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

Good afternoon. Thanks for joining us. I'm Salveen Richter, biotechnology analyst at Goldman Sachs, and we're pleased to have Ionis with us. And we have Brett Monia, the CEO of the company. So Brett, thanks for being here.

And maybe to start here at a high level, could you walk us through your key programs, the outlook for the remainder of 2020 and your strategy here on the [ forward ]?

Sure. Thank you, Salveen, and it's a pleasure to be here today. So yes, I'd love to give an update on -- at a high level on where the company is today on the key programs. So starting with SPINRAZA. Of course, SPINRAZA continues to perform as it should, as a blockbuster medicine as it should. We're now approaching nearly 11,000 patients globally that are on SPINRAZA. It is the standard of care for all forms of SMA, all types. And we're -- we had a great first quarter on SPINRAZA this year, and we're expecting another year of growth over last year and continued growth beyond this year as well. SPINRAZA is truly performing exceptionally well across all forms of SMA. The other programs that are worth highlighting, of course, are the late-stage pipeline. We have now 5 Phase III studies in progress across 4 drugs. Our Huntington study is fully enrolled, so that study is now on track to read out in 2022, on schedule, and we're really, of course, looking forward to that. Our first of several ALS drugs, Lou Gehrig's disease drugs, is progressing in Phase III very nicely. We are expecting -- this is a genetic form of ALS, that the cause of which is due to mutations in a gene called SOD1. And SOD1, our SOD1-ALS drug is expected to complete enrollment this year and read out next year, and so a Phase III result next year, and we expect that to be our next commercial product. Other Phase III programs include our drug that Novartis is conducting Phase III in, our drug targeting a risk factor for cardiovascular disease called Lp(a). This is not a rare disease. This is a very common broad disease. A risk factor that affects tens of millions of people around the globe, where there really are no treatment options for Lp(a)-driven cardiovascular disease. And we showed in Phase II really quite impressive activity in lowering Lp(a) levels. And based on that data, along with the excellent safety, tolerability and compliance, they launched into a very large cardiovascular outcome trial, which is now progressing nicely. And then the follow-on to TEGSEDI. In addition, our -- another LICA medicine, like our Lp(a) drug, it's a LICA chemistry, is now in 2 Phase III studies. So -- and they're enrolling and they're doing nicely, running that -- going nicely. So late-stage pipeline is doing well. Our commercial SPINRAZA, particularly, is doing quite well. And then the mid-stage pipeline is setting us up for more Phase III studies later this year to initiate, as well as well into the future. So the pipeline is performing great, and we're really excited about the future.

Great. And then on a technology standpoint, so we've seen a lot of optimization, creating next-generation ASOs. How should we see the cumulative profile of Gen 2.5 LICA? And then when you look at this technology modality versus others, just given that we're in a world where now there's multiple other diseases where you think ASOs offer a benefit over the other modalities per the indication?

