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

All right. Good afternoon, everyone. I'm Andrew Galler, one of the biotech analysts in Morgan Stanley. And I'm pleased to be joined today by Brett Monia, President and CEO of Ionis. Brett, thanks for joining us today.

Thanks, Andrew. It's great to be here.

And I just wanted to jump into a quick disclosure statement and then we can kick it off with Q&A. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. And with that, we can get into it.

So Brett, Ionis has been through a lot of transformation over the past 3 to 5 years, going from a partner of choice for ASO drugs to a true independent drug developer with wholly-owned programs in late-stage development like olezarsen and donidalorsen. Should we expect this trend to continue? And then how do you think about developing a commercial presence?

Thanks, Andrew. So the trend you're referring to is for Ionis to be moving to full integration. We've been a great biotech company for over 3 decades now, outstanding science and innovation. But in our past, we've largely been a company that has partnered assets early on in development. And that served us well for a while, but for -- to really maximize this value to shareholders, to all stakeholders to Ionis, it's time for us to move to full integration, bring products to the market ourselves, to launch them, to commercialize them, maximize value to the company. We're well on our way. I moved into the CEO role in 2020, and that was my first step, and we're building on an outstanding commercial organization. We're looking forward to our first commercial launch in the [indiscernible] with AstraZeneca next year for TTR amyloidosis. And then the 2 drugs you mentioned we'll be bringing to the market ourselves, olezarsen and donidalorsen. Our commercial organization is coming together very well. We're very much involved in the co-commercialization with AstraZeneca. And the organization will be ready to launch in next year and the year after and for many years to come.

Great. And then maybe more broadly about strategic vision. You've historically had kind of an unfocused pipeline across multiple therapeutic areas, maybe 1 or 2 shots on goal in each. So how are we thinking about maybe a more focused Ionis going forward?

When we -- when our business model was one to partner, there was no need to really be focused, right? We were opportunistic to work in any area we can because we were going to partner out our drugs and have our partners take on the risk and they would need to -- they were the ones that needed to focus, quite honestly. With our evolution to full integration and bringing drugs to the market ourselves, focus is imperative and we are focused. Our key therapeutic areas today are in cardiovascular diseases, where we have several drugs reaching the late stages of development in the late stages of development and preparing for launch and in neurological diseases. And those are our focus. And in addition to that, we will continue to be opportunistic for the drugs we keep when it makes sense to keep them for rare diseases, for example, that offer high probability for success and really attractive market opportunities. Our hereditary angioedema drug is a drug like that that doesn't fit nicely within cardio or neuro, but it's a great opportunity for us. So we're going to keep that one as well. We're focused on our 3 near-term commercial opportunities and we're laser-focused on it to bring them and to succeed on the market. Those are eplontersen for TTR amyloidosis, olezarsen for severely elevated triglycerides as well as the -- our donidalorsen for hereditary angioedema, which I just -- I referred to.

And so I guess the story of ASOs in industry has been along with many chemistry modifications along the way. Like it seems like it's mostly derisked at this point just based on your success with GalNAc conjugates. Why don't we talk about maybe a next-gen chemistry modification like MSPA and how that can further transform the profile of ASOs and maybe make it more competitive versus other genetic medicines?

Yes. Scientific innovation at Ionis has never been stronger. We continue to advance new chemistries for ASOs, for siRNA strategies or mechanisms. And they're providing even further enhancements to drugs that have already shown really a really great profile there particularly in the liver, which you just mentioned, the GalNAc targeted delivery strategy for the liver is validated. It's proven. We've now treated thousands of patients for several years with liver-directed ASOs and with excellent safety, reproducible efficacy and 4 drugs in Phase III development, one of which we expect to be on the market next year. We now, as you referred to, have new backbone chemistries that really, there's not a lot of room to improve on efficacy or tolerability. Really, what we're focused on is 2 areas. One is to increase the durability of our drugs. Right now we're dosing our drugs with a self-administered formulation, simple formulation with an autoinjector pen that is typically given monthly for systemic applications. Our MSPA backbone modification, we think will get us to biannual dosing or maybe even annual dosing which is more convenient for patients. We're also focused on new targeted delivery strategies. As you say, liver has been a great success. It's been a breakthrough. We're now very close to moving new drugs into development for targeted delivery to other organ systems. Muscle cells has been our primary focus to date, skeletal muscle, cardiac myocytes, neuromuscular diseases, heart failure, 2 areas right in our sweet spot, and we expect to move 1 or 2 of those into development early next year. So the technology continues to expand through medicinal chemistry, new targeted delivery strategies and we're well on our way.

