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

All right. I want to thank everyone for joining us today. This is Kevin DeGeeter with Oppenheimer. The next presenting company is Ionis. And it's going to be structured as a fireside chat. So going to look to just jump right in. Eric, maybe you can just briefly introduce yourself and maybe give us the 60-second overview of the Ionis ASO technology platform? Sure.

Thanks for having me on, Kevin. I appreciate the opportunity to chat. So I'm Eric Swayze. I am the Head of Research at Ionis. A long time Ionis veteran, I've been here since 1994 and have been heavily involved in bringing the technology forward. So on a medicinal chemist by training and started off trying to make better building blocks for antisense oligonucleotides. And the 60-second overview is we make precision genetic medicines. They're designed to bind to the -- to all forms -- any form of RNA, which is the intermediary between genes and the function of genes in the cell. And what we can do is modulate gene function and modulate the function of genes by binding to RNAs. We have a drug called SPINRAZA that's partnered with Biogen, which modulates a gene called SMN that restores a lost functional protein in spinal muscular atrophy, and has really transformed the disease. And we have lots of drugs in later-stage clinical trials that lower targets and lower expression of genes and marketed products such as TEGSEDI and WAYLIVRA that do that. So that's the 60-second overview. Rich pipeline, happy to discuss questions about any of those assets and strategies.

Yes. So against that backdrop, I want to take a little bit different take on kind of the standard question of how to think about the next kind of 12 to 18 months of kind of news flow and update. And take it from the perspective of you sit in, leading the R&D group. What piece of learning, a card will turn over in that 12 to 18 months period, do you think that's going to be the most informative of incrementally understanding and validating some of the continued investments and what's really continuum on the platform at Ionis.

Yes. So I don't necessarily have one card to turn over. So that's a good question, but a tough one for me to answer because there's a lot going on. And I don't think any, really, singular card for Ionis is just positive on the technology. We have lots of bets in lots of places. If we start with our liver targeting drugs where we use a variety of chemistries with the GalNAc targeting LICA, we know they work, right? So we know they get to the liver. We know the doses. We have a wealth of Phase II data on those medicines, and we're pretty confident that they're going to lower their targets to the degree we want. And so there, the question becomes for each asset, does lowering the target to the degree that we are confident we can lower it, make a benefit in a particular disease. And so I don't think that's really a dispositive technology aspect. There's lots of cards turning over in that space. It's -- did we do the right thing for the disease. For example, in our PKK program, we're going to present Phase II data. It's a competitive marketplace. Is our PKK inhibitor going to reduce HAE attacks as well as lanadelumab, the current standard of care? And do we think we can competitively position in the marketplace with that type of inhibitor relative to an antibody? So I think those are key questions, but they're not really dispositive for the technology. I could pivot to pulmonary and say, well, we have an ENaC inhibitor where we're going to have some Phase IIa safety data. That's not really going to be dispositive for whether it will make a difference in cystic fibrosis or in our second indication with that drug like COPD with chronic bronchitis. And we know that we engage the targets. So we've already presented Phase I data on that. We're engaging the target in the lung. So I think that data was pretty important for us because that showed that the class of chemicals that we're making without any targeting ligand can be delivered specifically to the lung with local administration and modulate the target. And then with our technology, once we've modulated ENaC, we can modulate multiple other targets in the lung, and it opens up a whole new area for us to practice in what I call a pulmonary franchise. And so there's lots of unmet medical needs and we have lots of drugs. And then if I could just say, there's a neurology franchise again, SPINRAZA certainly was dispositive data that says we can make a difference in a severe neurological disease and really reverse or prevent a motor neuron disease, where that was unheard of before, and no one knew if that was possible. That was really cool data, and it enabled us to expand into ALS, where we now have multiple programs in ALS. So if I had to pick one, I guess I pick the tofersen data because there, it's a Phase III readout later this year, intervening on genetic mechanism, lowering SOD1 in SOD1-driven ALS where it's a known pathogenic ANA function, great preclinical data, great Phase I data in fast progressing mutations where arrest of the progression. And it's a proven in Phase III, proved that we can make a difference in ALS, proved that lowering the genic target can stop another motor neuron disease and a neurodegenerative disease, which I think really sets us up for the breadth of our neurology pipeline, which is pretty deep and pretty wide and growing. And we have lots more things coming that we haven't disclosed that are going to move into development in the next several years. And if we can make a difference in neurological diseases with 2 drugs, it means it's more likely we can make a difference with 5 or 10 drugs, which is what we aspire to do.

