Ionis Pharmaceuticals Inc (IONS) 2013 Q3 法說會逐字稿

Welcome to the Isis Pharmaceuticals third-quarter financial results conference call.

Please note this event is being recorded.

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

Dr. Crook, please begin.

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

On this call, first, Beth will walk you through our financials and updated guidance.

Then Lynne will highlight some of our recent business successes.

And I'll close the call by focusing on some of our upcoming events.

Joining me on today's call are Lynne Parshall, Chief Operating Officer; Beth Hougen, Chief Financial Officer; and Wade Walke, Vice President of Corporation Communications and Investor Relations.

Now, Wade, if you'll read our forward-looking language.

Thanks, Dan.

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

Any statement describing Isis' goals, expectations, financial or other projection, intentions or beliefs, including the commercial potential 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' 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, 2012, 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 Beth to discuss our financial results for the second quarter of 2013.

Thanks, Wade.

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

I'm pleased to report that we continued our strong financial performance by ending the quarter with more than $670 million in cash, which was due in large part to the $200 million we've received from our partners so far this year.

In addition, our pro forma net operating loss for the year to date at $23 million was significantly lower than our guidance would suggest.

We achieved these financial results by effectively executing our business strategy and successfully advancing the drugs in the pipeline.

These results illustrate that our business model is working, by consistently generating cash and revenue as the drugs in our pipeline advance.

As a result of our strong financial performance this year, we will substantially exceed our cash guidance and significantly improve upon our pro forma NOL guidance.

As such, we are now projecting to end the year with more than $625 million in cash, and a pro forma NOL in the mid $40 million range.

Over the last couple of years, we've kept our pro forma NOL in the $60 million range, while significantly expanding and maturing our pipeline.

We are pleased that with 10 drugs in Phase 2 and Phase 3 development, we are able to project a pro forma NOL for this year in the mid $40 million range.

A more than 30% reduction from our initial guidance.

The substantial improvement in our already healthy cash balance was primarily due to the $200 million we've received from partners so far this year.

In the third quarter alone, we received $100 million from our recent strategic collaboration with Biogen Idec.

In addition, to date, we have received nearly $100 million from six of our partners associated with advances in eight different drugs.

That we can consistently generate revenue from multiple partners and numerous drugs is a reflection of the succession of our partnering strategy.

This strategy and its successful execution is a key element of our ability to continue to remain financially strong, While expanding and advancing our pipeline and continuing to improve our technology.

The improvement in our NOL was also driven by the success of our partnership strategy, from which we've earned more than $94 million in revenue, primarily from milestone payments and the amortization of up-front fees so far this year.

In our year end call in February, we projected that our 2013 revenue would include $45 million from milestone payments, as our partner drugs advance in development.

We have significantly exceeded our projections by earning more than $70 million already this year.

In the third quarter alone, we earned $2 million from Biogen Idec for advancing ISIS-SMNRx, and $9 million from GSK for advancing ISIS-TTRRx and ISIS-GSK3Rx.

WIth numerous successful partnerships, encompassing multiple drugs, we still have several opportunities to earn additional milestone payments from our partners in the fourth quarter.

Already in the fourth quarter, we have earned a $10 million milestone payment from Biogen Idec for initiating the IND-enabling tox studies for ISIS-DMPKRx, our drug to treat patients with myotonic dystrophy Type 1.

Another significant component of our revenue is the amortization of up-front fees from our collaborations.

In our guidance, we included $40 million from this component of our revenue.

Here again, we are on track to exceed our guidance.

In October we began amortizing the $100 million up-front payment we received from Biogen Idec over the six years of the research collaboration, which will provide us with new revenue of approximately $4 million in the fourth quarter and each quarter thereafter through the research term.

As our drugs progress in development, our expenses will continue to increase, as they did in the third quarter.

The increase this year and next will reflect the increasing number of drugs we have in Phase 2 and Phase 3 development, including ISIS-TTRRx, for which the Phase 3 program is progressing well, and ISIS-APOCIIIRx and ISIS-SMNRx for, which we plan to initiate Phase 3 programs early next year.

