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

I'll be hosting Beth Hougen, CFO of Ionis Pharmaceuticals. Is it Hougen, have I been mispronouncing it for 5 years of covering the company?

No, you've actually got it right.

Okay. I had a insightful moment. Beth, it's good to have you. You may be the only team that flew from better weather here to visit us in Miami.

But before we go diving into details on pipeline, et cetera, let's talk a little bit on the balance sheet. I know this has been sort of an increasing topic, which is not surprising, as we approach one credit security on the balance sheet going into current status. Obviously, that's less of a concern for a company that has Ionis' fairly robust balance sheet as well as sort of opportunities to access capital. But it's something that comes up as, "Hey, how you think about strategy, convert versus other types of debt and sort of what the long-term complexion of the capital stack should look like?"

It's a great question. Just as a reminder, we ended 2024 with $2.3 billion on the balance sheet. So a healthy cash balance, which I think is extremely important today as we look forward to the Tryngolza launch that's underway now, the WAINUA launch that's entering its first full year and a host of additional independently launched medicines over the next 12 to 18 months, all of which are requiring additional capital from the company. So we've got this healthy balance sheet. Thank you for asking about that. And as we think about the convert, holding on to the cash is obviously critically important to Ionis. It's a capital-intensive business, we all know that. It's not easy to raise capital in these markets. And so having the healthy balance sheet, I think, gives us tremendous flexibility as we think about the 2026 converts at 0% interest. Now the beauty is it's 0% interest, so I want to hold it as long as I can. I think you rightfully pointed out that nobody is really paying much attention to the fact that it could be a current asset that's not -- or a current liability, rather, that's not a big issue for folks. And so I'm not particularly concerned that I need to do anything with that debt between now and April of next month, if you will. But I do think that it's important that we look at the ways that we can manage that debt, maintaining as much flexibility, maintaining our cash balance as long as we possibly can. I don't really want it to go into next year. I'd like to get that taken care of this year. We've got some really important catalysts coming up that could be opportunities for us to think about a refinancing transaction. We've used convertible debt for a very long time very successfully. We've had a lot of opportunities to manage that debt successfully over those years. And we'll probably employ some of those various different techniques as we think for it. Long term, as I think about the long-term capital structure for the company, we're projecting cash flow positive in the next few years-or-so as we bring a whole host of new medicines to the market that will really drive the revenue growth that could drive our positive cash flow. And at that point, we'll look at the balance sheet, we'll look at our convertible debt and we'll make some decisions as to what is the right capital structure for the company. It's going to be all facts and circumstances based, cost of capital based just as we should be.

So let's slide from the balance sheet over to the income statement, operationally speaking. Let's talk a little bit about what we should expect from Tryngolza launch in terms of metrics as the launch progresses, both -- revenue, obviously. But also like how we should think about end market metrics, what you will be tracking internally and what we should expect in your quarterly reports as we evaluate the speed of launch, acceleration, et cetera?

Yes. So Tryngolza was approved on December 19 last year. It is a drug for familial chylomicronemia syndrome, so FCS. And I think it's really our first independent launch. So it's very exciting for Ionis to be a commercial-stage company now. We've been working to this point for the last several years, and we finally have gotten into this new era for the company. That being said, I think the team is executing phenomenally on this launch. We had our first prescription on a Saturday, the day after approval, with a fully trained field team ready to go out into the market. Now mind you, this is over the holidays. And so I think that's a tremendous success by the team. We also had drug in channel within 2 weeks, again, another really important metric to demonstrate just the commitment this team has to executing on our first independent launch. The other thing to be watching are things like, are we getting to a broad range of physicians? So are the endocrinologists, the cardiologists, the lipidologists, the lipid specialists, the pancreatologists, are they prescribing Tryngolza? And the answer is yes. Are we seeing this across a whole host of different physicians across the country? The answer is yes. Are we seeing repeat prescribers? Yes, that's a really important metric. And what does it look like in terms of reimbursement? Are patients who are genetically confirmed as well as clinically confirmed getting their drug reimbursed? And the answer again is yes. And I think that's also really important. It demonstrates that the broad label that we achieved with our Tryngolza approval is actually playing out in the market and that patients have -- payers, excuse me, are actually reimbursing this drug regardless of whether it's genetically diagnosed patients or clinically diagnosed patients, and that time to fill is very favorable to the drug and to the patients. So all of those things are working exactly as we would expect, and that's what you should be paying attention to as the launch progresses.

