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

Hi there, everyone. My name is Tyler Van Buren, I'm a senior biotech analyst at Piper Sandler. Welcome to Piper's 32nd Annual Healthcare Conference. As this is our first time with a virtual format, we appreciate you all logging in. For this session, we're very pleased to have Ionis Pharmaceuticals here with us. And from Ionis, we have Brett Monia, the Chief Executive Officer; and Beth Hougen, the Chief Financial Officer. So I figured we could start with a brief state of the union of the company and the description of the science behind the drugs for those who are less familiar, which by now, I'm sure it's not many. But also, it would be helpful to explain why you guys are so committed to the antisense technology and what indications it could be used for.

Sure. Thank you very much, Tyler, and thank you for the invitation. It's a pleasure to be here. So yes, we're very excited about the platform we pioneered and have now validated. Ionis Pharmaceuticals is doing very well. It's really been a great year in 2020, and we're set up for a great 2021 and for a really great future -- well into the future. The technology we pioneered is called antisense. It's based on our technology in which we target RNA, and can either upregulate gene expression or downregulate gene expression by targeting RNA, which is very different than traditional platforms, which target proteins, small molecules, monoclonal antibodies and so on. And we're committed to it because it works. We're committed to it because we spent decades validating and improving it. And we're committed to it because what it offers that other platforms don't offer for drug discovery. It's an incredibly efficient and versatile technology, allowing us to tackle causes of diseases, which were not approachable ever before with traditional platforms. And the efficiency has allowed us to create a really exciting commercial pipeline with SPINRAZA, a major blockbuster for all forms of spinomuscular atrophy. TEGSEDI, WAYLIVRA, 5 Phase III studies in progress now with more coming for disease areas where there's an enormous unmet medical need in each case and a pipeline of 40 drugs. So we're committed to this technology tremendously because of what it's already delivered and the future is even brighter. New technology -- advancements in our technology that are allowing us to get to tackle additional disease areas through delivery -- different delivery routes, such as pulmonary delivery and oral delivery, and new chemistries that are allowing us to deliver our drugs directly to in a precision -- highly precision and in a precise way to specific cell types targeted delivery. So it's really -- the technology is even growing at -- is growing and it's going to offer even greater opportunities for the future. The disease areas because of the versatility are very broad. We're virtually in almost all areas where that plagued humans today, where there's a large unmet medical need, whether it's your pulmonary diseases, cardiovascular, neurological diseases, metabolic diseases so forth and so on. Our 2 largest franchises are in the neurological disease space where we have SPINRAZA on the market, and several Phase III studies in progress and a rich pipeline behind those. And the other large -- the second largest franchise in our -- at Ionis is cardiometabolic diseases, where we have 10 drugs now in development at least and, like neuro, several Phase III studies in progress. So the indications are broad. The technology is advancing and the pipeline is really exciting.

Beth, maybe just one general question for you. For the size of your company, you guys have a pretty significant cash pile. I think it's $1.8 billion, is the pro forma number, including the Akcea acquisition or merger, if you want to call it that. And you guys have a pretty -- you're in a unique position where you guys have been profitable as of late or at least near profitable. And you've got an R&D revenue stream that is contributing. So maybe you could just comment on that and the sustainability of the research and development revenues.

Sure, absolutely. Thank you. So as you said, we are in a very enviable position financially with $1.8 billion worth of cash after the Akcea acquisition and a very broad base of revenues from our existing partnerships and drugs under those partnerships. So historically, we've been able to generate well in excess of $300 million a year in revenues from our R&D partnerships. And so that has allowed us to continue to fund R&D ourselves as well as to build our organization now moving towards commercializing medicines ourselves, we'll be able to really fund a broad pipeline and build commercial capabilities. So R&D revenues are something that a lot of companies consider to be a bridge to their commercial revenues. For Ionis, they're foundational, which is, I think, something very unique to the company. It gives us the ability to really mitigate risk because we have revenues from multiple different sources. And that, I think, is a really important strength for the company. We expect that our R&D revenues will be sustainable well into the future as our medicines continue to advance in development. The milestones we earn will continue to grow to demonstrate the value that we're creating as we advance those medicines in development. And because of the productivity of our technology and the productivity of our partnerships, we anticipate bringing more and more medicines into development and advancing those through to the market as well. So with more and more medicines and more and more medicines advancing, you can anticipate continued growth, certainly continued sustainability and potential growth out of our R&D revenues.

That's great, yes. Thanks for that, Beth. So Brett, in his opening remarks referred to SPINRAZA, which is clearly a very important franchise for you all with annual royalties approaching $300 million. Could you just provide your greatest -- or latest, greatest and latest thoughts on the sustainability of those revenues? And in particular, some comments on competition. Zolgensma has been launching now for a little while, it hasn't really had a major impact. But obviously, there's risk to plan that we have to start paying attention to. So curious to get your thoughts on the SPINRAZA royalties in general.

