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

Well, great. Hello, everybody, and thank you for dialing in. My name is Luca Issi. I'm a senior biotech analyst here at RBC Capital Markets. And today is our great privilege to have Beth Hougen, the CFO of Ionis for a fireside chat. Thanks so much for joining us. How are you doing today?

Great. Thanks for having this, Luca. I appreciate it.

That's fantastic. So can you maybe start with a question on Akcea. You obviously recently completed the acquisition of Akcea. Can you remind us the rationale behind that decision? And maybe just give us a quick update on the process? And how should we think about cost synergies going forward here?

Sure. I'd be happy to. The acquisition of Akcea that we completed last year was really an important step in our overall shift in commercial strategy. So today, we're sitting here with a very rich mid and late-stage pipeline, and we're on track to achieve our goal of 12 or more medicines on the market in 2026. And so a big part of that is our wholly owned pipeline. And Akcea had 4 really important medicines as well as their 2 marketed products, and we wanted to be able to, one, accelerate our commercial strategy, by bringing Akcea back in-house. We wanted to get full access to that deep rich pipeline for the benefit of Ionis and its shareholders. And to your point, we wanted to realize the significant financial benefits from the efficiencies and cost savings of combining the 2 organizations together. And I'm happy to say that we are well on track for all of those achievements. I think we've met all of our objectives from the acquisition. The integration has gone extremely well, and we're realizing, today, cost savings well in excess of $50 million on an annual basis. And those cost savings primarily are being redeployed into our wholly owned pipeline into our highest priorities, which today are TTR LICA, which we're now calling eplontersen. I'll have to try to remember to say that. And APOCIII LICA as well as potentially PKK LICA, which has -- recently had very compelling Phase II data. So we're -- I think we're very well positioned and continue to see the pipeline advance and expand, and our Phase III studies continue to progress very well.

That's fantastic. That's a great update. And maybe best, you also recently executed on a convertible note, fairly large convertible note. Maybe 2 questions. One, why you decided to go for convertible note versus, let's say, [indiscernible] or maybe more traditional debt? And two, how should we think about the use of proceeds for the note here?

Sure. Maybe I'll take that in reverse order, if it's okay, and start with the use of proceeds for the convertible note. It was really for 2 purposes. The first purpose was to refinance our convertible notes that were coming due at the end of this year. We wanted to make sure that we retain the cash on our balance sheet for really the most important opportunities that we've been talking about, our highest priorities, building our commercial capabilities to support those wholly-owned pipelines as well as advancing the technology. So refinancing the notes was really important to us. And then the second really important use of proceeds was a very large capital improvement project that we kicked off earlier this year. We are building increased capacity and capabilities in manufacturing and development chemistry as well as in research laboratory needs so that we can support the wholly-owned pipeline. We want to be sure that we have everything that we need to successfully launch our -- the drugs that we're developing and moving to the market ourselves, and this is an important part of that process. So shifting to the second part of your question, why the convert versus other possible financing mechanisms. And it really comes down to the cost of capital. This particular convert is a 0% coupon. So essentially no interest whatsoever for the 5-year term. And because it's the convertible note, the way we've structured it, it doesn't -- it won't convert, if at all, until our stock gets well into the $70 range, probably mid- to high 70s. And so we felt that those terms, combined with the fact that there are no financial covenants like you have with term debt and really, equity is expensive, and this reduces the potential for dilution substantially, we felt this was really the lowest cost of capital for the needs that we had. And we're pleased with having gotten that done. We've got our balance sheet well-structured now, strong cash position and positioned, frankly, to focus entirely on the pipeline and our commercial strategy.

Super, super helpful. Maybe the last question for the CFO before we go to the pipeline here. I think you recently restructured your agreement with Sobi as well and also your TEGSEDI operations. Again, can you remind us what you have done there? And why does that decision make strategic sense for the organization?

