Ionis Pharmaceuticals Inc Q4 FY2022 Earnings Call

Good morning, and welcome to Ionis Pharmaceuticals Fourth Quarter and Full Year 2022 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, Senior Vice President of Investor Relations, to lead off the call. Please begin, sir.

Thank you, everyone. Before we begin, I encourage everyone to go to the Investors section of the Ionis website to view the press release and related financial tables we will be discussing today, including a reconciliation of GAAP to non-GAAP financials. We believe non-GAAP financial results better represent the economics of our business and how we manage our business. We've also posted slides to our website that accompany today's call. With me this morning are Brett Monia, our Chief Executive Officer; Eugene Schneider, Chief Clinical Development Officer; Onaiza Cadoret, Chief Global Product Strategy and Operations Officer; and Beth Hougen, our Chief Financial Officer; and Eric Swayze, our Executive Vice President of Research, will join us for the Q&A portion of the call. I would like to draw your attention to Slide 3, which contains our forward-looking statement. During this call, we will be making forward-looking language statements that 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 contained in our SEC filings for additional detail. With that, I'll turn the call over to Brett.

Thanks, Wade. Good morning, everybody, and thanks for joining us today. As we begin this year, we are building on the significant momentum from the key successes we achieved in 2022, highlighted by our progress in advancing our three near-term commercial opportunities towards the market. With eplontersen, we delivered positive data from the 35-week interim analysis, which formed the basis for our NDA submission in December. With olezarsen, we completed enrollment in the Phase III BALANCE study for FCS putting us on track for data in the second half of this year. The FDA recently granted Fast Track designation for olezarsen for FCS underscoring the significant unmet medical need for these patients. We also advanced and expanded our clinical program supporting olezarsen for the broader SHTG indication. And with donidalorsen, we delivered multiple positive data readouts, all further strengthening our belief in this medicine's potential best-in-class profile for the prophylactic treatment of HAE. And we're pleased to report that the Phase III study of donidalorsen continues to progress well, keeping us on track to complete enrollment this year. We've also made excellent progress in building our commercial organization. As a result, we are well positioned to successfully launch these medicines beginning with co-commercializing eplontersen with AstraZeneca. We're also on track for our first independent launches of olezarsen and donidalorsen. Beyond our three near-term commercial opportunities, our partner pipeline also continues to make great progress. Tofersen which is partnered with Biogen is under review in the U.S. and EU, positioning it to be added to our commercial portfolio this year. And our rich late-stage pipeline recently grew this year when GSK initiated Phase III development for epiraversen for HBV. Further, we expect our late-stage pipeline to grow even more later this year when Roche advances IONIS-FB-LRx into Phase III development in patients with IgA nephropathy. Indeed, our strong pipeline progress sets us up very well to deliver a steady cadence of new products to the market for many years to come. We also took important steps last year to broaden and diversify our technology, including advancing programs utilizing muscle LICA and programs utilizing novel MSPA backbone chemistry. Furthermore, Biogen recently initiated an SMA follow-on Phase I study that utilizes advanced Ionis chemistry potentially enabling long interval dosing. And we entered into a collaboration with Metagenome, an industry leader in next-generation gene editing. By adding gene editing capabilities to complement our existing platform, we expect to tackle more diseases, reach more patients and further strengthen our leading position in genetic medicine. Importantly, we further strengthened our financial foundation recently to support our future cash needs. The capital we raised from the royalty monetization and sale-leaseback transactions will directly support the investments we're making in advancing our late-stage programs and building our commercial organization ahead of our planned upcoming launches. With that, I'll turn the call over to Eugene to discuss our recent pipeline progress and preview our upcoming key events. Next, Onaiza will provide an update on our commercialization efforts; and then Beth will review our 2022 financial results as well as review our 2023 financial guidance. And after Beth, I'll wrap up our prepared remarks before taking your questions. So now over to you, Eugene.