Sure. I'll start, and then Beth could jump -- happy to have Beth jump in. So SPINRAZA is, of course, the first medicine ever approved for spinomuscular atrophy. It is indicated for all forms of SMA. It's a blockbuster breakthrough medicine for patients with all forms of SMA. With now more than 11,000 patients around the globe on drug, including presympt -- babies who are diagnosed genetically, who are presymptomatic and our living lives essentially normally being on SPINRAZA, it truly is a breakthrough. And we and our partner, Biogen, are expecting SPINRAZA to continue to grow well into the future despite emerging follow-on competition. As you mentioned, Tyler, gene therapy really has not had a significant impact on the commercialization -- of commercial upside of SPINRAZA because it's only indicated for a very small subset of the SMA patient population and the durability of Zolgensma has been brought into question under certain circumstances. And we know that some patients who have gone on to gene therapy have gone on to SPINRAZA. And in fact, Biogen is now preparing to launch a study called RESPOND, a post-marketing study, to test SPINRAZA in patients who are suboptimally treated with Zolgensma and that will start next year. Risdiplam is considered by Ionis and Biogen as a more significant competition. It is an oral formulation, and that's the advantage, that's considered the advantage, the convenience versus an intrathecal administered drug like SPINRAZA. Well, like I said, despite emerging competition, we and Biogen, expect continued growth for SPINRAZA and in particular, ex U.S. in the adult population particularly, with more and more countries receiving our market reimbursement and approvals around the globe, we expect SPINRAZA continuing to grow well into the future despite versus the plan taking on more patients itself. In addition, we know that the prevalence of SMA is much larger than what was originally estimated when SPINRAZA was first approved a number of years ago. Almost double -- or actually more than double, 65,000 patients versus 30,000 patients are estimated now around the and it's probably going to grow more from there. So and I guess the final thing I should say is the most obvious is that SPINRAZA has set a very high benchmark for all competition. Its efficacy is remarkable. And its safety and tolerability profile has been pristine, which is -- which sets, as I said, a very high benchmark for all forms of competition. We're going to have to match the efficacy and match the safety that SPINRAZA has offered. So those drugs, particularly versus the plan are in the earliest stages of their launch. We'll have to wait and see how they do in the real world. SPINRAZA has been around the real world for a very long time now. It's doing quite well, and we expect it to continue to do quite well. Beth, would you -- anything to add to that?

No. I think what I would add is just really to underscore your point around efficacy. Efficacy is critically important in this patient population. As Brett said, these type 1 patients, these infants typically die from their disease within the 1st year of life. And we know that on SPINRAZA, particularly if they're treated presymptomatically that they develop as normal healthy children. And so I think right now, SPINRAZA is the only demonstrated, proven, sustainable efficacy. And that's been demonstrating sustained across all ages and all types of SMA patients for nearly 7 plus years now. So there's a tremendous amount of not only clinical but commercial real-world data that demonstrates SPINRAZA's leadership, frankly, in the space. And that combined with its first-to-market mover advantage gives us lots of reason to be optimistic about its future growth potential.

With respect to your other commercial products, TEGSEDI and WAYLIVRA, could you just give us -- tell us about the current status of those launches? And when you would expect them to maybe accelerate and really become a meaningful contributor to the P&L?

Beth, do you want to help me around with that?

Help you around with that? Sure, happy to. So TEGSEDI is continuing to expand into new countries in Europe, across Europe. We've actually been pleased with the fact that we've been able to continue to add new countries with pricing and reimbursement approvals across Europe even in the face of coronavirus and the pandemic. And we've continued to keep patients on therapy. We've added patients. We've been able to continue to expand genetic testing. And our Akcea Connect patient support program has continued to function very effectively in the midst of this pandemic. And I think one of the benefits that has been well appreciated for TEGSEDI is its subcu at-home, once-weekly injectable formation. And I think that in this current environment is magnified, the ability to have your medicine literally delivered to your doorstep, and then to be able to take it in your home at your convenience, I think, is very much appreciated. And we've seen switching from competitor products as a result of that competitive advantage of an at-home subcu injection. So TEGSEDI continues to expand. We're looking forward to continued expansion into new countries in Europe as well as in Latin America, where PTC is commercializing TEGSEDI on our behalf. And then for WAYLIVRA, it launched late last year. And its launch has been a little bit slower as a result of the pandemic, but we continue to see encouraging pricing and reimbursement across Europe and look forward to that really getting more traction coming into 2021. And then as far as the U.S. is concerned, we're looking forward to refiling in the United States, and hopefully, we'll have WAYLIVRA on the market in the U.S. next year.