And let's touch on the neurology pipeline for a moment. I mean, the company does, through its collaborations with Biogen, have a really broad footprint in development for ALS and a number of other large market opportunities, Huntington's and others. But you also have highlighted some of the opportunities for development of more rare opportunities that can be wholly owned by Ionis. I think we are -- from the investor side, the question of advancement of some of these wholly owned programs is, I think, central focus for us. So I want to pick up on your last comment about further pipeline expansion in CNS. Should we think about that as remaining balance between large market opportunities for partners and more of these wholly owned opportunities for Ionis or, from an R&D perspective within CNS, more heavily focused now on some of these more rare indications that may provide an opportunity to be commercialized wholly in-house?

Yes. I think it's going to be a mix, actually. And just -- Huntington is partnered with Roche. It's one of our programs that's not partnered with Biogen. So we have a pretty broad strategic relationship with Biogen, but we did partner Huntington with Roche in the midst of doing that. So -- and that Phase III is on track and scheduled to read out in 2022 for Huntington's disease. So another exciting program. As far as the newer pipeline assets, a lot of them were developed by the research team because they were such great opportunities. And it was clear that the technology could do something in these spaces that just really demanded we take a crack at it. Some of them were crazy ideas. When I first heard the Alexander disease concept of lowering GFAP to treat Alexander, I didn't know anything about the disease. I said, "What? You want to lower GFAP? That's insane. Why would we do such a thing?" And then what's the disease? Where are the patients? And then you learn about the disease and okay, well, there's patients that really need a treatment and you learn about the biologic mechanism and think, well, geez, it's a disease that's driven by a dominant toxic gain of function mutation in GFAP, which activates GFAP. And so there's this feed forward cycle where if you have bad GFAP, it activates itself and kind of the brain just goes nuts and creates this horrible leukodystrophy in these little kids. And it's pretty straightforward. Well, gee, we can lower GFAP and does that stop it? And then we did the mouse experiment with a collaborator and it was just spectacular data. And so it kind of demands that you develop that drug and find a commercial path for it. And it's things like that, that kind of spearheaded our commercial wholly-owned pipeline. It's like, well, we think we can make money in this space. We think there's a market. Truthfully, it's a program that, because of the smaller market size, isn't that amenable to partnering, but it makes sense for us. And then there's a whole host of these types of opportunities. Lafora disease is another one where it's a glycogen storage disease that accumulates excess glycogen. Well, let's lower glycogen, see if we can reduce the seizures. And there's a host of these. We also have a mix of diseases coming. I can't really discuss the specific targets that are going to be out in the zone. They are for broader indications. The neurology research group is amazingly productive. The technology is amazingly productive. And we can produce more good therapeutic opportunities that fit with our partners' programs. And so they get returned to Ionis, and we think they're great opportunities for us and we're going to start developing multiple opportunities. So I think you'll see a mix of Ionis-owned rare opportunities with broader opportunities that are Ionis-owned and continuing with the partnership. The partnership with Biogen's been great, excellent partnership, valued strategic partner with lots of assets, and they're going to keep moving some of them forward.

I want to revisit the general topic of additional modes of delivery, oral, pulmonary, skeletal, muscle. It's kind of, once again, sort of a wealth of activity, all sort of at kind of earlier kind of approaching proof of concept. So maybe we can start with oral where we did have an update in the fourth quarter through a partnered program for the PCSK9. How do we think about next data points around oral? Do you think those are likely updates from your partners on their selection of a path forward with a next-generation compound? Or are there opportunities to get updates perhaps on internally developed or other partnered programs that may sequence them before for investors who want to see more data around that mode of delivery against other targets?

