使用警語:中文譯文來源為 Google 翻譯,僅供參考,實際內容請以英文原文為主
Operator
Welcome to the Isis Pharmaceutical third-quarter financial results conference call.
Leading the call today from Isis is Dr Stanley Crooke, Isis Chairman and CEO.
Dr Crooke, please begin.
- Chairman, CEO
Morning, and thank you for joining us on today's conference call to discuss our third-quarter financial results.
Lynne will discuss our financials and after that I'll give you a brief update on pipeline progress and planned activities for the rest of the year.
Joining me on today's call are Lynne Parshall, COO and CFO; Ben Hougan, Vice President of Finance; Richard Geary, Senior Vice President of Development; and Wade Walke, Executive Director of Corporate Communications and Investor Relations.
Wade, will you please read the forward-looking language statement.
- Executive Director of Corporate Communications and IR
Yes.
Thanks, Stan.
Good morning, everyone.
A reminder to everyone that this webcast includes forward-looking statements regarding Isis' business, the financial outlook for Isis, and the therapeutic and commercial potential of Isis' technology and products and development.
Any statement describing Isis' goals, expectations, financial or other projections, intentions or beliefs, including the planned commercialization KYNAMRO is a forward-looking statement and should be considered 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' 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' forward-looking statements reflect a 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' programs are described in additional detail in Isis' 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 will turn the call over to Lynne.
- COO & CFO
Thanks, Wade.
Good morning, everyone, and thank you for joining us.
2012 has been a very successful year so far.
Leading our achievements is, of course, KYNAMRO.
We are pleased that the FDA Advisory Committee voted in favor of approving KYNAMRO in the US for patients with homozygous FH.
These are patients who are at extreme risk of a fatal cardiovascular event, despite all that medicine has to offer today.
We believe that KYNAMRO could make a profound difference for these patients.
To that end, we're working with Genzyme on the next steps for KYNAMRO approval for homozygous FH in the US.
Genzyme continues to make progress with the European Regulatory Agency as well, although the process has taken a bit longer than anticipated.
The teams continue to ensure that all of the Agency's questions are answered thoroughly.
Although no final decision has been made by the EU regulators, we currently believe that the label for KYNAMRO in Europe may be somewhat narrower than what we originally proposed and may be more in line with what we expect to receive in the US.
We remain on track to hear back from the European Agency by the end of this year.
The on going Focus FH study, which is under an SPA with the FDA is designed to support broadening the KYNAMRO indication.
This study is an important element to support the long-term growth potential of KYNAMRO into patient populations beyond homozygous FH.
Genzyme and we believe the initial commercial market for KYNAMRO in homozygous FH will be significant and expansion into the severe heterozygous FH population has the added potential to make KYNAMRO a very significant commercial success.
Beyond KYNAMRO we have an exciting and robust lineup of novel first-in-class drugs and, over the next three months, we expect to report clinical data on a number of these drugs, expand our pipeline by adding several new drugs and continue to mature the pipeline with the initiation of later stage clinical studies.
Stan will provide more color on these exciting upcoming events later in the call.
We ended the third quarter in a very strong financial position with more than $340 million in cash, which places us on track to meet our year-end cash guidance of more than $300 million.
We also ended the quarter with pro forma NOL of $36 million, which is significantly improved over the same period last year.
Our strong financial position is primarily due to the $41 million we received from our Biogen Idec partnerships, the $25 million milestone payment from Genzyme for the NDA acceptance and $31 million net proceeds from our convertible debt refinancing.
These transactions allow us to meet or exceed our cash guidance, despite the slight delay in the $25 million milestone we expect to receive in early 2013 when KYNAMRO is approved in the United States.
So far this year we have earned more than $82 million in revenue.
This includes revenue from the KYNAMRO milestone payment for NDA acceptance, amortization of the $41 million from our two new deals with Biogen Idec, payments from Alnylam associated with our share of transactions they've completed, and approximately $11 million in revenue from the sale of KYNAMRO to Genzyme to support the initial commercial launch.