Okay. Now let's get into some of the pipeline programs. As Brett referred to, you guys have a very robust pipeline. But maybe before we get started on asking questions on some of the specific programs, if you could just highlight some of the several active Phase III programs you have ongoing?

Absolutely, happy to. It's a very exciting late-stage pipeline at Ionis, both rare diseases and broad diseases. We have 2 really remarkable programs in neurodegenerative diseases in late Phase III. The most advanced is our most advanced drug for ALS, 1 of 4 different drugs in development for ALS. This drug, tofersen, is targeting the genetic cause SOD1-ALS due to mutations in the gene SOD1. As you may recall, Tyler, we reported data late 20 -- late 2018, actually, we announced that we had a very successful Phase II outcome that led to the initiation of a Phase III study, which is now wrapping up, and we expect to have the Phase III results next year from that. We expect that to be our next commercial product, Tyler. The other neuro Phase III program is, of course, our Huntington's program with our partner, Roche. The Huntington's program is now fully enrolled. It's a 25-month study in which 800 patients approximately are being treated. And there's 3 treatment arms; placebo, bimonthly and triannual, every 4 months dosing. The drug is tominersen. And that will read out in 2022. And right now, it's all on track, it's fully enrolled. In addition, we expect an update on the open-label extension study from the tominersen Phase II study, that we conducted several years ago, next year in which an update on the open-label extension will be provided. The other Phase III programs are in the cardiometabolic space, pelacarsen, with our partner, Novartis, targeting a risk factor, cardiovascular risk factor, genetically caused called Lp(a) that causes Lp(a)-driven cardiovascular disease, heart attacks, strokes in patients who have abnormally high levels of Lp(a). Think of it like LDL cholesterol with the exception that there are no treatments for it. Statins, PCSK9 do not control Lp(a). We have a drug, pelacarsen, that targets the root cause of this disease. It's now in an 8,000-patient cardiovascular outcome trial with Novartis, due to readout in the 2024 time frame. It's going very well. And then the other 2 -- and that's how that drug, pelacarsen utilizes our LICA chemistry, which is a precision driven -- precision-directed chemistry that directs the drug directly to the site known. The other 2 drugs are also LICA chemistries and they're both follow-ons. One is a follow-on to TEGSEDI. Our TTR LICA drug, which is now in 2 Phase III studies, one for the broad cardiomyopathy indication, and it's enrolling rapidly; and in the same indication as TEGSEDI, the polyneuropathy indication for patients with mutations in the TTR gene. And then the other Phase III study that we're expecting -- or a drug which we're expecting to move into Phase III later this year is the follow-on to WAYLIVRA. APOCIII-LICA. That will start a Phase III study in FCS later this year. And then we're looking to start additional Phase III studies in the future. And we're hoping to get another one starting next year in patients with very high triglycerides. So the Phase III studies are moving along very nicely with our first of several readouts for years to come next year with SOD1 ALS drug.

Now maybe we'll finish with some specific program questions. You guys have a lot of early to mid-stage candidates that are emerging that we don't have in our models. You've had some recent proof-of-concept data from several programs, including your HAE program, ENaC program and PCSK9 program. But coming up at the Investor Day next month, you've got an AGT-L resistant hypertension update, I believe. So maybe you could just say a few words about what we should expect there?

Yes. We're very excited about this this program. We're targeting angiotensinogen, again, using a LICA strategy in the liver to block the angiotensin RAAS pathway essentially in the liver. We have now completed 2 Phase II studies; one in patients who are controlled, their blood pressure is controlled on existing therapies, but were weaned off of those therapies and put on our angiotensinogen LICA drug. And the question there was, could we control those patients as a monotherapy and keep them controlled. The other more real-world setting type of study is in patients who are refractory -- who have refractory hypertension. These are patients on at least 3 medicines to control their blood pressure and their blood pressure is not control. And we put them on our angiotensinogen drug in the Phase II study to determine whether we can get them under control whether we can lower their blood pressure. And both of those studies, as I said, are completed. And we are looking forward to sharing the results of those studies at Investor Day on December 7. That drug is also -- and very importantly, we're also excited about sharing the safety profile of that drug because it's very important to inhibit angiotensinogen only in the liver and not in the kidney due to some side effects that -- on-target side effects that can occur if you inhibit the RAAS pathway in the kidney. We'll talk all about that at Investor Day. This drug is now moving into additional Phase II studies in hypertension and in heart failure, and we'll update on that as well.