In addition, our drugs to treat Type 2 diabetes recently began Phase 2 programs.

We project that our fourth-quarter pro forma NOL will be similar to Q3.

In other words, in the low to mid $20 million range.

We're projecting revenue in the mid $30 million range, including revenue from the amortization of up-front fees of approximately $15 million, which includes the new revenue from our fourth Biogen Idec collaboration.

In addition to the $10 million milestone we recently earned from Biogen-Idec, we still have several opportunities to earn additional milestone payments before year end.

With the significant maturation of our pipeline, we are projecting that our expenses will increase in the fourth quarter, as we progress ISIS-APOCIIIRx and ISIS-SMNRx into Phase 3 development in advance of the seven drugs we have in Phase 2 development.

As a result of the substantial increase in our revenue, offset in part by an increase in operating expenses, we are projecting a significant improvement in our pro forma NOL to end the year with an NOL in the mid $40 million range.

We are also projecting to end the year with more than $625 million in cash.

In fact, we think it's likely we will significantly exceed this projection.

We've had an excellent year so far because of the effective execution of our business strategies and the success of the drugs in our pipeline.

We expect to continue our strong financial performance through the end of the year, and into 2014.

Now I'd like to turn the call over to Lynne.

Thanks, Beth.

2013 has been a year of substantial growth, and maturation for Isis.

KYNAMRO approval started the year off on a great note.

And since then, we've had a continuous stream of positive news from our pipeline and from our partnering activities, including adding new partners, and expanding existing partner relationships.

We believe that our partnerships are structured to provide the best support and ultimately the best value for each drug in our pipeline.

Our pipeline has matured significantly this year with multiple positive clinical data events, showing that our drugs work in many diseases, and many patient populations.

These activities have added significant value to Isis and to our shareholders.

Earlier this year, we added Roche as a partner to help us develop our Huntington's disease program, which is a high priority program for us.

Roche's expertise in neurological disease has already provided us with significant value.

We plan to select a development candidate to move into IND-enabling studies this year.

Our pipeline has also matured this year.

We now have a pipeline with numerous late-stage clinical programs.

For example, our Phase 3 study with Isis-TTRRx in patients with TTR amyloidosis is enrolling on schedule.

We have already earned $22 million in payments from GSK associated with the advancement of ISIS-TTRRx, including $12 million related to the ongoing Phase 3 study.

As this study progresses, we're eligible to earn an additional $48 million in milestone payments from GSK, prior to GSK licensing the drug.

Our triglyceride-lowering drug, ISIS-APOCIIIRx is ready to move into Phase 3 development early next year.

This is a drug that we wholly own, and one that we believe we can rapidly move towards the market in our first indication, patients with FCS.

FCS is a severe and rare genetic condition characterized by extremely high levels of triglycerides.

We plan to advance our drug to treat children and infants with spinal muscular atrophy, ISIS-SNMRx, into a Phase 3 program next year, also.

And OncoGenex and Teva plan to report data in the first half of next year from the Phase 3 study of OGX-011 in men with prostate cancer.

These data, if positive, will support OncoGenex' regulatory filing for marketing approval of OGX-011.

This year, we reported eight sets of positive clinical data, including four sets of Phase 2 data on ISIS-APOCIIIRx.

And we plan to provide additional data on ISIS-APOCIIIRx at the upcoming AHA meeting this month.

We also initiated clinical trials on six drugs, including advancing two drugs from our metabolic franchise to treat Type 2 diabetes into Phase 2 development.

We also continued to add new drugs to the pipeline.

Taken together, these activities look like an unusually high number of positive events for a single year.

But when you consider that our pipeline consists of 30 drugs, many moving into later-stage development, this level of activity is consistent with the steady positive progress of our business and our pipeline.

In the third quarter, we significantly expanded our alliance with Biogen Idec, completing our fourth collaboration with them in less than two years.

Four collaborations represent a very significant investment by Biogen Idec in antisense technology from which we have the potential to earn milestone payments a licensing fees in excess of $4 billion, plus double-digit royalties.