So while we're on that topic of patient populations. This is not the last patient population you're going to be studying here. Obviously, while FCS, there's tremendous unmet need, a lot of good to be done West between price point than the eventual sHTG population. So how do you think about price when you're looking at two very different populations, price to value, what the metrics are? And operationally, how you transition from one model to another?

Yes. So FCS is really the tip of the pyramid, if you will, in severe high triglycerides. Those are the patients that have extremely high triglyceride levels. I think our Phase III study of the baseline demographics were 2,300, 2,400, 2,500 mg per deciliter. So very, very high triglyceride levels. Severe high triglycerides are patients who have triglycerides 500 mg per deciliter or higher. And the most severe of those severe high-triglyceride patients are the 880 and above patients. We are talking about that entire patient population when we sit down and talk with physicians and when we sit down and talk with payers, so that both physicians and payers understand that there is a much broader patient population here in need of therapies to bring those triglycerides down to a level that will significantly reduce the risk of acute pancreatitis. That's the risk that these patients face. And those can be very, very severe attacks. They put these patients in the hospital sometimes for a week or more, take them off of all food, potentially could be fatal. So that is what we're trying to drive to, is a significant reduction in acute pancreatitis. And we saw that in our FCS Phase III study. So when we sit down and have the conversation with physicians and payers, we start there, and then we whittle down to what is FCS specifically as a subpopulation of sHTG. What that means from a payer perspective is they now understand that we are going to target that broader patient population, assuming our Phase III studies are positive and we get approval from the regulatory agencies, and that we're going to reduce the price significantly to match the patient population and the significant increase in patient population, so they know going into FCS that they're not going to be signing up for a price for a very large patient population that's starting out with a very small patient population. So that's how we're approaching it. Once sHTG is approved, we'll drop that price down in the, say, $10,000 to $20,000 annual cost of therapy range, and we'll be targeting a much broader patient population.

You do have a competitor who is sort of following on in both these indications that is likely to be in FCS fairly briefly before you transition to the broader indication. How do you think about contracting price as a competitive lever in a world where you have an FCS and sHTG indication versus a competitor who is early on in an FCS launch?

It's a great point. And just to maybe round that out a little bit for folks, we'll be launching -- we're in the market right now with FCS with a rare disease price very commensurate with the patient population in FCS, as you would expect. We've got about a 1-year first-mover advantage before the other nearest competitor brings their product to market at the end of this year. At that point, we will be very close to bringing our drug to the market for the broader sHTG patient population. And that's a significant difference in size of population from about 3,000 potentially in the U.S. to hundreds of thousands of patients that will be addressable with our drug. And so at that point, they will be just launching into FCS and we'll drop that price down to the $10,000 to $20,000 range. So they're going to be at a very significant disadvantage as they're trying to build a market for a very, very small patient population with a price that is significantly lower than what that would necessarily command. We think that puts us in obviously a very favorable position. And we're looking forward to, frankly, being in that position. We probably will have 1 to 2 years first-mover advantage over this competitor in severe high triglycerides, so we'll have a long period of time to be developing this market. And that's what we need to be doing. Right now, we need to be developing this market, we need to make sure that the physicians understand that this is a much broader patient population over time and basically, building brand loyalty to Tryngolza.

So I want to take this exact sort of dynamic -- well, a similar dynamic and move it to a different indication, where you were not first we're playing, you're more of a fast follower, second, third to market dynamic in TTR. WAINUA has been launched, is an injectable, self-administrated, at-home therapy, competing with a market leader, which is an approved in-office subcu in Amvuttra. Obviously, Amvuttra is priced for polyneuropathy, it has done quite well for Alnylam for some time. Presuming approval at the end of this month for cardiomyopathy, how do you think about potential price competition contracting? And how is this analogous or not analogous to the Tryngolza dynamic for you looking forward?