Yes. Great. It's -- in late last year, we entered into a distribution agreement with Sobi for TEGSEDI and WAYLIVRA in Europe. And we recently expanded that distribution agreement for TEGSEDI in North America. And we felt this was an appropriate way for us to -- really to ensure that there's access to both TEGSEDI and WAYLIVRA in their appropriate markets, while saving substantial amounts of money that we can put forward to, as I said, our highest priorities, to follow-on medicines eplontersen, APOCIII LICA and other wholly-owned medicines as well as building the commercial capabilities to advance those to the market. I think what's well understood is that when you've got a field force in particular, it's much less expensive when you can amortize that over multiple drugs. And we're a few years away from being in that position. And so being able to work very closely with Sobi, leverage their extensive commercial capabilities while retaining key commercial activities such as KOL engagement, global brand strategy, we're continue to be the marketing authorization holder. So all of the responsibilities that go with that, we remain at Ionis. And so it allows us to build the capabilities we need today to support the wholly-owned pipeline, do all the precommercial work we need to do and then build the field force, if you will, of the medical affairs field teams at a more appropriate time when we've got those drugs, multiple drugs closer to the market. And we expect that will be a couple of years out. A few years out. And at that point, we will certainly be building all of the field teams that we need to support our OEM pipeline. So right now, we're moving all of -- redeploying all of the savings from the Sobi transactions. Together with the savings from the Akcea acquisition and putting that forward to the pipeline, commercial capabilities and expanding the return technology. So really investing internally for growth.

Got it. Got it. Makes a lot of sense. And maybe pivoting to the commercial products. Obviously, SPINRAZA is partnered with Biogen. We have seen pretty good resilience overall for sales. However, very different dynamics ex U.S. versus in the U.S. I think ex U.S., the product continued to execute well versus I think in the U.S., we have seen some pressure from [ meglimine ], risdiplam, the recent launch. How are you thinking about the trajectory of SPINRAZA going forward from here?

We think SPINRAZA continues to have a very bright future. It continues to be the market leader. And we think that, that really is a function of the substantial efficacy combined with the excellent safety profile that SPINRAZA affords these patients. And so we continue to see tremendous opportunity for this drug as does Biogen. And we think that the -- SPINRAZA has really positioned this foundation of care will sustain into the future. And you can see that when you start comparing efficacy profiles among the 3 different marketed products today. SPINRAZA continues to demonstrate substantial durable efficacy for these patients regardless of age, regardless of SMA type. And we know that the longer you're on SPINRAZA, the better these patients do. And that on the other marketed products that the durability isn't necessarily there. And we know, in fact, that anecdotally that patients need to move back to SPINRAZA to get that efficacy. And so we're continuing to see, as I said, a very bright future for SPINRAZA. And Biogen is very focused on doing what is necessary to ensure that future for SPINRAZA.

Got it. And I think in terms of things that Biogen is doing, obviously, I believe they're exploring a higher dose of SPINRAZA via DEVOTE. Can you walk us through the rationale behind that trial and why that trial could be potentially helpful in protecting the franchise long term?

Sure. DEVOTE is -- as you said, it's a trial that Biogen is running. Right now, it's in the pivotal stage, in which they're evaluating much higher doses of SPINRAZA. And really, you can do that because of the long-term safety profile that SPINRAZA's demonstrated to date. So they're continuing to look at these higher doses to enhance the benefit that these patients are getting from SPINRAZA and also potentially to be able to adjust the dosing regimen. In this particular study, they are dosing with fewer loading doses. And I think that fewer intrathecal injections certainly helps these patients and makes their -- makes it more convenient for them to get on and stay on SPINRAZA. So we see this as really helping enhance outcomes for patients, which is a really important objective for both us and for Biogen.

Got it. Got it. Very helpful. Very helpful. Maybe pivoting to the pipeline. You obviously announced recently that the HAE is moving into Phase III. We've seen the top line data. I don't think we've seen the full data quite yet. Walk us through the value proposition of this molecule. Is this going to be just the convenience play versus [indiscernible] again [indiscernible], the majority of patients are dosed every 2 weeks. And I think when you dose patients over four weeks, you may have some breakthrough. And obviously, here, you're dosing plus a month. Is this primarily a convenience play? Or do you think there is space for maybe you have showing better efficacy given that you're tackling the pathway to different nodes you're going after PKK and kallikrein? How should we think about that?

