Ionis Pharmaceuticals Inc Q4 FY2020 Earnings Call

Good morning and welcome to the Ionis Pharmaceuticals Fourth Quarter and Full Year 2020 Financial Results Conference Call. As a reminder, this call is being recorded. At this time, I would like to turn the call over to Wade Walke, Vice President-Investor relations, to lead off the call. Please begin.

Thank you, Tom. Before we begin, I encourage everyone to go to the Investors section of the Ionis website to find the press release and related financial tables, including the reconciliation of GAAP to non-GAAP financial measures that we will discuss today. We believe non-GAAP financial results better represent the economics of our business and how we manage our business. We have also posted slides on our website that accompany our discussion today. With me on today’s call are Brett Monia, our Chief Executive Officer; Beth Hougen, Chief Financial Officer; and Richard Geary, Executive Vice President of Development. And joining us for Q&A are Onaiza Cadoret, Chief Corporate Development and Commercial Officer; and Eric Swayze, Executive Vice President of Research. I would like to draw your attention to slide 3, which contains our forward-looking language statement. We will be making forward-looking statements, which are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to consult the risk factors discussed in our SEC filings for additional detail. And with that, I’ll turn the call over to Brett.

Thanks, Wade. Good morning and thank you for joining us on today's call. Last year marked a new beginning for Ionis. With new leadership in place, we laid out a bold new vision for the business and took important steps towards realizing our goal of having 12 or more medicines on the market in 2026. Key to our new vision is our strategy to maximize the value of each medicine in our wholly-owned portfolio. Today, our focus is primarily on commercializing our rare neurological and cardio-metabolic disease medicines. But those opportunities outside these core areas, we will set a course forward that maximizes the value of each medicine which may include Ionis’ commercialization or partnering. Last year, we accelerated our commercial strategy by acquiring Akcea. This transaction also enabled us to strengthen our organization and to recognize the full value from Akcea’s rich product portfolio. Further, our distribution agreement with Sobi made it possible for us to restructure our European operations which further streamlined our business. We were able to unlock substantial resources through these transactions which we are investing in the business in the following three key areas; first, we're advancing and expanding our wholly-owned pipeline. Second, we're building our commercial capabilities in support of our rich pipeline as we prepare to launch prioritized medicines from the Ionis’ wholly-owned pipeline. And third, we're broadening the reach of our technology through investments in medicinal chemistry, human genomics, validation of new routes of delivery and through other means. We believe investing in these three key areas provides the greatest potential to drive future growth and to achieve our goals of 12 or more medicines on the market in 2026. Last year, we made substantial progress towards achieving this goal, with numerous significant advances across our rich late and mid-stage pipeline. We now have six Phase 3 studies underway, including three studies with wholly-owned medicines. We also have a prolific mid-stage pipeline of medicines advancing towards Phase 3 development, many of which are expected to reach pivotal trials in the near term. With so many programs in mid to later stages of development together with our historically high rate of clinical success, today, we are in the enviable position of delivering a steady cadence of Phase 3 data readouts for many years to come. And we're especially excited about the upcoming Phase 3 readout of the VALOR study for tofersen in patients with SOD1-ALS with data expected in the second half of this year. Positive results from this study would put us one step closer to providing the first ever disease-modifying therapy for ALS. And importantly, positive tofersen results would also provide for the first time, tangible clinical evidence that treatment is possible for patients with ALS, providing hope for all patients suffering from this devastating disease. And more broadly, tofersen success once again demonstrates the power of our antisense technology to pioneer new markets and deliver transformational medicines to patients. In addition to advancing our pipeline, we're also expanding utility of our technology, having now demonstrated proof of concept for aerosol delivery of antisense medicines to the lung. Based on these results, we're well on our way in building a new pulmonary disease franchise with the potential to treat conditions such as cystic fibrosis, COPD, IPF, and asthma. We've only scratched the surface of the unique capabilities of our antisense platform. With the medicines advancing in our pipeline today with the potential to continuously pioneer new markets in areas of significant unmet medical need and change the standards of care for diseases needing better treatment options for many years to come. As we began the year in 2020, we of course could not have imagined the challenges society would face from the global COVID-19 pandemic. Because of the dedication of our employees and strength of our technology and our business, we were able to successfully manage the evolving pandemic and achieve our key goals. Successfully manage the evolving pandemic and achieved our key goals for 2020. This includes achieving our 2020 financial guidance while advancing our pipeline and our technology. As Beth will describe in more detail, we plan to put our substantial financial resources to work even more this year by increasing our investments in our medicines and our technology. We believe this has the greatest potential to drive future revenue and earnings growth. And with that, I'd like to turn the call over to Beth to review our 2020 financial results and our 2021 financial guidance which is focused on maximizing the value of our wholly-owned pipeline. Then Richard will discuss our key recent pipeline achievements and highlight important areas of focus for this year. After Richard, I'll wrap up our prepared remarks before taking your questions. Now over to Beth.