Yes. So one of the great thing about our -- the research we're doing at Ionis is we're continuing to advance the technology, and we're advancing it in many different ways. We're inventing it with novel routes of delivery. We are the ones that pioneered intrathecal delivery for CNS diseases, like SPINRAZA in Huntington's and ALS and so on. And the liver, obviously, is a very sensitive organ for our drugs. And we're looking at other routes of delivery such as pulmonary delivery, oral. And a lot of that's enabled by our chemistry that you referred to, Salveen. And advancements in our -- in chemistry have really been breakthroughs over the last few years. Our LICA platform, even with Gen 2 drugs, is looking great. We have 16 LICA chemistries for the liver that are performing reproducibly, similarly, and that's in respect to -- with respect to potency, safety and tolerability, and which is -- the safety and tolerability profile has been really pristine and the potency has been quite dramatic. And these are the drugs that are in Phase III development that I referred to earlier, Lp(a), TTR, follow-on to TEGSEDI and many others that are performing quite well. So we're excited about that. And now what you refer to as Gen 2.5, we're adding that now to LICA. And we're getting added experience with multiple drugs now in the clinic with Gen 2.5 LICA. And what we found is -- what we know is that Gen 2.5 is about tenfold more potent than Gen 2 on its own. And what we have now shown, which we've done a lot of work preclinically that, that added potency is additive with LICA. So when we add LICA to Gen 2.5, we get about a hundredfold more potent drug, greater potency compared to Gen 2 alone. And that has allowed us to show even greater -- lower doses, even greater efficacy. And most importantly, it has also allowed us to -- Gen 2.5 plus LICA to potentially solve commercially viable oral delivery because we know we can get 10% oral bioavailability in humans. And now with Gen 2.5 LICA, the potency is so high, we think that the potency is good enough for commercially viable delivery there. So our experience with Gen 2.5 is growing rapidly. It is the chemistry we're using for lung diseases, where we're delivering our drugs to the lung. And we think that we've also been able to potentially crack oral delivery with Gen 2.5 with LICA chemistry. The only other thing I'll mention on the technology and the next-generation chemistries is, that's probably worth mentioning is, our liver LICA is what I've talked about, discussed so far, but we're now developing new LICAs. We think we've already cracked the pancreas beta cells with new LICA chemistry that is giving us the same potencies as we have with LICA in the liver. We're getting very close to settling on a LICA for skeletal muscle that we think will allow us to get back into myotonic dystrophy and do chains and so forth and other organs as well. So the chemistry continues to evolve and opening -- and it's opening up new routes of delivery, but also new organ system cell types.

And you've mentioned in the past that you've looked or have been looking at potential complementary technologies. What are your updated thoughts here or interest in kind of tissue-specific technologies?

Yes. We are focusing a lot of attention on investment opportunities. Our pipeline is performing well. Our platform is performing exceptionally well. And we're in a very strong financial position at Ionis. And we have the capital to not only invest in our pipeline and in our technologies and even our Ionis-owned pipeline and building our commercial capabilities, but also to invest in new technologies as well, partnerships or what have you. And I kind of look at those investments in -- as 2 buckets. One bucket is a set of technologies that complement what we're doing with antisense. So examples of that where we've already made established partnerships and invested are in genomics companies, genomics partnerships where we're focused on continuing to replenish the pipeline with genetically linked targets for cell types in organs where we know we can practice antisense pharmacology very effectively, whether the local routes or systemic routes. So we actually initiated a collaboration earlier this year, and we're expecting to do more. It's -- and as you know, Salveen, the genetic targets offer many advantages for drug development. Having that validation, target validation in the human setting is a big advantage. And it also allows you to select your patient population more effectively. Those are oftentimes to increase the probability of clinical success. Another area that we're investing in, in that bucket, that's, I would say, complementary to antisense is chemistry. As I mentioned earlier, we're developing new LICA-targeted chemistries -- chemistries that target our drugs specifically to the cell type of interest. And we established a partnership earlier this year to further advance the work we're doing internally. And I think we're making great progress there. I mean that's an example of another complementary technology, and we're looking to do more of those. Then there's another bucket where we've begun to look at new platforms that we are considering investing in and investing in significantly in the future, that could be -- and that diversifies our platforms, our technology for drug discovery to do things, platforms that could maybe do things that antisense is less equipped to do. Like for example, targets that -- or platforms that can up-regulate gene expression. We can do that a little bit. We do it well with SPINRAZA, of course. But usually, we knock down a disease-causing target. It would be nice to complement what we're doing with technologies that can increase the production for loss of function diseases. So that's where we are with technology investment. There's a lot going on there. And this will be a long, continuous process as we go forward.

And then with regard to your own pipeline right now, you've had [ lot of slew ] partnerships across the portfolio. But how are you thinking about the partnership strategy going forward? Whether you keep them, whether there's a certain value inflection point at which you choose to partner?

