Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) Q2 2023 Earnings Call Transcript

Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) Q2 2023 Earnings Call Transcript August 9, 2023

Ionis Pharmaceuticals, Inc. beats earnings expectations. Reported EPS is $-0.6, expectations were $-0.94.

Operator: Good morning, and welcome to Ionis’ Second Quarter 2023 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.

Wade Walke: Thank you, MJ. 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 on our website that accompany today’s call. With me this morning are Brett Monia, our Chief Executive Officer; Richard Geary, Chief Development Officer; and Beth Hougen, our Chief Financial Officer. Eric Swayze, Executive Vice President of Research; Eugene Schneider, Chief Clinical Development Officer; and Onaiza Cadoret, Chief Global Product Strategy and Operations Officer, will also 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.

Brett Monia: Thanks, Wade. Good morning, everybody, and thanks for joining us today. We achieved a great deal in the first half of 2023 as we continued to focus on our most important strategic priorities. We advanced our pipeline in many important ways. We made great progress in building our commercial capabilities. We are writing the next chapter for Ionis as we transform Ionis into a highly successful, fully integrated biopharma, focusing on delivering an abundance of new medicines to patients. Launch preparations for our three near-term commercial opportunities, eplontersen, olezarsen and donidalorsen are right on track. Eplontersen is currently under regulatory review for ATTR polyneuropathy in the U.S. and we’re on track to submit additional filings outside the U.S. before the end of the year.

We and AstraZeneca share the goal of bringing eplontersen to ATTR patients globally, who today have limited treatment options. We are also pleased with the longer term week 85 data for eplontersen from the Phase 3 NEURO-TTRansform study that we reported last month. These longer term data showed continued improvements from baseline out to 19 months, highlighting eplontersen’s durable efficacy and contributing further to its overall attractive profile. And in a few minutes Richard will dive deeper into the importance of these data. And just last week we reported that our landmark CARDIO-TTRansform study of eplontersen in patients with ATTR cardiomyopathy completed full enrollment with more than 1,400 patients. This is the largest study ever conducted in this patient population.

Our next major late stage milestone is the top line readout of the olezarsen Phase 3 BALANCE study in FCS in the second half of this year. We expect olezarsen in FCS to be the first independent commercial launch for Ionis and we’re well prepared. In parallel, we’re advancing our olezarsen Phase 3 pivotal studies in the much larger patient population, severe hypertriglyceridemia, or SHTG, which we’re also well prepared for. We also completed enrollment in the Phase 3 OASIS-HAE study of donidalorsen earlier this year. This important milestone keeps us on track for data in the first half in next year. We continue to be encouraged by the efficacy data donidalorsen has generated to date. We recently announced two-year open-label extension data that showed consistent and sustained protection against HAE attacks in line with what we previously reported from our randomized Phase 2 study and our open label extension study at one year.

I also want to highlight the continued success we’ve achieved developing medicines for patients with neurological diseases. SPINRAZA continues to be the global market leader for the treatment of all types of SMA. And just recently, SPINRAZA’s proven strong efficacy was reinforced further with highly encouraging new data from the ongoing RESPOND study in SMA patients who had a suboptimal response to gene therapy. And with their recent approval of QALSODY in the U.S. we now have two breakthrough commercial medicines on the market to treat two severe neurodegenerative diseases. The FDA has accelerated approval of QALSODY, brings hope and a breakthrough treatment to people with SOD1-ALS and their families. And QALSODY’s approval further validates our capabilities to treat intractable neurological diseases.

Today, we have 12 medicines in clinical development for neurological diseases, including treatments for other forms of ALS, dementias, neurodevelopmental diseases, and much more. Our industry-leading neurology research team is also making remarkable achievements to further advance our leadership in neurology therapeutics. With a track record of driving innovation, we are focused in making great progress in advancing new cutting edge medicines into development to address severe neurological diseases for patients in need. Additionally, for the second quarter in a row, our robust late stage Phase 3 pipeline has expanded. Roche recently initiated Phase 3 development of IONIS-FB-LRx in IgA nephropathy, increasing our late stage Phase 3 pipeline to eight drugs being developed for 10 separate indications.

Our robust late stage pipeline sets us up for a steady cadence of Phase 3 data readouts over the next few years, positioning Ionis to deliver many new important transformational products to the market for years to come. And just last week we were pleased to announce our expanded collaboration with Novartis, demonstrating their confidence in Ionis’ capabilities to create a next generation compound targeting Lp(a) as a potential follow-on to pelacarsen utilizing our latest cutting edge technologies. As a reminder, pelacarsen is in an ongoing Phase 3 cardiovascular outcome study called Lp(a) HORIZON, which is fully enrolled with more than 8,000 patients. The HORIZON study is progressing well with data and a potential filing plan for 2025. We also recently expanded our cardiovascular franchise when we advanced our first cardiac muscle like a drug into preclinical development.