Yes. So on oral, I only view oral as a journey and a long-term journey, right? And it's a way to add convenience to patients and differentiate our drugs in competitive marketplaces. And so I almost think of oral as a life-cycle management type thing. So right now, the only things that are amenable to oral will be our liver-targeted LICA drugs. And the reason for that is we need the potency of those molecules to compensate for what we know will be low oral bioavailability. And the math works when you think, well, even if you get 5% oral bioavailability, because the drug is still potent, we can think about a commercially viable form. And that's what led to the PCSK9 oral program with ACE. We're very disappointed that we're not doing a MAD trial right now to really see if it works in humans. But I understand ACE's decision to advance the subcu drug very aggressively because it was working so well and we had what looked like a best-in-class inhibitor. And so what we're doing with oral is continuing our journey and continuing the process. We're working on it for Ionis-owned programs. Our intention is to get an Ionis-owned oral formulation into development this year. We -- it'll take some time to get that work through toxicology studies. We want to anticipate problems, so we got to get -- do the experiment and then get it into a human experiment where we can do a repeat administration of long enough duration to get to steady state and show target reduction. So that's the killer experiment, but the key readout, it's going to take a while to get there. And it's a journey. And what we want to do is make sure that we have the best possible oral formulation with that drug so that we can then pivot that drug into giving at convenience for patients in the marketplace we choose. So that's oral. I'd love to talk about some of our other expansion into delivery modalities and -- that I think nearer term, right? So liver-LICA like it is here. We're fully intent to have commercialized products with the liver-LICA very soon. If you look at our cardiovascular pipeline, it's full of them. And that begs the question, well, are there other LICAs? Can we target other tissues? That started our path down -- our research down this path. We have presented and published data on pancreas-targeting LICA where we use GLP-1 peptides to target the beta cell of the pancreas. That gives us really nice target engagement in preclinical models where we had known it all without the LICA. And my analogy is it's like life and the -- intelligent life in the universe. If you find 2 instances, there's probably a whole bunch more. So once we found 2 LICAs that work, we said, "Wow, this -- maybe this is really broad." And we started looking very broadly across the space. We're working aggressively to try and find LICA technology that delivers drugs to the lung and does it better than the local administration we're doing now, increased potency on the lung, much likely increased potency in the liver with the liver-LICA. And we're working hard on muscle where there's lots of unmet medical need in neuromuscular disease. And we pay attention to the literature and seeing that engaging transparent receptor really gets you across the vasculature and into the muscle effectively. And it looks like it can be transformative for muscle, much like the GalNAc was transformative for liver. So I'm very bullish on LICA. I think there's lots of opportunities in this space. Each like it's hard work. It's kind of its own adventure and discovering the right ligand and the right technology to get it there. But once you find it, you then have an opportunity to make multiple drugs that use that technology. So the investment's well worth it.

And if you look out at the landscape from a BD standpoint, many of us in the investment community have tended to see Ionis as an out-licensor of product candidates just based on the wealth productivity. But as we think about the series of thoughts you just laid out in terms of the importance of ligands targeting, is that work you think, over the next several years, driven primarily from in-house innovation? Or do you view business development as an important adjunct to bring in some of the additional know-how to further accelerate the opportunities for more targeted delivery of LICA to other tissue type?

Yes. So I think it's interesting. We have historically been an out-licensor of drugs. And of course, now we're engaging in commercializing our own. But in addition to that, we have enough financial strength that now we can look to be an acquirer of technology that we think would complement ours. And that is both in technologies that complement our base, antisense platform technology that will do things that we don't do as well as we would like in some instances. And also what you alluded to is acquiring technology that will help us with LICA and delivery. And there, one of the key things in LICA technology is acquisition of ligand. So you have to -- even if you find the great thing that's expressed on the surface of the cell that's going to bring your drug in, you need something to bind to it. You need something to engage it, and you need to a ligand. And that's -- an example of that would be our collaboration with Arrow, who specializes in making nanobodies, Cinterion-like things that will bind to various proteins on the surface of cells. And that's an example of a technology that we've gone out and gotten that we think will help us get better LICAs. We're also developing things in-house. But I think you'll see more of those types of deals with us where we get some technology that helps us do things like make better LICAs.

And I do want to return to pulmonary, specifically the ENaC and CF opportunity. We will get an additional data readout this year? Just how should we think about benchmarking there, both in terms of tolerability and drug activity to support further development?