Coupling our antisense technology to Biogen Idec's internal and external network of disease expertise, from basic science through complex clinical development, we believe that we can build a large and valuable neurological disease franchise well beyond what we could do on our own.

We already have a good start on this.

Our drug to treat children with spinal muscular atrophy will enter Phase 3 development early next year.

And we plan to begin clinical development on our myotonic dystrophy drug next year, as well.

And we also plan to add new drugs to treat neurological diseases to our pipeline.

In addition, as Beth mentioned, we received $200 million this year from our partners in up-front, milestone and licensing payments.

All of these accomplishments have added significant value to Isis, and increased our already strong financial position.

We're happy to share with you today that we have updated our 2013 guidance to reflect these successes.

So, as you can see, it's been a very busy and productive 2013 thus far.

We look forward to carrying this momentum through the end of this year, and into next year, as we continue to advance our pipeline.

With that, I'll turn the call back over to Stan.

Thanks, Lynne.

I think you'll agree the first three quarters of 2013 have been productive.

And as we look to the remainder of this year, we have a number of exciting events that we can still look forward to.

First, later this month at the American Heart Association scientific sessions we'll provide additional detail on the Phase 2 program for ISIS-APOCIIIRx.

In addition to ISIS-APOCIIIRx data at the AHA, we will also present the results from the Phase 1 study of our Lp(a) reducing drug, ISIS-APOARx.

This drug is particularly exciting because high levels of Lp(a) represent another independent risk factor for cardiovascular disease.

There are patients with normal LDL cholesterols, but extremely high levels of Lp(a) who are at extreme cardiovascular risk.

For these very sick patients there's nothing today that can significantly lower Lp(a) and improve their risk of cardiovascular events.

We're developing ISIS-APOARx to treat patients with this severe and rare lipid disorder.

We've initiated Phase 2 studies on our glucagon receptor and PDB1b inhibitor.

Both drugs are designed to treat patients with Type 2 diabetes.

We plan to initiate a Phase 2 program on a corticoid receptor drug also this year.

And we look forward to giving you an update on these metabolic programs early in 2014.

We also plan to complete and report data from the ongoing ISIS-SMNRx studies by the end of this year, or very early next year.

Once these studies are complete, we plan to move rapidly toward initiation of registration-directed for ISIS-SMNRx in the next year.

Finally, we plan to expand our pipeline by adding at least two more exciting new drugs to our pipeline this year.

And with that, I want to thank all of you for joining us today.

And we'll now open it up for Q&A.

Emily, if you can set us up for questions.

(Operator Instructions)

Chad Messer, of Needham & Company.

Great, congratulations on another great quarter, and thanks for taking my question.

On APOCIIIRx at AHI, you're billing this as sort of a Phase 2 grand overview, from all the data we've seen so far.

But it sounds like there will be some newer incremental data, as well.

I was wondering if you could comment further on what kinds of new data we might expect to see.

The new information will just be a continuation of the data in the very high triglyceride patient population primarily.

We expect to summarize all of the Phase 2 information in one place for you, so you can put it altogether.

All right, great.

And then, you're going into not just one, but actually two pivotal trials with APOCIII next year.

Presumably the FCS trial is going to be shorter and report out earlier.

I was wondering if you could comment on, as you progress this, how you think of the optionality that you have around this program, with going into two pivotal trials, one that may report out.

As this progresses, maybe you could just share with us a little bit more about how you think and prioritize the options that you have for this program.

I think I understand the question.

And if I don't understand exactly what you're asking, then maybe Lynne does, and she can help, or you can help clarify.

We are planning two Phase 3 endeavors.

The first is FCS, and the second is the 880.

And we do expect the FCS study to complete first.

We think that that initial FCS opportunity is a rare disease opportunity that will certainly support value pricing.

And the 880 opportunity is also a rare disease opportunity that will, again, support very significant value pricing.

We look at these two indications as different in the nature of the marketing requirements and nature of sales force, and a lot of other things.

But obviously, in the aggregate, they represent a very substantial opportunity for APOCIIIRx.

And we are continuing to control APOCIIIRx ourselves.