Yes. It's a great question. Let me maybe start first by giving a little bit of background on how the WAINUA launch is going in polyneuropathy, I think that's really relevant here. We launched with our partner, AstraZeneca, WAINUA in early last year. So last year was a partial year, if you will, with WAINUA on the market. And we saw, quarter-over-quarter, increasing growth, so accelerating sequential growth quarter-over-quarter last year. Q3 to Q4, we were capturing about 50%-or-more of the new patients in the U.S. that went on drug. So there was about $37 million of revenue between the Alnylam products and WAINUA in Q4. $19 million of that was WAINUA's. So I think a really strong showing by WAINUA early on in its launch. We think those dynamics are going to continue, and we also think they will read through to cardiomyopathy. And where things are different? One, we're going to be very interested to see how Alnylam prices for cardiomyopathy. We'll be interested in understanding what their label looks like. We'll see all of that in the next few weeks-or-so. So that will be very interesting. We'll have opportunity for the next couple of years-or-so to watch how the launch progresses, how their pricing dynamics progress. It's a little bit different because they're Part B and we're Part D in this space versus the Tryngolza situation, where both drugs are Part D, so that's a little bit of a difference. And so that will have their -- its own dynamics that we'll have to be paying attention to. And it's also different in that the overall market opportunity is substantially different. For severe high triglycerides, we think that Tryngolza for the broad patient population could be a blockbuster drug. And then as we expand out potentially bigger than that, WAINUA and TTR, just the overall TTR space is somewhere between a $15 billion to $20 billion market opportunity. Right now, there are 4 drugs in that market, there are 2 stabilizers and 2 silencers. We believe that we'll be bringing WAINUA forward as the second silencer in the cardiomyopathy space, the bigger indication here when we read out those data next year. So I think the difference is, in a lot of ways, just sheer size of that opportunity in ATTR and the fact that it can very easily support 4 drugs in a -- with $4 billion, $5 billion, $6 billion of annual peak revenues.

So let's talk a little bit about CARDIO-TTRansform, your ongoing pivotal Phase III in that market. A little bit different of a design than HELIOS-B, which is Alnylam study. It's certainly different than ATTRibute. Reflecting in part the fact that you have AstraZeneca supporting you, so you have -- it's a different level of resources than any of these other players; talk to me about how the design of CARDIO-TTRansform informs a competitive position in the market you expect to launch into and into a partially genericized market.

So let me start by saying that -- and maybe expand on your comment about the design of our Phase III study. One of the things that we identified as we were working through the enrollment for our CARDIO-TTRansform study, which is the Phase III study of eplontersen in cardiomyopathy, we were hearing and learning that the demographics of the patient population had really been shifting over time that these patients were being diagnosed earlier, they were younger, they were getting on drug earlier, so they were better managed. And that was affecting the -- could potentially affect the rate of events in this patient population. As a result, because we weren't fully enrolled, we had the opportunity to significantly increase the size of our Phase III study. So we did that. We increased it to 1,400 -- actually slightly more than 1,400 patients at full enrollment, which is almost double the size of any other studies that were being conducted at that time. So that gave us, we think, the opportunity to really potentially have differentiating data from that Phase III study. So with as many patients as we have, we have the opportunity to see subgroup analyses that could answer some questions around what does this drug do on by itself, what does this drug do in hereditary cardiomyopathy patients, what does this drug do in the wild type, what does this drug do as a combination therapy with tafamidis, for example. And so all of those things were important questions that were on our minds. And we believe, having robust comprehensive data would enable us to go into the market in a highly competitive position. In addition, we're running a number of sub-studies that we think further expand the potential value of data coming out of the eplontersen Phase III program. We're running an MRI study and we're running a scintigraphy study and both of those studies are going to give us information on the function and structure of the heart as a result of the use of eplontersen as a treatment for cardiomyopathy. Now, what does that mean for WAINUA or eplontersen as we think about tafamidis going generic? Well, we think that, that actually plays very favorably because as you think about adding a silencer on top of a stabilizer, particularly a stabilizer that's generic, the cost is very -- is limited on the stabilizer because it's generic and you can put the silencer on top of that. I think it's widely agreed or at least has been, and I think that's still the case, that the silencer mechanism should be a preferred mechanism because you're stopping the production of the disease-causing protein rather than stabilizing that -- once it's already caused disease. So we think we actually have the opportunity to have the most robust data, and that should help us weather tafamidis or the other stabilizer or a generic or still branded.