Thank you, Brett. Our pipeline continues to perform very well. Last year was highlighted by many positive data readouts, and we expect the same to continue this year. Over the next few minutes, I will review our recent achievements and preview our key upcoming data and regulatory events. The recent NDA submission for eplontersen was based on positive data from the Phase III interim analysis. We're planning to share 35 and 66-week data in the first half of this year. Importantly, we're also looking forward to the potential approval of eplontersen in the U.S. for ATTR polyneuropathy late this year. We and AstraZeneca are also planning to file additional regulatory submissions outside of the U.S. later this year. We're also pleased for the continued progress of the CARDIO-TTRansform study. By conducting the most comprehensive study in patients with ATTR cardiomyopathy to date, we expect to deliver a rich data set for this broad patient population. We believe these data will be a key differentiator, positioning us to successfully compete and lead in this growing, dynamic and global market. We expect to complete enrollment this year, keeping us on track for data in the first half of 2025. Our broad olezarsen development program targeting two different but related indications is also progressing very nicely. Both FCS and SHTG patients have severely elevated triglycerides, which can lead to fatal pancreatitis and atherosclerosis. Phase III BALANCE FCS study is fully enrolled, and we expect it to read out in the second half of this year. And our broad Phase III program designed to support the SHTG indication is also continuing to progress well, with data expected next year. With first mover advantage in both indications, we remain confident in the potential for olezarsen to be a substantial driver of future growth for Ionis. Our donidalorsen OASIS Phase III program in patients with hereditary angioedema remains on track for full enrollment this year with data to follow next year. We've continued the steady cadence of positive data from the Phase II program with new positive long-term data that demonstrate rapid reductions in HAE attacks that were sustained in patients treated for at least one year with an overall sustained mean reduction in HAE attack rates of 95% from baseline. Importantly, more than 85% of patients in the open-label extension reported a clinically meaningful improvement in their angioedema quality of life scores with improvements observed in all domains. Additionally, 75% of patients who transition to bimonthly dosing remained attack-free, demonstrating the potential for dosing flexibility. Over this extended time period, we also continue to observe favorable safety and tolerability profile. We believe that these data reinforce the potential for donidalorsen to be best-in-class prophylactic treatment in HAE. The rest of our rich late-stage pipeline is also advancing, including our partner drugs. Tofersen, our medicine partnered with Biogen for patients with SOD1 ALS is under regulatory review in the U.S. and in the EU. The advisory committee will meet in March to review the data supporting tofersen's NDA. If approved, tofersen will be the first approved disease-modifying medicine for the treatment of a genetic form of ALS and our next commercial medicine. Novartis also continues to advance LPA Horizon study keeping pelacarsen on track for data and potential regulatory filing in 2025, with more than 8 million people estimated worldwide to have elevated LPA and cardiovascular disease, pelacarsen represents a multibillion-dollar opportunity. And recently, our late-stage pipeline expanded when GSK announced the start of a broad Phase III program for vepiraversen. Based on the Phase IIb data reported last year, depuriversen has the potential to provide a first-in-class functional cure for people living with chronic hepatitis B. Worldwide, 300 million people have HBV with approximately 900,000 dying annually. GSK's aim is for depuriversen to become a foundation of future HBV therapy. Furthermore, our late-stage pipeline is poised to further expand when Roche initiates their planned Phase III study for IONIS-FB-LRx in patients with IgA nephropathy. As I just previewed, we expect that 2023 will be a highly productive year led by important regulatory milestones and late-stage pipeline progress. Given the richness of our pipeline, there's potential for even more important events. We look forward to updating you on our progress throughout the year. With that, I'll turn the call over to Onaiza.

Thank you, Eugene. We have made tremendous progress in building our commercial organization, hiring top talent and integrating commercialization processes into the fabric of Ionis. Today, we are finalizing preparations for each of our near-term products, starting first with our launch of eplontersen, and we are right where we should be in preparing for our first independent launches of olezarsen and donidalorsen. One of my first priorities at Ionis is building a strong global product strategy and portfolio planning team. Since 2020, this team has integrated new product planning, global market access and health economics and outcomes research into Ionis' R&D operations. Together with R&D, this team is helping to drive pipeline prioritization, indication strategy, development and commercial planning and other key strategic decisions. My next priority was to add medical affairs to our organization. This team is focused on data dissemination, disease education as well as collecting and integrating customer insights into our product plans. And for the last two years, our field medical team has been engaging with thought leaders and educating HCPs on ATTR elevated triglyceride diseases and more recently, hereditary angioedema. Last year, we began building the in-line commercial team to prepare for the launches of eplontersen, olezarsen and donidalorsen. These teams include market access and reimbursement, in-line marketing, commercial operations, patient services and omnichannel engagement. And as our launch windows approach, we plan to add our customer-facing teams. Now I would like to spend a few minutes on each product starting first with eplontersen. Currently, there are an estimated 40,000 addressable patients with ATTR polyneuropathy worldwide. However, less than 20% of those patients are currently receiving approved treatments. With our deep expertise in ATTR, together with AstraZeneca's global scale, we are confident in our ability to capture a significant portion of these patients around the world. Today, we already have the majority of the infrastructure for the U.S. launch in place. And this year, we plan to complete our build-out for eplontersen, including fully staffing our nurse educators. We expect olezarsen to be our first independent launch. With olezarsen, we have first mover advantage for both FCS and SHTG indications and fast track designation for FCS. We plan to enter the market for the rare indication and then expand into the broader indication, which provides us with significant revenue potential. We are leveraging eplontersen capabilities and customizing them for the SHTG market. As we approach our launch of olezarsen for SHTG patients, we plan to further scale these capabilities to realize the full potential of the product. We expect donidalorsen to be our second independent launch. In the U.S., the prophylactic HAE market has a concentrated prescriber base with a small number of allergists prescribing the majority of HAE products today. With an efficient and growing market for prophylactic treatment, our expertise in rare diseases, and a potentially best-in-class profile, we continue to see donidalorsen as a very attractive opportunity for us. As with olezarsen, we are leveraging our existing capabilities and customizing those specifically for the HAE market. It's an exciting time at Ionis. We are building upon our excellence in our research and development with our medical affairs and commercial teams to successfully deliver our medicines to the market. Now I'll turn the call over to Beth.