It's a great question, and I'm actually really happy that you asked it because I think it's really important for people to understand that we think PKK LICA could be far more than just a convenience positioning for this drug. We think that there -- that the Phase II data that we've seen sets the strike up for best-in-class. And the efficacy is really, really important to these patients. As you noted, most patients on current therapies are on the every two week dosing. And what's really -- and the reason they're on that is because they get breakthrough attacks. And these patients are really, really concerned about attacks. Those are very, very scary events in which, frankly, they could be hospitalized and they could be life-threatening. And so remaining attack-free is critically important to these patients. And what we've seen with PKK LICA is really 3 pillars of efficacy that's important to these patients. First and foremost, the speed of onset to their attack-free, which is for PKK LICA, we saw that 97% of patients were attack free after the first month of dosing. And that compares to 2.5 months with the currently -- with the current competitor on the market product. So that's a significant benefit. Secondly, it's how -- really, how can you think about this drug in terms of -- do you need to use rescue therapies, for example? I think it's really important for these patients that do not have breakthrough attacks. And so that's a really important part of this as well. And so we've seen a significant decrease in the need for acute therapies. And that's really because you've got this attack -- very substantial attack-free results. And then last, the ability to really be attack-free for a very long sustained period of time. And we were able to see about 92% of patients in the Phase II study were attack free and retained that status through the course of the study. So that combined with the tolerability and safety profile really makes this an exciting drug and potentially best-in-class. Just to remind folks, this is a once-monthly small volume subcu injection could be administered with an auto injector, so essentially painless. So gives us a lot of advantages over the current therapies. So again, efficacy and safety and tolerability, all combined, we think we're hitting on all of those measures.

Got it. Got it. Super helpful. And then maybe sticking to HAE, one last question before we move on. I think at this point, a lot of the patients in the U.S. are on prophylactic therapy, and they are receiving an injectable like [indiscernible]. However, we're seeing some progress on the oral side, obviously, ORLADEYO can be used as prophylactic therapy and it's, obviously, an oral. How are you thinking about that? Is there a scenario where maybe by the time you launch, a lot of patients would have been switched to an oral? And so the space for an injectable here will be a little bit more competitive than you originally anticipated. Do you have any thoughts on that?

Absolutely. Yes. I think it's actually a great question. Again, it comes back to the ability to maintain these patients in an attack free state for as long as possible. Anything that can give these patients the peace of mind of being able to live their lives without the fear of attacks in the background is a -- I think, is going to have a superior position in the market. And the oral, right, now doesn't have the efficacy that the injectables do and certainly not comparable to the profile we've seen from PKK LICA to date. So our view is to design a Phase III program that further demonstrates the profile that we think PKK, one, we know has demonstrated in Phase II, and two, show that again in Phase III. And also to set up a Phase III program that allows us to help physicians and patients make that decision to switch with all of the necessary data they need to make those kinds of important informed decisions. And so our Phase III design is in process right now. We'll review that with folks and go over that with people a little bit further in the year. But trust us when I say that we're definitely keeping in mind what we need to do in order to be able to position this competitively in the market.

Got it. Got it. Very helpful. Maybe pivoting quickly on ENaC, obviously, recently discontinued that molecule due to a pre-clinical tox here, felt to me from the earnings call that the tox was actually not related to a nontarget effect, it was not related to the inhibition of ENaC. Does that mean that the issue was an off-target effect? So maybe this is the wrong molecule that was going after the wrong spot of a transcript or am I being just too speculative at this point, and it's just too early to tell?

It's a little bit early for us to say for sure. What I can say is that we saw a long-term -- a tox finding in a long-term tox study in nonhuman primates. It was not anything we have seen in any of the clinical studies with this molecule. So there was no clinical correlate whatsoever. And we -- and what I would say is we knew, with this funding, that we would need to spend some additional time to really evaluate the molecule and evaluate the target before progressing back into the clinic. And so as we thought about, really, the totality of data that we had around ENaC, around the specific molecule and the work that was -- would need to go forward, and we look at that in context of what we have in late-stage research. And we just feel like we have better molecules, better targets, and we really want to be sure that we're putting forward our very best drugs. And so we've made the decision, unfortunately, to step back away from ENaC and away from that particular drug in favor of the targets and drugs that are coming up in late-stage research. And we're going to continue to do the necessary evaluations, as we always do, and hopefully have some better answers. But right now, we don't see any read-through from a clinical perspective. We don't see any read-through to the rest of the pulmonary programs, and we certainly don't see any read-through to the platform in general because these were very specific to local delivery in the lung. And our drugs don't distribute systemically when they're administered into the lung. So we feel we're in a really strong position to advance pulmonary with the rest of our late-stage research pipeline.

