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

All right. I want to thank everyone for joining us. So the next company presenting is Ionis Pharmaceuticals. My name is Kevin DeGeeter. I'm a biotech analyst here with Oppenheimer, joined by several of my Oppenheimer colleagues and some of the folks from Ionis. I think the way we're going to do this is sort of Q&A format. So very much looking forward to that. If you do you have any specific questions, of course, you can e-mail them to me directly. I think most of you have my mail, but kevin.degeeter@opco.com as well, or I think directly Q&A chat box.

With that out of the way, I guess, maybe we'll do a couple of the housekeeping items upfront. Akcea, a very, I think, strategic transaction, the company announced a little over 2 weeks ago now. Just kind of any update you can provide if there is one with regard to time line to close? And how to think about your progress towards consummating that transaction?

Sure. I'll take that one, Kevin. Thank you, first of all, for having us. We really appreciate being here today to answer questions and give an update on the company. We were really excited to announce the transaction with Akcea a couple of weeks ago, to be able to bring Akcea back in-house and to be able to retain now 100% of the cash flows from their rich pipeline, and their commercial products is something that we are very, very excited and pleased about. So the transaction is progressing well. We have launched the tender offer, did that last week, and that's in process. And we expect at this point to close probably early in Q4. Beyond that, there's not a whole lot that I can say because we are in the offering period. But stay tuned, more to come. We're looking forward to the combined company and the efficiencies and the focus and the financial benefits that we think we will -- that we know we'll be able to realize with the combined entity.

And picking up on that last point, I do have -- get a lot of questions from clients as to how to think about potential synergies. I think most of us appreciate that this is fundamentally a growth transaction for the company, but there will be some cost savings. Is the third quarter financial results conference call, a reasonable time frame to think about perhaps some more granular discussions on potential integration synergies?

I think that's reasonable. We're -- we've got a team right now, a joint team with the 2 companies, actively engaged in all of integration activities across all of the various functions in the 2 companies. And as you think about synergies, I think a natural place to go is the cost savings that you can anticipate from combining 2 public companies. And that, I think, is sort of low-hanging fruit, if you will. And then, we'll go from there and think about working closely with our Akcea colleagues what else we can do to make the combined organization much more efficient, and we'll be able to see some cost efficiencies from just being able to work more closely together and in a more efficient manner. I anticipate that we will see those synergies play out over the course of next year. I don't think we'll see immediate synergies this year. It just takes a little bit of time to get the 2 companies combined and structured appropriately. So that work is ongoing, but expect to hear more from us. Q3 earnings is one place and certainly by year-end earnings in February, we'll be able to provide even more direction.

And then just maybe one more Akcea question, and then we'll go ahead and turn to some of the exciting pipeline and R&D opportunities. As -- I mean, you obviously know Akcea well, super well. And so, as we think about the commercial capabilities that are already there at Akcea, how would you describe the relative kind of strengths and frankly, the limitations of the commercial footprint? In other words, what can we sort of fully expect Ionis to continue the course on and maintain where the areas where we might think about either enhancements, expansion or maybe a bit of a directional change after this acquisition is complete?

That's a great question. And I think -- maybe I'll take a step back for just a second in answering your question and just remind folks that one of our areas of focus this year is on our Ionis-owned pipeline. It's an exciting pipeline with a lot of wonderful opportunities in it. It's a pipeline that's maturing. It's in mid- to late-stage right now, and it's expanding. And so it is a key area of investment for the company today, and will be an area of investment going on into the future. In parallel, we're building our commercial capabilities to support that Ionis-owned pipeline. And so those are areas that we're investing in today. The acquisition of Akcea is the first step in realizing the vision of Ionis as an entity that has an exciting pipeline with tremendous commercial opportunities. And so we've taken that step now. As I said, we're working closely with Akcea on how we integrate the 2 companies. But there's tremendous -- there's so many exciting parts of that business. Akcea Connect is a great example. It's really a world-class patient support model that Akcea built from the ground up. And we use it to support TEGSEDI and WAYLIVRA in all of the markets from the U.S. and across Europe. And frankly, our partner, PTC, in Latin America is using similar models to support patients. And so that's an area where we think there's real value. It's just an example, but it's one example of real value that we believe could be applied to other medicines in our pipeline. And we're just now thinking through how we take that and other functions that Akcea has created to support the commercial business and bring them into Ionis in a way that can support our Ionis-owned pipeline. And we'll be talking more about what that looks like as we get closer and closer to -- actually, as we get to our R&D Day in December. So you should stay tuned, we'll be giving a lot more insights as to our commercial strategy and our sense of capabilities and how those are going to build as we get to -- as we move into this integration.