Thank you, Brett. I'm pleased to say that we exceeded our 2020 guidance with revenues in excess of $700 million and net income of $111 million on a non-GAAP basis. We achieved these results while continuing to invest heavily in our rich pipeline, with a focus on our wholly-owned medicine. And we're particularly pleased with these results, given the challenging global pandemic environment. In the fourth quarter of 2020, we took important steps toward our goal of creating a stronger, more efficient company when we acquired Akcea and moved our European operations to a distribution model. Together, these transactions unlocked substantial cost savings that we plan to reinvest to drive future revenue growth. I'll talk more about that in a few minutes. But first, I'll walk through our 2020 financial highlights, beginning with revenue. Last year, about 50% of our total revenue came from our marketed products, with the majority coming from SPINRAZA. Most of the remaining 50% of our revenue came from eight different partners as together we advanced more than 20 programs. Our ability to generate revenue from numerous diverse sources is a key element of our financial strength. SPINRAZA continued its blockbuster performance last year, generating over $2 billion in global sales. We earned $286 million in royalty revenue as a result. Virtually all of that revenue falls to our bottom line as profit. Biogen remains committed to enhancing patient outcomes and reinforcing the proven efficacy and safety profile of SPINRAZA in SMA patients of all ages. The RESPOND study and the DEVOTE study are two examples of this commitment. The RESPOND study, which is now underway, is evaluating SPINRAZA’s potential benefit in SMA patients who have experienced a suboptimal response to gene therapy. And the DEVOTE study, which is evaluating the potential to deliver even greater benefits with higher doses of SPINRAZA compared to the currently approved dose, is now enrolling patients in the pivotal, blinded cohort. Given SPINRAZA’s robust efficacy and safety profile established in SMA patients of all ages, SPINRAZA continues to be a foundation of care for the treatment of these patients. And with over 11,000 patients on treatment at the end of last year and over 60,000 SMA patients in markets where Biogen has a commercial presence, we believe SPINRAZA’s future remains bright. TEGSEDI and WAYLIVRA had combined product sales of $70 million, an increase of more than 65% compared to 2019, as these medicines launched into new markets and new patients began treatment in existing markets. TEGSEDI has demonstrated consistent quarterly growth since launch driven by new patient growth in established markets such as the US and a new market across Europe. Last year, we achieved pricing and reimbursement in numerous new countries bringing the market in which TEGSEDI is commercially available to this team. Notably, we began generating revenue in countries across Southern Europe, including Portugal which is strategically important because of its large endemic hATTR patient population. We began recognizing revenue in Canada and we continue to expand into Latin America. Patients in Brazil and Argentina are being treated with TEGSEDI under our names patient program administered by our partner, PTC. In its first full year of commercial sales, WAYLIVRA achieved important successes despite the pandemic. Through the efforts of our European team, we achieved pricing and reimbursement in six major European markets. WAYLIVRA is under review for marketing authorization in Brazil through PTC, and we are optimistic about a potential approval this year. PTC is continuing its efforts to expand access in other Latin American markets as well. During 2020, we earned R&D revenues of approximately $365 million, slightly above our annual average of $350 million. Approximately 80% of our R&D revenue is from medicines in our leading cardio-metabolic and neurology franchise with more than $165 million from our cardio-metabolic franchise and over $125 million from our neurology franchise. Additionally, we earned nearly $50 million from Alnylam last year. This included $41 million in sublicense fee revenue we earned in the fourth quarter when we obtained a favorable award in our arbitration proceedings. As 2020 once again demonstrated our ability to consistently earn revenue from multiple sources is a key pillar of our financial strength. As we projected in our 2020 guidance, our non-GAAP operating expenses increased compared to 2019. The increase was driven by growth of just over 10% in non-GAAP R&D expenses related to advancing our Phase 3 programs for TTR LICA and APOCIII LICA plus our wholly-owned medicine. Our SG&A expenses on a non-GAAP basis were slightly lower year-over-year, primarily from reduced travel and related expenses due to the pandemic. We exceeded our net income guidance of meaningfully profitable with net income of $111 million on a non-GAAP basis. And we ended 2020 with nearly $2 billion in cash, enabling us to increase our investments across our business. As a result of our Akcea and Sobi transaction, we recognized approximately $400 million of related expenses in Q4 of last year. Importantly, most of these expenses were noncash and nonrecurring. We excluded these expenses from the non-GAAP results I've just reviewed with you because they do not reflect our normal ongoing operations. These expenses were comprised of $31 million of severance and retention costs, $59 million of noncash stock-based compensation expense, and $312 million in a noncash adjustment of our valuation allowance for our federal deferred tax assets. I’d like to just take a couple of minutes to provide some additional information about the adjustments to our valuation allowance. Since Akcea’s IPO, we've been required to report our federal taxes as two separate companies. That meant that Akcea’s operating losses and R&D tax credits were not available to reduce Ionis’ taxable income during that time. As a result of the acquisition, we were able to reconsolidate the two companies for federal tax purposes and will now combine Akcea’s expected losses with Ionis’ taxable income, resulting in tax losses for the next few years as we make significant investments to drive future revenue growth from our rich pipeline. Additionally, this means Akcea’s pre-acquisition federal tax assets of nearly $300 million are now available to us to reduce our consolidated taxable income in the future. However, because we anticipate consolidated tax losses in the near term, we are required to establish a valuation allowance against these deferred tax assets. So, while it's a large number, it's important to note that this is a noncash adjustment based on technical accounting guide and reflects the substantial tax benefits we have available to us to reduce our consolidated taxable income in the future. Now, I'd like to provide some color on the financial benefits from our Akcea acquisition and the restructuring of our European operations. Last year, we put our strong balance sheet to work when we reacquired Akcea. The acquisition provided us with significant financial benefits. First, we retained the full value of Akcea’s rich portfolio, which we expect to drive considerable revenue growth in the future. Second, we are realizing significant cost savings from the efficiencies we are achieving by operating as a single company. Third, we gained full access to Akcea’s substantial cash balance of nearly $400 million at the time of the acquisition, enabling us to freely use it to maximize the value of our medicine. And, fourth, we gained access to the nearly $300 million of Akcea’s deferred tax assets I discussed a few moments ago. We are also realizing significant financial benefits from our Sobi transaction. Restructuring our European operations improves our bottom line by enabling us to distribute TEGSEDI and WAYLIVRA in a more cost-effective manner by leveraging Sobi’s commercial infrastructure and reach across Europe. As a result, we expect to realize substantial savings. In aggregate, we expect to realize more than $50 million of savings in 2021. And we are putting these substantial savings to work by reinvesting them in other value-driving areas of our business. Now, turning to our 2021 financial guidance. We are projecting to earn more than $600 million in revenue, incur operating expenses in the range of $675 million to $725 million, and end 2021 with a net loss of less than $75 million assuming the low end of expenses, all on a non-GAAP basis. Our 2021 guidance reflects our new strategy to maximize the value of our wholly-owned medicine, focused primarily on commercializing our rare, neurological, and cardiometabolic disease programs. These programs. Our guidance also reflects the shift in revenue for TEGSEDI and WAYLIVRA in Europe from product revenue to royalty revenue. As I mentioned a few moments ago, our restructured European operations will provide us with substantial savings which we are redeploying to achieve our growth objectives. As we've always done, our R&D revenue is probabilized based primarily on the anticipated timing of the many different milestone payments we anticipate achieving as we advance partnered programs. Because of this approach, we have upside opportunity particularly since we expect our R&D revenues to be higher in the second half of the year compared to the first. We expect our operating expenses to increase as we invest in driving future growth. That means investing our resources in three key areas; advancing and expanding our wholly-owned pipeline, building our commercial capabilities, and broadening the reach of our technology. Our investments in our pipeline are focused on advancing our ongoing Phase 3 studies for TTR LICA and APOCIII LICA, starting new Phase 3 studies for APOCIII LICA in a larger patient population, advancing ION363 in FUS-ALS at the Phase 3 development, and continuing to progress our multiple mid-stage programs. We are also investing in building our commercial capability. With that view, we acquired a strong commercial foundation, and we continue to build on that foundation. Specifically, we have established a new product strategy team which is focused on go-to-market strategies and indication optimization ahead of launching our wholly-owned benefit. And we are investing to broaden the reach of our technology, ensuring our platform remains innovative and competitive. We expect our R&D expenses to increase approximately 25% to 35% in 2021 compared to last year. And because most of our synergies are within SG&A, we expect our SG&A expenses to decrease. We can increase our investments as I just described while projecting a modest net loss this year because of our multiple sources of revenue and the significant cost savings we realize from acquiring Akcea and restructuring our European operations. Our capital allocation strategy is focused on investing internally for growth. We strongly believe this is the best use of our capital. We are confident that investing in our medicine can grow future revenues at double-digit rates as we bring more and more new medicines to the market and achieve our goal of 12 or more marketed products in 2026. And with that, I'll turn the call over to Richard.