Our expenses for the first nine months of 2012 are right where we projected.
We predicted a modest 7% increase in expenses for this year and we are on track to meet this, while moving a number of programs aggressively forward to later stages of development.
Already this year we have advanced four drugs in our pipeline into Phase 2 studies and have done the preparatory work to initiate a Phase 3 study this year for ISIS-TTR-RX.
Other than the small timing change for the KYNAMRO approval milestone, we've met all of the financial goals we set for ourselves this year, including completing the GSK amendment for TTR, which provides us with significantly enhanced economics.
However, due to changes in the accounting treatment, we will amortize the amounts we'll earn from GSK for TTR this year rather than taking them immediately into revenue as milestones.
Because of the timing change for the second KYNAMRO milestone and the accounting change for our GSK transactions, we're adjusting our NOL guidance to the mid $70 million range.
Additionally, the refinancing of our existing convertible debt was a key financial goal for us this year.
In August, we took advantage of the attractive terms for debt offerings to complete a successful private placement of approximately $201 million of 2.75% Convertible Senior Notes.
We're extremely pleased that we priced at the high end of the conversion premium with a competitive interest rate, while placing the notes with high quality investors.
The goal of this offering was to raise sufficient capital to redeem our then existing convertible debt, which we did in early September.
Because of the significant interest in Isis and this financing, the bankers exercised their over allotment options at the same time we completed the offering.
I thought it might be helpful to give you some guidance on the accounting for our new convertible notes, even though it's consistent with the accounting we've used for our previous convertible notes.
Accounting rules require us to separate the debt and equity components of these notes.
The debt component reflects our borrowing rate for debt instruments without a conversion feature, which means that we recorded our convertible debt at a discount because the 2.75% interest rate we pay is less than the rate at which we could borrow without a conversion feature.
We then amortized this discount over the expected life of the debt, or seven years, as additional non cash interest expense.
The amount of non cash interest expense related to this amortization for the third quarter of 2012 was $778,000.
This accounting treatment does not effect our cash, but it does decrease the carrying value of our $201 million convertible notes to $142.5 million at September 30, 2012, with a corresponding increase to shareholders' equity.
Thank you for bearing with me through that.
I know it's complicated, so if you have additional questions after reading our 10-Q please feel free to call.
I will now spend a few minutes reviewing Regulus and what their recently complete IPO means for us.
First of all, we're very pleased with the progress Regulus has made since we co founded the company in 2007.
The excitement around microRNAs is still strong as evidenced by Regulus' strategic partnership with high quality pharma partners like Sanofi, GSK, Biogenea, ICON, AstraZeneca.
We look forward to Regulus moving into this next phase of development as a public company and advancing microRNA targeted antisense drugs into development.
We remain a significant shareholder with a total of approximately 7 million shares of Regulus common stock or approximately 17% ownership on a fully diluted basis.
Our investment in Regulus is currently valued at approximately $35 million, a significant gain over the $13 million we've invested.
Importantly, we believe the Regulus IPO enables it to be financially independent.
Our accounting for our investment in Regulus will change beginning in the fourth quarter because our ownership in Regulus has dropped below 20%.
As a result we'll no longer use the equity method of accounting.
This means we'll no longer record our portion of Regulus losses on our P&L.
Instead we will account for our investment at Regulus at fair value by adjusting the value of the stock we own to take into account fluctuations in Regulus stock price each reporting period.
We'll also be booking a significant gain in the fourth quarter to reflect a change in our ownership.
Let me conclude by highlighting the value of some of our recent partnering accomplishments.
Our business strategy provides us with numerous ways to generate cash in revenue, while prudently managing our expenses.
Our strong balance sheet is evidence of the success of this strategy.
This year we established a relationship with Biogen Idec for our drugs to treat patients with spinal muscular atrophy and muscular dystrophy bringing in $41 million in cash.