Great. And then I think you mentioned your first MSP programs are going to be in the CMS. Is that just because it has the greatest convenience you minimizing intrathecal injections?

Part of that is that, that our CNS drugs are administered intrathecally, simple bolus injection, local anesthesia in an outpatient setting. It's fairly quick, but still it requires intrathecal administration. SPINRAZA, our blockbuster medicine for SMA is administered every 4 months. We would like to reduce the frequency of dosing to make it more convenient for patients. MSPA, we think, can get us there. Absolutely. We think we can get to annual dosing with an intrathecal dose, which really bodes really well for our vast CNS platform, not just SMA, for ALS, Huntington's disease, Alzheimer's disease and many other diseases. So MSPA is -- offers the advantage of extending durability for CNS. Why the first 2 MSPAs came to development that were in CNS? A little of that is just chance, speed at which we're moving things forward in research happens to be 2 CNS drugs. We're the first to reach that point. We are MSPA chemistries coming forward rapidly for systemic cardiovascular and other indications as well. And I would stay tuned for those to reach development next year.

And then should we also expect MSPA programs to act as almost kind of franchise extension for your inline programs?

Yes. All of our inline -- all of our prioritized programs as well as several from our partners, we have follow-on strategies, right? We're making enormous investments as our partners in franchises in cardiovascular, TTR amyloidosis, hypertriglyceridemia and so on and in CNS as well. And we will focus -- continue -- we've made those investments. We want to capitalize on those investments by ensuring that we have longstanding follow-on strategies, lifecycle management strategies. MSPA is a great example of that, where we will bring in follow-on molecules behind these franchises that we think are going to be really successful. And we want to make that -- and we want to enjoy that success for decades to come. So it's part of our follow-on strategy. It's also part of novel drug, new drug discovery as well as I mentioned, as we just talked about with the first 2 drugs that are reaching development.

Okay. And then regarding the recent Metagenomi deal, I guess, why was now the right time to bring CRISPR into the Ionis toolbox?

Yes. We're very excited about this evolution of Ionis. Our vision -- my vision is for Ionis to be the leader in genetic medicine. We led the way, we pioneered in RNA targeting. Antisense was the first and biggest investment there. We're now well into siRNA as well. We have harnessed the power of RNA as a target for drug discovery. Now it's a natural extension for us to harness the power of DNA. The data that has been -- that has emerged, although it's -- there's not a lot of data to date, the data that has emerged is compelling. It has a long way to go, a long way to go to prove safety and durability and other things that we have proven with RNA targeting. But the data is interesting and it's within our sweet spot. It's within our wheelhouse. It's the nucleic acid therapeutics. Much of what we have learned and have invented with RNA targeting therapeutics is going to be directly applicable to DNA editing, medicinal chemistry to make delivery more effective, to make the durability and the efficiency of DNA editing much more effective is a big win for us that we think we can make happen with our know-how. Drug delivery is a big area, manufacturing, it's all related. We think we can have a -- we can really have a big impact in DNA editing and that's what we aim to do. Why now? We want to be part of the leaders, we want to lead. And Metagenomi was a partner that we chose after extensive diligence evaluation of many different DNA editing companies, we think it's the right partner. And it accelerates our role in DNA editing and brings us what we think will allow us to get to the front of the class fairly quickly.

Absolutely. And so now following the Metagenomi deal, you have 2 RNA targeted modalities, ASOs and siRNA. And now you also have a DNA modality with CRISPR. As you interrogate a new target, how do you select which modality to use? Is there something intrinsic about the target like transcription rates or gene size that would determine that? Or it'd just be a trial and error pre-clinically?

DNA editing is still far out there. We will conduct some drug discovery activities. We want to be able to demonstrate in vivo activity next year and really figure out how -- where we are in this space and move that forward as quickly as we can, but it's going to take time. Really, the modalities today are in single-stranded antisense oligonucleotides and double-stranded siRNA technology. Our rich pipeline of antisense drugs is expected to deliver to the market next year with 2 new drugs to the market year after year after for many years to come long, long runway for antisense and then subsequently with siRNAs. How do we pick and choose? It depends. It's a target-by-target indication-by-indication basis. You'll never be able to make an siRNA work in -- for like SPINRAZA for SMA, right? You cannot do exon skipping or exon correction with a double-stranded siRNA strategy. That's off the table. There are distribution differences between these drugs. CNS is an area we have capitalized with antisense. We have a rich pipeline of CNS drugs and we know everything about them. siRNA has a long way to prove there. We're working in it for CNS and we know everything there is to know so far about SiRNA, but we don't see any advantages right now over ASOs. We only see disadvantages actually. We'll continue to explore that. But right now CNS is ASO for us. For systemic applications, liver or those sorts of things, we will conduct drug discovery activities with optimized chemistries for both platforms and we let the best drug win. We're agnostic to the platform. The best drug should win. It's best for patients, it's best for Ionis. And that's really the approach we take for drug discovery.