And we're looking at a whole range of opportunities in which we are going to seek to maximize the value of APOCIIIRx, while retaining commitment to our overall strategy, which is to remain small and focused, and focused on innovation.

Lynne, do you want to add or subtract anything to that?

The only thing I would add is that the overall Phase 3 program that supports both of these drugs, will, of course, be made up of multiple studies.

And we'll work out the details of that with the FDA and the European regulatory agencies when we have our end-of -Phase 2 meetings.

But the two programs will be quite complementary of one another, with, as you mentioned.

The FCS program being smaller and shorter, reflective of the indication.

And so that being our initial indication followed by the 880.

I'm not sure, Chad, whether we answered your question or not.

That does answer my question.

Thank you very much, guys.

Jim Birchenough of BMO capital.

Hi, guys.

Congratulations on all the progress.

Just on the Lp(a) program, based on feedback you get from clinicians, what's a meaningful reduction in Lp(a)?

And if you can talk about where these patients are seen right now.

Is this a big component of patients that are apherist right now?

And I've got a couple follow ups.

Again, what we have learned over the last couple of years is that there is a very wide variation in the levels of Lp(a).

And the levels of Lp(a) vary primarily genetically.

So there's very little environmental influence on Lp(a) levels.

People who have generally greater, I think, than 30 milligrams per decilitre are considered at high Lp(a) risk.

Certainly 50 is a very significant risk.

But we understand that there are patients who have Lp(a) levels that are as high as in the 100s.

And these people have an Lp(a) driven cardiovascular risk which is very substantial.

It is that group of patients that we'll focus on in the development of APOARx.

That is, patients with a genetically-driven extremely high Lp(a) level in their blood.

And obviously, since there are no drugs that really lower Lp(a), with the exception of KYNAMRO, there's little information about what sort of treatment benefits and so on.

And the general belief of the experts that we talk to is any significant reduction of Lp(a) in these patients will bring cardiovascular benefit, very similar to a significant reduction in LDL.

With regard to the question about apheresis, I don't know, Jim.

I don't think there are that many Lp(a) patients who are getting apheresis.

I think the bulk of the people that are getting apheresis are really there for their LDL problems, and occasionally triglycerides.

But I'll go back and talk to our experts and get a clearer answer to that for you.

And then at AHA, Stan, are we going to see Phase 1 data in patients with mildly elevated Lp(a)s, or the very high Lp(a)s?

I'm just trying to get a sense of the patients you're studying the drug in right now.

You will see data in normal volunteers.

And, as we have learned, normal volunteers have an extremely wide range of Lp(a)s.

So you'll see data in patients who have low to moderate Lp(a)s in normal volunteers, and you'll see people who have some very high Lp(a)s.

And we'll present the results of that study in a poster.

We're excited about the data.

And just one other question, just on myotonic dystrophy.

Can you be more specific in terms of when that program will start?

And in the Phase 1, will there be any ability to look at efficacy?

Or is it going to be purely safety?

I can't answer that question today.

Lynne, do you want to respond to that at all?

I actually can't answer it today either.

That's fine.

Thanks for taking the question.

We're in the process of planning all this now, so give us another couple of months, okay?

Okay, thanks, guys.

Cory Kasimov from JPMorgan.

This is actually Whitney on for Corey today.

Going back to APOCIII, I just wanted to follow up on the optionality.

I know you guys had mentioned potential follow-on compounds there.

So I was just wondering if there's any updates on progress on those.

And then, also, headed into the SMN data, if you can just help us set expectations in terms of what data we'll see initially, and then what you would view as a positive outcome from that.

With regard to APOCIIIRx follow-on, yes, we're very excited about the follow-on.

And we do believe that the follow-on is significantly more potent.

And that will give us opportunities to address a wider range of patient populations and so on.

So, we look at the APOCIII opportunity as a real franchise opportunity, first with APOCIIIRx, and then, assuming we're successful, then the follow-on expanding the opportunities even more.

With regard to SMNRx, what you'll see is a continuation of the data from Phase 2 in the older children.

And these are the children that we've shown single-dose data on.