Thank you, Onaiza. This morning, I'll provide a summary of our fourth quarter and full year results for 2022 and then review our 2023 guidance. I am pleased to report that we earned revenues of $152 million and $587 million for the fourth quarter and full year, respectively. We earned revenue from numerous diverse sources with just over half from our commercial products, and the balance from numerous partnered programs. Our operating expenses for the activities and our pipeline, especially our late-stage programs. And our 2022 non-GAAP net loss was $311 million. Additionally, we ended the year with cash and investments of $2 billion, which we further added to in January with the $500 million we received from our royalty monetization transaction. SPINRAZA performed well in 2022, demonstrating its resilience and long-term growth opportunity, both in the United States and internationally. SPINRAZA global sales increased 6% in the fourth quarter compared to the third quarter, and also increased 4% compared to the fourth quarter of 2021. The increases were driven by stabilization in the U.S. and growth in Asian markets, partially offset by competition in Europe. Importantly, U.S. SPINRAZA sales increased in the fourth quarter and the full year compared to the same period in 2021. This positive trend was particularly meaningful, especially when considering competitor results. Biogen is continuing to expand into new markets, and is also concentrating on expanding in existing markets. Within existing markets, Biogen is particularly focused on the growing adult SMA population, which has limited treatment options. Additionally, Biogen continues to generate important efficacy data as part of its robust life cycle management program. Based on these efforts, and SPINRAZA's strong efficacy and safety profile, we and Biogen believe SPINRAZA can return to growth. We earned R&D revenue of $72 million in the fourth quarter and $284 million for the year for advancing numerous programs partnered with Biogen, AstraZeneca and Roche, among others. Our ability to generate revenue from numerous diverse sources remains a key element of our financial strength. Our non-GAAP operating expenses increased in the fourth quarter and full year compared to 2021 as expected. The increase was driven primarily by higher development, CMC and medical affairs expenses to support our three near-term commercial opportunities. Our R&D expenses also included the upfront payment under our Metagenomic gene editing collaboration. And as Onaiza discussed, we have taken important steps to build our commercial capabilities to be ready for our planned launches. As a result, our SG&A expenses increased in the third and fourth quarters compared to the same period in 2021. Importantly, we bolstered our balance sheet by adding more than $700 million in cash from our recent royalty monetization and sale-leaseback transactions. As a result of these transactions, our cash in January was approximately $2.5 billion. Looking at our plans for this year, we are projecting to earn more than $575 million in revenue. We have a substantial base of commercial revenue with SPINRAZA royalties as the cornerstone. And given the recent stabilization of SPINRAZA product sales, we anticipate this will continue in 2023. Additionally, assuming tofersen is approved, we would add tofersen royalties to our commercial revenue this year. We also anticipate having a substantial base of R&D revenue from our partnerships that will contribute to our 2023 total revenue. One of the most significant elements of our R&D revenue this year will come from AstraZeneca for its 55% share of the global Phase III development costs for eplontersen. Additionally, with the rich pipeline and many advancing programs, we have the potential to earn numerous milestone payments. As we've always done, our R&D revenue is probabilized based primarily on the anticipated timing of the many different milestone payments we expect to earn as we advance partner programs. So far this year, we have already earned a $15 million milestone payment when GSK initiated the Phase III program for vepiraversen. And with many important regulatory events this year, we are eligible to earn milestones for tofersen's approval in the U.S. and EU as well as the sizable eplontersen U.S. approval milestone in late 2023. We're projecting operating expenses in the range of $970 million to $995 million on a non-GAAP basis. As you would expect, our advancing late-stage pipeline is the most significant driver of our operating expense projection. We are conducting six Phase III studies for four medicines nearly all of which are either fully enrolled today or expected to reach full enrollment this year. As a result, the bulk of our Phase III studies are at or nearing their most capital-intensive stage. Additionally, as our various launch windows approach for eplontersen, olezarsen and donidalorsen, the investments we make in our commercial preparations will continue to increase. We expect our non-GAAP R&D expenses to increase approximately 20% to 25% this year compared to last year, excluding the upfront payment under our Metagenomic collaboration. And we expect our non-GAAP SG&A expenses to increase approximately 25% to 30% year-over-year. Our 2023 operating expense guidance underscores our commitment to these near-term value-driving investments. Our revenue and expense guidance translates to a non-GAAP operating loss of less than $425 million and a year-end cash balance of approximately $2 billion. Our 2023 guidance reflects the confidence we have in our ability to continue generating significant revenue while retaining our most valuable assets to drive growth. As we look beyond this year, we anticipate the completion of multiple Phase III studies and preparations for multiple commercial launches. For the next several years, we expect to be in a period of increasing investment. This is one of the most important reasons why we substantially bolstered our balance sheet with our recent financial transactions. The capital we raised from the royalty monetization and sale-leaseback transactions will directly support the investments we are making in advancing our late-stage programs and building our commercial organization ahead of our planned upcoming launches. Importantly, we anticipate our strong financial foundation, combined with our accelerating investments will enable us to bring a steady stream of products to the market. And in doing so, we expect to drive greater value for Ionis and our shareholders. And with that, I'll turn the call back over to Brett.