Thank you, Beth. We made important progress across our portfolio in 2020 including moving many of our wholly-owned programs closer to market. We're pleased with the performance of our Phase 3 assets with several key achievements last year. The Phase 3 studies of tominersen for Huntington's disease and tofersen for SOD1-ALS achieved full enrollment. We initiated Phase 3 studies with two of our rare wholly-owned cardio metabolic disease programs TTR-LRx for patients with TTR cardiomyopathy and APOCIII-LRx for patients with FCS. And importantly, all six of our Phase 3 studies continue to progress well. We also made substantial progress with our mid-stage programs, including reporting positive data from six studies, initiating more than 10 new Phase 2 studies, and expanding the reach of our technology by demonstrating our ability to safely deliver antisense medicines by aerosol to the lung. We are well positioned for a very busy year of catalysts. The first significant of which is the Phase 3 data for the VALOR study of tofersen in patients with SOD1-ALS. ALS is a disease particularly of importance for us because antisense technology is ideally suited to address the root causes of ALS. We have leveraged our platform to develop medicines to treat all forms of this disease. Today with four medicines in development, we believe we could truly have ALS around. Tofersen has the potential to become the first disease-modifying treatment for ALS, which we believe will fundamentally change the ALS treatment landscape. Positive tofersen data would also give us greater confidence for our programs for the treatment of other forms of ALS. We believe tofersen may also have the potential to slow progression or even delay the onset of disease in presymptomatic SOD1-ALS patients, similar to the profound effects demonstrated by presymptomatic SMA patients treated with SPINRAZA before symptom onset. Biogen plans to initiate the ATLAS study this year to address this question and, hopefully, demonstrate a similarly profound benefit for tofersen in presymptomatic ALS patients. Our next ALS program to enter development is ION363 for the treatment of FUS-ALS, which we plan to move directly into a pivotal study shortly. FUS-ALS is a devastating rapidly progressive form of ALS caused by mutations in the FUS gene. So, we are pleased to be moving so rapidly to evaluate this medicine in patients with such a clear unmet medical need. Importantly, ION363 is Ionis’ first wholly-owned ALS medicine to enter the clinic. In addition to these exciting ALS catalysts, we have a busy agenda from programs across our wholly-owned portfolio. Coming up in the first half of this year, we look forward to multiple catalysts including key data readouts and study initiations. We plan to report top line Phase 2 data from PKK-LRx and GHR-LRx for the treatments of HAE and acromegaly, respectively. We also plan to present more detailed data from our ENAC-2.5Rx and AGT-LRx programs at upcoming scientific meetings taking place in May. At the American Thoracic Society meeting, we plan to present Phase 2 data for ENAC-2.5Rx in patients with cystic fibrosis and at the American College of Cardiology Conference, we plan to present Phase 2 for AGT-LRx in patients with resistant hypertension. Each of these medicines has the potential to change the standard of care for these indications. Additionally, these medicines have the potential to address additional indications, representing further opportunities for growth. Looking at upcoming study initiations, we are very close to starting a Phase 2 for ION373 in patients with Alexander disease. Together with ION363 for patients with FUS-ALS, these programs represent significant advancement among our wholly-owned neurological disease medicines. We plan to advance AGT-LRx into a larger Phase 2b study in resistant hypertension patients on three or more antihypertensive medications, a population representative of real-world patients. This study is expected to get underway soon. We also plan to study AGT-LRx in patients with heart failure in a Phase 2 study expected to start midyear. And also in the first half, we look forward to advancing ION224, our wholly-owned medicine targeting DGAT2, and our advanced medicine in development for NASH into a Phase 2b study. Looking to the second half of this year, we expect even more key value-driving events. We plan to further expand our pulmonary disease franchise based on our growing body of data supporting aerosol delivery and antisense medicines to the lung. In addition to continuing to advance our Phase 2 study in patients with COPD, we look forward to advancing our cystic fibrosis development program with the initiation of a larger Phase 2b study of ENAC-2.5Rx in cystic fibrosis patients not amenable to CFTR modulators. Biogen recently offered an early preview of our Alzheimer’s disease program noting that MAPTRx demonstrated durable time and dose-dependent reductions in CSF tau protein and was generally well-tolerated in the Phase 1/2 study in Alzheimer's disease patients. With Biogen, we look forward to reporting these results later this year. And as I mentioned, we, of course, look forward to data from Phase 3 VALOR study of tofersen in patients with SOD1-ALS later in the second half. In addition, in the first half of this year, we planned to host a series of disease-focused educational webinars. We’ve invited experts who will discuss current treatment options and needs for patients with cystic fibrosis, hereditary angioedema, and acromegaly. We look forward to hosting these webinars prior to top line data reports for each of these programs. Around the middle of the year, we plan to wrap up this series with an investor-focused webcast to talk specifically about data from these programs in the context of the unmet market need. Importantly with our pipeline progress to-date and our key anticipated data catalyst this year, we are well-positioned for a steady cadence of Phase 3 data for years to come. These data support our goal of 12 or more medicines on the market in 2026, including potentially six or more wholly-owned medicines. And with that, I'll turn the call back over to Brett to close this portion of the call.