And now you will have the opportunity to see the benefits that these children may get with repeat dosing.

Children have different amounts of dosing that they've gotten, depending on the dose level that they will have gotten.

But you've have the opportunity to evaluate -- we will have the opportunity to evaluate the performance of the drug with regard to safety and tolerability, as well as benefit, principally in the Hammersmith scores, now with multiple doses.

And we would think that any suggestion of improvement in these children will be a cause for real optimism about the drug.

Got it.

Thanks for taking the question.

Salveen Richter of Canaccord.

Hi, this is Andrew Goldsmith on the line for Salveen.

A question on APOCIII, I was wondering if you could speak at all about how you see the competitive landscape.

I'm particularly thinking about [d-gap-1].

We think that these patients who have SCS are in desperate need.

And they need every new agent that they can possibly get.

As we understand d-gap-1, its principal activity is likely to be in reducing excursions after meals, in triglyceride levels.

And based on the information from Phase 2, we think the effects of the d-gap-1 inhibitor are really quite modest on triglycerides, compared to the enormous changes we're seeing with APOCIIIRx.

So, we can easily imagine, because the two drugs are really quite different, that the drugs would be used in combination.

And we certainly believe that the kind of efficacy we're seeing out of APOCIIIRx is unlikely to be matched by any drug in development that we know about.

Great, thanks.

And then, just to follow up, also on the SMN program, can you just remind us about the conversations you've had with FDA recently?

And in particular with regard to the Phase 3 trial design.

Thanks.

The conversations are still in progress and we will update you when the conversations with the FDA have reached an appropriate conclusion.

Okay, thanks so much.

Stephen Willey of Stifel.

Thanks for taking my question.

I hopped on late so my apologies if this was already covered.

Just any thoughts on the recent FDA panel for [Ameren].

Specifically the FDA's stance that the triglyceride risk, I think in patients at 500, as discussed, in terms of the data set not necessarily being the best indicator of risk.

Does that now change FDA's thinking with respect to a particular cut-off value?

And does your 880 cut-off reflect that thought process?

Steve, Lynne can amplify what I'm about to say.

And, of course, I not able -- I certainly won't speak for the FDA.

But what we heard that was important to us out of that conversation is that there are questions in some minds about the benefit of lowering triglycerides in patients who have triglycerides 500 and lower.

We actually think the weight of evidence supports the benefit of lowering triglycerides in that patient population.

But we've always believed that outcomes studies would be required for approval of any triglyceride-lowering agent in those relatively lower-risk patients.

So, from our perspective, the conversation didn't change anything about our plans.

Lynne, do you want to amplify on that?

Yes, the only thing I would add is, it was very interesting at the initiation of the panel discussions, and Eric's Coleman's introduction.

That he made it very clear that in the over 500 patient population -- that well in the over 500 patient population, where there were a myriad of health problems, including pancreatitis, triglycerides were the end points that this basically broad dislipidemia, triglycerides over 200 patient population that was being studied, and considered by the panel at the meeting, was a different question.

So I think he went out of his way to say this conclusion is not a conclusion on all triglyceride-lowering drugs, it's a conclusion on this patient population.

In short, we felt very encouraged that the way we've been thinking about the development of APOCIIIRx seems to be supported.

That is, we're going to focus on patients with severe triglyceride problems whose health problems are very clear, and very clearly associated with triglycerides.

And that an outcomes study would be required for those patients who have lower triglycerides than 500, whose primary issue is cardiovascular risk.

And the benefit is going to have to be defined by outcomes studies.

We really feel that the plan that we've been talking with you folks about for the last couple of years is very much on point.

Okay.

And just a quick question on SAT3.

Can you maybe just provide a little bit of color around how much additional data we might be seeing and ASH?

I know the abstracts, I think, are due out here the next couple of days.

And then maybe just remind us, the opt-in there, or the magnitude of the milestone payment is response based?

Is that correct?

Yes.

Lynne, do you want to answer that?

I don't believe we'll have any new data at ASH.

Wade, you might confirm that.

Sorry, Wade and I are in two different places.

That's right, Lynne.