Thank you, Beth. Looking ahead, we expect the strong momentum at Ionis to continue with several key regulatory and late-stage events coming up this year. We're excited about the work already underway and the progress we've made to advance our following key priorities. We are well positioned to deliver an abundance of new genetic medicines to the market with the potential to add two new products to our commercial portfolio this year with a steady cadence of additional products to come in the near and in the longer term. Our integrated commercial organization is on track to successfully co-commercialize eplontersen and independently launch olezarsen and donidalorsen. We're leveraging our recent technological advancements for medicines in development today. Additionally, our collaboration with Metagenomic positions us to expand our technological capabilities for future drugs as well. And finally, we substantially strengthened our financial foundations for our pipeline and commercial plans, all of which we believe will drive increasing value. We're looking forward to a great year at Ionis and sharing our progress along the way. Before closing, I want to mention Rare Disease Day, which is Tuesday, February 28, a day, where we recognize all the patients and families living and struggling with rare diseases. With that, I'll now open the call for questions. Operator?

The first question comes from Yanan Zhu with Wells Fargo Securities.

Congratulations on the progress. We have two questions regarding the TTR program. First, about the NDA for eplontersen polyneuropathy, I believe you submitted it in December. Can you provide an update on how that process is going with the FDA? Also, when can we expect to hear about the NDA acceptance announcement if you intend to make one? Are you anticipating a priority review or an AdCom meeting related to the NDA acceptance?

Thanks, Yanan. We're very much looking forward to the completion of the NDA process with the FDA. As you said, we submitted the NDA in December. We've now cleared the standard 60-day review period with the FDA, and we're just waiting on the official notification from the FDA, the day 74 letter, if you will. In that letter, details will be provided on PDUFA date, for example, whether there'll be a standard or an accelerated review, we expect to your question a standard review for eplontersen in polyneuropathy and whether or not they would want an outcome. We don't expect an outcome. The process has gone very smoothly with the FDA. There have been no concerns whatsoever. So really, we're just waiting for the final notification, the official notification from the FDA, and we will announce that with all the details that we get in that notification at that time. So that will be coming up pretty soon.

That's great to hear. If I may ask a question about eplontersen related to the CARDIO-TTRansform study, do you still expect to complete enrollment for the study in the first half? Following the modification of study size and enrollment strategy, are you achieving the desired results in balancing various patient subtypes? What is your expected rate of on tafamidis compared to naive patients from this enrollment strategy? Additionally, how does the cardiovascular event rate trend on a blended basis?

Thanks, Yanan. We're expecting to complete enrollment around midyear this year. Enrollment is going very well. As you know, we upsized the study to ensure for the most robust and successful outcome in the outcome trial possible. And we upsized the study to achieve three objectives. The first objective was to ensure that we have strong powering for the study to have the successful study and the most robust outcome in this study based on the fact that patients with TTR cardiomyopathy are being diagnosed much earlier under the disease. And therefore, patients are generally more mild when they are diagnosed with the disease. Second was to ensure that we have a good balance, a relatively equal balance between naive patients and tafamidis patients. And thirdly, to help ensure that we have the preferred percentage of patients that are hereditary, hereditary TTR amyloidosis with cardiomyopathy. And I'm very pleased to say that not only are we on track to complete enrollment as planned around midyear this year, that we're achieving so far all of our objectives. We're seeing a significant uptick in blinded event rates in the study as we expected when we upsized the study. We're seeing a really nice balancing of naive versus tafamidis usage in the study as we had planned to have. And we're also seeing a very nice uptick in the percentage of patients with hereditary TTR amyloidosis with cardiomyopathy. So everything is progressing very well in the study, and we're very much looking forward to the data readout on track in 2025.

The next question comes from Luca Issi with RBC.

I have three quick questions. First, regarding TTR cardiomyopathy, could you share your thoughts on the recent news about the advisory committee meeting and its implications for your program? Second, what's the latest update on AGT? Are you still looking to invest in both the first and second generation, or do you plan to shift focus to the second generation at some point? Also, could you provide an update on business development for AGT? Lastly, concerning HAE, I recall that at the American College meeting last year, three of the eight patients treated every eight weeks switched back to monthly dosing. However, it seems that in the abstract presented at Quad AI, only two out of eight made that switch. Can you clarify what occurred there?

Sure, Luca. So I prefer not to comment very significantly on competitor products and outcomes by the FDA. What I could say is that in hindsight, not too surprised, the results were a little complicated. The 6-minute walk test, the magnitude of benefit, and the benefit in patients on tafamidis versus naive patients is pretty complicated. So not terribly surprised that the FDA is going to want to get input publicly from experts in the field. We welcome it because it gives us more information. We have very strong relationships with all the key opinion leaders and investigators around the world. We want to ensure the best for patients with this disease, but we're always welcome to hear more. And I think it can help us set us up for a better, more successful cardiomyopathy outcomes trial. Regarding AGT, we're still planning to present data on the two molecules in the second half of this year. The hypertension study is wrapping up, and we're planning to start a heart failure study for the second molecule, the Gen 2.5 molecule in the second half of this year. We won't wait for that study. We'll share the data from the two molecules in hypertension and the first molecule in heart failure by the end of the year. And as far as business development activities, we're kind of on pause because we want to generate all the data for those three studies before we start responding to inbounds, and there's been certainly interest in the program. Regarding HAE, the correct number of patients that were attack-free in the bimonthly is correct in the Quad AI presentation, six of eight patients. The previous data that was presented last year was 58 patients. That was really just a timing effect when you make the cutoff. One-year treatment, six of eight patients were attack-free in the bimonthly whereas the timing for that included the five patients that was presented last year was just beyond one year. So it's just a technical thing. If anything, it favors the efficacy and bimonthly for donidalorsen. And with that said, it's really the monthly dosing that we are very excited about by month that gives you an option for dosing, but monthly dosing really is one of several key advantages for donidalorsen versus competition. The convenience of monthly self-administration, excellent tolerability, fast onset of action and the unprecedented efficacy with 95% mean reductions in HAE attacks for now for a year of treatment.

