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

Hello, everyone, and welcome back to the next session in our suite of presentations for our 10th Annual Global Healthcare Conference. I'm Mani Foroohar, senior analyst for our genetic medicines team, and I'm fortunate to host Eric Swayze and Wade Walke from Ionis Pharmaceuticals. How are you guys doing today?

Doing Great. Glad to be here. Thanks for the opportunity.

Okay. So I want to start just by working through some of the sort of key questions around the pipeline you guys have already reported for the quarter. So those numbers are already out. So we can just dive into the science. For those in the investment -- in the investor audience, if you have any specific questions, things you wanted us to follow-up on, please enter them straight into the video -- into the video, will be directly below my face or if you can enter the question into the prompt there, or e-mail me directly at mani.foroohar@svbleerink.com. I'll have to share the questions, and we'll introduce them into the debate. But let's start with an interesting question that doesn't have a clear answer yet, but I'm interested in how you think about it, Eric, which is how does knockdown of ENaC translate to clinical efficacy in human CF patients? And does that ENaC answer even exist yet?

Well, I like your last part, that's probably what we're trying to answer. So we know from -- in our preclinical models that around a 50% reduction in ENaC is giving a disease benefit in the animals, right? So for whatever that's worth, then question is -- good questions, how's that translate to a human disease? But the mechanism of ENaC inhibition makes sense. So it -- lowering ENaC rehydrates the lung. 50% reduction in a preclinical model, we see lung rehydration. We know that in mucus models, our drugs penetrate and get into the tissue roughly the same that they do in a non-mucus situation. So that gives us confidence that we're engaging the target enough. When we combine that with our Phase I data, which we've shared where we were getting over 50% target engagement in healthy volunteers, as measured by PCR of bronchial brushing. So I do feel good about our target engagement that we're on the dance floor for where we need to be, with our weekly dosing the aerosol administration. And gradually the hypothesis for testing in our Phase II program is -- can that have a benefit? I think it's going to take a while to definitively get to that answer. What we have ongoing and we'll report out later this year is a Phase IIa study, really, which is a safety study in patients. So of course, we're looking at lung function measurements, but it's not powered to be a true proof-of-concept, disease benefit demonstrating study. It's powered to be a safety study that sets us up to do further proof-of-concept work. We're still certainly hopeful we'll see some trends in the right direction with measurements like FEV1 that will convince us that our dosing is right. And the -- and that the target engagement is sufficient.

So one of the pushbacks that I get from investors when I talk about the opportunity for this, for this target is, but we've seen ENaC thrown at cystic fibrosis patients in many different ways, and it's never quite panned out. Vertex has had a couple of programs, various stages, et cetera. And so I think there's a lot of confusion around why things haven't worked and why they might work. Parse out how you think about the value of avoiding outside of the lung exposure to ENaC, avoiding kidney exposure, the value of that element of your platform versus just getting to higher levels of knockdown inhibition as we've seen with previous approaches. And how you think of each of those 2 pieces of your platform -- of your platform's technology and what that -- and why that suggests your ENaC approach could work for others or not?

Yes. Well, I think that's exactly the point, and both of those go together, right? So I don't personally know why the other ENaC compounds failed. Vertex might know why theirs failed. I certainly don't have the insight into the information that they have on their program. But it is a small molecule, right? And so the small molecule is going to have broad systemic exposure. It's known that if you inhibit ENaC in the kidney, you can get hyperkalemia. And so it's going to have on-target dose-limiting toxicities in some way. As to how the relative target engagement in the kidney versus the lung and the right lung cell population is for a small molecule, I have no way of knowing that. But what we know is that we will engage the target selectively in the lung because of the local aerosol administration and very, very limited systemic exposure after we treat locally in the lung. So we've looked at this extensively. While we do have some systemic exposure, it's not nearly enough drug to accumulate in any cell population and give target inhibition. And so we know that we're not inhibiting ENaC in the kidney at doses where we're getting lots of target suppression in the lung, basically maximal target suppression. So we think we can certainly get enough drug on board to give more target suppression in the lung than we need to test the hypothesis, whether ENaC suppression in the lung can do what people have thought it would do. So I think we're in a unique position to try and test that hypothesis because we don't have a systemic exposure.

That makes sense. And another question that I -- it was actually e-mailed to me by one of our investors, who I presume is in the audience now. Regarding -- so we saw a north of 50%, 50% knockdown in reduction -- excuse me, in healthy normals in ENaC. Obviously, lung physiology is different in CF patients. You talked about the mucus issue, et cetera. But isn't the healthy normal knockdown proof-of-concept enough for you to move into other lung indications? And I guess the question as it was phrased to me is, why not go into 5, 10, 15, 20x of whatever x number is of lung indications? Why go after something tough as cystic fibrosis first? Are there other indications, more normal lung physiology that Ionis could aggressively pursue?

