAMRO approval on the horizon, this is an exciting time to be at Isis.

We believe that with the initial indications, KYNAMRO could be a substantial commercial opportunity, with the largest market being Europe initially.

In addition, together with Genzyme, we are progressing toward expanding the market potential for KYNAMRO with new indications.

The FOCUS FH study, designed to support the long-term growth potential of KYNAMRO, is progressing well.

As I've said before, we believe that KYNAMRO is a great drug that has been comprehensively studied and can bring real benefit to desperately needy patients.

KYNAMRO has been shown to lower all apoB-containing atherogenic lipids that are measured, including LDL cholesterol and other independent risk factors such as Lp(a).

An analysis of the LP(a) data from all 43 studies was recently presented at the European Atherosclerosis Society.

In all of the patient population studied, KYNAMRO produced sustained reductions of Lp(a) with either neutral or positive effects on HDL cholesterol, or good cholesterol.

That is a unique profile and an extremely valuable profile.

For patients who are unable to reduce their LDL cholesterol to acceptable levels with currently-available lipid-lowering therapies, the only option is apheresis, and expensive, invasive, and very difficult procedure.

We believe that KYNAMRO could reduce LDL levels in many of these patients to below the levels where they might require apheresis.

In fact, last year at the European Atherosclerosis Society, data were presented highlighting KYNAMRO's potential to reduce the necessity for apheresis by lowering LDL cholesterols below the threshold.

This year, at the European Society of Cardiology, an additional analysis of the potential for KYNAMRO to reduce LDL cholesterol levels below these thresholds will be presented.

We hope that you'll join us on a webcast on August 29, during which Dr. Parhofer of the Ludwig-Maximilians University in Munich will present the results of this analysis.

Now let's focus on the second half of the year.

In the second half of this year we expect to report clinical data from studies on a number of our drugs, including phase II data from our CRP drug in patients with rheumatoid arthritis this year or early next year; and the results from an endotoxin study, in which will be able to assess the ability of our drug to blunt acute increases in CRP and other inflammatory mediators and alter signs and symptoms associated with an endotoxin challenge.

We believe this next year will be a very, very important year for our CRP drug and for medical science.

With these data in hand, we will have, for the first time, an opportunity to address whether lowering CRP can generate therapeutic benefit in a variety of diseases.

We'll complete the report of phase I study in patients with SMA later this year and move on to phase II -- a phase II multiple-dose study.

Next year we plan to initiate a phase III study in these children with this spinal muscular atrophy.

In addition, we'll have a number of opportunities to evaluate clinical data from our metabolic disease franchise, as clinical trials will be completing, including our first anti-obesity drug that targets FGFR4 and our glucagon receptor antagonist, the corticoid receptor antagonist and our novel insulin sensitizer, PDB1b.

So we have a very full agenda for our metabolic drugs in the coming months.

We'll continue to advance the pipeline with the addition of -- initiation of clinical trials for many drugs, including a phase III study for our TTR drug that we're developing to treat TTR amyloidosis with our partner, GSK.

We're pleased to announce that we were recently granted orphan drug designation by the FDA for our TTR drug and look forward to evaluating this drug in patients later this year.

A phase II study in patients who are undergoing total knee replacement for our anti-thrombosis drug targeting factor in 11 is underway -- or getting underway.

In this study we hope to see a reduction in factor XI with no bleeding, consistent with the results that we saw in phase I. In addition, we'll be evaluating the effects of our drug on the instance of Deep Vein Thrombosis associated with total knee replacement, and we'll compare those results in terms of efficacy and safety to enoxaparin, a low-molecular-weight heparin drug.

And of course we'll continue to add new drugs to our pipeline, including drugs to treat severe, rare diseases.

Our severe and rare disease franchise is one of the fastest-growing areas of our pipeline.

Antisense drugs offer a unique approach to treat many severe and rare diseases for which there are no specific disease-modifying drugs.

With our technology, we can target toxic RNAs, non-coding RNAs, RNAs that are involved in the production of disease-causing proteins.

We have shown that with our SMA drug, that we can alter splicing of an RNA, enabling the cell to produce protein necessary for normal function.