The next question comes from Gary Nachman with BMO Capital Markets.

First, a few more on eplontersen. So what do you plan to do with the 66-week data when that's available, talk about the timing of filings ex-U.S.? And does that impact the PN filing in the U.S. at all? Or is that completely separate? And then if you have the PDUFA late this year for PN, how soon would you and AZ be able to launch the product? And then on cardiomyopathy, what's the likelihood that you might have early readouts for that data? And then I have a follow-up for Beth.

I will ask Onaiza to discuss the launch planning for eplontersen in polyneuropathy after addressing a couple of your other questions. We plan to present the week 66 data during the first half of this year at a medical meeting, and we will share the top-line results as soon as they are available. This data will be crucial for our filings outside the U.S. for eplontersen, and we intend to use it as a key component in those applications. We do not expect the week 66 data to significantly affect the NDA currently under FDA review based on the week 35 data, and we do not plan to submit a supplemental NDA with that data at this time. We believe the week 35 data is adequate to achieve our desired outcome with the FDA for eplontersen in polyneuropathy, although we may consider a supplemental NDA after approval based on future data. Concerning the cardiomyopathy early readout, we will keep monitoring any changes in the competitive landscape that might influence a decision by Ionis and AstraZeneca to release the study results earlier. We will also focus on blinded event rates and patient demographics, which will play a role in any decision to potentially release the study early. We do have the option to do so based on our review. Onaiza, could you provide some insight into the anticipated late-year PDUFA date and our plans for launching eplontersen?

Yes, Gary, we're preparing for success for the PN launch. So there are a lot of pre-commercial investments that are already being made for the U.S. We have, as you know, a field medical team that's been in place over two years, really ensuring that there's enough disease education out there over the last two years. We plan and have already actually hired out our field directors for the nurse educator team. And then as we look to the second half of the year and we hear back on the 74-day filing, Astra will start building out the sales capabilities. So basically, we are going to be very ready to go upon approval and not have a lot of time between approval and launch as well.

Okay. Great. Very helpful. And then for Beth, just the greater than $575 million revenue guidance. You talked about some of the key factors directionally. So will the overall mix and quarterly cadence be similar to 2022? And then how will you be reporting the Royalty Pharma agreement? How is that factored in the guidance? And then can you still hit the guidance if tofersen or eplontersen are delayed into next year at all?

Great question. In terms of the quarterly mix and cadence, I expect 2023 to closely resemble 2022. The balance of commercial and R&D revenue should remain similar, and I anticipate it will likely be back-end loaded. Regarding the guidance, even if tofersen or eplontersen approvals are postponed until next year, it's crucial to note that we have consistently accounted for our R&D revenue items with probabilities based on when events may occur. Items expected later in the year receive lower probabilities. This, combined with our strong pipeline of partnered programs that consistently generate milestones, gives us flexibility if certain items are slightly delayed. Therefore, I am confident that our guidance is achievable. Did I miss any of your questions? I believe I addressed them all.

Yes. Now the lesson was the Royalty Pharma agreement. So just how that's factored into the guidance.

Yes. Thank you for reminding me. The SPINRAZA royalties under our Royalty Pharma agreement will continue to be booked into our top line revenue. So 100% of the royalties from SPINRAZA will continue to be booked on our top line revenue. And then the cash payments to Royalty Pharma will really be a balance sheet item for the company. I'll have more details when we get to our Q1 earnings because at that point, we'll have finalized all of the more detailed accounting with our auditors. But I think it's a great point to make that SPINRAZA royalties will all hit our top line revenue as they always have.

The next question comes from Jessica Fye with JP Morgan.

Thinking ahead to the acromegaly data later this year, what are you going to be most focused on when those results read out? And second, can you remind me where you are with simdulersen for acromegaly and when we could expect the next update?

Thank you, Jess. For acromegaly, we're awaiting the outcome data and what that will entail. Eugene, perhaps you could provide some insights on this.

No, absolutely. That's what everyone is waiting to see is how the functional benefits translate into hard outcome data, and that's what it's due soon, and we're all obviously going to be focused on also similarities of the population enrolled in that study and the CARDIO-TTRansform study. So that's probably the second most important aspect is to see how representative of the population that they've enrolled is to what we're seeing today in our study.