Thanks, Richard. This is an exciting time for Ionis as we expect to accelerate our next stage of growth and deliver a growing number of new transformational medicines to patients in need. We have the potential to bring three new medicines to market by 2023 and looking further ahead, we're well on our way to achieving our goal of 12 or more medicines on the market in 2026, over half from our wholly-owned pipeline. In support of our new vision to commercialize our wholly-owned medicine, we're making significant investments to aggressively advance these programs forward and also as part of our strategy as the wholly-owned pipeline develops, we're setting our plans to determine the best path forward for each asset to maximize value to patients and to shareholders. And from across our entire pipeline, we look forward to a continuous flow of Phase 3 data readouts for many years to come. In addition to investing in our wholly-owned pipeline, we're investing in building our commercial capabilities and implementing our plans to commercialize our own medicines, advancing our technology and potentially expanding it with new technologies that complement our antisense platform. We believe these investments will provide substantial returns including double-digit revenue growth and this growth will be driven by our successful Phase 3 programs into the market, generating more value from the wholly-owned programs we commercialize and from those programs partnered today and those we retain longer before we partner in the future. Before we close this portion of the call, I want to take a moment to recognize Rare Disease Day, which has been celebrated around the world this week. For many years, Ionis has dedicated and continues to dedicate substantial resources to serve patients suffering from rare diseases such as SMA and ALS. We're proud to say that in the case of SMA, we at Ionis pioneered a new market and brought the first disease-modifying medicine to these patients, many of whom are with us today because of SPINRAZA. And in the case of ALS, in just a few short months, we again have the potential to deliver the first disease-modifying medicine to treat ALS. We’re proud of these achievements but we're only at the beginning. Of course, Rare Disease Day is about the patients and families living with rare diseases. We have strong partnerships with these great people and we’re confident that we will continue to provide transformational medicines for more patients for many years to come. With that in mind, please join me in recognizing and celebrating the dedication and accomplishments of the brave patients suffering from devastating rare diseases, as well as the families who care for them. And with that, I'll open the call for questions.

We will now begin the question and answer session. The first question comes from Yaron Werber with Cowen. Please go ahead.

Great. Thanks so much for taking my question. And really nice progress. Two questions, Beth, maybe just for your housekeeping, and then a question more about the pipeline. Just in terms of top line, your guidance for more than $600 million in revenues, can you give us a little bit of a sense how are you looking at SPINRAZA? You kind of expecting it to be kind of flattish in the growing segment or are you expecting a little growth and no collaborative revenues you mentioned are going to ramp forward in the second half? But anything you can guide us there. And then, a quick question on the ENAC-2.5 technology, I mean it sounds like we're going to get data shortly. The study, it fully goes to Phase 2a. And you're noting that you started Phase 2b now which is in CF this year. Can you just remind us, are we mostly going to be looking at expression in the CF patients or are we going to be able to also look at some kind of a pulmonary function like SEC1 or is the study just too small, the Phase 2a? Thank you.

Sure, Yaron. Good morning. So thinking about our top line guidance for this year, when you think about the commercial revenue stream, really the only impact to commercial revenue is that the transition for TEGSEDI and WAYLIVRA from a product sales top line in Europe to royalty revenue in Europe. We continue to think that SPINRAZA has a very bright future, as I mentioned. We see the opportunity to continue to expand the numbers of patients on treatment primarily outside of the United States. But I think the strong efficacy of SPINRAZA that's been well established in more than 11,000 patients for seven-plus years for many of those patients. It really bodes well for SPINRAZA’s future. And so, we're not anticipating a negative impact at all in the top line with regard to SPINRAZA. And then on R&D revenues, as we always do, we likely factor in the many milestone opportunities we have over the course of the year. And by doing that, we know that we have lots of opportunities to overachieve on our top line as the year progresses, and we achieve those milestone events and the payments that go with them. So, starting here in February, we like to make sure that we have guidance that we can achieve. But consistently in the past, we have outperformed that guidance and we certainly have those opportunities this year as well.

Thanks, Beth. Was there a follow-up question?

I was just going to ask Beth, just remind us, with Sobi the royalty and milestone agreements and what you have disclosed. That will make sure everybody gets this correct in the models. Thank you.

Yes. Sure. We haven't disclosed the actual royalty percentage. But think about it in the general range of royalties associated with a drug that we share in many of the post-marketing activities. So, we’re continue to supply drug and handle this distribution. We continue to manage safety. We continue to be actively involved with KOLs in this setting, the global strategy and working very closely with Sobi. So, think about it really as a relationship in which we share in the opportunities for top line growth.