So we're touching on a fairly controversial debate there. So taking a step back, operationally, how does one reprice a higher-priced drug to a markedly lower price? And how is that different in an at-home administered drug or self-administered drug, this was like Part D, versus something given in office, whether it's subcu, IV, any kind of Part B, like mechanistically, how does that work?

It's a great question, and we're actually looking forward to seeing how that's going to be accomplished by Alnylam as a Part B drug. It can be done. Our market access team has told me it can be done, but it's very difficult. And it's difficult because their Part B model is a buy-and-bill model. So they're paying a higher price than what they may necessarily be reimbursed for. And that's something that's going to have to be managed very carefully. So one of the benefits in this case of not being first to market is we'll be able to monitor how they're managing their contracting, their rebating, their price dynamics, and we'll be able to respond accordingly. I think as a Part D drug, it's much easier for us. It's just -- it's much, much easier for us to manage those dynamics, and we'll be keeping a close eye on how this plays out over the -- we'll know something here in the next few weeks, as I said, and we'll see where this goes over the course of the next year or 1.5 years-or-so.

One certainly hope so on behalf of patients.

Yes. Agree.

So I'm going to hop over to another large but complex and competitive rare disease market that Ionis will be entering on a stand-alone basis, which is donidalorsen and HAE. I'm going to ask something we talked about last night, which is based upon the work that you and your team have done, obviously, in prep for the launch deeply [indiscernible] in this market. What is the churn rate for HAE patients on a prophylaxis therapy -- prophylactic therapy to a different prophylactic therapy on an annual basis?

Yes, it's a great question. I think if you had asked that question a few years ago, I think the answer you would have gotten is that there is very little switching going on in that market, that it was a very sticky market and that when folks went from HAEGARDA or TAKHZYRO that they stayed on those therapies. I think what we've learned with the introduction of ORLADEYO into that market, is that, in fact, it's really not as sticky a market as anyone had anticipated. The market is actually much more of a switch market than anyone would have believed previously. We see between 20% and 25%-or-so of patients switching on an annual basis, based on our data. And what that tells us is that there's tremendous dissatisfaction with the existing therapies and opportunity for a preferred therapy to come forward. There's three things that patients who have HAE are looking for from their therapy: They want efficacy, they want a significant reduction in the attack rate that they have to be concerned about. These attacks are severe, they're painful, they come unexpectedly and they could be fatal, depending on where they may occur within the body. They're also looking for ease of administration, tolerability. They want these drugs to be drugs that they can take without a lot of side effects or a lot of discomfort. And the third thing they want is they want the convenience of managing their disease. This is generally a young patient population. They're often diagnosed as young children, 10, 11, 12 years old, and they live with their disease for their entire life. So they want to be able to grow up and to manage a life, a full life, without really focusing on their disease. Right now, there is not a single therapy that offers these patients all three of those attributes. And so we believe that donidalorsen, in fact, could be that therapy. We've seen efficacy that demonstrates more than 95%, almost 96% attack rate reductions in our long-term open-label extension studies. We recently presented those data at the AAAAI conference in San Diego a few weeks ago. We also believe that with a easy-to-take, once-monthly, subcu, small-volume auto-injector, which is what we're delivering this product in, answers the question about tolerability. They don't have GI side effects, they don't have painful viscous injections that they need to take, and it's about a 10-second injection, so very quick and very easy. And what we're offering as well is the ability to dose every 4 weeks or every 8 weeks. And we think that also is going to be beneficial. Right now, they either have to take a daily pill or they have to take in every 2-week injection and sometimes they can push that to every 4 weeks, assuming that the efficacy doesn't fall off and they don't have attacks. So that, we think, means that there are three critical factors that these patients are looking for that we can offer them in donidalorsen.