So patient demographics will be very interesting in addition to, of course, the main endpoints, the primary endpoints. Jess, on the acromegaly, the monotherapy study is continuing ramping up. We're planning to share data hopefully at a medical meeting, but we'll get it out in the second half of this year for the monotherapy data. As you know, we presented data in patients that are poorly controlled on somatostatin analogs last year. So we'll have the monotherapy data in the second half of this year. And with that, next steps.

The next question comes from Myles Minter with William Blair.

Just on Biogen's claims that SPINRAZA is going to return to growth, and they're citing that only 20% of adults, presumably type 3 patients are actually treated with disease-modifying therapy. What's the sort of cadence, I guess, of return to growth that we can sort of expect? It doesn't seem that it's going to happen this year. And it seems as if for the SPINRAZA franchise that you really like to back this up with clinical data. And I think the type 3 patients, particularly the adult is probably where there's a lack of SPINRAZA efficacy data. So can we expect some clinical studies to be launched by Biogen to support that thesis?

Beth, on the return metrics, the return to growth?

Thank you for the question, Myles. We are seeing the anticipated return to growth beginning in the United States, with stabilization and some increases year-over-year and quarter-over-quarter in Q3 and Q4. This aligns with the initial launch of both SPINRAZA and the competitor products. We expect similar trends to occur in other regions, following the launch patterns we've observed. It's important to highlight that SPINRAZA has demonstrated strong efficacy and safety, especially among teens and adults, compared to competitor products that do not adequately serve this patient group, particularly since Zolgensma is not approved for older patients. This presents a significant opportunity for SPINRAZA to expand, especially since teens and adults make up about 60% of the prevalent population. Biogen is also focused on growth in markets such as Asia, Latin America, and Eastern Europe. All these factors will contribute to SPINRAZA's return to growth.

The post-marketing studies will significantly contribute to and enhance the growth potential for SPINRAZA. Those studies are progressing well. Two studies are investigating higher doses of SPINRAZA. The DEVOTE study shared some data last year, indicating that higher doses showed even greater efficacy in SMA patients. The ASCEND study is examining a higher dose in patients whose disease progresses on risdi to demonstrate improved outcomes for those patients. The RESPONSE study is looking at the current commercial dose of SPINRAZA in patients whose disease progresses while on gene therapy, and this study is also progressing well. Biogen has not provided specific timelines or expectations for data sharing, but overall progress in the studies is on track, with the aim of enhancing the market performance for SPINRAZA.

And just a quick follow-up for Beth. How much of the OpEx guidance is factored into building the new manufacturing facility for this year versus just underlying R&D costs for the business?

So none of the OpEx guidance includes any costs associated with the new manufacturing facility. That's all balance sheet at this point. It's using some of our cash as we construct the facility, and we'll be building the costs associated with that asset over the course of the construction period and then we'll begin amortizing those costs in the sort of 2026 time frame once the building is online and operational. And at that point, you'll start to see some of those expenses from the amortization flow into our OpEx.

The next question comes from Mike Ulz with Morgan Stanley.

Just one for me on vepiraversen in HBV. You highlighted your partner, GSK, recently started the Phase III study. Just curious how the recent J&J decision to deprioritize their HBV program might impact your thinking on potentially the opportunity here or maybe your go-forward strategy?

Eric, do you want to take a stab at that?

Yes, it really doesn't affect our program at all. We're very pleased that GSK is enthusiastic about this program and has begun their Phase III study. The vepiraversen in the B CLEAR study showed results that are competitive with other drugs aimed at lowering S antigen, which has led to a long-lasting loss of S antigen. That is why GSK is continuing with it. We're very optimistic about our program and don't see any influence from other programs.

Yes. Michael, I think in short, the competition from the J&J drug was kind of discounted already because we have seen, as Eric said, greater efficacy in Phase IIb for vepiraversen this just helps clarify that situation. So if anything, it clarifies the competitive landscape for Vepiraversen and just further enhances it.

The next question comes from Paul Matteis with Stifel.

This is James on behalf of Paul. Just a quick one on Angelman's. I guess what's the latest thinking on when we may see that data? And again, how are you thinking about whether or not this trial is suited to get a sense of efficacy? And then maybe just quickly, taking a step back from a strategic perspective, as you look at all of your non-partnered assets, how are you thinking about the balance of potentially monetizing them versus launching them and pursuing them independently? And from a BD perspective, thinking about other technologies in light of the Metagenomic partnership or so.

Certainly, James. There was a lot to cover in your question, but I'll keep it brief. Regarding Angelman, we don’t have any new updates at the moment, but we feel confident about how the study is progressing. Biogen hasn't announced a timeline for sharing data from the Phase I/II study. We are currently assessing the effectiveness endpoints that would support a Phase III study, and we're making significant headway with regulators on what will be defined as a clinically meaningful benefit for patients with Angelman syndrome in preparation for a potential Phase III initiation. I can't provide more details at this time, but we are optimistic about the Angelman study and hope Biogen will share more information later this year. In terms of monetization, I can address that, and Onaiza might join in as well. At present, Ionis has numerous assets from our R&D organization. We are focusing on our late-stage pipeline, while also having a robust mid-stage pipeline and several new drugs entering development. We are carefully evaluating which assets, such as eplontersen, olezarsen, and donidalorsen, we should retain to bring to market ourselves and which might be better suited for partnership in the future. We look forward to updating on what we consider the next wave of commercial opportunities for Ionis later this year, beyond those three drugs. Currently, our main priority is launching those therapies. Regarding monetization, we do not have plans for any royalty transactions like we did for pelacarsen in SPINRAZA with Royalty Pharma earlier this year. Would you like to discuss our prioritization process further?

