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

Thanks, everyone, for joining us here at the William Blair Growth Stock Conference. My name is Myles Minter, I'm a biotech research analyst here at the firm who covers Ionis Pharmaceuticals. Just before we kick things off for this fireside chart, I'd like to remind everyone that there's a complete list of research disclosures available at williamblair.com that you can peruse at your own leisure. And throughout the fireside chat, we have prepared questions. But also if you would like to submit your own Q&A, please do so in the box below, and we will do our best to get those answered for you. And with that, there's a small change to the schedule this morning. Beth Hougen, the CFO of the company, unfortunately, had a family emergency that she's attending to. We wish her all the best. But at very short notice and early notice, may I say, Eric Swayze, the Executive Vice President of Research at the company has agreed to join us this morning. So thankful for that, Eric. And perhaps we can just kick things off. This is a rather generalist conference, unlike the health care specialty that we'd normally be used to. So maybe in the long tenure of Ionis since 1989, you can maybe give a brief overview of the company, the technology at play here and what the company's immediate focus is at the moment.

Yes, sure. So thanks for letting me sub in Myles, and I trust you'll keep me out of the wheels if I venture down, talking about basic antisense technology, chemicals since that's what I like to talk about what I do. So I joined the company in 1994, actually, and it was founded in '89, and the premise was to really create a platform of drug technology that used oligonucleotides to drug RNA, and it's commonly noticed the RNA-based therapeutics space now. It is hugely popular right now. It was pretty popular when we started, and it was kind of viewed as the next great thing. And then it turned out, it wasn't as easy as it sounded just to design an oligonucleotide, to find another oligonucleotide and make a drug to cure all diseases. So we spent truthfully a lot of time working on the technology and trying to figure out how to make it work. And there was some early successes and lots of failures. And one of the things I think that Ionis has done really well is continue to plow away at making the platform better, improving the base chemistry, improving our understanding of what diseases to treat and how to go about doing it. And I think it's gotten us to a place where we're really poised to become a super successful biotech. Our stated objective is to have 12 or more medicines on the market in 2026. And that's a lot of growth for us from where we are now with really 3 products on the market. One is SPINRAZA, of course, which was our really first breakthrough product partnering with Biogen. It really changed the path of terribly devastating neurological disease, and it opened up the neurology space for antisense medicines in general, which has gotten us a very broad pipeline of assets in the neurology space. And another thing that the technology has really enabled us to do is target the liver effectively. And a couple of iterations of that. We have now multiple, what we call, LICA medicines in Phase III pipeline. We just announced really spectacularly positive Phase II data for a drug targeting PKK called PKK-L. This was -- this we think has the potentially best-in-class for hereditary angioedema. We have drugs targeting a protein called TTR with TTR-L, which is now called eplontersen for TTR amyloidosis, and this serves a rare disease market, but it's a pretty big rare disease market with probably 0.25 million patients worldwide in the cardiomyopathy space and as a wholly Ionis-owned medicine as is PKK-L. Another wholly owned medicine is APOCIII-LRx, which we're trying to get a name for. This treats a disease called FCS and also severe high triglycerides. It's a medicine that lowers triglycerides and is a pure triglyceride-lowering play and also Ionis-owned. And LICA platforms come a long way. And we think we have the opportunity to make lots of RNA-based therapeutics that can have a benefit in a whole host of diseases. And if you look at our pipeline, you can see that it's broad and diverse.

Yes, it certainly is. And maybe before we dive in individually to some commercial-stage assets and then into those pipeline assets, we can talk a little bit about the technology as a whole and sort of where you sit in the landscape. So there was actually a question in from a listener about sort of the differences with your single stranded antisense oligonucleotide technology versus other double-stranded siRNA therapies that are out there? And maybe a broader question about like how these RNA-targeted therapeutics sort of fit into the treatment landscape with all these gene therapies and gene editors sort of being developed as well? Where does Ionis sit in all amongst that burgeoning landscape?

