Analyst Conference Summary


Ionis Pharmaceuticals

conference date: May 9, 2019 @ 8:30 AM Pacific Time
for quarter ending: March 31, 2018 (Q1, first quarter 2019)

Forward-looking statements

Overview: Great quarter with lots of pipeline data ahead in 2019 and 2020.

Basic data (GAAP):

Revenue was $297 million, up 55% sequentially from $192 million, and up 106% from $144 million year-earlier.

Net income was $84 million, down sequentially from $320 million, but up from negative $1 million year-earlier.

EPS (diluted) was $0.62, down sequentially from $2.32, and up from negative $0.01 year-earlier.


On track to achieve or exceed 2019 financial guidance, including about $2.0 billion in cash at year end.

Conference Highlights:

CEO Stanley Crooke said "Our strong first quarter results put us on track to achieve our 2019 goals. We added commercial revenue from the first full quarter of the Tegsedi launch to our growing commercial revenue from Spinraza. Waylivra is now our third antisense medicine approved in just over two years, and we look forward to launching in Europe next quarter through our affiliate, Akcea. This week, data presented from our medicines targeting Huntington's disease and SOD1-ALS once again demonstrate the potential for our antisense technology to provide benefit in disease measures for patients with serious and previously untreatable diseases. Both medicines are in Phase 3 clinical trials with potential to support rapid paths to patients. Novartis licensed our most advanced LICA medicine, AKCEA-APO(a)-LRx, targeting the millions of patients worldwide with Lp(a)-driven cardiovascular disease. Novartis' decision to advance AKCEA-APO(a)-LRx into a Phase 3 cardiovascular outcomes study further validates the potential of our rapidly expanding LICA pipeline to treat a broad range of diseases, including those for large patient populations. We plan to advance our next LICA medicine, AKCEA-TTR-LRx targeting TTR amyloidosis, into Phase 3 development in the second half of this year. "

Waylivra (volanesorsen) was approved in the EU for the treatment of adults with genetically confirmed familial chylomicronemia syndrome (FCS) at high risk for pancreatitis. Will launch in Germany in Q3 2019, followed by other EU nations in 2020.

Tegsedi (Inotersen) sales were $7 million, up from $2.2 million in Q4, the first quarter of revenue for the drug, which is licensed and sold by Akcea. Tegsedi was approved in the EU for polyneuropathy in adults with hATTR (hereditary transthyretin amyloidosis), and was launched in Q3 2018, starting in Germany. Feedback from payers, doctors, and patients has been good.

There is a wave of Ionis medicines heading to Phase 3 this year. We have at least 10 medicines with the potential to enter Phase 3 trials by the end of 2020.

SMA population treatable with Spinraza may be larger than originally estimated.

"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: $60 million from Spinraza royalties; $7 million Tegsedi sales; $1 other million licensing and other royalties; $229 million R&D revenue from collaboration agreements, including $35 million in milestones from Roche.

Spinraza is approved in the US, EU, Japan and Canada, with reimursement approved in 40 countries. There are now over patients on therapy. Spinraza sales by Biogen were $518 million, up from $479 million in Q4 and 42% above Q1 2018. Royalties are tiered. Over 7,500 SMA patients are under treatment. New data reinforced safety and efficacy profile; benefit of treatment increases over time. The earlier babies are treated, the better.

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 $126 million, down sequentially from $351 million, and up from $25 million year-earlier.

Cash ended at $2.3 billion, up sequentially from $2.1 billion. Debt was $ 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.

Volanesorsen (Waylivra) is under review in the U.S. 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 released data from the OLE study of IONIS-HTTRx in patients with Huntington's disease and changed dosing to once every four months.

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.

Tofersen (IONIS-SOD1Rx)data was presented by Biogen, showing a clinical benefit. A Phase 3 study has begun for ALS patients with SOD-1 mutation.

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 pivotal 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 $176 million, consisting of $1 million for cost of goods sold; $107 million for R&D and $68 million for selling, general and administrative. Operating income was $121 million. Investment income was $12 million, interest expense $12 million. Income tax expense $31 million. Net loss attributable to noncontrolling interest in Akcea $6 million.

In Q4 2018 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

Q&A summary:

At AAN heard hypothesis that SOD-1 would be helpful even if that is not the disease driver? We agree with the notion. Lowering SOD-1 could bring benefit to other forms of ALS. Biogen would be the source for more information.

TTR-Lica? Wrapping up Phase 1 study, data later this year. Working on Phase 3 study design, talking to regulators. Tafamadis has set a significant bar, so survival improvement will be important.

Acromegaly success bar? Topline Phase 1 data is expected this year. This growth hormone program is a lica form, current agents have substantial limitations. We believe we could have advantages in efficacy and safety.

How common is the genetic screening of ALS? Almost all ALS patients are screened at major medical centers. Many families already know about their risk. Currently 2% of ALS patients are SOD-1, about 2000 patients in the U.S.

We believe we can successfully target one or more other ALS genes.

Tegsedi payers? We are under contract with the top 10 payers in the country. We are having no issues with Tegsedi reimbursement.

Tegsedi about 20% of market? We started about one quarter behind. So more like $7 million to $12 million. Too early to make firm conclusions, we will see what the numbers say as the year progresses.

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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