So it's obvious that using our drug discovery technology, we can develop antisense drugs to many different severe and rare diseases, and we have an active research program doing just that.

As an example, there are now two very striking papers that have recently been published that demonstrate the potential of antisense drugs to treat these hard-to-treat diseases.

Earlier this summer we and our collaborators at UCSD and Genzyme published a paper in the journal Neuron that highlights the selectivity and potential benefit of an antisense approach to the treatment of Huntington's disease.

We reported that a single injection of an antisense drug designed to target Huntington RNA produced a rapid, sustained improvement in a mouse model of Huntington's disease.

After one injection directly into the spinal fluid, treated mice exhibited increased mobility, and still they progressed in normal mobility.

The improvements were still being observed nine months after a single dose was administered.

We're very encouraged with this work and the clear demonstration of activity in an animal model of Huntington's disease, and we look forward to advancing this program into development in the months -- in the near future.

More recently, we and our collaborators at the University of Rochester published a paper in the journal Nature that demonstrated similar, striking, sustained results in a mouse model of myotonic dystrophy.

In this study we were able to rapidly reduce our target, a toxic RNA, in skeletal muscle and reduce the disease for more than a year after treatment.

These data are especially significant, as this is the first time we have developed an antisense drug to target toxic RNA, and this is the first time we have published data showing the potential for therapeutic benefit by targeting an RNA in skeletal muscle.

We used to think that second-generation antisense drugs did not work well in skeletal muscle, but thanks to continuing advances in our technology and our understanding of the mechanisms by which antisense drugs are distributed in the body, we now know that we can get our antisense drugs into muscle cells with very good effects.

By the way, let me emphasize that the drugs are formulated in a simple saline solution.

Doesn't require any special formulation for any of these uses.

This, of course, expands the potential utility of antisense drugs.

Again, as Lynne mentioned, we recently partnered our myotonic dystrophy program with Biogen Idec, and together we're moving this program forward rapidly to identify and develop the candidate.

So stay tuned.

We have a busy second half of the year ahead, and we look forward to continuing to share our successes and progress with you.

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

Derek, if you can set us up for questions, that would be helpful.

(Operator Instructions).

Salveen Richter, Canaccord.

My first question is just around the KYNAMRO regulatory filing.

You submitted a filing in last July, and it looks like we should have heard by now in terms of the CHMP decision.

Was there any additional updated data that you submitted, or is it due to questions that you've been responding to, that this just seems to have taken a while for us to get an answer here?

No, I think the progress on the European filing is exactly on schedule, and the process has been very standard.

We received the typical 120-day questions, and then the formal 180-day questions.

We're responding to the 180-day questions.

The questions were straightforward, and we feel we have very solid answers to all the questions.

In the meantime, the manufacturing plant has been inspected and approved.

And so we're right on the schedule that we expected, and we are looking forward to getting the drug approved in Europe.

Great.

And can you provide the date at which the CHMP is reviewing the drug?

Genzyme doesn't give out that level of regulatory detail, Salveen, so unfortunately we can't.

But we are expecting approval this year.

Okay, great.

And we've been consistent about saying that.

You know, the Committee on Medicines meets monthly, but the August meeting this year was not held, principally because of the Olympics.

There were difficulties in getting meetings together around the Olympics.

Great, thanks.

And then just another question, just on your long-term outlook for the Company.

You've never had an intention to be a commercially focused company, but when you look at entering and focusing on these rare genetic diseases, have you thought about maybe keeping these assets, given that there is not a huge investment required on the commercial front, instead of partnering them out?

Yes, we've thought about that in some detail, not just for what is typically thought of as rare diseases, but for our market subdivision, our paramerital development strategy for things AplusC3, which is a subset of patients that might be considered, if not rare, certainly not common.

And the basis for our strategy is primarily -- has to do with long-term innovation and the commitment to be a long-term innovator, and to do nothing that diminishes our ability to innovate.

And that is the primary basis, in part, of our business strategy, coupled to the efficiency of antisense technology.