Well, so first, I guess I'll just handle the lung physiology. We're not really concerned about the ability of our drugs to work in a diseased lung. And we get the mucus question all the time, do we penetrate mucus, how can you -- how do you know you'll penetrate the mucus? And until people start asking me that question, we really don't even think about it because -- or I didn't think about it, but because our drugs just penetrate the mucus. They're hydrophilic molecules. They dissolve into mucus. They diffuse through the mucus. And so it's not a barrier like it is to a more hydrophilic molecule that would be delivered locally. We've also looked in a whole host of variety of disease tissues broadly, not just lung, but definitely lung, and we rarely see a difference in the uptake and pharmacology of our drugs in a normal versus a diseased tissue. So I don't really think that's an issue for us. As far as the breadth and does the target engagement we've seen in the lung give us confidence to pursue lots of other pulmonary diseases where there's lots of unmet medical need? Absolutely. And we're doing that. So we think that the ENaC drug is -- can have lots of utility in cystic fibrosis. We think that rehydrating the lung and improving mucociliary clearance will help us in diseases like COPD with chronic bronchitis, which is why we started a Phase II program with the ENaC drug in that indication. We have an as yet undisclosed drug that is going to be entering, I think, clinical trials this year in another lung indication. We haven't disclosed the target yet, but we have a good molecule, and we're moving that forward into humans. And behind that, in the research group, we've been very enthusiastic about pulmonary -- our pulmonary franchise, as we're calling it. But they're merging and have a pretty big and focused group working on a variety of lung diseases. Because we're confident that with local administration, we can engage our targets and there's lots of unmet medical need. So we're being very aggressive in the space. I do think that the Phase I data is validating. Of course, we've got a lot more work to do to really demonstrate how our drugs perform in the lung to make the disease benefit. But I think it shows that we're on the dance floor, right? And we've got a lot of things we can do, and there's a lot of unmet medical needs in the space and a lot of tremendous commercial opportunities. So we're very enthusiastic about it. I think ENaC is a good first foray. There is unmet medical need in cystic fibrosis. There's a subset of patients that aren't treated. And if we can make a difference in that set of patients, I think that's a meaningful commercial opportunity for us.

So I want to follow-up that last -- on that last bit. I think there's a discussion on exactly where the unmet need is. I think it's very obvious in [ no mutants ] that there's an obvious unmet medical need, clearly not eligible for any corrector, et cetera, because there's no protein to correct, properly speaking, by and large. I think that's a fairly obvious opportunity. How do you think about the opportunity set in different genetic subpopulations of CF, for which there is some therapy available? Is there -- how do you think about the add-on opportunity and kind of do that study, given the broad adoption of oral therapies in those populations? And how do you -- how do those 2 coexist? Which comes first, and which is the follow on?

Well, I think the untreated patients come first. And we've said that, and that's the study that we're planning on doing. And I think that's planned to get started later this year, right? We also -- and it depends on how the drug performs, right? So if we really start to see a large benefit, then we can start to think about adding it on to the existing therapies. I don't -- and they should add well together, right? If you have an underlying genetic modifier that starts to correct some of the deficiency in the CFTR protein and add-ons -- but doesn't do it completely, right, and those drugs don't work completely, then an add-on something that improves hydration of the lung, you should have an additive or synergistic benefit. But I think we have to see how the data plays out.

That makes sense. Let's pivot off of ENaC in the lung for the moment and talk a little bit about novel generations of therapy. You guys have clearly moved through multiple generations of sort of pioneer days of therapy, which is technology that's found its way in some forms into a number of different companies. As you think about moving into the next generation, oral ASOs, novel tissue types, et cetera, are there novel technologies in terms of delivery, in terms of aerosolization, et cetera, that makes sense to add on to your existing platform? Or do you think that most of the changes you need to make to achieve those goals, oral, novel type -- [ digital types ] are largely going to be built out internally? How does BD fit into your R&D?