And pivoting off of that last point of R&D updates for the balance of the area. You called out the R&D Day. One of the items that we've been waiting to see a bit more on is some initial data from sort of the first of the oral compounds being developed for some of your collaborative structures. How should we think about -- is that still a fourth quarter potential update or second half update? And is that R&D Day, one venue perhaps to think about for a discussion of -- for a sort of next-generation opportunities around oral ASO formulations?

There is some time. Thank you.

Yes. So that still is a second half update. And last week, the American Heart Association published the titles of a couple of abstracts that AZ and Ionis are presenting on that particular program. And so that will be discussed at the American Heart Association. And so the oral program partnered with AZ is a nice one because they're pursuing both a subcu formulation of this drug and an oral formulation. And the key advances that make oral sensible in this indication are the combination of potency enhancements of the technology platform from what we call our Gen 2.5 chemistry, which engineers higher binding affinity for the target into the molecule and improves potency. And that's combined with our LICA platform that targets the drug to the hepatocyte in the liver where we really need it for this target. And so that gives us a huge increase in potency, which makes the fairly low, 5% to 10% oral bioavailability that we've seen with other programs now commercially viable. So I think it's an exciting advance for the technology, and certainly is an interesting program to put oral in.

And for the sake of everyone in the conversation today being on the same page, can you just remind us in terms of the existing collaboration relationships for some of the cardiovascular and cardiorenal programs, particularly those targeting large markets.

Yes, sure. So...

I'm saying about the oral there and whether or not that would be a separate? If an oral were viable, is it a separate new collaboration versus build on to existing collaborations?

Well, I guess I'll start -- you asked me for a collaborative kind of an overview of the program. So I guess I'll start with those and then talk about how we could work oral into each of those programs. So I'll start with the Phase III program. The molecule now has a name called pelacarsen. This is targeting a protein called Lp(a) which is a risk factor for cardiovascular disease independent of LDL cholesterol. So you can have cardiovascular disease and normal cholesterol and high Lp(a) is associated with that risk. That's in partnered with Novartis and is currently in a Phase III program with the pelacarsen molecule, which uses our LICA platform. Roughly 15% to 20% of the population of the planet has high Lp(a). So you can envision that an oral formulation for that drug, were it to be viable, would be very interesting to think about and consider. And we would have to do that in concert with our partner since they licensed the Lp(a) target from us and are working on that program. Another large patient population asset is a drug called vupanorsen, which targets angiopoietin-like 3. This lowers a series of atherogenic lipids lowering -- angiopoietin-like 3 lowers a series of atherogenic lipids, such as LDL cholesterol, VLDL cholesterol and also triglycerides. This is partnered with Pfizer. They picked up an option on that program last year, and have vupanorsen, which is also like a molecule slated to data Phase IIb study to find a dose and then hopefully take that into a large Phase III outcome study for cardiovascular disease. And Pfizer highlighted that in their -- in a presentation last week as one of their future bought clusters. So we were pleased that the value of that program is realized by Pfizer as evidenced by their license. And again, because of large patient population, you could think about that program for advancing in oral. And of course, we have to engage Pfizer in that decision and discussion. We also have now Ionis-owned via the Akcea acquisition programs in APOCIII and TTR. Both of those are also LICA molecules and could be considered for oral. APOCIII is a target that lowers triglycerides. So this would be a pure triglyceride-lowering target. Right now, it's in Phase III for FCS, which is the same disease that WAYLIVRA is approved for in Europe. And because it's a LICA formulation, we think this would be a vastly improved version of WAYLIVRA and do the same thing. There's also other high triglyceride indications that we're thinking of moving that drug forward and ranging from things like MCS, which is modestly high triglycerides, all the way to the cardiovascular outcome patient population, which would be competing with things like fish oil. So again, if you can think of a -- if you -- an oral formulation there would make sense if it was viable. Also have TTR LICA for polyneuropathy and cardiomyopathy. Both of those programs are currently in Phase III and Ionis-owned assets. And the cardiomyopathy patient population is pretty big and is -- the standard of care is tafamidis, but we think lowering agents will do very well both in combination with tafamidis and I'm cautiously optimistic that the lowering agents will outperform it. So again, you can think of oral moving forward par -- were the technology to be proven successful.