Yes. So I mean the ENaC Phase II readout that I believe was going to be presented at ATS in May is -- it's a Phase IIA. So it really is a safety study. The numbers of patients are not that great. And we don't -- we haven't powered it to give statistical measures, sort of things like FEV1. So it's a safety readout, and that's what we're looking for. We've already started a phase -- a broader Phase II study for the ENaC drug in COPD with chronic bronchitis. So we believe in the target engagement we saw in Phase I. We believe that's going to translate. And we think it's worth testing in a broader Phase II. And we have plans later this year to start another Phase II study with the ENaC molecule in cystic fibrosis patients that are not amenable to CFTR modulator therapy, which just makes perfect sense for the drug, right? I mean TRIKAFTA's a fantastic drug. That's been really helping the lives of patients with CF, but it doesn't serve all of them. And so we're looking to try and see a benefit in patients that are -- they don't have good therapy right now.

And then as we sort of look sort of deeper into the pipeline, I do want to kind of also revisit the cardiovascular franchise. Once again, just incredibly rich sort of later-stage data readouts. But one of the updates that you provided some clarity on earlier this year was Phase III plans for the APOCIII opportunity. Can you just kind of walk us through study design there and how we should think about pace of enrollment and time line data readout?

Yes, sure. So the study we have talked about with APOCIII LICA is in FCS, which is fairly rare high triglyceride disease with stratospherically high triglycerides that put patients at risk of pancreatitis and a host of bad things. Our drug, APOCIII LICA lowers triglycerides, lowers APOCIII, which is key in triglyceride maintenance and flowering APOCIII, lowers trigs dramatically. It's -- I think it's the best mechanism out there for lowering tricycles. It's the same mechanism as WAYLIVRA, nearly the same drug with the LICA on it, which is approved in Europe for lowering triglycerides and treating SCF patients -- FCS patients. And so the trial is very similar to that trial, where we're enrolling patients with FCS and treating them with our drug. And lowering triglycerides, it seems like kind of a slam dunk, right? We know the drug's going to lower triglycerides because we know the dose. And so that trial's progressing. I believe it's scheduled to read out in 2023. And we haven't said exactly what it is. But we've announced that we're going to start another high triglyceride indication for the APOCIII LICA later this year and get that up and running. And that's a good example of an Ionis-owned program where we think there's lots of value in that program. And currently, that's all Ionis-owned.

And then kind of sticking on some of the more orphan opportunities that are being driven in-house. Can you talk a little bit about the company's development plan for Lafora and how you think about patient selection, in particular, for that indication?

Yes. We really haven't discussed development and clinical plans. But we've done a lot of work looking at natural histories in Lafora and other diseases, the rare neurology diseases. So we've got a good feel for what the patient's journey is and what benefits we need to make and want to make to really improve the lives of the patients. And Lafora is -- it's kind of a tragic disease. It happens in kids and young adults. And they are -- they're normal, and then they start to seize. And as the glycogen builds up, and they have really catastrophic seizure events that cause terrible neurological consequences of many forms. And so the idea is to intervene in that process as early as we can, lower their glycogen burden. And we've shown preclinically that we can lower the Lafora bodies, which are the abnormal glycogen accumulations, and then try and then see if that reverses the disease and measure things like seizures and EGS and the other obvious things to try and demonstrate benefit. And that's an encouraging program. Hopefully, we can get that going within a year and start those trials. A lot of these smaller indications also present nice opportunities for more streamlined clinical design than the standard model where because they're rare and they're very severe diseases, you can do some creative thinking about trial design that gets them move fairly quickly. I'm sure we'll discuss them with that when we start to get the compound moving.

That's super helpful. And then just as we think about some of the partnered programs, Huntington's, sort of any update or how we should think about a time line partner, Roche, to -- I guess there's 2 potential read-through there. There's a longer-term follow-up on the Phase II cohort and then the ongoing Phase III. So any updated thoughts there, particularly with regard to the value of any read-through on that longer-term follow-up from the prior study?