So we had a fairly stable duopoly. But there were some older -- [indiscernible] older therapies for HAE, but we frequently had supply issues because of plasma derivation. So we had, what was, a fairly stable duopoly, which became a higher switch market with the introduction of a differentiated product, in this case, the oral. And now we're having a second differentiated product, a less frequently administered product with a different MOA in donidalorsen. Looking out beyond that, we have a gene editing approach currently in a pivotal study as well as your own editing partnership with Metagenomi, which includes equity ownership. Talk to me how you think about not just the disruptive and churn-driving opportunity that the introduction of donidalorsen offers, but also how you expect to participate in the eventual introduction of potentially onetime aspirationally, functionally curative, I'm trying to be careful here, not use the C word dangerously; genetic medicines into this market? How do we think about that sort of life cycle generational management of what's going to be a meaningful franchise for Ionis?

So one of the things that we did that I thought was very innovative as we were sitting down together and thinking about the Phase III design for donidalorsen, and this is where the value of having a fully integrated RDNC organization comes into play. We designed the first prospective Switch study and ran that Switch study. And that Switch study was so important for multiple reasons. What we were able to learn through that study was just what mattered to patients and how could we help them switch effectively and safely to a new therapy. So some of the data that came out of that Switch study, we learned that while these patients spot, they were well controlled on their existing therapy, they got an additional 64% reduction in their attack rates by being on donidalorsen. That was really important to them because, as I said, efficacy and the ability to manage attacks is a critical attribute for them in their -- managing their disease. We also learned that they had a very strong preference for doni. We surveyed these patients. And of those patients that were surveyed, 80% said -- actually, more than 80% said that they were -- preferred donidalorsen and have stayed on donidalorsen in the Switch study. So again, very important data. We're going to bring all of those data to bear in the marketing efforts and really drive the switch market in favor of donidalorsen. But that's not where it stops for Ionis. For Ionis, we have a deep pipeline of partnered and wholly owned medicines, and we're committed to really holding on to the leadership role in those medicines. So that means thinking forward to the follow-ons and the life cycle management of those medicines. To your point, we have follow-on programs for all of our late-stage medicines right now, designed primarily to look at extended dosing frequency. So there's a real push right now in the market for less frequent dosing and we're able to bring that forward with the advanced chemistries that we've been working on at Ionis. We have one of the leading medicinal chemistry organizations in this entire space, and we're bringing it to bear to be able to bring forward these follow-ons. Additionally, to your point, we're also looking at gene editing as an opportunity even further down the road to maintain our leadership in these various different franchises.

So we're coming down the end of our end of our alloted time. We talked about a lot of different elements of the pipeline. We didn't get to Angelman, we didn't get to -- I know [indiscernible].

I love Angelman.

But let's talk about exactly that dynamic, the perfusion of other assets, which realistically would take a ton of capital to all move into Phase III. How do we think about early and mid-stage assets that live inside the Ionis pipeline that should perhaps be partnered? And how do you decide what to partner, what not to partner? And to what extent does that lead into our very first question around managing sources of capital?

Yes. The beauty of partnering for Ionis today is that it does enable us the financial flexibility to focus on our wholly owned pipeline. It also enables us to have the resources to focus on our wholly owned pipeline because we no longer have to put those resources towards programs that our partners are executing on from a development and commercial perspective. So that is very, very important for Ionis. Partnering will still be an important aspect of the company, but it will be for those reasons, not as a core business model for the company as it's been in the past. Where our focus is on our wholly owned pipeline, and we've really spent the last 4, 5 years focusing that pipeline, particularly in the areas of neurology and cardiology, where we believe we have the ability to lead particularly in neurology, and I'd love to spend more time talking about that at another time. And so that's -- our focus is ensuring that our resources, our capital and our people are brought to bear on their wholly owned pipeline and that we're building that wholly owned pipeline for that revenue growth and for the strong cash flow that, that revenue growth is going to drive going into the future.

Great. I would love to continue this for another half hour, but we are very late. Thank you so much, Beth. Looking forward to continue the conversation again soon.

Thank you. It was great to be here.