With the addition of financial flexibility that we have, obviously, what we're doing is developing more drugs, and we're keeping them longer.

So with rare disease drugs, very often you have the opportunity to do phase III programs that are relatively modest and do not require a giant organization or infrastructure.

And so some of those, we're certainly considering keeping longer before we partner.

We may do distributorships and the like.

So what we try to do with every drug in the pipeline is optimize the partnering strategy in a way that acknowledges the risks and assures appropriate participation and investment in the opportunities.

And we'll continue to do that.

Great.

And then just my last question, can you provide us with any color on the TTR phase III trial design?

We will be able to do that very shortly.

I can tell you that we have had the opportunity to get advice from both the European and regulatory agencies.

We're very encouraged by their response to the drug, the data, and our plan.

We're in the process of putting the dots on the Is and crossing the Ts in the protocol and the changes in the business terms that were necessary as we move forward into phase III.

Remember that the transaction with GSK contemplated a phase II program, followed by phase III.

So bear with us.

We should be able to tell you a lot more about it very, very soon.

Thanks again.

Lynne, you --.

Salveen, I just wanted to add -- we actually have given some amount more granularity on that trial, and so I thought I'd just repeat that for your benefit.

It will be a probably fewer than 200 patient trial, with 12 to 15 months of dosing, using a neurological impairment scoring system that is unique but similar to ones used for other drugs as the endpoint.

Chad Messer, Needham & Co.

Thanks for taking my question.

My question is also on your TTR program.

Your colleagues and, sometimes, friendly competitors over at Alnylam just a couple of weeks ago put out some phase 1 data on their program.

And the market reacted very, very favorably to that.

I was wondering if you could just compare and contrast, maybe, the approaches that you guys are taking with the drug and the development path in TTR?

And does the data that they showed raised the bar for your own expectations in any way?

Well, first of all, we and Alnylam are great friends, and always friendly, and we worked together on many, many things including, of course, co-founding Regulus.

So we're very excited for our friends at Alnylam.

I think the market reaction to Alnylam was a product of seeing the TTR data and the PCSK9 data as clinical validation that double-stranded RNA can work in the clinic.

And so I think it was many factors that were there.

We have shown dose-dependent reductions in TTR that took TTR to undetectable levels in normal volunteers.

Our drugs are single-stranded.

They are drugs that work in cells in animals and in man.

And they work in all the tissues; they work in all the organs; and they work for multiple diseases.

They require no special formulation.

And we have more than 6,000 patients in our safety database saying they are safe and effective.

So our drugs are the product of a very mature technology that we have pioneered and we know a lot about.

The Alnylam drugs are double-stranded RNA, so they differ dramatically.

Double-stranded RNA is as different from single-stranded as night and day in terms of distribution and other kinds of properties.

Double-stranded RNAs require either cationic lipid formulations or, more recently, our friends at Alnylam have shown that a conjugate called GalNAc can be also used.

They have been shown to work in the liver.

And of course, the lipid formulations are very complex, and the combination and that that formulations and double-stranded RNA is pro-inflammatory, and as a consequence, patients needs to be pretreated with steroids and antihistamines, both H1 and H2.

That GalNAc doesn't require special formulation, but again, so far has been shown only to work in the liver.

The results of the TTR studies that Alnylam and we have done have shown roughly comparable reductions in target.

And so the bar for us isn't raised at all, and the facts are, we're moving to phase III.

So we are excited for Alnylam, and we're excited for the patients.

And we look forward to seeing what chronic administration of double-stranded RNA is like, and we believe that Alnylam is going to continue to advance that technology, and we support them in every possible way.

Great.

Thank you very much for that update.

And can I just ask a quick -- a follow-up on apoC-III, and I apologize if you touched on this when you were doing your pipeline review.

Are we still expecting -- or when are we expecting the phase II study to initiate, and when will we see more of the phase I data?

Well, you've seen all the phase I data.

The drug worked, it produced dose-dependent reductions in apoC-III, post prandial and fasting triglycerides.

And again, it was extremely well tolerated.

The phase II study is well underway.

There are -- and we expect to finish it and have those data for you later this year or early next year.