Partnerships, yes, we have a lot of partnerships, as you know. And most of the partnerships we have today are strategic in nature that expand therapeutic areas or our partners bring particular capabilities that we think bring great advantages to our pipeline or for commercialization. Our technology is incredibly efficient. And to take full advantage of -- to maximize the value of our technology, our pipeline, it really requires us to continue to do partnering in one way or another. If we just focused on the Ionis-owned pipeline and our own commercialization efforts, it would limit us greatly in what we can develop, what we can bring to market. So we'll continue to partner, and we'll partner, as we have in the past, to some extent. I mean today, Ionis is different than what it was in the past. And our need to partnership -- to partner, of course, is very different. We don't need to partner for purely financial reasons today. But we will want to partner for opportunities that [ overt ] for very large markets that require very large Phase III studies like Lp(a). The Phase III studies is going to involve the enrollment of more than 7,000 patients globally in a cardiovascular outcome trial. Novartis is perfectly suited to do that. What we did there, though, is to hang onto that molecule and prove through Phase II the value of the molecule. And what that does is commands much more attractive economics, through R&D milestones, through royalties, upfronts and those sorts of things, and that's what we'll do. For programs that we do partner, for large indications, we'll make sure we're driving really attractive economics in one way or another. We did that last year with Pfizer with angiopoietin-like 3, a very large market opportunity. The programs that we will keep ourselves are ones where they don't require really large Phase III studies or a really large commercialization unit or force. Rare diseases. And rare diseases, I would say where we have expertise. Neuro, neurological diseases, for example, or in cardiometabolic diseases. We have a lot of expertise there. And if we can identify rare disease opportunities that make sense for us to hang onto and bring to Phase III -- through Phase III and commercialize, we'll do that. And then there's those drugs in the middle -- midsized opportunities, say like NASH, where we'll make a call on a case-by-case basis, whether to keep or to partner. But we're really going to -- I would view Ionis as a blend of the Ionis-owned pipeline, which is growing, maturing -- we're building our commercial capabilities to support the Ionis-owned pipeline -- a mix of that with strategic partnerships. And I see that as our future.

Great. And then when you talked about neurology here, I think you've mentioned in the past that maybe you'd look to keep the non-partnered assets with Biogen in future assets to yourselves and look to whether you keep it in-house or create an Akcea-like subsidiary that could be a possibility. Just curious if there are any updated thoughts there.

Yes. We're -- so neurology, the Ionis-owned neurology pipeline is a priority for us. We have 3 drugs that are advancing to clinical testing now for rare disease neuro programs: Prion, Alexander's disease and Lafora disease, and there's more behind that, more that's coming. We are planning to take these programs through to the finish line at this point and then to commercialize them in one form or another that maximizes the value to Ionis. Akcea isn't a neuro-focused company. That's really not their specialty. And Akcea has quite an agenda right now with TEGSEDI WAYLIVRA, getting WAYLIVRA approved in the U.S. and then the locked follow-ons to TEGSEDI WAYLIVRA, and to LICAs. TTR LICA, which we're developing, but they will commercialize; and APOCIII LICA, which we are developing, and they will commercialize for FCS, other triglyceride indications and so on. So they have quite an agenda ahead of them right now. I wouldn't rule out the possibility of moving an additional asset or 2 into Akcea at the appropriate time and in the appropriate way. But right now, I see the neuro assets [ that try ] Ionis as something that we will probably create a commercialization strategy that's distinct from Akcea. What that is, is we're still working on. We still have some time to work those details out. I have recently hired Onaiza Cadoret at Ionis, who has extensive commercialization experience from her past positions. And we're building various options for that -- for those assets as well as additional assets in our Ionis-owned rare disease pipeline outside of neuro. So we're hoping to -- we're planning to talk more about that later this year, about what that looks like, and so stay tuned. But we have a lot of options on the table there for that.

Great. Great. Maybe jumping into the late-stage pipeline here. So you were talking about Huntington's with the pivotal on track for 2022. Any updates about what the FDA would want to see in terms of whether they'd accept biomarker data as a circuit endpoint or functional data here? And there's additional trials being run like the natural history data that's being accumulated. Could you just give us updates there of [ time lines ] as well?