Great. And then maybe just on CNS specifically, you said that's only ASOs for Ionis right now. Can you maybe just discuss briefly how the deep brain penetration compares to cortical penetration?

We have a really good understanding, as you can imagine. We've been in this for 10 years now in CNS, evaluating different chemistries, different ways to deliver the drugs intrathecally, slow infusion, bolus injection, maybe even looked at ICV administration and the differences in distribution. We understand the distribution of our drugs very well with intrathecal -- and intrathecal bolus is the best way to go for distribution. We understand what are the most sensitive tissues and cell types. They get into neuronal cells, glial cells, all the cell types that are in the CNS very effectively, but there is a gradient. When you get into the deep brain structures, there's a gradient between deep brain structures versus cortex versus spinal cord. The greatest distribution is in the brainstem, the cortex, we understand this. We're taking full advantage of it for diseases like SMA, ALS, many other diseases where these tissue system -- tissue beds are most relevant. However, we do get distribution into the deeper brain structures. And we understand what level of distribution we get and we can demonstrate very effective target reduction in those deeper brain structures to date. With that said, we have to be able to get the sufficient target reduction at therapeutically acceptable doses. And we think we have targets in the deeper brain structures where that meets that criteria. But clearly, there's a difference there and we want to improve it. One way that we think we can improve distribution to the deeper brain structures is by coming up with strategies that cross the blood-brain barrier. A blood-brain barrier drug actually penetrates the CNS from the vasculature, right, not from the CSF as an intrathecal dose would do. We're making great progress in advancing our CNS platform for peripheral administration of oligonucleotide drugs to penetrate the blood-brain barrier. And we believe that that can actually enhance distribution to the deeper brain structures because it's a different delivery mechanism, if you will, different exposure to the system. And it's still -- we still have a ways to go, but we're working on it. And I think that that is probably the best strategy to get to those deeper brain structures if we need to.

Absolutely. And then I guess, if you think broadly about the genetic medicines field right now there's a pretty prevalent trend right now in going to larger broader diseases like hypertension, lipid management, thrombosis, for example. So how do you think Ionis might be uniquely positioned to your competitive versus your competitors?

Well, we are -- we have a large portfolio of drugs in the rare -- severe rare disease space. Our pipeline is largely made up of severe rare indications. However, we are well on our way. We have a rich pipeline also for diseases that are for prevalent indications. I think the advantages that Ionis brings for prevalent disease indications are 2. One is the vast experience we have. We have the biggest, richest pipeline of anyone in the oligonucleotide therapeutic space that -- what comes with that is a great deal of experience, which is important for prevalent diseases to ensure that you have the safety that you need for those types of diseases for large patient populations. And the convenience also such that, especially when you get into those asymptomatic diseases, right, like cardiovascular diseases and those sorts of things, you need the convenience of self-administered once a month dosing in which the patient doesn't even feel the injection. I mean the -- it's easy to inject, painless. And that's very important too and we have a great deal of experience there as well. In the CNS, we're also moving into prevalent diseases such as Alzheimer's disease. Our tau program has now started Phase II development. We have showed in Phase I really robust reductions in tau in the CSF that were really -- were really truly amazing. And Parkinson's and other CNS diseases. And there, we differentiate because we're the only ones in the oligonucleotide space that are in the CNS. So it's a natural evolution for biotech companies to go start often with rare and they move to prevalent and you have to generate that safety and that experience before you can really move into those prevalence and we're there.

Great. Then maybe just briefly to touch on this, since it's still early days, the Inflation Reduction Act, how do you think it impacts Ionis as a rare disease manufacturer and then maybe more broadly?