And that's a phase II study in patients who have triglycerides that are greater than 500.

We're also looking at a cohort of patients that we're treating in combination with fibroids.

We're further doing a study called a clamp study in patients with diabetes.

In these studies what you do is you treat and then look to determine whether insulin sensitivity is improved.

We certainly expect that to be positive, because lowering apoC-III and triglycerides should improve insulin sensitivity.

So we should have data from those studies and some other things that we're doing here by the end of the year or early next year.

And that would put us -- make us ready, then, to begin phase III work.

We're very excited about what we're seeing, and we're very excited about this drug.

We've also had informal regulatory conversations, as you are allowed to in Europe, to discuss our strategy of initially targeting patients with triglycerides greater than 1,000 who have an enhanced risk of pancreatitis.

Actually, we're going to use 880 as the number.

And so we're very encouraged by what we got out of the regulatory agency in Europe.

So this program is moving gangbusters.

Great, thanks for those updates.

You bet.

Ted Tenthoff, Piper Jaffray.

Thank you very much, and thanks for just all that detail provided in the call.

You mentioned that the panel meeting for KYNAMRO, if I heard correctly, is going to be October 18.

Is there anything in particular that you're working with or prepping Genzyme for, Sanofi for, for that meeting?

And what do you think are going to be the most important issues that are raised?

Do you want to take that, Lynne?

Sure.

Obviously the panel is supposed to look at the risk and benefit of the drug, and the benefit of this drug is very substantial.

It's supported by 4 robust phase III clinical studies, in each of which all of the endpoints -- primary, secondary, tertiary endpoints -- are all very, very positive.

The drug works in the liver.

And the principle effects that we've seen in the liver, which are monitorable and manageable -- but those of the principles side effects that we've seen with the drug.

And I think you should assume that that's what the FDA and the committee will think about in terms of assessing the drug.

Okay, that's helpful.

Good, excellent.

I look forward to continued progress in the back half.

Thanks, Ted.

Eric Schmidt, Cowen and Company.

On the SMN update that Stan gave, I think he mentioned the phase I dataset would be presented at the later this year, or at least released later this year.

Is there a medical form that you're targeting, or will that be a press release?

You know, I don't remember.

Can we get back to you on that, Eric?

Sure.

Stan, you also discuss plans --

What I think is important is that we've already gotten to the top dose that we projected in our dose escalation and have seen excellent tolerance and safety.

So we're certainly buoyed by what we're seeing in the clinic and moving as fast as we can to do multiple doses in these little children.

And you also mentioned plans to potentially start a phase III next year.

Is that based on what you're seeing in safety and tolerability, or anything else behind that?

The safety and tolerability, of course, support the plans.

The phase III plans that we discussed are a product of thinking about the disease, and then conversations with the regulatory authorities.

What would you need to see in Phase II go into Phase III?

Would you need to see strong signs of efficacy?

No.

I think what we need to see is safety.

And we'll begin to measure muscle strength and those sorts of things, but as you know, these children are so sick that any suggestion or benefit, I think, would be strong support for continuing to evaluate the drug.

And one of the principal things that we're hoping to see out of the phase II, Eric, is to generate the pharmacokinetic data to help us determine dose interval.

We think this drug may be able to be dosed as frequently as once every six months, or maybe even longer.

And so a principal purpose of the phase II study is to look using a variety of term biomarkers at Piquet parameters so that we can set the phase III up appropriately.

We are planning on initiating two different phase III studies, one in the infant form of the disease and a second in the type II/III -- the children with the type II/III forms of the disease.

We plan on starting both of those late next year or early 2014.

Okay, and the phase II will be in --

One more point of clarification.

Not biomarkers, we'll just mention the drug.

And the reason that the treatment will be so infrequent is the clearance of drug from CSF is determined by CSF turnover, and not primarily by metabolism.

So we know based on our experience to date that it should be certainly six months or longer.

And obviously, the fewer times per year you have to make an injection, the better off these kids are.

Got it.

So moving to TTR, you mentioned plans to start the pivotal in the familial subs type.