Got it. Got it. Very helpful. When I think about Ionis in the second half of the year, probably the most important [indiscernible], in my mind, is just the SOD1-ALS, full-blown Phase III data coming down the pike. One, what gives you confidence that, that trial will be successful? And 2, should that trial be successful, what does this mean for the broader ALS franchise?

So we feel confident about this, about tofersen because of the substantial benefits we saw in the Phase II study. I think if you remember, [indiscernible] sort of think back to the Phase II data, we showed substantial benefits, statistically significant benefits in ALS functional rating scale in those patients who have the fast progressing mutations for -- of SOD1, very significant separation of curves. And we saw, while not statistically significant, still very impressive curve separations with the patients who didn't have the fast progressing mutation. And so those data really give us confidence that this Phase III study could be positive. And if these data are positive, if VALOR is a positive Phase III study, we believe that could be a game changer for ALS. We believe we could have the first disease-modifying therapy for ALS, and that could give tremendous hope to these patients. And potentially, this could be our next commercial product on the market sometime possibly as early as next year with Biogen filing after Phase III data readout this fall. So we're excited about this opportunity. And as you know, we have a broad ALS pipeline coming behind to person. So this is just the beginning of our ability, we hope to address ALS in all of its forms.

Got it. Very helpful. Maybe 2 last questions. I know we're running up against time here. Maybe the first, since we're talking about ALS on C9, what's my understanding is Phase II was supposed to read out in the second half of 2021. I -- however, I think Biogen said that they're adding an extra dose to that trial. And so the readout has been pushed to 2022. What's the latest thinking on that program?

Yes, absolutely. So we, again, remain excited about C9 as does Biogen. And the fact that they were able to add an additional cohort to the Phase I study, it's really just another -- it's just an opportunity to fully evaluate the therapeutic window for that drug. And the safety data gives us the ability to do that. And so I think it's just prudent to take advantage of the opportunity. And so the Phase I study will read out, as you said, sometime next year. I think first half of next year, including that additional cohort. So stay tuned. We're looking forward to that.

Super helpful. Last question, Beth, you guys have a long history of partnerships on favorable economics. What's the strategy going forward, how you're going to strike this balance between partnership versus, again, trying to commercialize some of your products on your own? Walk us through the latest thinking there.

Sure. Yes. We have had a long history of partnering. And to your point, our recent partnerships over the last several years have been very lucrative for the company. And we'll continue to partner where it's appropriate. There's -- the antisense technology in our hands is just very, very broad. We have a lot of opportunities. And so there are opportunities in our pipeline that are best -- where the value is maximized really by a partner. But we look -- right now, we've shifted our commercial strategy, our go-to-market strategy, if you will, to really focus on our neurology and cardiometabolic assets, particularly our rare disease assets. And that's where our focus is. TTR LICA, APOCIII LICA. And even with APOCIII LICA, we're sort of pushing the envelope on what we mean by rare because we're going into a broader patient population with severe high triglyceride patients. And so really wanting to capture substantial value from these high priority assets that we believe have the ability to transform patients' lives. So eplontersen, TTR LICA, APOCIII LICA, hopefully, PKK LICA. We're finishing up the business case on that. So stay tuned. You should hear about that soon. And then others in our wholly-owned pipeline, particularly in the neuro space as we move forward.

Fantastic that we are a couple of minutes late. I want to make sure I keep you on track with the rest of your day. Thanks again for joining us. Great conversation all around, and we'll talk to you soon.

Great. Thank you. Have a great day, and thanks for having us.

Thanks so much. Yes. Bye-bye.

Bye.