Analyst Conference Summary


Ionis Pharmaceuticals

conference date: February 27, 2019 @ 8:30 AM Pacific Time
for quarter ending: December 31, 2018 (Q4, fourth quarter 2018)

Forward-looking statements

Overview: Good overall, but only $2.2 million Tegsedi revenue. There was a $292 million non-cash income tax benefit, so non-GAAP numbers are likely a better guide.

Basic data (GAAP):

Revenue was $192 million, up 32% sequentially from $145 million, and up 14% from $168 million year-earlier.

Net income was $320 million, up sequentially from negative $4.6 million, and down from negative $3 million year-earlier.

EPS (diluted) was $2.32, up sequentially from negative $0.03, and up from negative $0.03 year-earlier.


For the full year 2019 revenue is expected over $725 million. Non-GAAP R&D expense range $360 to $390 million. SG&A range $260 to $290 million. Operating income (non-GAAP) expected to be over $100 billion. Cash balance over $2.0 billion.

Conference Highlights:

CEO Stanley Crooke said "In 2018, we launched Tegsedi globally through our affiliate, Akcea, adding revenue from Tegsedi sales to our substantial commercial revenue from Spinraza. We also achieved many important milestones in our pipeline, particularly among the medicines within our late-stage pipeline. This week, Novartis exercised its option to license AKCEA-APO(a)-LRx for which we earned $150 million. Novartis plans to initiate a Phase 3 cardiovascular outcomes study and initiation activities are already underway. We and Akcea are finalizing Phase 3 study designs for the AKCEA-TTR-LRx pivotal program that we plan to initiate in the second half of this year. In addition, our late-stage neurological disease programs recently achieved important milestones. Roche is now enrolling patients in the Phase 3 study of IONIS-HTTRx for Huntington's disease and Biogen is planning to add an additional cohort to the ongoing study of IONIS-SOD1Rx for patients with SOD1-related ALS that has the potential to support marketing approval."

"Ionis is in its strongest position in its 30 year history." Readouts from numerous Phase 2 trials should come in 2019, allowing for Phase 3 trial initiation in 2020.

Tegsedi sales were $2.2 million in Q4, the first quarter of revenue for the drug, which is licensed and sold by Akcea. PTC Therapeutics will market Tegsedi in Latin America and has filed for marketing approval in Brazil.

Expects Spinraza sales to continue to grow globally.

Inotersen has been renamed Tegsedi. Volanesorsen has been renamed Waylivra. Tegsedi was approved in the EU for polyneuropathy in adults with hATTR (hereditary transthyretin amyloidosis), and was launched in Q3 2018, starting in Germany.

"Beginning in Q2 2018, Ionis' R&D revenue includes revenue from the amortization of the $500 million technology access fee and equity premium related to Ionis' expanded strategic research collaboration with Biogen."

Revenue consisted of: $70 million from Spinraza royalties; $2 million Tegsedi sales; $1 million licensing and other royalties; $119 million R&D revenue from collaboration agreements, including $30 million in milestones from AstraZeneca.

Spinraza is approved in the US, EU, Japan and Canada, with reimursement approved in 40 countries. There are now over 6,600 patients on therapy. Spinraza sales by Biogen were $479 million, up from $468 million in Q3 and from $363 million in Q4 2017. Royalties are tiered.

Akcea revenue and expenses, or about 75% of them, are included with Ionis's, as consolidated P&L. Except inter-company transactions like licensing fees. Ionis is licensing drugs to Akcea. Ionis' net losses attributable to noncontrolling interest in Akcea for the quarter and year ended December 31, 2018, were $17 million and $59 million.

Non-GAAP numbers: net income $351 million, well up sequentially from $30.3 million, and up from $18 million year-earlier.

Cash ended at $2.1 billion, up sequentially from $1.96 billion. Debt was $559 million in 1% convertible senior notes.

Tegsedi (Inotersen) was launched in the U.S, EU and Canada for hATTR (hereditary TRR amyloidosis). Believes has significant commercial potential due to its once-per-week dosing by injection [Alynlam rival Onpattro requires infusions]. Licensed to Akcea, which is majority owned by Ionis. Launch is going well so far.

Volanesorsen (Waylivra) is under review in the U.S., EU and Canada for FCS (familial chylomicronemia syndrome). It will be marketed by Akcea. Focus is on identifying FCS patients. Could expand label to other diseases, with a trial in progress. There have been delays, but regulatory discussions in the EU are ongoing. Continuing to work with FDA on a path forward.