To address your question about ENAC, last year we showed data indicating significant reductions in ENAC levels in the lungs of normal volunteers after weekly aerosol delivery, which demonstrated strong safety and tolerability. This year, at the ATS meeting in May, we plan to present our initial data from patients with cystic fibrosis based on our completed Phase 2 study. Safety and tolerability will be key aspects for this study, as it’s our first experience with patients, and we are eager to share those results. Although it’s a small and short study, lasting about three months, we will present data on lung function at the ATS this year. Moreover, ENAC is the first of several drugs we are developing for pulmonary diseases through aerosol delivery. We plan to initiate another clinical trial this year alongside the ENAC studies, and we are currently conducting a Phase 2 study of ENAC in COPD. We are excited about the ongoing ENAC study in COPD and the upcoming clinical initiatives this year as we aim to expand our franchise for pulmonary diseases.

The next question comes from Paul Matteis with Stifel. Please go ahead.

Hey. This is Alex on for Paul. Thanks for taking the question. I was just curious about this new HFrEF program for the AGT product and what the rationale is for that mechanism of action and whether development there is pending anything in hypertension or if you plan to go in that direction regardless of how the hypertension program goes? Thanks.

Richard, would you like to take that?

Sure. Happy to. RAS inhibitors have been utilized in heart failure, and our preclinical studies indicate a strong effect by targeting angiotensinogen in heart failure models. While the concept is not new, the design of this study in HFrEF patients enables us to explore a population with a substantial understanding of heart failure, the effects of RAS inhibitors, and their safety. This approach allows us to conduct a robust proof-of-concept study. It is designed to provide more insights into both biomarkers and functional outcomes. We are looking forward to our initial examination of heart failure in humans with the reduced effect.

Yes. And as a reminder, Alex, again, we’re planning to present a much more detailed data, full data set from our Phase 2 study in patients with refractory hypertension, ACC.

The next question comes from Jim Birchenough with Wells Fargo. Please go ahead.

Hey, guys. Congrats on all the progress. Terrific stuff. Maybe on the financials and a pipeline question. On the financials, it’s just that SPINRAZA royalty outlook contemplate some COVID recovery and less spacing out of intrathecal injections, just interesting how you're thinking about that? And then remind us, if you're at the point with PTC where you've reached the sales threshold where you're participating in some of the upside from Latin America for TEGSEDI and WAYLIVRA?

Sure. Hi, Jim. With SPINRAZA, we expect that the COVID situation will improve this year. Biogen mentioned in their recent earnings call that they are noticing patients return to SPINRAZA from competing products because of the effectiveness SPINRAZA provides. This trend began in the fourth quarter and is likely to continue this year, especially as the pandemic eases in the US and worldwide. Regarding PTC, we've reached the point to start the 12-month clock, and we anticipate seeing some contributions from PTC sales in Latin America later this year.

Great. That's helpful. And then maybe on the pipeline, and for Richard, just on FUS-ALS, could you speak about the strength of supportive data whether it's just the biologic rationale or any preclinical data and how that compares to the strength of support for SOD1-ALS? Just trying to get a sense of how validating one may be for the other. And then the second part is just on your chart of catalysts or milestones, Huntington's update in terms of natural history study and open label extension is listed sometime in 2021. And so, just maybe to give us a sense of what you would expect to see in contrasting those two groups. Thanks.

Yeah. I'll give a high level and then I'll pass it over to my colleague, Eric, to question a little bit. FUS-ALS, of course, is a monogenic form and hereditary form of ALS. And because there is a known causative genetic component here that we can directly target, we believe that the FUS-ALS compound, which we've shown is a very good drug for lowering FUS to FUS genetic component, bodes well for us and allows us in fact with our conversations with regulatory to move directly into a study that is registrational. And I’ll pass it over to Eric for any other comments.

Right. Yeah. Thanks, Richard. That’s mostly right, the process of the known genetic cause of ALS much like SOD1-ALS. It's known to be a pathogenic protein which accumulates and aggregates in cells. And so, it's similar to tofersen in that we're reducing a genetic cause and reducing a pathogenic protein. And we do have preclinical data that supports that reducing and can provide a benefit. So, I do think it's similar to the tofersen program in that regard. And then I think you asked about Huntington and what Roche is planning to present. And I can just really refer you to their statements where they are continuing to plan to present some data from the open label study, a natural history study, at some point in 2021. And then beyond that, we're really focused on the Phase 3 study, which is progressing and scheduled for its readout in 2022, which I think is the key definitive experiment for Huntington's disease.

Thanks for taking the questions, guys.

The next question comes from Tyler Van Buren with Piper Sandler. Please go ahead.

Good morning, everyone. I have a couple of questions. On the financial side, you have been profitable over the last few years. Based on the guidance, this appears to be the first year you will report a loss, which seems to be justified by advancing the wholly-owned programs. Should we anticipate a modest net loss like this for the foreseeable future in the coming years, or will it continue to grow? For my second question regarding the pipeline, I want to ask about the Phase 2 programs. We have a good understanding of the Phase 3 program and when we can expect readouts and market access, but I am curious about the timing for the two or four Phase 2 readouts in the first half of this year. Which of those do you think could be the first to reach the market, and when do you expect that to happen?

Thank you for the questions, Tyler, and good morning. We are in a fortunate position with a very strong balance sheet at Ionis, allowing us to invest in all aspects of our pipeline. Our commercial strategy and technology aim to maximize the value of Ionis and contribute to its growth for the benefit of patients and shareholders. This is exactly what we are focusing on now, and we will continue to ensure we capture all potential opportunities. Currently, we are not providing projections for next year or the following year, but we will keep investing over the next few years. Additionally, we have multiple revenue sources, as Beth mentioned in her presentation, including R&D revenue, partnerships, and our commercial revenue. We anticipate that our next commercial product will be tofersen along with TTR-like polyneuropathy and Huntington, potentially having those three medicines on the market in 2023. This illustrates how our commercial and R&D revenue can help support our future investments. It is too early to project profitability for 2022, but we will certainly keep investing. Beth, do you want to add anything?