Yes, sure. I think you covered most of it, maybe I think I'll give you a lens into the second half of the year. As we focused on these three near-term commercial opportunities, we're also looking from a line of sight as to what comes next in the mid-stage pipeline. And we look at a lot of factors. I think Brett mentioned a couple. We have the time frame within which they would be on market, can we maximize the full potential of the product. If we can, then does that actually fit with some of the kind of customer-facing synergies that we see. And if they don't, can we actually do it in a very efficient way. So that's probably a bit of our schematic over here in terms of criteria to make those selections. We see a really nice cadence of products coming in from the neurology franchise. So it's very exciting. There's a really nice team that works on early to mid-stage neurology here. So you'll hear more about that in the second half of the year. And then we also have some things that can move into our specialty franchise, just like we have done in donidalorsen in specialty. We do have a couple of other specialty products such as sealers for polycythemia vera. So we're looking forward to seeing some of the data there, which is encouraging at this point in time. So that's kind of our way to kind of market in the near term and in the midterm. And then we work very closely with R&D, as I said, integrating kind of our early-stage pipeline as well to understand kind of what indication strategy look like and how we want to think about going to market with that for ourselves and where we think there's more benefit for partners to actually again, realize the full potential of the product.

Thanks, Onaiza.

The next question comes from Yale Jen with Laidlaw & Co.

Regarding Factor B, I understand that Roche is moving the study into a Phase III trial this half. I'm also interested in whether there is an indication for geographic atrophy and how the company is considering this, especially with one product recently approved and another currently in late clinical stages.

Both programs are going very well. Maybe Eugene will want to add to this. For IgA nephropathy, there's really nothing new to report, except that the news we reported late last year and early this year regarding Roche's plans to initiate the Phase III study is still on track. That's a rare indication. For geographic atrophy, it's also going really well.

Yes, the enrollment certainly has picked up post-pandemic, and we're very pleased with how the study is progressing. So it is a large study, one of the largest Phase II studies we've conducted recently. So we're quite optimistic. And also Roche obviously is very interested and keen to make a decision on the next steps for that particular program.

The Phase II GA study is designed to pave the way for a potential Phase III study based on the acute study. If your question pertains to how Roche will approach a rare indication compared to a broad indication, that's something Roche would need to address. I'm unable to provide an answer to that.

And maybe one more question, come from investors. In terms of eplontersen in ATTR-CM, you guys already upsized the trial study. It seems like that if you have the data later on, you may not do that, but just curious whether there's still options to change the upsize the study if you feel that could be needed in the future?

We do not plan to increase the size of the study. We believe we are in the right position. The CARDIO-TTRansform label extension study is progressing well, and we currently have patients as noted in the OLE. This context highlights the significance of our decision last year to increase the study size when we did. As I mentioned earlier, everything is proceeding as planned regarding blinded event rates, the balance of tafamidis versus naive patients, and the increase in patients with hereditary TTR cardiomyopathy. Therefore, there are no intentions to further expand the study. We are nearing completion.

Okay. Great. And congrats for all the progress.

The next question comes from Joseph Stringer with Needham & Company.

Just a quick one from us on the broad pipeline prioritization here, just given the company's pipeline breadth, do you consider the current pipeline size and R&D spend is sort of rightsized at this time? And is this an evolving outlook as you go forward?

Thanks, Joey. Since I moved into the CEO role, one of my key objectives as well as my team here has been to really focus the organization on what is going to bring the greatest value to the company. That has been really important is if you think about it, prior to our evolution to full integration, we partnered all of our programs. So prioritization and focus was less important. It's vastly more important as we make investments to bring products through Phase III into the market ourselves. So although I cannot say whether or not the size of our pipeline today will be the same size 5 years from now. What I can tell you is that we will focus the pipeline as we have done over the last couple of years when we announced and we said we're moving away from indications like oncology, for example, which we moved away from because we don't think that that's the best use of our resources. And we'll continue to do that. I don't know what that magical number will be that size, but we are focusing and prioritizing. And I wouldn't be surprised if the pipeline was proactively reduced in size based on a number of drugs and maybe even for those drugs, we will expand the indications as an example, to really maximize the value of each asset. Do you want to add anything to that, Onaiza?

I briefly mentioned this in the previous question. To highlight some of Brett's vision and how we're turning it into a process, we adopted a more rigorous approach to prioritization last year, which continues this year. What I appreciate about this process is that it involves a large segment of the Ionis team, encompassing research, development, commercialization, and manufacturing. We are considering not just the quantitative aspects of our programs but also strategic and qualitative factors to determine what is most crucial to advance and how to do so. We've established effective methods for deciding which projects to take to market, as well as clear distinctions about which programs might be best suited for partnerships to unlock their full potential. Stay tuned for further developments, as we continue to refine the focus that Brett mentioned, and you will see more of it reflected in our pipeline.