Biogen Idec also provides us expertise in the field of neurodegenerative diseases, which is allowing us to expedite development of these promising programs.
We look forward to continuing to move these important medicines forward.
Yesterday, we announced that we've amended our agreement with GSK to accelerate development of our drug for patients with TTR Amyloidosis.
This agreement provides us with significantly improved financial terms and is consistent with two strategic goals -- to advance our drugs to the market more rapidly and to participate more substantially in the commercial success of our drugs.
As part of the amendment GSK has committed $2.5 million as an up-front payment prior to the initiation of the Phase 3 TTR study, and $7.5 million fund at the start of the study.
Under the new deal we have the opportunity to receive $50 million more in milestone payments during the Phase 3 study than our original transaction.
In total we have the opportunity to earn more than $230 million in pre commercialization payments from GSK for our TTR drug.
In addition, we increased our commercial participation by adding sales milestones and then of course we will receive double-digit royalty payments.
We were able to renegotiate the agreement to achieve more favorable terms for ISIS-TTR-RX because of the encouraging activity and safety data we observed in our Phase 1 study and the commitment of both companies to move this program forward in a most expeditious way.
We and GSK agreed that this amendment would benefit the program by moving directly from a positive Phase 1 study to a Phase 3 study and provide an accelerated development path while lowering the overall development costs of the program.
Our ability to accelerate development and obtain a larger economic stake in our TTR drug is yet another example of our continued commitment to maximize the value of our innovations and ensure that these important new medicines are made available to patients in need.
In less than three years, we have progressed from a standing start in a new program with a new partner to beginning a Phase 3 study that could bring this important new medicine to the market.
Another component of our business strategy is our satellite company strategy, which allows us to advance drugs and technologies that incorporate our intellectual property in areas that are outside of our core focus.
This strategy also provides tangible value to our shareholders with little investment from us.
Regulus is a prime example of our satellite company strategy.
Our investment in Regulus is currently worth about $35 million and our equity ownership ensures that we retain a significant opportunity to benefit from advances in the company and the technology.
In addition to Regulus, our intellectual property license to Alnylam continues to generate money for Isis.
This year we have received $2.7 million from Alnylam as a result of Alnylam's partnerships that included intellectual property.
And we have the opportunity to continue to benefit through royalty payments and a portion of future milestone payments Alnylam receives from its partners in these collaborations.
Finally, our investment in Excaliard continues to provide significant value as Pfizer advances Excaliard's scarring drug in clinical development.
This is a drug we licensed Excaliard early in the research and development process, so our investment in the drug was minimal.
We have the potential to receive nearly $25 million from Pfizer, including the nearly $5.5 million we've already received in royalties on what could be a potential multi-billion dollar market opportunity.
This is a great return on our investment, which was essentially zero.
In summary, we continue to successfully execute our business strategy.
We're realizing tangible value from our satellite company strategy and our pipeline is maturing towards critical events for licensing and commercial opportunities.
With that I'd like to turn the call back over to Stan.
- Chairman, CEO
Thanks, Lynne.
So in 2012 we have had a number of successes and KYNAMRO, our flagship drug, is front and center.
We think the positive panel vote and the progress made to bring KYNAMRO to the marketed are important steps for patients who are in desperate need for KYNAMRO and for our technology.
These patients need to be treated very early in life and continue on treatment for their entire life.
Despite the fact that these patients have a severe disease, it's essential that drugs used in the treatment of this disease be safe enough to be used throughout their life.
That we expect to achieve approval for these patients confirms that our technology produces medicines with safety profiles that are more than adequate for the indications we are pursuing, particularly when you realize that the primary concern with KYNAMRO is with liver safety, an issue related to the target not the technology.
We and Genzyme also believe that the first market opportunity for KYNAMRO will be quite significant.
In addition, the ongoing Focus FH study, which was carefully negotiated with the FDA, provides an opportunity to substantially broaden the market.