No, I think that was extremely well said, Brett. Maybe the only thing I will add is that we have a long history of financial discipline, and we will continue to exercise that discipline while investing deeply in our wholly-owned pipeline in our technology and really ensuring that our medicines are prepared and ready to successfully launch when they get to market.

Regarding your question about the Phase 2 readouts, we have several coming up in the first half of this year, including three wholly-owned rare disease programs: hereditary angioedema, acromegaly, and the ENAC cystic fibrosis program. Given the next steps for these programs and the scale of the studies needed for registration and approval, I believe the acromegaly program is the furthest along, pending positive data from the study that will be announced this first half of the year. It seems well-positioned to move into a pivotal study. What do you think, Richard?

I would say that after the Phase 2b for cystic fibrosis, there would be a positioning for Phase 3, but there is still work to be done there. For PKK-L, it also depends on the results of the Phase 2 study. If the results are positive, that could move relatively quickly as well.

The next question comes from Vincent Chen with Bernstein. Please go ahead.

Congrats on all the progress and thank you very much for taking the question. Maybe just one quick question. I was wondering now that you have a little more experience dosing RNA into the CNS, how should we think about likely dosing regimens for this? I noticed for example that the FUS-ALS program is dose, after initial loading dose every two months which is kind of I guess the midpoint of the dose that you tried in Huntington’s and somewhat less frequent dosing than the SOD1 program. How do you think about the dosing required to treat CNS diseases?

Eric, you want to go?

Yeah, sure. Hi, Vincent. I mean, we're always looking at extending our dosing regimen and making then consistent with the duration of action of the drug. And so, in earlier programs, we were working out how to dose the CNS and learning how to get the drugs delivered in a way that they could reduce their targets understanding those relationships. And so, as we learn more and more, we understand how to extend the dosing regimen. So, I would look for continued expansion and extension of our dosing regimens in the clinic. It's a key objective and we think the profile the drug supports it and we're working across all of our clinical programs to try and understand how we can best extend dosing because obviously extended dosing is much more convenient for patients. An example of that would be in the Huntington's program where we work with Roche to get the every four-month dosing into the Phase 3 program that's ongoing and scheduled to read out in 2022. So, we think that's a good benefit and we can transfer that and hopefully extend it across all programs.

Our strategy to enhance durability and reduce dosing frequency is developing in two main ways. We’re optimizing our selection of molecules to achieve longer-lasting effects, along with advancements in medicinal chemistry. Additionally, as we've mentioned in collaboration with Biogen, we've demonstrated significant long-lasting reductions in TAO. The upcoming presentation of our study with MAPT in patients with mild Alzheimer's disease will highlight just how durable the effects of this molecule are.

Have you gained any insight from the Huntington data regarding patients treated with a dosing schedule of every four months, and the open-label extension for the initial generation A1c patients? Have you acquired any additional pharmacokinetic or pharmacodynamic insights into the feasibility of longer dosing schedules? Is there a specific reason for the more frequent dosing compared to what you are doing at Huntington? For instance, are you aiming to achieve further reductions? I'm curious about the reasoning behind this.

For diseases like ALS, which are very aggressive, it’s crucial to get enough medication in quickly to make a difference and lower the protein levels, as patients deteriorate rapidly. In contrast, Huntington's disease progresses much more slowly, allowing time to bring the drug to a steady state and reach the desired level of target production. Understanding the pharmacokinetics and pharmacodynamics of the drug is essential, and this requires time and effective human clinical trials to grasp how our drugs operate in the human central nervous system compared to preclinical models. Alongside optimizing drug chemistry and design, we also need to refine our dosing regimen and understand the effectiveness of our existing drugs. This was part of our collaboration with Roche during the Huntington's studies that guided us towards extended dosing intervals.

Great. Thank you very much for the discussion and congrats again on the progress.

The next question comes from Joel Beatty with Citi. Please go ahead.

Hi. Congratulations on the progress. Could you provide more information about the ongoing Phase 2 trial for ENAC in COPD? First, when can we expect to see data from that trial? Secondly, how predictive is your cystic fibrosis clinical data in assessing efficacy for COPD?

Richard?

So, with our Phase 1, Phase 2a experience with the ENAC molecule, we were able to look at a broad spectrum of genetic modifications, and that led us to move into COPD, because in addition to the ENAC target genes going down, we saw other important genes. I don't think we've disclosed at this point, but there'll be more information coming out in regard to what else we saw in that early work that led us to move fairly rapidly into a COPD trial. COPD trial, that’s how likely we’re reporting out. I don't know what we've put out publicly probably early next year, as well as the Phase 2b also would be next year, 2020.

And, Joel, that's a study of COPD patients, nearly 200 patients for over three months or so treatment which the primary change would be lung function. So really looking at real clinical function outcomes in that COPD study.

Yeah. And then just to add. If you think about ENAC inhibition as a way to rehydrate the lungs, and so there's a strong rationale for using it in COPD just like in cystic fibrosis because you can restore the hydration balance by inhibiting ENAC.

The next question comes from Yale Jen with Laidlaw & Company. Please go ahead.

Good morning and thanks for taking questions and congrats on the progress. My first question is that in terms of R&D revenue anticipation for the 2021. Are you guys not including any possible ownership and that's why you have the current projection or that part of things already sort of included?.

Great question. So, I want to reiterate that our top line guidance really reflects the new strategy to hold on to address longer partners. We do partner later in development and to really advance a broad pipeline of medicines to the market primarily neuro and cardio. So really as we think about our R&D revenue, it’s based off of amortization from prior upfront and milestone as well as a whole host of potential milestone and licensing fees across our current partnered programs in drugs and later stage research program.