That's a good long-ranging question that has many facets to its answer. I mean I guess I'll start with the internal technologies. So as you alluded to, and I like these questions since I've been doing that my whole career at Ionis, is trying to engineer better chemicals. We've invested heavily in the chemistry of our drugs and the medicinal chemistry of our drugs. And feel like we have a pretty good handle on that and has continued to bring better and better chemical solutions to bear on the platform technologies, and we continue to do that. We've gotten quieter about what we've been doing in that space with the emerging competition. Some of our success is in the oligonucleotide space and the antisense space have brought in a lot of competitors. And so we've been much more quiet about the chemical classes that we've been pursuing. But we're making lots of progress in bringing new generations of chemistry to bear for future [ oligos ]. Those, like Gen 2.5 has done with improving potency such that we can contemplate oral in getting us into the lung and getting us into the kidney, will start to have new chemicals that give us better potency, better therapeutic indices that allow us to push the envelope farther. Coupled with that is a pretty large investment we have in what we call LICA, which is tissue targeting. I really think that's been transformative for the platform. The difference that's made in our drugs, which target the hepatocyte in their profile and our ability to tackle large, broad diseases like we're doing with pelacarsen in treating broad cardiovascular outcomes with Novartis, has been transformative. I think that, that will continue to be transformative for tissue after tissue after tissue as we look for additional ligands that get us into other tissues. We've talked about targeting the beta cell with LIP1 peptides. We've talked at a high level about targeting muscle with transferrin receptor ligands. We're working very broadly on LICAs for multiple tissues. That's a lot of technology that we're developing internally, and we're also looking externally for some help in that space. So we've looked -- we've disclosed, for example, a relationship with Arrow to get us ligands that bind things on the surface of cells. And that's why we've looked at externally is they have a [ Centurion ] platform that allows us to utilize those to engage things on the surface of cells to bring our oligos there. So that's the type of thing that we're looking at acquiring, is expertise that we don't really have that we could get externally easier than we can build it internally. For -- there was a second part to that question, which I lost at the moment.

I think you actually answered both parts while you were working your way through it in terms of addressing how you think about BD and how it fits into technology development.

I guess where I was going to go with that is, let's say, for other types of technologies, other -- we're -- I'd say that's farther out. So what I talked about earlier was how we're improving our current technology platform in -- with improved therapeutic index, improved potency and better chemicals and different tissues. We're also thinking about adding to it what we'll call the next antisense, another new thing. And there's lots of technologies out there. We're also looking -- that would be probably more BD, right? That would be more what could we acquire? Is there a new budding technology that we could bring internally, partner with. Those are, I would say, those are farther out towards satisfying the pipeline, but we're actively looking in that space, and we've talked about that.

As you talk about filling out the pipeline, obviously, your pipeline is tremendous and broad, in part, because of your ability to access sort of large established partners, especially useful in the cardiometabolic space, for example, but also because you continue to build out the wholly owned pipeline. Tell me a little bit about how bringing Akcea back in-house has influenced how you think about R&D priorities? I know it's changed the commercial side of the business by integrating what was previously a little bit of a disparate operation. But having that fully in-house, how does that change your view on what should go into late stage, what in commercial infrastructure can support the things that you develop? And does it lead to any philosophical change on how you prioritize different projects internally?

Yes. And I'll start with research since that's the part of the business that is my charge. And I would say it hasn't changed much at all. So we have always -- and lots of companies say this, but we really do it, we think about the patient first. And what drug can we bring forward that will make a difference in a patient's life, where the patient needs a change to do better? And we don't spend a lot of time thinking about whether the drug is going to make a gazillion dollars, we think about what is going to make a difference to the patient. And I think that when you make a drug and that makes a difference to a patient, then you can figure out how to commercialize it and bring return to all of your stakeholders and shareholders. We're not changing that. We're never going to change that. And I think our technology allows us to take a lot more risk in terms of therapeutic opportunities that might not seem like it's the greatest, easiest path because we have lower risk of engaging our targets and a more efficient path to making a product. And so I don't ever want to change that. I don't want to ever throttle the innovation that we have in our research teams to go out and pursue, what I'll call, crazy ideas, because some of those crazy ideas turn out to be great opportunities in the end. What our acquisition of Akcea has changed is as the drugs progressed and the ideas -- the science ideas, if you will, progressing the drugs, we think more about the product opportunities and what would be required in a development context to really demonstrate the value to the patient that I talked about and demonstrate that you're improving something that the patients and their physicians and the payers will care about, and demonstrate that in a way that allows us to make a good commercial product. So I think that, that line of thinking actually helped make us more innovative in a sense because we're thinking about how to bring the -- how to maximize the value of the drugs in the development sphere.

That makes sense. There's a question from the audience. You've looked at several generations of products in TTR with a next-generation product in clinical trials now. Is this an indication where you see an oral approach being appropriate as that technology develops? Or do you think that this will -- this in the long term will remain a subcu in frequently dosed market?