Obviously this is financially important too.
Our clinical development of KYNAMRO was comprehensive.
The data from all of our clinical studies highlight the positive attributes of this important new drug.
As noted during the panel, KYNAMRO has a positive effect on all apoB containing lipids, with a safety profile that was felt to be sufficient for patient populations we intend to treat.
An item of particular importance for the technology is that we conducted a focused clinical trial on KYNAMRO that evaluated all the markers of systemic inflammation that we could assay with very careful time courses around each dose of KYNAMRO.
We found that KYNAMRO caused no systemic inflammation in human beings.
This is not only great news for KYNAMRO, but of course it's also great news for the technology.
We're also very pleased with the results of the carcinogistic studies.
The conclusions of the independent pathologists and the independent CRO who conducted the trials were that the studies were clean, meaning that there were only incidental observations deemed not related to KYNAMRO.
We and Genzyme agree with those conclusions and again this is great news for KYNAMRO and great news for the technology.
So 2012 has been a fine year for us on several fronts.
We will end the year with a strong cash position, a pipeline of promising new medicines and a technology that's creating novel first-in-class therapies.
With a business model that focuses on innovation and maximizing partnering opportunities, 2013 promises to be even more exciting.
We remain committed to innovation and development of new medicines while maintaining a manageable cost structure and a small innovation focused organization.
We currently have 25 first-in-class medicines in our pipeline and before the end of the year we'll add several more.
This year we've moved four drugs into Phase 2. These are drugs that target cardiovascular, inflammatory and severe and rare diseases and cancer.
We began Phase 2 studies for our apoC-III drug, which we are developing to treat an orphan like population of patients with extremely high levels of triglycerides and, as a consequence, a much greater risk of acute and recurring pancreatitis.
We began the next phase of development for our SMA drug.
SMA is a disease that affects infants and young children for which there are no therapeutic options.
In it's most sever form, SMA is fatal.
We began a Phase 1 study late last year in children with SMA.
We and Biogen Idec were sufficiently encouraged by the performance of our drug in this study, that we've now initiated Phase 2 study in these children.
This Phase 2 study is an important step in advancing into our Phase 3 program in these infants and children, and we plan that to start late next year.
Last week we announced the initiation of a Phase 2 study for our Factor XI drug in patients who are undergoing total knee replacement to evaluate its effectiveness in reducing thrombotic events without increasing bleeding.
In our Phase 1 study, we demonstrated that we could lower Factor XI and reduce clotting with no increase in bleeding or even bruising.
We are very excited about the range of possibilities for this drug as a broadly applicable antithrombotic agent with a better safety profile than existing agents.
In addition, because drugs based on our technology don't interact with drug metabolizing enzymes, we've observed no drug-drug interactions for our Factor XI drug.
This is of course as we expected.
This further enhances the profile of our Factor XI medicine.
Our Phase 2 study should provide us a robust data package to highlight the attractiveness of this novel approach to treat thrombosis.
In the last quarter we began a Phase 2 study in patients with advanced cancers, including lymphoma, for our STAT3 drug.
We recently presented results from our initial clinical trial and that were encouraging enough to support going into Phase 2. In that study, our drug produced clear responses in some patients who had failed several rounds of chemotherapy.
This is especially exciting as STAT3 is the first drug in patients to incorporate our Generation 2.5 technology.
We expect to report the full results from the initial study at a medical meeting later -- next year.
So we will end this year completing registration for KYNAMRO with OGX-011 in Phase 3 trials, multiple drugs in Phase 2 trials, and a pipeline that will expand from 25 drugs in development to perhaps as many as 27 or 28.
As Lynne mentioned, we also have a full agenda for the remainder of the year, as well.
To sum up, we have a maturing pipeline with more than a dozen drugs in later stage development.
