Analyst Conference Summary


Ionis Pharmaceuticals

conference date: February 28, 2018 @ 8:30 AM Pacific Time
for quarter ending: December 31, 2017 (Q4, fourth quarter 2017)

Forward-looking statements

Overview: starting to see some real revenue, continuing to develop pipeline.

Basic data (GAAP):

Revenue was $172 million, up 42% sequentially from $121 million, and up 8% from $160 million year-earlier.

Net income was $2.7 million, up sequentially from negative $1.0 million, but down from $25.9 million year-earlier.

EPS (diluted) was $0.02, up sequentially from $0.00, and down from $0.21 year-earlier.


"We project 2018 will be our third consecutive year of pro forma operating profitability even as we prepare to launch two new drugs. For 2018, we are projecting R&D expenses of $360 million to $390 million and SG&A expenses of $180 million to $210 million both on a pro forma basis. We project that we will end 2018 with more than $800 million in cash."

Will no longer recognize milestone payments for R&D activities immediately; will amortize.

Conference Highlights:

CEO Stanley Crooke said "Looking ahead, we believe 2018 could be an important turning point for Ionis. Most important will be the launch of inotersen and volanesorsen, if approved. We also expect to report data from at least six Phase 2 studies, initiate at least five Phase 2 programs and report data from multiple proof-of-concept clinical studies. These important events build on our recent momentum, solidifying Ionis as a multi-product, commercial company delivering innovative antisense medicines to patients in need."

Revenue consisted of: $52.1 million from Spinraza royalties; $4.5 million licensing and other royalties; $115.7 million R&D revenue from collaboration agreements.

Spinraza is approved in the US, EU, Japan and Canada. Spinraza sales by Biogen were not stated, but Biogen reported $363 million in Q4. Royalties are tiered. Spinraza sales outside the U.S. were $ million in the quarter, up sequentially from $73 million.

Starting in Q3, Akcea revenue and expenses, or 70% of them, are being included with Ionis's, as consolidated P&L. Except inter-company transactions like licensing fees. Ionis is licensing 4 potential drugs to Akcea.

Non-GAAP numbers: net income $25.1 million, up sequentially from $16.6 million, but down from $41.0 million year-earlier 21.5. This excludes $22.3 million of non-cash stock-based compensation.

Cash ended at $1.02 billion, up sequentially from $1.01 billion. Debt was $533 million in 1% convertible senior notes.

Inotersen is now under review in the U.S. and EU for hATTR (hereditary TRR amyloidosis). Data shows a strong benefit. Believes will gain a significant market share if approved. The PDUFA date is July 6, 2018. Global launch is planned for mid-2018. Believes has significant commercial potential due to its once-per-week dosing. Narrowed list of potential partners.

Volanesorsen is under review in the U.S., EU and Canada for FCS (familial chylomicronemia syndrome). It will be marketed by Akcea. Ionis owns 68% of Akcea. Launch planned for mid-2018. Focus is on identifying FCS patients. Advisory panel meeting on May 10. Could expand label to other diseases, with a trial in progress.

Positive data from Phase 1/2 study of IONIS-STAT3-2.5Rx in combination with AstraZeneca's Imfinzi was reported for people with head and neck cancer.

Robust, dose-dependent reductions of mHTT observed in people with Huntington's disease treated with IONIS-HTTRx in Phase 2.

Positive Phase 2 clinical data on five LICA drugs for liver diseases reported, demonstrating consistent, positive performance and sustained target reduction with potential for monthly or less frequent dosing.

Ionis has entered a new collaboration with Biogen to discover improved drugs for SMA.

Huntington's disease data will be released this week; IONIS-HTTRx licensed to Roche.

Ionis has a pipeline of 45 potential drugs. A growing number are wholly-owned.

Operating expense was $174 million, consisting of $128 million for R&D and $46 million for selling, general and administrative. Operating income was negative $1.7 million. Investment income was $0.7 million, interest expense $10.9 million. Income tax benefit $7.2 million. Net loss attributable to noncontrolling interest in Akcea $7.4 million.

"Operating expenses increased at a much slower rate than revenue with the increase primarily due to higher SG&A expenses as Ionis prepares to commercialize volanesorsen and inotersen this year."

For the full year 2017 revenue increased 45% y/y to $508 million. $111 million non-GAAP operating income. Exceeded guidance for the year.


Inotersen expanded access program, number of sites, etc.? Can't give details as is a competitive program, but pleased with number of sites, which is more than anticipated. Physicians and patients have been excited to enroll because of once-per-week self-administration.

Inotersen LICA follow on pathway? We have strong preclinical data. We expect Phase 1 to begin later this year. We plan to move to commercialization as quickly as possible using data from the inotersen program, but wild type may take longer than hereditary type. Could easily move from Phase 1 to Phase 3.

SG&A in 2018 breakout? Significant amount is by Akcea for their products including volanesorsen. Inotersen has more commercial opportunity and so will see a higher

Payments from partners for R&D should continue to increase over time.

Platelet movement and patient weight on expanded access for volanesorsen? Patients often have very low platelet counts, which volanesorsen may exacerbate. We monitor for platelet declines to protect them. Extreme low body weight patients do have a greater tendency to platelet declines.

CNS pipeline strategy? It is not a change in strategy. It represents the success of our strategy with Biogen. We are keeping therapies that require only small scale trials and salesforce. The larger scale projects we want to continue to do with Biogen. We will talk about the disease targets as we move toward INDs, including possibly two this year.

Ionis has done detailed work on pricing and reimbursement, including talking to payers. We will announce the price at the time of launch. Clearly inotersen is a transformative drug.

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Disclaimer: My analyst call summaries may include both condensations of statements made by company representatives and my own analysis. They are not covered by any warranty. I cannot guarantee anything said by company representatives is true. I try not to make errors, but it is possible. These are my personal notes which I share with other investors and which I use as the basis of my blog and Seeking Alpha articles.

Copyright 2018 William P. Meyers