Partner Roche started patients in a Phase 3 study for IONIS-HTTRx. It had been granted EU designation for possible accelerated assessment for Huntington's disease. Roche plans to present data from the OLE study of IONIS-HTTRx in patients with Huntington's disease in 2019.

IONIS-MAPT was granted EU orphan drug designation for frontotemporal dementia.

AKCEA-APO(a)-LRx for CVD (cardiovascular disease) reported positive Phase 2 results in Q3 2018. Novartis exercised its licence option in January, generating $150 million for Ionis/Akcea, with Ionis taking its half in Akcea stock.

Biogen is planning to add an additional cohort to the study of IONIS-SOD1Rx for patients with SOD1-related ALS, giving it the potential to support marketing approval. Biogen plans to present data from the completed portions of the Phase 1/2 study of IONIS-SOD1Rx in 2019

Positive Phase 1b/2 data for danvatirsen (IONIS-STAT3-2.5Rx) in combination with durvalumab were presented at ESMO, demonstrating a response rate approximately double that of durvalumab alone, based on previous studies in patients with refractory head and neck cancer. Ionis earned a $17.5 million milestone payment from AstraZeneca. A separate undisclosed oncology program with AstraZeneca earned a $10 million milestone payment.

The Phase 2b study of IONIS-FXIRx in patients with end-stage renal disease on dialysis completed enrollment, with data planned for mid-2019.

Ionis or its partners initiated clinical studies with IONIS-GHR-LRx (Phase 2), IONIS-C9Rx (Phase 1/2), IONIS-FXI-LRx and IONIS-AZ4-2.5-LRx (Phase 1).

New collaboration started with Roche for IONIS-FB-LRx for complement-mediated diseases. Received $75 million upfront payment, could get milestones worth $684 million, and royalties of up to 20%.

Ionis and Akcea are finalizing Phase 3 study designs for the AKCEA-TTR-LRx pivotal program planned to initiate in the second half of 2019.

Ionis is in a collaboration with Biogen to discover and develop a swath of neurological therapies.

In the future Ionis expects to launch pirotal trials of up to 10 new drugs by the end of 2020.

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

GAAP Operating expense was $181 million, consisting of $0.8 million for cost of goods sold; $113 million for R&D and $67 million for selling, general and administrative. Operating income was $11 million. Investment income was $11 million, interest expense $11 million. Income tax benefit $292 million. Net loss attributable to noncontrolling interest in Akcea $17 million.

In Q42018 Ionis released a large portion of the valuation allowance associated with its deferred tax assets. The Company determined that it is more likely than not that it will be able to utilize most of the deferred income tax assets it has accumulated to offset future taxable income

For the full year 2018 revenue was $600 million, up from $514 million in 2017. Operating income was negative $61 million GAAP, but $45 million GAAP. Revenue consisted of $255 in commercial revenue and $345 million in collaboration revenue.

Q&A summary:

SOD1, timeline for data? Target reduction, safety, and preliminary data that shows benefit. So Biogen will move towards registration as rapidly as possible.

EU Waylivra discsussions? In progress and very active, that is all we can say.

APO outcomes trial? Novartis is finishing up the design, they will provide details later this year.

Accelerated Huntington's filing by Roche? Two paths are being pursued, per Roche. This is consistent with the encouraging data. The natural history study will serve as a quasi comparito with the open label extension study. We are seeing encouraging trends in biomarkers and benefits.

Incidence of SOD1, patient identification? Patient identification has proven to be easy, the study enrolled quickly so far. Maybe 2000 patients world wide.

For TTR cardiomyopathy, functional readouts will be very important, not just for approval, but to go into a competitive market. We have an ongoing study that will present data later this year on patients with cardiomyopathy, both wild type and hereditary.

Head and neck cancer? Danvatirsen is showing good safety and efficacy. The new data will be used by AstraZeneca to decide on whether to start a pivotal trial. They are looking at indications beyond head and neck cancer.

Tegsedi ramp expectations? Nothing that was not provided by Akcea, I am cautiously optimistic about our potential market share.

Capital allocation? Our primary investment is in our pipeline and commercializing our medicines. If an outside opportunity could enhance our antisense capabilities, we are looking. We are also looking at the next big potential platform.

Q4 Tegsedi revenue details? Revenue was from both EU and US. We have very good visibility into the channel and are managing the inventory carefully, it is basically just in time ordering.

NOLs? $500 million range.

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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 2019 William P. Meyers