Yes. I think that the numbers are too small in the prior studies to really make a dispositive readout and a judgment on that data. And I would remain singularly focused on the Phase III trial. I know people want to read something into that study, but I think we all just have to wait until the Phase III readout in 2022. That's the experiment that was designed very sensibly by Roche in consult with us after we saw the Phase I data. And we said, "Hey, wow, we're lowering mutant Huntington. This is terrific. We're doing exactly what we think we should do in Huntington's disease, lower the cause of the disease and -- which has worked preclinically in multiple labs with multiple models. So let's do the Phase III experiment." And to Roche's credit, they designed a great Phase III trial and are executing it. 800 patients, 2 dose groups, fully enrolled, just right about the time COVID blew up, and study is progressing, and it's on track to read out its 25-month endpoint in 2022.

And I want to build off at just how your -- just a comment there with regard to the impact of COVID. And just -- I think those who are in the investment community spend a lot of time thinking about impact on clinical trial, enrollment, design, data, the integrity, a whole range of issues over, really, last year. But we tend to discuss a lot less about the impacts on internal R&D productivity and how organizations have structured their teams to remain innovative and productive on the discovery side of the equation. Just kind of what are some of the learnings now that we're a year into this and hopefully, the trajectory to an improving environment exactly?

Yes.

I mean what are you doing differently? And how -- I mean is there sort of just a natural disruption that's going to kind of flow downstream from the last year? Is that at least within the 4 walls of Ionis? It's not really the case?

So within Ionis, I don't think that's the case at all. And it's amazing across all of economic activity and the country, how adaptable the world is, right? I mean, one, we're talking on Zoom right now. Thank God for Zoom. And it's really allowed us to continue to function. We really never missed a day of flat productivity at Ionis. I mean people were stressed. And -- but people were coming to work. And we need to stay open. We kept our labs open. We developed a whole host of plans, which we thankfully never had to execute, ranging all the way down to we're going to have 5 people in here having to sacrifice all our animals because we don't have to be able to take care of them, which is just a tragic thing to do. And we never had to -- we never really had to do that. The worst we had ever had to do was do prioritization studies, but we kept everything going. All of the research programs are mostly on track with no time line slippage. And I really commend our whole team, who's both research and research support, who's been coming in to keep the lights on and keep stuff running. And I think that's probably been fairly consistent across lots of other companies. I think you probably hear more than I do. But I think people have done a tremendous job keeping the economy functioning through a pretty ugly mess. And hopefully, we're out of the woods. We're getting towards getting out of the woods. We can see the light.

The trajectory is looking much better, no doubt about it. And then just lastly, I think an area of focus for investors is just prioritization of the various partnered programs and some kind of simplification kind of, at least, the economic model for Ionis. Just how do you -- how should we think about the contribution of kind of business development to some simplification? In other words, is this -- I think is this sort of an evolutionary process? Or do you think -- are you sort of anticipating and organized in a way that structurally, there could be some changes that would help kind of simplify our ability to kind of recognize full value from the productivity of the R&D group at Ionis?

Well, so -- I mean, from a later stage pipeline aspect, I think you're going to see, and hopefully, it'll help simplify things for everyone, the maturation of our wholly-owned programs, right? And as we execute our commercial strategy and that becomes clearer to everyone and what drugs are in are wholly-owned and how we're going to commercialize them becomes clear, I think that will help and just in -- I'm not a modeler, but that will help them focus on these particular assets, which Ionis is going to sell themselves and contribute to our revenue growth. We're not going to stop partnering our programs. We're going to -- it's an important component of our revenue. We view it as an important long-term component of our product revenue and our commercial revenue. And I think it makes total sense to partner things like our Lp(a) pelacarsen program with Novartis' broad indication, thousands and millions and millions of patients that require point to on-call physicians to sell that drug. We don't want to do that. Let's partner and collect a royalty. And we got a nice deal with Novartis. So they're doing an 8,000 patient outcome trial. That's terrific partnering opportunity, right? And if that drug is successful, it's pure profit. But -- and we have lots of those opportunities that we can partner. But I think that the wholly-owned commercial pipeline will help give people things to focus on, and that will be all Ionis' assets. As far as our R&D goes, we are continuing to do what we do, which is look for the best opportunities for the technology and exploit them by making drugs. And if they fit within our wholly-owned commercial pipe, then we're happy to develop them ourselves. And if they don't, we go find a partner who's interested in the same thing and the same science that we are interested in and then they move that forward.

Well, Eric, we're up against time. But thank you. Always a pleasure. Very informative. So thanks again.

Great. Thank you. Enjoyed it.