We are completing the registration activities for KYNAMRO, completing clinical trials for our metabolic drugs, making progress on two important clinical trials with our CRP drug, completing the necessary steps to initiate a Phase 3 study for TTR drug, which we plan to start before the end of the year, and we expect to add several first-in-class drugs to treat a variety of diseases, including severe and rare diseases, to our pipeline before the end of the year.
Our partners continue to advance our antisense drugs.
OncoGenex is progressing in its Phase 3 program for OGX-011 and Pfizer plans to initiate the next clinical study for EXC 001.
As we have done this year, next year we'll continue to advance the drugs in our pipeline, including advancing our SMA and apoC-III drugs into Phase 3 studies to support marketing registration.
We have an exciting pipeline with many opportunities to share data with you next year.
All of this is clear evidence that we're following up on the successes of KYNAMRO by progressing our broad and deep pipeline of novel first-in-class antisense drugs through clinical development and towards commercialization.
With that, I want to thank all of you for joining us today.
We'll open it up for Q&A.
Sue, if you can set us up please.
Operator
Thank you.
(Operator Instructions)
Salveen Richter, Canaccord.
- Analyst
Thanks for taking my questions.
I am just wondering, with the amendment of your Glaxo partnership relating to TTR -- were all the increased milestones related to accelerated development?
Or did Glaxo gain additional rights to the drug?
And then just also wondering, the $2.5 million and the $7.5 million in milestones that you're supposed to get by the end of the quarter -- should we expect that to be amortized, and over what period?
- COO & CFO
So GSK did not get any additional rates to any additional programs.
The enhanced economics --
- Chairman, CEO
Didn't get any rights to this program.
- COO & CFO
Or any additional rights to this program.
The enhanced economics reflect the fact that we are accelerating the development of the program.
We hope to be able to put the drug on the market faster with a more efficient and effective development plan.
In other words, taking the very positive Phase 1 results that we have, we're going directly into a Phase 3 study instead of going Phase 1, Phase 2, Phase 3, which would have been more expensive and, importantly, taken a lot longer to complete.
So we're being rewarded for that increased efficiency both in terms of additional pre-commercialization milestones, additional milestones while the Phase 3 trial is ongoing, and additional post-commercialization sales milestones.
You'll remember that we had a $10 million milestone under the original agreement that we would get at the beginning of the next study.
That $10 million -- $2.5 million of it is being accelerated.
We earned that when we signed the amendment.
The other $7.5 million we'll get when the study starts.
Those two payments, the $2.5 million and the $7.5 million that we plan to get this year, will be amortized over the 2.5-year period of performance for the work under the amendment.
- Analyst
Great.
Then just a follow up question.
Regarding KYNAMRO -- in the FDA documents, there was a comment about how -- that you could look at efficacy and determine a threshold LDL reduction over a certain time period, and if you didn't see that reduction, potentially discontinuing the drug.
Do you think that's going to actually play out in the label?
- Chairman, CEO
No.
I think that's just the practice of medicine.
The facts are -- what we saw was, I think, actually very reasonable variability in the homozygous FH trial -- certainly no greater variability than was seen with other drugs in this patient population.
And you will remember that we showed that the vast majority of the sort of small responders were more late responders.
We saw them begin to respond a little later than some other patients.
So what we believe is that the label will read as we've expected, and physicians will treat their patients and monitor the performance of the drug.
And if they don't see good performance by six to twelve weeks, then they'll make changes to the drug.
But we expect good performance in the vast majority of patients.
- Analyst
Great.
Thanks, Stan.
Operator
Thank you.
You have no questions at this time.
(Operator Instructions)
- Chairman, CEO
If there are no further questions, I want to thank everyone for their participation.
We do have a very full agenda for the end of the year.
We'll keep you posted on the progress that we make, and then I think it sets up for an exciting year for the pipeline and the technology in KYNAMRO in 2013.
Thanks so much.
Operator
Thank you for your participation in today's conference.
This concludes the presentation.
You may now disconnect.
Have a good day.