And -- so maybe we can talk about TTR in the context, maybe sticking with the sort of observation or the opportunities around oral reformulation and sort of using that as a bridge to talk more specifically about TTR. How do we think about, as investors, the priority of sort of these different formulations against just sort of target validation? In other words, get something to market in the form of LICA, which shown itself to be a really powerful platform versus listing it, from a commercial perspective, having an oral to go with tafamidis, which is an oral, would be marketing guys would probably be pretty happy with that. So I mean this kind of push and pull between, you only have so much to invest with regard to asset or indeed to get certain programs to the point of benefiting patients versus investing in next generation platforms, where there's significant commercial upside perhaps with alternative oral formulation?

Yes. I mean, I don't really think of it as an either/or. I think of -- that the subcu formulations are there now, and we can get them to patients who need better therapies and treatments now. And the profile of these LICA medicines with subcu administration is very compelling. So we're in low volume, low dose monthly or even less frequent administration, which is -- we think it's convenient for patients. We know the drugs are -- get to where they need to go with that regimen. We know that the side effect profile is near pristine. And we know that they'll work in these indications that we're in. So we certainly are very interested in advancing our subcu formulations. That being said, another formulation, such as an oral, and this is the reason AZ is exploring this, adds extra convenience for patients who might prefer an oral formulation. And it also helps position some of these programs in what is likely to be a competitive marketplace. So I think both makes sense, and we're interested in pursuing oral to add to the technology platform. And -- but I don't want to give the impression that you just snap your fingers and create an oral formulation. It's a lot of work. And each of these programs will take some time and optimization of the oral formulation for that particular molecule to move it forward. So I think that both things make sense to do and that both things should be pursued. And that's what we do.

And extending on the discussion of TTR, particularly TTR LICA program do have an ongoing Phase III, can you just provide us an update with regard to how enrollment is progressing? And any impacts you may be seeing with regard to COVID-19-related disruptions in the health care system?

Yes, sure. I mean all of our Phase IIIs are progressing well to my eye. And we're very encouraged with how things are going. So we're happy that they're on schedule as planned. I mean, with regard to COVID, COVID was pesky for everybody in the space. And I think that the teams at Ionis did a great job managing this. And have had -- the COVID has had a very minimal impact on our high value and especially, our late-stage programs. So I think things that may have been delayed a little bit, have been catching up or are on track to catch up, and we remain in good shape for meeting our initial projected time lines on the key assets.

Great. And then sticking to TTR, the kind of discussion maybe of TEGSEDI and similar line of thought, though, any impacts -- lingering impacts from COVID-19 with regard to either new patient enrollment or compliance with TEGSEDI?

Do you want me to take that one, Eric?

Go ahead. Yes.

Okay. So I think TEGSEDI is well positioned in this current COVID environment as a once-weekly subcu injection that you can do at home. And we found that, that benefit has been magnified in this COVID environment. So more and more patients are on therapy now as a result of the ability to do this at home. It makes it easier for them, certainly. We ship them a month's worth of medicine to their home, and they basically just take their injections once a week. So it's really simple from that perspective for them. So we've seen patient growth from that. We've seen a little bit of a delay in new patient starts, but that's been picking up. And really was just a little bit of a blip, as Eric said, early on in the coronavirus situation. So I think really, the key takeaway for us is just the real benefit of having an at-home subcu injection and not having to go to a clinic or go to an infusion center for your medicine. And that's been a tremendous benefit for patients worldwide on TEGSEDI.

That's super helpful. And I do get questions periodically from investors who want to better understand how TEGSEDI fits in, in a portfolio if there is subsequent regulatory approval for TTR LICA where the Phase III program does focus heavily on cardiac TTR and cardiomyopathy? How does TEGSEDI sort of fit in where there is a TTR LICA on the market for polyneuropathy patients?