Sure. It's a really exciting program and is receiving, and appropriately so, a lot of attention. The unmet need for Huntington's disease is so enormous. And they're really -- our program is really the only bet in the foreseeable future to impact the lives of these patients and to have a meaningful impact. So we have a number of clinical trial work streams in process, as you alluded to. The Phase III study is called Generation HD, is 800 or so patients, Huntington's patients, 3 arms, 2 treatment arms, twice a month -- or every 2 months and every 4 months dosing, plus placebo as a third arm. And that study is now fully enrolled, and the treatment duration is 25 months. So we're looking at a 2022 readout from that Phase III study. And we're very -- feeling good about the study, not that just because it's fully enrolled, it was enrolled quickly. And the compliance has been excellent. Dropout rates have been low, which I think bodes well for the tolerability of the drug and who knows what else. So that's in the cooker, and that's moving. What has been agreed with, with regulatory agencies, are functional readouts, not biomarkers. Certainly, the fact that we can demonstrate and have demonstrated durable reductions in mutant Huntington will go a long way in providing the mechanism, [ not necessarily the cause ] of the disease, and we're doing that. We're knocking down Huntington very effectively. But the endpoints will be functional. That where, if compared to placebo, we'll need to show statistical significant halting of progression or maybe even reversal, who knows, compared to placebo. And one of the rating scales is called the Huntington Composite Disease Functional Rating Scale, which is a well-validated scale in patients, having studied the natural progression of the -- natural history of the disease study. And the other is what's called total functional capacity endpoint, which is just another functional readout on cognition and psychological and motor function, quality of life and so on. The other work stream, clinical work stream that's in progress is the extension of the Phase II study we ran, which is now in the open-label extension study. That study is coming to a natural completion, 15-month open-label extension in which patients rolled over into the OLE, all received the drug, and they're being assessed for same types of endpoints as in our Phase III study, functional endpoints. And that's now wrapping up and results from that study will be next year, so about a year ahead of the Phase III results. In addition, our partner, Roche, has initiated a natural history study involving a group of patients with Huntington's disease that are mirror images of the OLE patient population so that -- and studying the same clinical endpoints, so that natural history will essentially serve as a reference for the open-label extension patients. Both of those studies will be ready for -- to look at next year. So look to next year for the open-label data, natural history data and the following year for the Phase III results. I don't see biomarkers being a path forward necessarily for Huntington's disease. I really think they're going to have to show benefit on the functional endpoints, either in the open-label extension or more likely in the Phase III study.

Got it. And then with your SOD1-ALS program that's partnered with Biogen, can you just recap for us what you've seen to date, and how you think about maybe not just the -- this population, but even the sporadic ALS population and the impact it could have there?

Very exciting ALS franchise we're developing here at Ionis. We now have 3 drugs targeting for 3 -- targeting 3 independent causes of ALS in development. The most advanced is the one you referred to, the SOD1-ALS drug. SOD1 is -- causes ALS through the mutations in the SOD1 protein that cause misfolding of the protein and neurodegeneration. We showed, with Biogen in a Phase II study in patients treated for only 3 months, that patients -- their disease completely stabilized. Their progression over 3 months, as measured by another rating scale, called the ALS Functional Rating Scale, as well as lung function, FEV, in these patients stabilized compared to their baseline values, whereas patients on placebo were -- their disease was progressing markedly after only 3 months. And it's worth noting the fact that -- the reason why we could see those things at 3 months is because ALS is a rapidly progressing form of neurodegeneration. Huntington's is much more slowly progressing, 25 months for the Phase III study. ALS, our Phase III study for SOD1-ALS is 6 months. So longer than the Phase II but still only 6 months. So the result -- and of course, we showed SOD1 reductions in the CSF and so on, all with very attractive tolerability profile. The -- that led to the start of the Phase III study, which is now -- will be fully enrolled this year. And then the results of that study were coming next year, but we're feeling very confident about SOD1-ALS, and we're feeling confident that, that will be our next commercial product. The other drug, you did mention this, and I'll get to sporadic in one second, but is another genetic form of ALS that targets a different gene that's mutated, called C9orf. C9 is about 5x larger prevalence than SOD1-ALS, and that drug is now in C9 ALS patients in Phase II. And that, too, will -- that also will read out next year. So next year is an exciting year for ALS, SOD1 in C -- Phase III and C9 Phase II. Your question about sporadic ALS, we are on the verge of initiating clinical testing of one of several drugs we're bringing forward for sporadic ALS. The one that is about to begin clinical testing targets a gene product called ataxin 2, which has been strongly linked to the formation of toxic granules in the CNS of ALS patients, sporadic ALS patients. And we've generated quite a bit of preclinical data published on showing benefit in models of neurological diseases, including ALS. So we'll have 3 drugs very soon in clinical testing for sporadic as well as genetic ALS. So it's pretty exciting.