So yes, it is early days. It is a fluid situation. We expect legislature in the U.S. of course, the only right now only applies to the U.S. We expect legislature to change over time. With that said, we don't expect any impact on our rich portfolio of single indication rare disease drugs, single indication rare disease drugs are excluded from the Inflation Reduction Act. So there's no change there. And that includes eplontersen, which is now being developed in Phase III studies for TTR polyneuropathy as well as TTR cardiomyopathy. That drug is designated as a single disease, an orphan disease. And therefore, we don't expect it to be impacted either by the Inflation Reduction Act and that's very important because it gives us the exclusion as a single indication rare disease asset. As far as other advantages, our drugs are classified as Part D drugs in the United States. And one of the disadvantages of -- potential disadvantage of Part D the drugs historically has been the out-of-pocket expense that patients have to sometimes absorb. Medicare patients have to absorb that Part B drugs, which are administered by a health care provider has to provide, those patients receive because they're done in the health care setting. One of the things about the Inflation Reduction Act is that all goes away. So actually, Part D drugs are actually no longer disadvantaged for Medicare patients that they -- that patient -- those patients have to pay greater out-of-pocket expenses. So that's a new advantage actually for our drugs. As far as prevalent populations to be determined, Andrew, we'll have to see how this goes. There are various caveats and so on. We're looking at our pipeline and as are our partners, and no need to make adjustments yet, but we're looking at it very carefully.

Great. Can we go on to some individual asset question to that?

Sure. Absolutely.

So with donidalorsen, we recently saw the open-label extension data from the Phase II, which included a few patients on the Q8-week dosing regimen, which appear to have a marginally lower [ TAC ] reduction and Takhzyro. So have you done any market research as to how HAE patients and physicians balance a TAC reduction and convenience and whether maybe the Q8-week regimen has legs going into OASIS-HAE top line?

Yes. We've done extensive market research. Our HAE prophylactic treatment donidalorsen based on our Phase II data appears to show a profile that's best-in-class. And best in class on 3 accounts: one, efficacy, mid-90%, 95% or so reductions in hereditary angioedema attacks compared to placebo, that has not been demonstrated to date with anything on the market as well, that level of efficacy. Second, the convenience of monthly dosing. The main competitor that you -- the standard of care on the market for HAE is Takhzyro as you mentioned. That drug is largely -- the vast majority of patients on that drug are treated biweekly, every 2 weeks. You can treat every 4 weeks, but you lose efficacy if you go to less frequent dosing with that drug. Our drug wins on efficacy against both every 2 weeks and every 4 weeks as a entry 4-week drug. We also work -- have great tolerability and so on. With respect to every 8-week dosing, we explored every 8-week dosing in our long-term open-label extension data that we shared last month. The first conclusion of the long-term open label extension is that patients that continued on the every 4-week dosing, we sustained up to a year the efficacy that I just described, potential best-in-class profile, 95% reduction in HAE attacks. The vast majority of patients were attack-free with no emerging safety issues, long-term treatment. So it gives us some greater confidence in the Phase III study. The every 2 week -- the every 2-month dosing, we lost some of the protection. We were in the mid-70% range, a little bit less than Takhzyro every 2 weeks, but really within that same range. Do we need it? Absolutely not. Our market research shows that every 4 weeks, monthly dosing for our drug is a breakthrough for patients, especially as a painless, self-administered autoinjector pen administration by patients. So it's a big win on efficacy, tolerability as well as convenience. The bimonthly dosing is in our Phase III study and we expect it to be statistically significant, and it could be in our label as a option for patients, but it's certainly not necessary. The monthly dosing is very attractive.

Great. And then maybe move into olezarsen. Core studies are focused on triglyceride lowering, which is a biomarker for severe hypertriglyceridemia, which is probably approvable. So how do you think payers will react with outcomes data? And then maybe as a follow-on to that, it seems like there's a misunderstanding about elevated triglycerides versus severe hypertriglyceridemia in the sense that one's a cardiovascular risk factor and the other one is a pancreatic risk factor.

