Analyst Conference Summary


Ionis Pharmaceuticals

conference date: August 7, 2019 @ 8:30 AM Pacific Time
for quarter ending: June 30, 2019 (Q2, second quarter 2019)

Forward-looking statements

Overview: Revenue ramping rapidly, but the big news is positive results in its hepatitis B program, as reported by GSK.

Basic data (GAAP):

Revenue was $164 million, down 45% sequentially from $297 million, and up 39% from $118 million year-earlier.

Net income was negative $1 million, down sequentially from $84 million, but up from negative $40 million year-earlier.

EPS (diluted) was negative $0.01, down sequentially from $0.62, but up from negative $0.29 year-earlier.


Ionis is on track for third consecutive year of net income. Revenue in second half of 2019 should be in line with first half, but development expenses will increase.

Conference Highlights:

CEO Stanley Crooke said "We enter the second half of 2019 in a position of substantial financial strength driven by revenue growth of more than 75 percent. Spinraza's blockbuster performance, with over $1 billion in net sales in the first half, contributed significantly to our strong financial results. There are approximately 8,400 patients on Spinraza, an increase of approximately 12 percent compared to last quarter. Product sales from Tegsedi's second full quarter on the market also contributed to our strong first half results. Additionally, Waylivra is on track to launch in Europe this quarter. With three medicines commercialized in the last three years, an advancing technology and a pipeline of over 40 medicines, we are positioned to continue delivering value to patients and shareholders through this year and beyond"

The sequential revenue decrease from Q1 was because of a $150 million milestone payment received from Novartis in that quarter.

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 by Akcea in Q3 2019, followed by other EU nations in 2020. Encouraging discussions continued with the U.S. Food and Drug Administration to clarify a path forward in the U.S. Ionis received $6 million milestone payment from PTC Therapeutics for the EU approval in the second quarter

Ionis achieved positive results in its program to treat patients with hepatitis B viral infection as reported by GSK. Results will be presented at a future medical meeting.

Tegsedi (Inotersen) sales were $10 million, up sequentially from $7 million, and from $0 million year-earlier. Tegsedi is licensed and sold by Akcea. Tegsedi was approved in the EU for polyneuropathy in adults with hATTR (hereditary transthyretin amyloidosis). On track to launch in England this month following a positive reimbursement recommendation from NICE. Was launched in Q3 2018, starting in Germany. Feedback from payers, doctors, and patients has been good. PTC is preparing to market Tegsedi in Latin America.

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 is larger than originally estimated, more than 45,000 patients in markets already established.

Huntington's and ALS therapies are in Phase 3 studies partnered with Biogen.

Revenue consisted of: $71 million from Spinraza royalties; $10 million Tegsedi sales; $7 other million licensing and other royalties; $76 million R&D revenue from collaboration agreements, including $12 million in milestones.

Spinraza royalty revenue was $71 million, up 25% from $57 million year-earlier. There are now over patients on therapy. Spinraza sales by Biogen were $488 million, sequentially from $518 million and up from $423 year-earlier. Royalties are tiered. Over 8,400 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

Non-GAAP numbers: net income $38 million, down sequentially from $126 million, and up from negative $10 million year-earlier.

Cash ended at $ billion, up sequentially from $2.3 billion. Debt was $587 million in 1% convertible senior notes.

Alnylam licensed Ionis's technology to Regeneron, resulting in license fees.

Novartis plans to initiate the Phase 3 HORIZON cardiovascular outcomes study of AKCEA-APO(a)-LRx (TQJ230) in patients with elevated Lp(a)-driven cardiovascular disease before the end of 2019.

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 in Q1 2019, 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).

Ionis initiated a Phase 2 study of IONIS-PKK-LRx in patients with hereditary angioedema in Q2 2019.

Ionis initiated a Phase 2 study of IONIS-FB-LRx in patients with geographic atrophy secondary to age-related macular degeneration. Part of a collaboration started with Roche for complement-mediated diseases. Already 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 $183 million, consisting of $1 million for cost of goods sold; $106 million for R&D and $76 million for selling, general and administrative. Operating income was negative $19 million. Investment income was $14 million, interest expense $12 million. Income tax benefit $7 million. Net loss attributable to noncontrolling interest in Akcea $9 million.

Q&A summary:

Size of FPL opportunity? 3000 patients, similar to FCS, combined will be an important contributor to revenue.

SMA dosing? Once a month seems to work best for physicians and patients. Intrathecal injections are different, better for longer dosing intervals.

Roche Huntington program issues? AAN data did show with continued dosing showed NFL transient increase. But Huntington levels continued to be driven down. The dosing frequency change was due to new open label extension results. So reduced intrathecal dosing, it was not related to adverse events.

We have a lot of experience with intrathecal administration, the safety record is solid.

Bayer decision to go forward with factor XI? A milestone payment would be due, they seem enthusiastic, the data they generated is encouraging. If not Bayer, we will develop in another way, we are very excited by the agents.

FCS, FPL talks with FDA? We just got the FPL data, we need to finish the analysis before further talks with the FDA.

The reason we or Bayer might have to develop both Factor XI therapies, the older and the newer LICA, is time to market would be shorter for the older therapy.

RNA technology is not static, it is constantly evolving. We see improvements in drug performance over time. LICA is the most advanced now, but new technologies will be developed. Oral dosing has already been shown to sometimes provide enough bioavailability to show some efficacy, depending on the target. We hope to make oral RNA a commercial opportunity.

LICA TTR Phase 1 release target? We can dial in pretty much any reduction we want by choosing the dose. We know the target reduction from Tegsedi.

Our antisense RNA targets all four transcripts from Hepatitis B, which hopefully not only blocks replication, but eliminates the virus. We need to prove that, of course.

Tegsedi patients vs. the other options? We are not seeing a particular type of patient choosing the particular competing medicines. We are not seeing any clear impact of Tefamidis availability on Tegsedi. We are still ramping our patient numbers.

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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