And the opt-in is based on the magnitude of responses.

You're exactly right.

Okay.

So do you know, maybe approximately, as to when that opt-in decision might be reached?

Next year.

Okay, thank you.

I would add that we're very pleased with the progress, both in the lymphoma studies, and in the additional study initiated by AstraZeneca.

And we think the partnership is going very well.

Yaron Werber of Citi.

This is actually [Tenon] in for Yaron.

Congratulations on the quarter and the progress.

I wanted to ask you a couple of questions regarding your SMNRx clinical trials.

I saw that you increased the dose in the infant study from 9 to 12 milligrams.

And I was wondering what specifically gave you confidence in that dose from your pre-clinical studies?

And if you thought that that dose would be the upper range of the dosing, and what the evidence for that was.

We think it is the upper range.

And the basis for the confidence really derived from the excellent safety and the evidence of activity that we saw in the studies in the older children.

Terrific.

Great.

And in your Phase 3 study, are you planning on incorporating a biomarker there from any of the recent biomarker studies?

We'll be looking at a variety of measures of pharmacological activity.

And we are working with Biogen very hard on all those different measures that we're going to use.

But think I would rather leave it there for now, because it's still very much a work in progress.

Terrific.

Thank you so much, and congratulations again.

Navdeep Singh of Goldman Sachs.

Thanks so much, and thanks for taking my questions.

And nice progress on the quarter.

Not sure if you can provide this level of color, but I thought, it was worth a shot.

Since the Phase 2 trial for SMNRx and the open label study, do you have any sense on how the patient Hammersmith scores are trending?

Also, any update on the 12-milligram dose?

Can you remind us why the FDA allowed for you to increase the dose in the infants from 9 to 12 milligrams, but not in children?

Nice try, but, no, we're not going to give you any information about what anecdotes we're hearing.

We remain, along with our partners at Biogenic, extremely encouraged about SMNRx.

And I think the logic for supporting a higher dose in infants is principally the severity of the disease these infants have, and the need to intervene as aggressively as possible to prevent their very rapid deterioration and death.

And then a quick follow-up.

Can you discuss the level of confidence you have in your TTR program?

Are you more concerned with efficacy or safety in this program?

And do you believe there's a higher chance of success in the familial amyloid plantar neuropathy subset versus the cardio myopathies subset?

We know that our drug lowers TTR profoundly.

And the evidence is, I think, very clear that TTR levels determine the course of the disease.

So, we are very optimistic, as is GSK, and that's why we went straight to Phase 3, that we have a drug that should work.

And we are very encouraged with the enrollment that we're seeing.

And obviously the study is blinded.

We don't have any additional information other than to say that the performance of the trial sites is very good.

And all of the things that we're hearing from the field speak to excellent tolerability at this stage.

So, right now, we just need to get the study enrolled, and see what the results look like.

We think the poly-neuropathy is a better first indication for us to pursue.

And that's a decision we've made jointly with GSK, and we think that's a sensible decision.

Okay.

And then final question on APOCIIIRx, any update on your commercial strategy?

Are you still planning to partner it for the 880 population, or do you think you could do that on your own?

Thanks.

What I think is important for us to say is just to repeat what we've said.

That is, that we understand that APOCIIIRx is a unique opportunity, and we need to maximize the value of APOCIIIRx for our shareholders.

And we need to do that in a fashion that is consistent with our long-term strategy.

As we progress through Phase 3, we're evaluating a whole range of options about how to best commercialize that asset to assure that our shareholders derive the most benefit from that asset, while staying true to our long-term vision of the Company.

Lynne, do you want to add or subtract anything to that?

No.

Stay tuned.

We're working on it.

Thanks, Stan.

This concludes our question-and-answer session.

I would like to turn the conference back over to Dr. Crooke for any closing remarks.

Thank you very much, everyone, for your participation in the call.

We have a strong three quarters behind us, and an exciting quarter left, which sets the stage for 2014.

So stay tuned.

Lots of news coming, and we will keep you informed.

Thanks very much.

The conference is now concluded.

Thank you for attending today's presentation.

You may now disconnect.