Yes. This is a drug -- the drug, as you said, olezarsen, is a drug we have in 2 Phase III indications today. And there is -- it is complex, this disease area. There's a high, high unmet need for drugs to lower -- substantially lower severely elevated triglycerides for patients. Current standard of care fibrates, niacin do not come close to meeting the needs for patients in this area. What are the needs? The needs are high risk for severe and potentially fatal pancreatitis. Once you get into the above 500 range and particularly 1,000 and above, you're at high risk for a pancreatitis event. You also have all kinds of other metabolic abnormalities. As I said, there are no ways to get triglycerides down in these patients. The first indication is a rare genetic disease called FCS, which is fully enrolled and we expect that data to read out next year and then launch the following. And then the other indication is severely elevated hypertriglyceridemia, which is millions of people in the U.S. alone. Olezarsen is in that Phase III study, too, and that is expected to read out in 2024. So the indication really here is pancreatitis, not really cardiovascular here and that's where some of the confusion is. Cardiovascular -- triglycerides are managed, handled by the body differently. If you have elevated triglycerides, say in the 200 to 500 range, triglycerides are found, they are present in the body with VLDL particles, which is with LDL cholesterol, which is a cardiovascular biomarker. When you get above the 500 to 700 to 1,000 range, triglycerides are now packaged as chylomicrons. Chylomicrons go right to the pancreas and they can destroy the pancreas and cause pancreatitis. So we're really looking at different types of triglycerides here. We don't need cardiovascular outcome data. We need triglyceride lowering data, significant for both approvability as well as for market penetration. We will, of course, collect pancreatitis events in our study. We expect strong trends favoring the reduction in pancreatitis. We don't need it for the market as well as for provability, but we'll have it.

Great. And then maybe moving to your angiotensinogen portfolio in hypertension. I think [indiscernible] recently become more worried about reversibility given the long duration of genetic medicines. So do you have anything in mind that could just squash concerns on this front?

We need more data. Angiotensinogen, as part of the angiotensinogen RAAS pathway is a very interesting target for -- particularly for refractory hypertension and possibly for heart failure as well. The angle here is to be able to target the RAAS pathway by targeting AGT in the liver without affecting that pathway in the kidney. ARBs and ACEs can inhibit the pathway in the kidney, which can cause kidney failure, which is why they're often not dosed to maximal efficacy because of the risk of kidney disease. Because we're using a targeted delivery strategy to the liver, we're only getting inhibition in the liver. We have to prove that. And we have to prove that the drug is highly efficacious in refractory hypertension. And we'll have data next year for our Phase II trials as well as in a Phase II trial in patients with heart failure as well as separate trials. But your point is well taken. One of the risks of long-acting therapies for refractory hypertension is hypotension. Keeping in mind that many of these patients, the majority of these patients are frail or elderly and are at risk for broken bones and those sorts of things, a hypotensive episode is very risky for these patients. They can fall, have other problems. And the inability to reverse a long-acting drug is of concern, right, if you get into a hypotensive episode. Remember that these patients are going to be on 3, 4, 5 other antihypertensives as well at the same time. So be able to manage hypotensive episodes is not going to be straightforward, which is one of the reasons why we're exploring short-acting inhibitors of AGT as well as longer-term acting AGT. So we can actually pick and choose which therapy is best for these patients initially to make sure that they're well-protected.

Great. And then maybe think about tofersen given we have the regulatory decisions coming up in the next 6 to 8 months. Do you have any concerns that your C9ORF72 program failing might drive concerns for regulators that the SOD1 program is actually driving efficacy?

Not at all. We have several drugs in development for different causes of amyotrophic lateral sclerosis, ALS. Tofersen, we expect -- very hopeful that it's going to be approved next year, PDUFA date of April 25, it's under priority review. The data in the long-term extension is compelling across all the endpoints, including even potentially survival as beginning to separate after only a year. But all the other endpoints were statistically significant in the open-label extension, including a biomarker neurofilament light chain, which is very important. C9, we reported a negative data for C9ORF-ALS this year. The drug did exactly what we expected it to do. It lowered the toxic proteins that the hypothesis was based on that is believed to cause C9ORF, we disproved that hypothesis. We lowered the toxic peptides from the C9ORF mutant gene very effectively in those patients with good tolerability. Unfortunately, the patients didn't benefit. It's a more complex form of ALS that we still don't fully understand. A different mechanism of action is going to be necessary to treat C9ORF-ALS, SOD1-ALS where tofersen is indicated, the cause of that disease is clear. It's a toxic misfolded protein mutation SOD1. What we're doing is knocking down the production of the misfolded protein.

Great. And just lastly, about IONIS-MAPTRx for Alzheimer's. There's a broad range of tauopathy realistically between PSP, temporal dementias that could be a potential fit for this therapy. So are Ionis and Biogen considering these currently?

Absolutely. We're focused primarily on Alzheimer's disease. The mild -- the Phase II study in mild AD will begin any day now with dosing. It's well on its way at the beginning. But broad tauopathies is an area we will definitely pursue in the future. We want to get the Phase II study up and running and bring that to a success first.

Great. Well, I think we're out of time, Brett. So thank you again so much for your time today.

Thanks, Andrew. It was a pleasure.