Ionis Pharmaceuticals, Inc. (IONS) Earnings Call Transcript & Summary

Good day, everybody, and thank you so much for joining us at the Annual Bank of America Health Care Conference. My name is Jason Gerberry. I am the specialty pharma and smid-cap biotech analyst at Bank of America. I'm pleased to be introducing our next company presenter, Ionis Pharmaceuticals. Pleased to be joined by CEO, Brett Monia; and CFO, Beth Hougen. So first of all, Beth and Brett, thank you for joining us at the conference.

Thanks, Jason. Pleasure to be here. Thanks for the invitation.

Of course, of course. So look, I've got a number of questions, and obviously, those who are dialed in or can send questions to me electronically as well. But I figured we'd go through some of the more interesting pipeline programs and value drivers in the model. And from our perspective, the Huntington's program is one of the programs that we see as one of the bigger needle movers in the late-stage pipeline. So maybe we can start there if that's okay.

Sure. Sure. I can provide a few opening statements on how the company is doing or we could just jump right into it. However you want to do it, Jason.

Yes. I mean sure. If you wanted to frame what you think are some of the key milestones coming up for the company, and then we can jump into questions, that's fine as well.

Okay. Good. Because I know in this COVID-19 pandemic, one of the questions that are on a lot of people's minds are how is everybody doing with respect to their pipeline and their goals and all. And I'm very proud to say that Ionis today is stronger than ever. Even with this COVID-19 pandemic, and we're off to a great start this year, and we're on track for what I believe will be another exceptional year. This is in large part due to the preparations we made but also due to our financial strength. We're in a very strong financial position. And of course, having a strong financial position enables you to -- enables us to get through crises like one we're going through now. And in fact, despite this challenge, which we all are really looking forward to getting over, I know, getting through -- and we got about 70% of our people work in home or remotely. We're still on track to achieve our strategic goals for the year, including the financial goals, the commercial goals, which we can jump into or get into in more detail. The clinical pipeline goals, including our Phase III studies, all of which are on track, and maybe more -- we're expecting more Phase III studies as well to start this year, our regulatory goals, including goals around WAYLIVRA and our research goals. So all of our key strategic objectives seem to be falling into place despite the remote working situation the majority of the company is working through, and we're very pleased, obviously, what the second half of the year is going to shape up to be. So that's a brief little overview of where we are today, and happy to open it up for questions now.

Yes. So just -- you triggered a thought in my head with your prepared remarks. But where do you see as a logical fork in the road for Ionis and commercial ambitions to come to reality? I know that you have your unencumbered pipeline or mid-stage pipeline. I presume that there's certain milestone events that internally you may look to and say, look, these 2 or 3 assets really show what we think they can show, then that could be an accelerant to that process.

So we -- one of the aspects of what we do with the technology we created is to take full advantage of the efficiency by which we can identify drugs, put into the pipeline, bring them through clinical development. And to take full advantage of that efficiency and to be able to tackle very large patient populations, in addition to the rare population, to tackle the broad populations, we will continue to partner for a lot of the drugs that we develop to keep the pipeline moving and to tackle the larger indications. But one of the things that we have prioritized and has become a real priority this year is for us to grow the Ionis-owned pipeline in parallel with our commercial relationships -- or in parallel with our partner relationships for commercialization. And we're growing that pipeline now. The neuro Ionis-owned pipeline is growing at a rapid rate, and we are building our commercial capabilities now. Within Ionis, I -- this year, I hired Onaiza Cadoret with extensive commercial experience. Onaiza's building options for us to consider for commercialization as this pipeline of ours matures. And we're planning to talk about what our commercial strategies will look like for the Ionis-owned pipeline later this year. It's still coming together, but it's going together well. And Akcea, our commercial affiliate, was the first strategy that we took on for commercializing Ionis-owned products. And we're looking to further optimize our commercial strategy by developing additional options for commercialization of our pipeline. So you're going to see us continue to partner. You're going to see us demand high economics, attractive economics because we're going to be taking drugs. We're going to hold on to them longer even for the drugs we do partner and demand greater economics. And you're going to see the Amazon pipeline grow. And you're going to see new strategies from commercialization coming together as the year and following years unfold.

And that would be either a continuation of the affiliate model or potentially more of a direct commercial function with the in-house basically?

Those options are on the table and additional options as well. So for example, we can create affiliates, but they don't necessarily have to be public, at least for quite some time. Akcea did go public pretty relatively quickly. And there's other options, too. So the 2 examples you gave, Jason, I view those as bookends. Akcea is one end of the spectrum. Wholly owned commercialization internally is the other end of the spectrum. And there are additional options in between that we're developing so that we can maximize commercial value between assets that we keep while preserving the profitability of the organization by preserving the financial strength of the organization by preserving the culture of innovation that we hold dear to our heart at Ionis. So there are options in between those two of those, but those are on the table as well.