Great. Maybe we could get into the neurology pipeline a bit with a couple of questions. Next year is going to be a big year for the ALS franchise, as you referred to. And we're going to get SOD1 and C9ORF data, and you mentioned, I believe, 4 main programs progressing in this area. But specifically, can you give us any more granularity on timing for the SOD1, C9ORF data and what we should expect from those readouts?

We believe that we have the premier program hands down in treating the root causes of all forms of ALS. As you said, Tyler, we have 4 drugs in development now; 3 for genetic causes of ALS and the fourth for the broad indication in all forms of ALS. Next year, as I already mentioned, we plan to share the Phase III results. First, our SOD1-ALS due to mutations in the SOD1 gene. And in addition, Phase II results from our program that's evaluating our C9 drug in patients with C9 ALS mutations in the gene C9. And we're expecting results for both of those programs next year. We haven't put out any more details as to when next year. We'll get it out with our partner, Biogen, as soon as it's appropriate, but it will be a big year for ALS as you said. In addition, we plan on starting a registrational trial for another genetic cause of ALS next year due to mutations in the gene called FUS. And this is an Ionis-owned ALS program, exclusively, no partners, and we plan to start that registration trial and bring that to the finish line ourselves. And this is one of many drugs in the Ionis-owned pipeline that we're planning to bring to the finish line and to commercialization in the future. So it is a big year for ALS next year here at Ionis.

On tominersen and Huntington's Phase III program is ongoing, it's going to be a little while longer until we get that pivotal data, but you'll have open-label extension and natural history readouts next year. I guess, what should we expect from those 2 readouts and will it allow us to have, I guess, modify or probability of success for the Phase III? Will we get composite endpoint functional data? Or what should we expect?

Yes, the data for the Phase III study is due out 2022. It's not that far, I mean, considering patients with Huntington's disease have been looking for a medicine like this for generations, and we're getting so close to the finish line. But the open-label extension that you refer to is going to be -- an update will be provided on that study in the natural history next year. Certainly, we're going to be looking at how well tolerated the different dosing regimens are, it's important to give confidence that the Phase III study will read out on time, on track as designed and as well as sustained reductions from pharmacodynamic markers, specifically Huntington reductions in the CSF. What those reductions look like with the different dosing regimens and how sustained they are, safety on biomarkers and those sorts of things. And there'll be some assessments of cognitive and motor functions, of course, that are similar to the Phase III readout. And will also be used against the natural history study, which will also be presented, 15-month natural history study in patients with Huntington's disease, with examining additional -- or examining similar and clinical endpoints as will be examined in the open-label extension and in the Phase III study. Certainly, that study could lend confidence in the Phase III outcome. It's also important to keep in mind that it's a shorter study and a much smaller sample size, 15 months versus 25 months. And maybe you've got 60 patients, 60, 70 patients or so compared to 800 in the Phase III study. But that's what will be shared next year, and I believe will give confidence to the Phase III study outcome.

Okay. Maybe in the last couple of minutes -- 25 minutes moves by very quickly. We can touch on the cardio renal franchise. You guys had an educational webcast fairly recently. It includes TTR LICA, APO(a), vupanorsen, APOCIII. I guess, if you are to speak about 1 program in that franchise, which one would it be and which one should investors pay attention to right now?

Well, it depends on how patient the investors are. I mean pelacarsen is an enormous market opportunity with 8 million to 10 million people around the globe affected and are at-risk for cardiovascular death due to high LP(a) levels. And we are way ahead of any competition, and we're targeting the root cause of this disease. In our Phase II study, we were able to normalize LP(a) levels in virtually all the patients, in nearly 300 patients over 6 to 12 months of treatment. So I mean, it depends on your patients, right? That's 2024 readout. In the shorter term, I have to draw attention to APOCIII LICA. It's an exciting opportunity for triglyceride management. FCS is an ultra-rare disease. And we're expecting that study to be very successful because it's a better drug than WAYLIVRA. And WAYLIVRA was very successful in FCS. But we're moving that drug into larger populations that can read out quick in a shorter time frame than pelacarsen. They are populations such as those with severe hypertriglyceridemia who are at high risk of pancreatitis and cardiovascular disease, and we're looking very hard closely at this indication to get that Phase III study, which should be a very -- reasonably simple streamlined Phase III study based on reductions in the biomarker triglycerides that we'll get through -- we think we'll get to an approval in the U.S. and this is an indication that affects millions of people in the U.S. alone. So I would highlight those 2 from the cardiometabolic franchise, Tyler.

Okay. Great. Well, unfortunately, we're up on time, but Brett and Beth really want to thank you for your thoughts. It was a comprehensive yet efficient discussion, and thanks to everyone for logging in.

Thank you, Tyler. It was a pleasure.

Thank you.

Take care.