And Joe, you had another part to that question, which I forget.

No, that was it.

The next question comes from Yaron Werber with Cowen.

Great. Brett, I just got two. The first one is just maybe just to follow up on the Factor B question. The I believe you guys ran a study that was started in 2018, 120 patients, obviously smaller than the current study, which is 330. That started and then I think that study was terminated. Just give us a sense kind of what happened there. I think the primary endpoint was also different. That was a factor B levels, whereas in the current study is obviously looking at change in GA? And then second, just your thoughts in the nuts preliminary on the IRA. Eplontersen potentially will have two indications in the future, hopefully, what does that mean from a negotiation standpoint or can you ultimately get a broad TTR label?

Thank you, Yaron. Regarding Factor B, Eugene can add in as well. There have been studies that were terminated before reaching their natural conclusions. We conducted a Phase I study, which may be what you're referencing. We measured safety with both a single dose and multiple doses, looking at pharmacodynamic activity reductions in Factor B. This set the stage for our current Phase II study on geographic atrophy, which, as Eugene mentioned earlier, is seeing strong enrollment and progressing well. I can't share too much detail, but there have been no unexpected terminations in the Factor B programs for either geographic atrophy or IgA nephropathy. The program is progressing effectively. Onaiza, would you like to discuss IRA?

Yes. So as you know, we’ve kind of been looking at the implications of the IRA for our portfolio. For eplontersen specifically, as you know, there’s an orphan direct designation exclusion for single disease orphan drugs. And for eplontersen, both indications of PN and CM qualify as a single disease. And that is because of the way we got the ODD exemptions. Our orphan drug designation is for ATTR, not necessarily for one indication and the other. So you should think that through as you’re thinking about that, and we would then be excluded from that maximum fair price negotiation as well. The other thing to keep in mind is this is a really good thing for patients. In a way, we took away the disadvantage for patients for out-of-pocket costs under Medicare Part D – so the so-called donut hole catastrophic care really kind of goes away, and we do believe that really allows patients to kind of make the right choice for their product, and not leave it up to kind of cost between a Medicare Part D or a Medicare Part B benefit as well. So we think both of those are playing really well for eplontersen as we look into the IRA implications.

The next question comes from Gena Wang with Barclays.

Just a few very quick ones. First, I wanted to confirm that the tofersen milestone will be reported as part of the R&D revenue. Second, regarding the manufacturing facility construction, what is the asking cost facility? And then lastly, quickly regarding the CARDIO-TTRansform. I remember you mentioned in the past that you'll go in patient teams. Can you remind us a percentage of patient hereditary patients? What is the goal regarding the percentage of patients in the final?

So Gena, you were breaking up a little bit, but I think I got your questions. Thanks for the questions. Beth, do you want to take the tofersen milestone and the manufacturing facility?

Sure. Absolutely. Yes. Thanks for the question, Gena. So eplontersen approval milestone will be reported as an R&D revenue item. And on the manufacturing facility cost we're anticipating that will be about $350 million. We are already well along in the construction process with design, programming, engineering, architectural efforts underway. And so you should anticipate that cost to be spread out over the next several years. We expect to be manufacturing API in that facility and up and running in late '25, mid-'26 time frame.

And then for CARDIO-TTRansform, I'll ask Eugene to comment on what our targets are goals for hereditary, but for the tafamidis, again, you broke up a little bit, but our goal, as I think I stated earlier, is to get a relatively equal balance between naive patients and tafamidis patients. And right now, the upsizing of the study is delivering exactly that. We're well on our way. Hereditary?

Yes, hereditary is indeed our focus, and we are using the ATTRACT study of tafamidis as a reference point. It's important to note that this study was conducted at a different time with varying diagnostic methods and attention towards this disease. Although approximately 25% of the patients enrolled were hereditary cases in relation to the total population, achieving that percentage will be challenging. However, that is our target, aiming for somewhere in the 20% to 25% range.

Thank you, Gena. Maybe we have time for one last question.

And the last question comes from Do Kim with Piper Sandler.

I'll keep it to one. I just want to follow up on the royalty pharma agreement and how best are you going to recognize the upfront payment? And if any of that is factored into the revenue guidance for this year?

Sure. So the $500 million payment we received in January is essentially increasing our cash. So you'll see that in our Q1 cash balance there'll be an offsetting liability for the payments we need to make to Royalty Pharma. And 100% of our SPINRAZA royalties will continue to be booked to the top line in revenue. So it's already factored into our revenue guidance. Again, assuming a similar split of commercial and R&D revenues really reflects that 100% of the SPINRAZA royalties on the top line revenue. And we'll give some more detail at Q1 once we complete the detailed accounting treatment with our auditors.

Thank you, Do. Thanks, everybody. Thanks for joining us on today's call and for participating. We're really looking ahead to a very successful 2023. We plan to continue our positive momentum and delivering on our key commercial pipeline and technology objectives for the year, and we look forward to providing updates to all of you as we make progress throughout the year. So until then, thanks very much for participating, and have a great day.

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