Got it. Great. Okay. Now shifting gears to the pipeline, and I was a little overly eager to jump into Huntington's, but maybe we can get there now. Can you talk a little bit about how COVID-19, how that impacts data capture, especially around some of these functional parameters for patients? I know that -- I think there's some sort of electronic wearable device that captures some of the functional attributes. But can you just talk a little bit about how, if at all, COVID-19 impacts the trial conduct?

So as the Huntington trial is performing on track. It's obviously our drug that we discovered and developed and then licensed to Roche is the only drug that's targeting the cause of Huntington's disease that's so far along in Phase III development, and it's on track. And as you know, we announced full enrollment, completion of enrollment a couple of weeks ago. And now the cake is in the oven, if you will. So it's a 25-month treatment period. And that's due to read out in 2022, last patient in plus 25 months. The primary end points remain the same, COVID, no COVID, the composite unified Huntington's disease rating scale and the total functional capacity score, TFC, as the primary end points in the study. And the COVID situation isn't going to impact those. Those will be assessed by the clinicians. This is obviously a very serious severe disease. We're sort of -- they have the COVID -- we have the COVID situation managed, and that's not going to be affected in any way that we see nor has Roche has -- and that's what they've stated as well. The dropouts in the study have been very low. So it's actually the study is very well powered and probably more powered than originally anticipated because the dropouts are less than what was originally modeled. There are additional end points in the study, including wearables, as you mentioned, which can monitor function of individuals remotely, such as gait, the patients' gait, their mobility and so on, but the primary end points remain the same. And those end points are not going to be impacted by the pandemic in any meaningful way.

So the punchline here that given the severity of the disease that the interaction with the clinician to assess and capture the information for these end points isn't impacted just because this is too severe of a condition to -- for COVID to impact that interaction with the clinician and the patient?

Yes. Absolutely. And remember that these patients are only being dosed when they come into a clinical setting to get an intrathecal dose every 2 months or every 4 months. So the demand isn't that great. The clinical demand isn't that great either. But even if it was more frequent than that, absolutely. This is a top priority clinical program in a disease that has such high severity that it's a priority no matter where you are. We haven't seen any impact even in areas of the world that have been most severely impacted with COVID-19. Roche hasn't had any issues in physicians seeing their patients conducting the analyses that they need to conduct nor patients getting their doses.

Got it. Great. Brett, I've honestly lost track a little bit of who said what regarding when we may or may not get an update on open-label and natural history or just open-label, non-natural history and all the different considerations that go into that. And you and I talked about this before because we did a conference call about a month ago, and I appreciate some of the dynamics of preserving the integrity of the Phase III. But can you give us the latest in terms of your understanding as of today? What you can share with investors regarding when we may get our next material update from some of the studies that are going to precede the Phase III readout?

Sure. Absolutely. There's -- and we did talk about it a little while ago, Jason. And it's worth talking about again because there's so much excitement about this program because of the unmet need. The -- as I mentioned, the Phase III study is on track to read out in 2022. The ongoing studies that are -- the relevant ongoing studies are, number one, the open-label extension study, which is the Phase II study we did in which patients -- all patients then went on drug for 15 months and then rolled into another open-label extension, right? So the patients that went into the original OLE, after 15 months, they roll into another OLE, which captures all patients from all studies. In addition to that 15-month OLE, there's a natural history study that's ongoing in which the patient population is a mirror image of the Phase II patient population. And those patients are being studied to compare their disease progression to the 15-month OLE data in the study. The 15-month OLE is complete, and Roche is analyzing the data. The natural history study is not yet complete. It will be completed this year and then be analyzed. And the OLE data, 15-month compared to the natural history data of 15-month, will be presented -- Roche said that they will present the data next year. They haven't really been nailed down precisely as to when and where, but they said that they will present that data next year.

Got it. That's really helpful. So for the OLE then, we'd be looking at something like at 45 patients, 23 per dose arm, something in that ballpark. And do you think that that's sufficiently large enough to draw conclusions at all regarding functional improvement when compared to a natural history comparator?