Yes. So if -- you mentioned RNA interference-type therapies and double stranded. I think -- I make the distinction more mechanistically about how the drugs work than whether it's 1 strand or 2 strands. The double strand is required to activate the mechanism of the RNA interference therapies. The mechanism that we use for the drugs that I just discussed, it is a different type of mechanism [indiscernible] describe the details, even though it's fun. But they both largely do the same thing. What those drugs tend to do, SPINRAZA excepted, and I'll come back to that, it is they reduce the levels of an RNA, which reduces the levels of a protein. So if you think about having a bad gene that is causing a disease. TTR, for example, is a protein that misfolds and aggregates in tissues and causes all sorts of problems. And so what these drugs do is lower the expression of TTR. So you have a bad TTR gene. It has a mutation in it or it's just prone to aggregate, and you can reduce the level of that protein with either an RNAi drug or an Ionis drug, and that reduces the effects of the disease. And I would say that for liver targets, those drugs are performing very comparably. They use a targeting technology. We call it LICA. It brings the drug to the liver. And when you get those drugs at the appropriate concentration in the liver, both work pretty well. Our drugs have shown the ability to work in the CNS with local administration. We're way ahead in that space. And one of the distinctions is that the double-stranded structures tend to require some sort of targeting vehicle. We call it LICA. It helps our drugs. We actually didn't need the targeting vehicle, both TEGSEDI and WAYLIVRA, our 2 products and some before it were delivered without any targeting vehicle, went to the liver and work. So we believe that we can have fairly broad access to many tissues with both local and peripheral systemic administration with our technology. And now I'll just contrast, you asked about gene therapy and some of the others. Those tend to replace genes that aren't there. This is something that RNA interference can do. It just turns things down. Our technology allows -- in some instances, allows for gene upregulation. We're not going to replace a gene, but we can upregulate it. And in the case of SPINRAZA, it has a very interesting mechanism. SPINRAZA modulates the slicing of a gene, actually. So it modulates the processing of the gene such that SPINRAZA allows the creation of a protein that was deficient in the disease. So there's a broken gene that causes spinal muscular atrophy, without it motor neurons die and different levels of severity. In the most severe form, little babies die before they can stand up. And what SPINRAZA does is use a different gene, modulate its processing to create the protein that's missing in that gene. So in this case, our technology was quite versatile in that we were able to fix that broken gene that's led to SPINRAZA, which really changed the standard of care in SMA, whereas we've shown in clinical trials if you administer it to genetically diagnosed patients before they succumb to the symptoms of the disease, before they become symptomatic, that they're essentially nearly normal because we've replaced the broken protein and the neurons never begin to decay.

That's very helpful. And maybe we can dive more into SPINRAZA because that's no scratch of a therapy for a devastating disease, it's become standard of care, and it does generate over $2 billion annually. We did see some tapering of prescribing, I think, during the COVID-19 pandemic. And now that we're seeing sort of a return to normal, hopefully and more hospitalization rates increasing and patients coming back for their procedures. Are we seeing recovery for SPINRAZA prescribing? And do we expect sort of a return to normal as long as this pandemic continues to subside?