Are there -- is Glaxo interested in other subsets of the disease here -- cardiac variance, or the CNL systemic variance?

Yes.

The first step is fam; next step is the rest of the disease.

Conceptually, the drug should work very well in all forms of the disease.

Are there plans to start trials in other forms?

Yes, but what I would prefer is to just focus on what we're doing just now, and then we'll -- as we move toward getting the rest of the work underway, we'll talk about it in more detail then.

Okay.

Last question.

I was just intrigued by the publication last week on the DM1 side and the ability to clear toxic RNAs.

Have you disclosed any other programs that are toxic RNA-based in nature?

No; but we have them.

It's not that we're -- we haven't deliberately chosen not to disclose, it just hasn't come up.

There are quite a number of diseases, and many of them are these triple repeats diseases like Huntington's, where there is some debate about whether the problem is at the protein level or the toxic RNA level, or both.

And so this is an area of very active interest in us for quite a while now.

And as opportunities emerge, where it looks as though you've got an RNA that is a problem itself, it's very straightforward for us to cause that RNA to be reduced.

And these are great opportunities that are uniquely approachable with antisense.

And most of them are in the nucleus, and so really the only mechanism that you can use even from an antisense perspective, is RNA SAGE.

And so we really like the opportunity it presents, because it is so uniquely approachable with our technology.

So you mentioned Huntington's, Stan.

Are there any other indications you'd care to note now?

There are, but none that I want to talk about now.

I think they are all early, and I'd rather wait and talk about them when we have more data.

Okay.

Thanks a lot.

You bet.

Stephen Willey, Stifel Nicolaus.

Just a quick question, actually, on the manufacturing front.

I know on Friday you highlighted in the press release that you have been able to significantly reduce the COGS and capacity associated with KYNAMRO at this point.

So just wondering maybe where you are on that front in terms of where you figure you might be able to get COGS to from a steady-state perspective.

And then where you are on the capacity front, and what can you currently supply the market with, just based on where you are in that process?

Sure.

Let's deal with capacity first.

Remember that our goal is not to be a commercial manufacturer.

So we have the capacity to make, in our facility today, all the drugs in clinical development plus launch quantities of KYNAMRO, and we could do launch quantities for TTR, for example.

We are working with Genzyme Sanofi to transfer technology so that in due course at the Sanofi plant in Germany they can take over manufacturing of KYNAMRO.

And before that happens, we are fully capable of providing all the KYNAMRO that is necessary.

In addition, there are numerous, now, third-party manufacturers.

Avecia is probably the best known.

And the supply chain for all of the nucleotides in terms of building blocks and so on -- I'm getting into detail you probably didn't want me to -- but all of that is stuff that we've worked on for 23 years and is well in hand.

In terms of cost of goods, of course, we've worked steadily to reduce cost of goods.

And we have, I think, been public in our projections that at a ton scale, and KYNAMRO won't be at a ton scale, but at a ton scale, we think we can achieve $20 or -- in the range of $20 a gram costs.

Remember that our dose for KYNAMRO is 200 milligrams a week, so that's 50 weeks, that is 10 grams last I looked.

And obviously, on the KYNAMRO scale, we won't be at $20 a gram, but cost of goods are certainly well in hand for KYNAMRO and all the drugs that we're developing -- something we look at very carefully when we make a decision to develop a drug.

And this technology that we've invented and continue to progress -- and we're very confident we are going to be able to get costs to the level I mentioned, cost of goods to the level I mentioned, and we believe significantly lower over time.

And so the transfer to Sanofi takes place later this year, did you say?

It's taking place now.

Exactly when their plant comes online is not fully defined yet.

But the technology transfer has been underway, with Genzyme first, and then when Sanofi acquired Genzyme, with the Sanofi-Genzyme team for months.

And then could you maybe just give us a little bit of an overview in terms of what Genzyme has disclosed to you or in your discussions with them regarding the commercialization of this drug, how they've outlined the pricing and reimbursement strategy within Europe?

Have they indicated this is going to be the conventional drug launch we've seen in recent years, whereby you try to take price in a region like Germany, or does the recent events in Germany change that strategy at all?