Okay. That's very helpful. And maybe just one question for Brett which is that you mentioned that you also contemplate potentially new technology to complement the current technology you have. What’s likely to be an idea technology that may be fitting into the build?

Thank you, Yale. I’d like to discuss our technology investments in two categories. The first category includes technologies that enhance our existing capabilities in antisense technology. This encompasses new chemistries that might target new tissues such as muscle, cardiac tissue, immune cells, and cancer cells. We are pursuing this through partnership and significant internal investment. Another aspect involves new delivery methods that broaden the application of our technology, similar to our efforts in pulmonary delivery and previously in intrathecal delivery. Additionally, genomics plays a crucial role as well; we know that genomically linked targets provide the best validation before pairing a target with a drug, and we are actively investing in this area. We've identified numerous exciting genomic targets through both partnerships and internal research with our functional genomics teams. That covers the first category. The second category is likely what you are inquiring about, which involves exploring new platforms and complementary technologies beyond our current datasets. Unfortunately, I can’t share too much detail at this point, but we are investing in proof of concept studies across various areas, seeking technologies that may achieve greater efficiency than what our antisense technology can offer. For instance, technologies that can more effectively upregulate gene expression—while our current technology SPINRAZA is a solid example, it has limitations in this regard. Therefore, advancements in these areas will allow us to expand the effectiveness of antisense technology. Although this initiative is more long-term, we are committed to it and are making significant progress. Please stay tuned for updates.

The next question comes from Luca Issi with RBC. Please go ahead.

Thank you for taking my questions. Congratulations on all the progress. I have two questions, one regarding HAE and another about AGT. For HAE, there was an interesting discussion about the editorial in the New England Journal of Medicine recently, particularly regarding the debate on inhibiting liver PKK versus inhibiting plasma kallikrein. I'm curious if you have any thoughts on this, and more broadly, how should we consider the upcoming Phase 2 data. As for AGT, I understand you have two molecules in development. Could you share your perspective on how you are prioritizing one over the other, especially since one is in an ongoing Phase 2 trial and the other has just entered Phase 1 with healthy volunteers? Any insights would be appreciated. Thank you.

Thanks, Luce. I’ll address the AGT question, and Richard can provide additional insights. Most kallikrein comes from the liver, whether in plasma or tissues. Our approach targets prekallikrein, effectively stopping its production in the plasma and preventing the formation of kallikrein, which triggers bradykinin production and hereditary angioedema attacks. We believe our method is superior because it prevents the molecule from being produced in the first place, rather than cleaning it up afterward. We think this offers a better approach for preventing hereditary angioedema. We’re excited about the journal you mentioned and look forward to sharing our Phase 2 data in the first half of this year. Richard, feel free to add anything or shift to AGT. I just wanted to emphasize that.

No, I think you covered that nicely. So, I’ll jump in to AGT for just a minute. We have two molecules, one that is ready for Phase 2b and one that has just started in the clinic, our Phase 1 study for ION904. We're making progress with the 2.5 LICA now. It's important to note that the 2.5 LICA is based on our preclinical data and shows significantly higher potency. We consider it in two ways. First, in heart failure, having a molecule that we can administer very infrequently through a subcutaneous approach could be highly beneficial. Additionally, the 2.5 LICA provides us with the potential for an oral option. We're aiming to become the best-in-class for this indication and are advancing that quickly. We'll have data throughout the Phase 1 trial to specifically assess its potency in humans and duration of action. So, keep an eye out for that.

The next question comes from Jessica Fye with JPMorgan. Please go ahead.

Good morning. This is Daniel, for Jessica Fye. Thanks for taking our question. Focusing on the near-term readout in acromegaly, given that growth hormone receptors are found in multiple tissues throughout the body, do you see a risk in targeting a liver-specific glaucoma receptor expression alone with your LICA product? And then when it reads out, what should we expect with the top line data?

So, first of all, yes, we are targeting liver where the majority of the receptor at least systemically lies. And so, the initial is in addition to somatostatin analogs which have already gathered up inhibition of majority of the receptors, and now what we're doing is significantly reducing the activity in the liver. Again, I think I'll wait for the data but the top line data is going to IGF-1 and where we’re looking at also probably not top line but later we'll be able to report out all of the information on quality of life where we're seeing some exciting kind of results. So I think that's what you’re going to be able to see as we move forward and why we think liver targeting is likely to be not only additive but potentially even as a single agent. We’ve started our single agent study now.

Yeah. And I’ll just add to that liver is also the primary source of IGF-1 in addition to the growth hormone receptors in other sites which of course drives this disease. And what we're hoping to show is that patients who are poorly controlled on somatostatin analogs. We can get a fair number of those patients. A good number of those patients under control to normal IGF, and that’s what we're hoping to do and we think this mechanism has potential to do that. So, we're looking forward to sharing those results.

The next question comes from Mani Foroohar with SVB Leerink. Please go ahead.

Thank you for taking my question. I'll begin with a specific inquiry and then move on to a broader topic. There has been some discussion about the HAE opportunity during this call. Can you provide more detailed insights into the commercial and clinical opportunities regarding frequency of administration and the extent of attack reduction? How do you envision this translating into a clinical trial design that could yield a label to support success in a competitive market? Additionally, regarding the ongoing discussion about therapeutics beyond the liver, how does Biocompare view competing companies that seem unaware of your CNS success with SPINRAZA? As you consider generating effective knockdown data in therapy for both the long and other indications, how should we approach the potential for targeting additional tissue types? What timeline can we expect for this to translate into accelerated R&D partnerships as you explore new potential target tissues for collaboration?

Thank you, Mani, for the great questions. I’d like Onaiza, who is on the call, to discuss the opportunity we see in HAE. There are already drugs available that treat this disease, but we believe in the potential of our current models. I would like Onaiza to elaborate on this.