Yes. So I think the logic there was sound and Biogen has talked about that and communicated that. And of course, this drug is partnered with Biogen and they're commercializing it. And I refer a lot of the questions about commercial stuff to Biogen. But I would certainly say that we're very bullish on SPINRAZA as is Biogen. We think it will remain the standard of care. It is the standard of care. It changed SMA disease pathology completely. And with SPINRAZA, people who were doomed to die are able to walk and have some normal life span. So -- and just one key point about this disease is, we think efficacy is the key here. And so the most efficacious drug will win. Certainly, we have competition in the space. There's gene therapy now to replace this missing gene only for infants, and there's an oral drug that modulates splicing. And it does a similar thing as SPINRAZA. So -- but we think that the most efficacious drug in the end will be what patients want to have. If you are having a motor neuron deficit, I think you want to walk as the best as possible or shoot a basketball if you can and not compromise on efficacy over having an oral, for example, instead of an infrequent intrathecal injection, which is how our drug is given. So I would watch the efficacy very closely to think about how the marketplace is going to wear out -- play out. And I would also note that Biogen is acutely aware of this. And because of this, it is running some clinical trials to demonstrate the efficacy of SPINRAZA in the marketplace. One is the DEVOTE trial, where they're looking at higher doses of SPINRAZA. This removes a couple of doses. So it does help the dosing frequency. And -- but the higher dose, we think, has the potential to give even higher efficacy on top of the already great efficacy of SPINRAZA, which we think would be very competitive. We also have a RESPOND study, which is on top of gene therapy. And I mean, frankly, the reason they're running a study on top of gene therapy is because in the real-world use, people have been using SPINRAZA on top of gene therapy. And my assumption is the only reason you do that is if there was some optimal efficacy from the gene therapy drug. And to their credit, Biogen is running the study to ask that question, does SPINRAZA help and work on top of gene therapy? And if it does, it obviously bodes well for the drug. And the last thing is we've been working on follow-on for SPINRAZA with Biogen. We've announced that deal several years ago. We've made great progress. And then the objective is to get a drug that has the early administration and the same efficacy of SPINRAZA. And I talked about our chemical technology early on. This is a result of continually improving the technology and understanding how we can best tune the drug for the profile we want in the marketplace. So hopefully, that will start to move forward, and we can talk more about the profile of the drug.

Yes. That's interesting. Maybe we'll keep the commercial metrics to Biogen. But both companies, I believe, have been messaging as of first quarter that around about 11,000 patients, may be greater than that are currently on therapy. I think the market estimates are about 60,000 patients, so SMA patients worldwide. So I guess, what's the low-hanging fruit here? Where can growth come from? What patients are currently on SPINRAZA versus what patients aren't on SPINRAZA? And I guess, why are they not taking SPINRAZA currently?

Yes. So that's going to be a tough question for me. I think that a lot of the growth is expected to come ex U.S. and where access has been harder to get and rollout has been a little slower. So I mean -- so not being a commercial expert, I do know it takes time to roll the drug out worldwide. And I think really hats off to Biogen. They've done a great job with the commercialization of SPINRAZA. It was a spectacular launch, and there continues to expand and get access for patients outside of the U.S. And I think that's been reflected in the numbers. And I'll go back to my efficacy thing and think that patients once they understand the efficacy profiles and once the data is really available, we have the data that's published, and people will start to move to the drug. It gives them the best ability to have as normal life as possible. So -- but most of the growth, I think has been ex U.S.

Makes sense. And that's certainly what we're seeing currently. Maybe on the DEVOTE and the RESPOND studies. You did mention them and sort of looking to demonstrate either increase dosing, more efficacy or providing greater benefit over Zolgensma, the gene therapy. Is there any update on how those trials are enrolling? When we might see data from those trials? And sort of how those trials could potentially inform on prescribing SPINRAZA down the road?

Yes. I don't know the details on what Biogen has disclosed regarding when they'll have data on those studies. I could definitely look it up. You guys can do that, too. I don't know the answer to that question, sorry, except that they're both ongoing. And I think the clinical trials numbers are posted is in the '23 time frame for DEVOTE and the next year for RESPOND. And I don't know if Biogen communicated any other timing from now on.

Yes. And then just in terms of like the outcome here, I guess, like do we envisage a scenario where you kind of mentioned it's already happening, like people get gene therapy and then they get SPINRAZA add-on therapy, that would technically be off-label, I guess, currently. So is that how these trials are going to inform usage going forward, get that in a label per se and unlock those patients that are on gene therapy? Or is there another way we should be thinking about the readouts of these trials?