So Brett, 2 questions for the audience here. One is with respect to your ENaC drug for cystic fibrosis, when do you expect data to be released from the Phase I/II study? And do you anticipate you'll be able to move it into a Phase III study in 2021?

Our ENaC drug is delivered, for those who aren't aware, by inhalation directly to the lung. And we have a lot of experience with inhalation of our molecules to the lung with the Gen 2.5 chemistry preclinically. And the preclinical data for ENaC as well as several other programs that are coming into the clinic for other indications -- COPD, IPF -- really looks impressive, I think, in the preclinical data. The ENaC is the most furthest along. It has completed Phase I, neuro volunteers, and now is in CF patients in Phase II. We're also planning to start a Phase II study later this year in larger populations, including chronic bronchitis with our ENaC program. We're expecting to share results from the -- both the Phase I and the Phase II study later this year. We're expecting to have at least 4 more clinical proof-of-concept readouts this year, maybe more. That's one of them. And the kind of data we're going to be planning to share is the -- obviously, the tolerability, safety, evidence of target engagement, target knockdown, ENaC knockdown in the lavage fluid from patients. And also, we'll be looking at exploratory clinical endpoints as well in patients -- in the CF patients. So it depends on the data. It will be a data-driven decision. But certainly, we have the possibility of going to Phase III in 2021 based on positive Phase II data, and that could involve a Phase III setting where there's a -- where CFTR modulators are not indicated or effective, or it could be in broader CF patients on top of those agents. So it will be data-driven. Our goal is to move into Phase III following Phase II, but it has to be supported by the data.

And then a second question from the audience here has to do with Akcea and how much, I guess, input you have at Ionis into their strategy there. And maybe just some explanation on the recent shakeup where we saw a change in maybe 3 senior managers at a similar time point.

Akcea, we have -- we're 78% shareholders of Akcea. We work very closely with Akcea. I speak with leadership at Akcea daily, almost. I mean, not daily, but sometimes it feels like daily. And I think the leadership in place is off to a great start. They've identified opportunities for increasing commercial upside for TEGSEDI. The launch for WAYLIVRA is off to a good start. And they've done a great job and are planning for refiling WAYLIVRA for U.S. approval. And they've also identified a number of strategies to not only increase commercial success but also savings opportunities, which we think is also important to be -- work towards fiscal responsibility. They also have quite an agenda in front of them with TTR LICA coming up, coming forward in APOCIII LICA. And as for the reasons for the changes, that's history, and that's something we talked about last year. The Akcea Board felt like it was -- that the -- in the best interest of the company, that changes needed to be made, and the Ionis team supported their position. And so far, that -- those changes are showing quite a bit of promise.

Great. And then, Brett, when you look outside of your late-stage pipeline, and you talked about the 4 pivotal stage programs here that you highlighted, what are you most excited about in the pipeline on the forward?