So as I think has already been said but I think it's worth reiterating is that we're really looking at a treatment that is designed to prevent attacks rather than simply kind to treat acute episodes on demand, right, and we expect an improved tolerability profile in the existing therapies as well. I think the name of the game over here in this marketplace has really been about zero attacks and as you said, Techzero done a nice job as they've entered the market with that. What we see as a continued opportunity from an efficacy perspective is the durability of response. We know that initially you can get down to zero attacks but can you actually maintain a zero tax over time. And we really believe that the PKK again, the mechanism and what's already been described on the call will help us achieve that and of course we'll see that as the Phase 2 data comes out. But that is really where the positioning competitively of the product will be and then of course we know that the current treatment from the marketplace have a more viscous, difficult to inject profile as well and we'll certainly beat that profile as well. So that's where we're looking at it.

We are excited about the potential of PKK as a leading molecule. We approved it based on its ability to reduce attack rates, but we'll wait to see the results. We are seeing significant reductions in PKK, which is linked to this disease. Regarding your other questions, we are just beginning to explore new molecules and drugs for serious neurodegenerative diseases that are being added to our pipeline. Our pipeline is already thriving and will continue to grow with more neuro drugs as we validate our platform, demonstrating substantial reductions in targets and CSF, as we are doing this year with the tau program, and in previous cases like Huntington's and SOD1. We are also working on improving CNS delivery with less frequent dosing and advancing new molecules for that purpose. One potential new franchise shows promise, and we’ve developed new chemistries, Gen 2.5, that are delivering good results in terms of target engagement, safety, and tolerability. We're eager to explore this new franchise for various organs and tissues. Additionally, we are continuously seeking new delivery methods and chemistries to target organ systems and tissues. We aim to initiate development this year for a muscle-related program, targeting not only skeletal muscle but also cardiac tissue affected by heart failure. We are optimistic about the data we've generated so far, and there is more to come. Our pancreatic data cell program is progressing, and we've collaborated with AstraZeneca on our cell initiatives, with additional new cell types and tissues on the horizon, showing promising data as well. Concerning partnerships, if you meant in-licensing, we have established collaborations with companies and invested our resources to enhance our LICA chemistries. We aim to further develop partnerships to expand our LICA platform, complementing our extensive efforts in medicinal chemistry at Ionis. I hope this addresses your question.

The next question comes from Jason Gerberry with Bank of America. Please go ahead.

Oh, hi. This is for Jason. Thanks for taking the question. My first question is about Huntington’s. Can you outline some details regarding your natural history cohort and the open label data that you plan to present later this year? What factors will help you feel confident in demonstrating improvement in functional endpoints and safety? I'm also interested in how crucial it is to observe that your matching natural history cohort is deteriorating over a 50-month observation period. My second question pertains to HAE. Just to confirm, do you generate competitive data to engage in this space? Is it the expectation that you will need to collect longer-term follow-up data beyond the standard six-month trial to demonstrate a greater maintenance of a tax reduction benefit? Thank you.

We briefly discussed this earlier in the call. Roche has mentioned that they will share some data from the OLE and natural history studies this year, and we’ll see what they present. Beyond that, we can’t comment further, but I believe the main focus is on the ongoing Phase 3 study scheduled to report results in 2022. Huntington’s disease progresses slowly, and this study is designed to provide the drug enough time to lower mutant Huntington’s levels, which we know it can do, to assess the disease benefits and test the hypothesis that reducing Huntington's will yield significant benefits. To me, this is the key experiment. As for the HAE question, the Phase 2 study is expected to report top-line data in the first half of this year for patients with hereditary angioedema. We will examine the frequency of attack rates over approximately three months. There is extensive data available on attack rates from existing therapies that we will compare against. We’ll evaluate whether our treatment is competitive or potentially superior in reducing attack rates. Based on the results, we will determine our next steps. We have already considered various options based on the anticipated data outcome. However, as Richard mentioned earlier, we wouldn’t dismiss the possibility of this program advancing to a pivotal study based on the Phase 2 data expected in the first half of this year. We need to analyze the data thoroughly and then decide on the most suitable Phase 3 strategy.

One other piece of information to add to that, Brett, is that we have moved all eligible patients into an open label extension that allows us to continue to monitor attack rates on the long term. So, we have an open label extension for the Phase 2 program that is ongoing, has already started. Many of these patients have been in the open label extension for many months. And so, that is where we're going to get our long-term data very quickly.

Yeah. And I will just add to the need, I think you said beyond six months. So, if you take a look at the real-world data beyond six months. So, if you take a look at the real world data and how patients are doing currently, you start to see excursions from their therapies as early as three months. And then, more substantial declines between that three to six-month period. So, we don’t think that we would need data well beyond that period to demonstrate it.

The next question comes from Salveen Richter with Goldman Sachs. Please go ahead.

Hi, thank you so much for taking our question. This is Sonia, on for Salveen. A few quick questions from us. I was wondering, could you give us the status on your Prion disease asset and when you can expect data there? I think there was going to be a trial initiation sometime mid-year. And then also on the muscle LICA, if you could give us some color on what indications you would potentially go into? That would be really helpful. Thank you.

So I'll start with muscle LICA, we’re not really prepared to discuss exactly what indication we're going into at this time on the muscle program. But we're very, very excited about what we're doing in terms of being able to target the muscle. And there is lots of opportunities there in there across various spaces of neuromuscular disease. And as for the Prion program, I can't provide too much color on timing. But we are identifying several candidate molecules and working as hard as we can to rapidly get the best candidate where we would involve patients.

This concludes our question-and-answer session. I would now like to turn the conference back over to Brett Monia for any closing remarks.

Thank you everyone for joining us on today’s call and for all the questions during the Q&A session. We at Ionis are very excited about the company's present and future. We look forward to providing further updates on the significant progress we are making at Ionis for the rest of the year. Thank you again for joining, and have a great day.

This concludes our conference. Thank you for attending today's presentation. You may now disconnect.