Well, I think it's important that we don't lose sight of the fact that the Phase III study is a perfectly -- what we believe is a perfectly designed study, properly powered with a placebo group and 2 dosing cohorts, so 3 cohorts together every 4 months, every 2 months dosing and then placebo, 800 patients. So that has to be taken -- that has to be factored in when we're thinking about 45 or so patients within a noncontrolled setting compared to natural history. And how much you're going to get out of that data, right? It's possible that the data could be so overwhelmingly positive that trends or more than trends would be observed in such a small patient cohort. But we have to keep in mind why the Phase III study that was ongoing is so large. So I think we're hopeful that we'll see such strong trends on clinical end points. We certainly expect to see continued reductions in mutant Huntington in CSF as we've seen that continuously throughout the study. But we just have to take that into account that -- we don't -- we shouldn't over -- set out unreasonable expectations for a relatively small open-label study, but we're hopeful. And if the data is over -- if the drug is performing overwhelmingly positive, we hope to see something.

Got it. And at AAN, I believe Roche had indicated that they're continually monitoring the Phase III open-label data in an early filing remains, I guess, a possibility that's still on the table if there is sufficient data to support that. So can you talk a little bit about the role -- what role you play in monitoring the open-label data and the decision making there? Is there a joint committee that would make some of these determinations?

So absolutely. Roche has stated, and we've had our own discussions with them that if the data from -- if early data from open-label extensions and natural history studies warrant an early filing, they will do it. They will do whatever it takes to get this drug to patients as early as possible if the data justifies it. And that could be -- they're going to discuss that data next year. The data that they would use for that would be the open-label data that I referred to earlier, the natural history data, plus any additional data they have. As you mentioned, there's additional open-label extension data. The Phase III study originally started and then stopped and then restarted. But the patients that were in the initial start are all in an open-label extension. That's up almost 100 patients. So Roche can look at all that data and come to a conclusion as to what it is they would -- they think is the best interest of the patients, best interest of the drug at that time. As for who sees data and how we work together, Roche is in control of that data. They see that data before we do. And then they inform us of it, we have regular joint meetings in which we discuss data and so on, but they're in control of the data. They see it in real time, if you will, and then share the data with us periodically during our regular joint meetings.

And not to put the cart before the horse here, obviously, there's a lot of important considerations with the data. But can you talk about just potentially how big this market opportunity could be because when we do the math and think about other rare orphan price points that are in an appropriate price range, if you are able to show an improvement in functional outcome, it would seem to be pretty substantial.

The price point you're asking?

No, no, no. The actual revenue opportunity.

Oh, absolutely. This is -- SPINRAZA is a blockbuster medicine. This goes fivefold greater than SPINRAZA at least. And that's just the symptomatic patients. Remember, this is a disease which there's -- in which death is the only outcome today. If you have a CAG expansion beyond a certain number in your Huntington gene. It's handed down from through families over generations. You can determine whether or not you're going to get the disease on a genetic -- based on a genetic test. And you could also determine how early you might get the disease based on the length of the CAG expansion you have. So symptomatically, this population is far greater than that of SPINRAZA. SPINRAZA is a multibillion-dollar medicine. And that's very symptomatic. You can also envision a scenario which you start moving towards the early manifest, early symptoms of the disease before clinical symptoms start kicking in earlier and earlier. It's a very large population, and there really is essentially no competition whatsoever for this medicine. So yes, it's an enormous opportunity, Jason.

And how would that play out in your mind. I mean you -- I have seen situations even with expensive medications where there is a sensitivity to getting on therapy and a pressure to get therapy earlier stage than perhaps the Phase III study population informs because nobody is going to want to wait until it gets to a symptomatic point. So do you think that this is something that is sort of -- there becomes an inherent pressure to get people on to therapy earlier and earlier? Or would you have to conduct more studies or at least confirmatory studies to drive that?

It's -- I think it really comes down to the performance and how transformational medicine is. A great example is SPINRAZA. For SPINRAZA, we treated infants and adolescents, adults with the drug. We had never treated presymptomatic SMA patients before the drug was approved. Yet, because the drug was so transformational because the mechanism was clear, we were proving the mechanism, it was we were targeting the cause of the disease. SPINRAZA was approved for all forms of SMA, including presymptomatic. Subsequent to that approval, Biogen did a study, not because they had to, but because it was in the interest of showing that demonstrating that in presymptomatic babies, the drug performed and the kids and the babies were developing normally, if you treated them presymptomatically. That's not -- so that speaks more to the enthusiasm. I don't even want to say reimbursement because it was being reimbursed presymptomatically anyway, but it generates greater enthusiasm once you generate that data. But I wouldn't say it's necessary for -- to get in a label or early symptoms. Now with Huntington is different, right? Huntington develops over decades and decades. So I think you're going to get pushback on getting treated at a very early age. But I do think that biomarkers will be identified long before symptoms can be detected. That point to -- it's time to start getting on drug earlier on that prevent the loss of motor neurons or function. And I think that that's the direction you would go in a disease like Huntington, which manifests much later in life. Biomarkers that would predict and then you get on the drug earlier this year, as you suggested, you can't recover once you lose nerve function, your neurons. So you really do want to get in there early.