Yes, well it's hard, Salveen, to pick among so many exciting programs on which ones you're most excited about. But I have to say, Huntington and ALS, obviously, are very exciting programs because the unmet need is so large, so significant. And these are genetic diseases. So they're handed down, oftentimes, especially Huntington, for generations and so on. But we covered those. So I would say, third in line from the late-stage pipeline I have to really flag the Lp(a) cardiovascular disease program because, again, rare diseases, these are great programs for rare diseases, but the Lp(a) program, I view Lp(a) as LDL-cholesterol before statins came about. It's a risk factor that causes heart attacks and strokes in young people as well as older people who have -- who are nonobese, nondiabetic, sometimes they get -- they'll have heart attacks in their 30s or 40s because their Lp(a) levels are just -- skyrocketed. And it's genetically determined how -- what level of Lp(a) you have. So -- and there's no treatments for it. And it's estimated to have 8 million to 10 million people with this disease that's untreatable today. And we're way ahead of anybody that's out there, that's coming after Lp(a). So this is -- and we have the right partner in Novartis, who runs cardiovascular outcome trials very successfully. So we're -- I would have to flag that one, in that it really is a very large market opportunity that's not too far down the road. I mean we're projecting 10 or more new drug applications over the next 5 years, starting next year with SOD1-ALS, starting initially with those rare diseases, the SOD1 and Huntington and others, and then you're going to start seeing those large indications like Lp(a), cardiovascular kicking in, in the '23, '24 or '25 time frame, Angiopoietin-like 3 and HPV and so on. So -- but I guess, I would flag that one as something that certainly has my attention.

And then just on the Ionis, like your cardiometabolic oral program, what should we expect to see from that in maybe this year or next year? And how are you comparing those trials in parallel to prepare the oral versus kind of the subcu administration?

So our -- I'm feeling quite good about our oral strategies with AstraZeneca. And we have a strategic cardiometabolic collaboration with AstraZeneca. We have 3 drugs in development with them on the cardio space. And we've worked for years, starting a few years ago, for a number of years on optimizing delivery, doing the work that was necessary to draw the conclusion that we think we're at commercially viable oral delivery. Commercially viable is critical. We can -- we have oral bioavailability of our drug, but it has to be practical from a COGS standpoint, from a convenience standpoint, as a once-a-day small tablet. We think we're there based on the preclinical data. In the clinic, what to expect later this year when we talk about this program, are a couple of things. One is that, first of all, we actually have a subcu version of this drug in development alongside the oral drug. So we want to talk about both programs because it's really the added potency, as I referred to earlier, that Gen 2.5 LICA brings that we think gets us to commercially viable oral delivery. And our subcu program needs to demonstrate that we actually get that hundredfold increased potency that I referred to earlier. I'm feeling pretty good about that, and then the bioavailability of the Gen 2.5 LICA for oral needs to be demonstrated. So we'll share results from the subcu and the oral programs, our rationale and the data, preclinical and clinical, on both programs. And what you'll see is biodistribution, pharmacokinetics, biomarker data, tolerability.

And then also, in partnership with Astra, you have the pancreatic beta-cell LICA program, maybe you could just comment on that and then the next steps there.

Yes. The Pancreas LICA is our second LICA. We're expecting several more coming for other organ systems. That was work we did with Astra as well, as you mentioned. It's targeting specifically beta cells in the pancreas. And the potency is comparable and based on preclinical data as our hepatocyte LICAs. And that's really remarkable because, as you know, we work well in the liver, liver LICA made us work many, many, manyfold better in the liver. Pancreas is completely refractory to distribution of our molecules. But the LICA made it as potent as liver LICA. So it's pretty interesting. We're in drug discovery phase now. So we're still optimizing the ligand and that sort of thing, but we're pretty close. And really, now we're in the drug discovery phase with that, so we're like evaluating different targets and different models, particularly in diabetes, which is what we're focused on for the pancreas LICA. And we're expecting to reach late-stage research towards the end of this year or early next year and get a drug into development.

Great. Well, with that, thank you so much, Brett.

Thank you, Salveen. I enjoyed it.

Thank you for your time today.

Excellent. Great. Thank you. Have a nice day.

You too. Bye.