I was curious as to how all you guys may be -- what information Genzyme has provided to you on that front.

I'm going to give you an answer that isn't going to be very satisfying, because Genzyme has provided us a lot of information about that that they have asked that we not share.

Genzyme and Sanofi together, obviously, are extremely well positioned in Europe.

We are dealing with a drug for a rare disease patient population.

And all I can say there's a lot of uncertainty in Europe; Genzyme and Sanofi absolutely recognize it.

They believe they have a good handle on how to approach, on a country-by-country basis, Europe.

And I can't -- given what's going on in Europe today, I can't think of two companies or a company and a group that I would rather have on our side in negotiating their way through Europe than having Sanofi and Genzyme to do that for us.

Okay.

Thank you very much.

And that is the art of using a lot of words and not saying much.

It's one of the arts that you have to have.

Carol Werther, Summer Street.

Can you just discuss a little bit what you expect the label for KYNAMRO to look like both in the US and the EU?

Carol, I don't think I can provide more granularity than I have.

We expect the indication in Europe to be broader than the US just because that's what they told us.

And we expect the label to read that KYNAMRO is to be used in patients who can't achieve target LDL levels with conventional therapies, to be used in combination.

In the US it will be narrower.

And beyond that, there's not much else that I can tell you today.

Okay.

I thought, correct me if I'm wrong, but is Sanofi still planning to file another broader EU filing this year?

I'm sorry, is who?

Sanofi Genzyme -- I thought at one point after approval in Europe, they were going to file another -- for the label to be broadened to, I think, patients that have cholesterol levels of 150?

So we do have plans that we've discussed, which center on the study FOCUS FH to expand indications in both the US and Europe.

That study is underway, but -- and that will be the basis for the filing.

We expect to finish enrollment of that study early next year.

And that's a one-year study.

So we would have the data a year later to support then broadening the filing.

So certainly not this year, but good progress toward expanding the label both in the US and in Europe.

And if I may, one more question.

And I know you're probably not going to be able to answer this, but I'm trying to get an idea of -- when I look at your pipeline, what product might be the next ones commercialized?

I'm happy to answer that.

Okay, good.

There are five that we are looking forward to that have, we think, a reasonably high probability of getting to the market.

During the period when KYNAMRO is growing significantly, so over the next five years or so.

The first and most important to me is apoC-III -- tremendously exciting opportunity, and we're proceeding down a paremetral development path, like we did with KYNAMRO.

The first indication will be patients who have severe triglyceride problems and a high risk of pancreatitis.

We are well along the way to getting that done.

Next is TTR.

We are beginning Phase III work this year, and we think that's a tremendous opportunity that we'll be developing with our partners at GSK.

The third is OGX-011.

As you know, that's being developed by OncoGenex and Teva.

Encouraging phase II data, and the phase III prostate study is going to complete, and we hope that supports filing.

The fourth is SMA, which is a bit earlier, but as I said, I think any benefit that we can bring to these children will be sufficient to support approval.

And as I said earlier, we start phase III next year.

And then finally, and very, very excitingly is EXE001.

That is the Excaliard drug that Pfizer now owns and is being developed for scarring.

Here's a drug that really works -- has worked beautifully in phase II, is administered locally, so there are no systemic risks with the drug to meet a very significant need of the patients who develop bad scars after plastic surgery or surgery of any sort.

And there again, I think Pfizer is progressing toward getting that drug to the market in a timeframe that is in the five-year time frame.

So we have five drugs.

We think all of them are -- have a real good shot of getting to the market, and we think we can get it all done in the next few years.

Okay, great.

Thank you.

And that's a good focus for people.

And the next time we talk, we'll talk about all the licensing opportunities that we're going to have in the next couple of years as we complete these clinical trials for drugs that we want to license before phase III.

It's a very exciting time for us, Carol.

I think -- are there -- I think we probably need to bring this call to a close.

I very much appreciate your interest and questions, and we look forward to keeping you apprised as we progress.

Thanks very much, everyone.

Ladies and gentlemen, that concludes today's conference.

We thank you for your participation.

You may now disconnect.

Have a great day.