Great. That's helpful. Maybe shifting gears to SMA, just some of the more near-term cash flow driving components of the story. I believe you talked a little bit about COVID-19, and this is probably a business that has a slight impact with patients able to kind of stretch out maybe how frequently they get dosed. And I think Biogen had also commented on their April call, they were starting to see perhaps some lowering of demand in 2Q relative to 1Q. So I'm curious if you can offer any additional perspective maybe on some of the near-term dynamics going on with SPINRAZA due to COVID-19 specifically?

Yes. Sure. SPINRAZA continues to perform exceptionally well, but Beth is closer to it than I. So maybe I'll just pass it on to her and she'll cover that one.

Absolutely. Nice to be here, and thank you for having us, Jason. As Brett said, SPINRAZA had a very strong first quarter with growth over the prior quarter same year -- sorry, same quarter prior year as well as Q4. And Biogen has said, as you know, that they've seen a little bit of impact from coronavirus with patients delaying their dosing. And that may have a bit of an impact in Q2. But there are lots of reasons to anticipate growth year-over-year for SPINRAZA and to anticipate that both in the U.S. as well as outside of the U.S. We've got nearly 11,000 patients on SPINRAZA treatment as of the end of the first quarter. Those patient numbers continue to increase. We are seeing more and more countries continuing to come online, so there's growth outside the U.S. in both the existing major markets as well as in emerging markets. And these are areas where Biogen has a very strong presence. So I think as you think about the fact that there are about 45,000 patients with SMA. The opportunity for continued growth is very real and substantial. And we and Biogen continue to be optimistic that we'll see that this year.

Got it. And as you think about maybe some of the more recent data from PTC and Roche with risdiplam and FIREFISH in the Type 1 SMA patients. How do you think that potentially could alter the treatment algorithm for the market? I know that there was perhaps some perception out there that maybe that drug would fit in patients who were poor candidates for intrathecal, people with spinal scoliosis. I'm just wondering if that view has fundamentally changed at all.

I think -- sorry, go ahead.

Beth, please, you run with it.

Okay. So I think the first thing you have to remember is, as I said, we've got 11,000 patients on SPINRAZA today, and that's a substantial foothold in the market. And so I think it's important to remember that SPINRAZA is the standard of care. It sets an extremely high bar for competitors. And I think as we look out, every day that goes by, in which a competitor is delayed in coming to market, gives SPINRAZA a further opportunity to strengthen that foothold and to raise that bar. So right now, I think that's an important consideration as we think about SPINRAZA's growth potential over the coming months, quarters and years. And then I think as -- we'll have to wait and see how that data set translates to label. And what that looks like from a commercialization perspective. But right now, we feel very confident in SPINRAZA's growth opportunity and in its foothold across the world, frankly. And Brett, do you want to add to that?

Well, yes. In addition to that, I would just say this. There have been some very inappropriate comparisons of the Type I Phase III data that we generated for SPINRAZA with risdiplam's FIREFISH data. The patient populations were very different. The -- when we were developing SPINRAZA, there was no treatment for SMA. Essentially, all babies came into the study, whether they had prior history of respiratory failure or pneumonia or other aspects, there were sick babies in that study. Those were excluded from the FIREFISH study, healthier patient population. We know that healthier babies do better on SPINRAZA. I assume they would do on any medication. The second is that the FIREFISH data, the treatment period was longer. And we know then for SPINRAZA. And we know that the longer you treat, the better patients do. And I think SPINRAZA was 6 months on, [ go home to ] that might have been 9, but I think it was 6. And then the longer we treated past the primary end point, the better patients did. So it's really comparing apples to oranges. And I would -- you can't do cross-study comparisons, and that's an example of why you can't do those types of comparisons. So we'll see once risdiplam gets onto the market. I assume it will. We'll see how it performs in the real world. But as Beth said, SPINRAZA's performance in the real world has been exceptional.

Got it. Great. Well, we're up against our time. So Brett and Beth, thank you so much for taking a little bit of your time of your day to share your thoughts regarding some of the latest dynamics and how things are evolving within your company story. So best of luck and stay safe. And with that, I think we can wrap up our call.

Thanks, Jason. Appreciate it.

Thank you.

Have a good one. Bye.

Bye-bye.

Bye.