Yes. So I again, refer you to Biogen on the commercial question of what they would think about for a labeling and how they would market it. I think about the scientific question, right? So it really -- I suppose the commercial drug development flows from good understanding of the science of how the medicines work, at least I can continue to believe that from my little world. So -- but scientifically, it makes great sense, right? So scientifically, gene therapy replaces the missing gene. We know that gene therapies, they don't necessarily hit all cells or hit all populations. You can get different levels of delivery of the gene to different cells. So some cells might not have a lot. Some might have a lot. And we know that our drug hits all cells in the central nervous system when we administer it intrathecally. And it's pretty consistent cell to cell. And it's a different mechanism. So instead of having an exogenous gene modulating a normal gene. So those 2 should actually work nicely together to give improved efficacy because you make more of the deficient protein in more cells. So it's a great science question to ask. We thought for years about asking it in animals, and asking it in people is better because then you have the real-world patients that can benefit from the combination. So I think there's a real potential to benefit patients with the addition of SPINRAZA on top of the gene therapy. And the duration of gene therapy still is unknown in humans. It just hasn't been tested how long does it last. Is it really one-and-done for the last 50 years [ or the 5 or ] who knows? So we'll start to get that evidence. And we know that we can redose SPINRAZA and add it on top. And then I think everyone understands the benefit of a higher dose. So there's no problem with making too much SMA protein and the mechanism of SPINRAZA is kind of capped. There's a threshold. You can't really make more. So a higher dose allows you to maximize the efficacy of the drug, and make sure you're at the top of that dose response curve in all the cell populations. And then if you, I think it as an overload, to give more drug, you have more sitting around, and it will decay over a longer period of time because you gave more drug and there's half-life in there, and then you can dose less frequently. So both, I think, are great science questions and will help us understand how best to use the drug, and we'll position it commercially to continue to excel.

That's fair enough. There'll be exciting data sets for sure. Maybe we can switch to TEGSEDI and WAYLIVRA, and it's a little bit of a devil's advocate question here. But I know investors, they were looking at the Akcea acquisition, and it made sense to bring in this commercial part of the business as you continue to develop wholly-owned assets, and you're expected to do this yourself. We have seen the out-licensing in Europe to Sobi for the commercial rights of those products. I think PTC is doing in Latin America, and we've seen a sales force reduction after the Akcea acquisition. So without being too commercially focused, I guess my overarching question is, is Ionis still committed to the TTR amyloidosis community? And I guess, how do you envisage the developments that are going on in the company to sort of influence that marketplace going forward?

Yes. I'll [indiscernible] that's the question about the TTR amyloidosis. We are absolutely committed to that disease space. And we can talk at length about eplontersen and the LICA follow-on to TEGSEDI. This is a result of technology improvement basically. So TEGSEDI is a subcu once-a-week administered drug. We think it gives great benefit to TTR polyneuropathy patients. It's not approved for cardiomyopathy, who have that disease. It's been obviously, positive Phase III trials and utilized in the marketplace. We think that the subcu once a week at home was -- is a nice route of administration and good for these patients. The transactions we did with Akcea and then the Sobi transaction really to maximize our business and run our business in the most effective way possible. And try and keep those drugs to patients and get those drugs to as many patients as possible while managing our expenses and making sure that we can use our substantial financial strength and substantial capital to advance our late-stage medicines that we think have more potential, frankly, and we'll end up being the standard of care or the Ionis contribution to the standard of care in those marketplaces. And so if you think about TEGSEDI and WAYLIVRA, those are once-a-week administered drugs. And when we make the LICA versions of those drugs, it switches to once a month with a lower dose and a far, far, far superior profile overall. We can get better or the same efficacy, probably better and with a much lower volume injection, much fewer side effects, in an auto-injector device that's a monthly self-administered, subcu injection and a very convenient auto injector, and that's the intention of those drugs. And truthfully, I would expect that once those drugs are successful, provided they're successful in Phase III, they would replace TEGSEDI and WAYLIVRA in the marketplace since they're just superior products. That's the way we're thinking about it. And the Akcea transaction was -- we are committed to developing our own commercial products, marketing them ourselves. We're focusing in our neurology and cardiovascular spaces. We have several Ionis-owned drugs. Eplontersen in one, APOCIII-LRx is another one in the cardiovascular space. We have multiple Ionis-owned neurology drugs. They're a little earlier, but they're also fairly, fairly rare indications and have some streamlined development paths. And so we're really focusing our commercial future structure on those types of opportunities at Ionis to hopefully maximize the value to shareholders that we can get from these assets.