This muscle targeting drug is our first to enter into development utilizing our in-license Bicycle technology. This achievement further highlights the potential for us to expand our drug discovery capabilities for cardiovascular and neuromuscular diseases. And importantly, we remain on track to accomplish our other key strategic goals across the business, including achieving our 2023 financial guidance. With that, I’ll turn the call over to Richard to discuss our recent pipeline progress and preview of coming key events. Next, Beth, will review our second quarter and first half financial results and then I’ll wrap things up before taking your questions. Richard?

Richard Geary: Thank you, Brett. Well, as Brett just mentioned, we’ve made important pipeline progress in the first half of this year, bringing us even closer to our goal to deliver an abundance of new medicines to patients and to the market. We believe that the positive data we have reported to date from the NEURO-TTRansform study demonstrate eplontersen’s potential to provide substantial benefit for patients with ATTR polyneuropathy. The recent 85 week data further strengthened our confidence in eplontersen’s competitive profile. Through 85 weeks, eplontersen continued to demonstrate a sustained and substantial reduction in CM-TTR concentration base compared to baseline. As you can see from both the mNIS+7 and Norfolk Quality of Life graphs, the changes from baseline through 85 weeks of treatment are very encouraging.

Photo by National Cancer Institute on Unsplash

Importantly, a substantial number of patients treated with eplontersen continue to demonstrate improvement in neuropathy impairment and quality of life through the 85 weeks of treatment. These data further add to the totality of data supporting eplontersen’s differentiated profile. We plan to report the full data set at a medical conference later this year. Eplontersen is currently under review in the U.S. with additional filings outside the U.S., including the EU planned for the end of this year. We and AstraZeneca, recently expanded our agreement to include Latin America, further underscoring our and AstraZeneca’s commitment to bringing eplontersen to patients around the world. Positive efficacy and safety results we’ve seen from NEURO-TTRansform study also support our confidence in eplontersen for ATTR cardiomyopathy.

Notably, we recently completed enrollment in our Phase 3 CARDIO-TTRansform study. With more than 1,400 patients, this is the largest study ever conducted in this indication. We designed the study to demonstrate benefit on cardiovascular outcomes in a broad set of patients. Now that enrollment is complete in CARDIO-TTRansform, we expect to report data as early in the first half of 2025. As with most outcome trials, our timelines are based on a variety of factors including event rates and the evolving clinical landscape. Following eplontersen, olezarsen is the next drug we expect to bring to the market and is the first we will commercialize ourselves. We are developing olezarsen for two indications, FCS, and SHTG. And while FCS is a rare indication and SHTG represents a much broader population, both indications are characterized by severely elevated triglycerides, which can lead to fatal pancreatitis and atherosclerosis, and both are poorly managed by the current standard of care.

We remain on track to report data from the Phase 3 BALANCE FCS study in the second half of this year. Our development program to support the broader SHTG indication is also progressing well. With over 3 million patients in the U.S. with severe hypertriglyceridemia and first mover advantage, we believe olezarsen represents a blockbuster opportunity for Ionis. Following closely behind olezarsen is our next wholly-owned medicine, donidalorsen to treat patients with hereditary angioedema. We recently completed enrollment in the Phase 3 OASIS-HAE study for donidalorsen keeping us on track for data in the first half of next year. In June, we reported top line two year results on the Phase 2 open-label extension study of donidalorsen showing an overall sustained mean reduction in HAE attack rates of 96% from baseline through two years across dosing groups.

We plan to present these data at a medical conference later this year. Based on the totality of the data generated to date, donidalorsen continues to demonstrate sustained protection in preventing potentially fatal HAE attacks. As a result, we are confident in donidalorsen’s competitive profile, providing us with a meaningful commercial opportunity. Our industry-leading neurology franchise continues to deliver groundbreaking medicines. In April, the FDA approved QALSODY for patients with SOD1-ALS, making it the first approved treatment to target a genetic cause of ALS. In addition, we have 12 medicines in clinical development to treat neurological diseases, including two in Phase 3 studies and eight in Phase 2. One of our highest priorities is to expand our wholly-owned franchises in neurology and cardiology.

We currently have several wholly-owned medicines that are moving quickly to the clinic. Our world-class neurology research team is working to turn great science into great medicines that we plan to develop and commercialize ourselves. As a result, we expect a steady cadence of new clinical study starts over the next several years, ensuring our neurology franchise continues to lead in innovation and positioning us to deliver a growing number of new medicines to patients and the market for years to come. Now, I would like to briefly touch on the recent positive interim results from the RESPOND study of SPINRAZA. RESPOND is an ongoing two year Phase 4 open-label study evaluating SPINRAZA in SMA infants and toddlers with suboptimal response to gene therapy.

Results from the interim analysis showed that most patients improved in measures of motor function with SPINRAZA treatment. SPINRAZA also continued to demonstrate a favorable safety profile on these patients previously treated with gene therapy. These data add to the extensive body of evidence demonstrating SPINRAZA’s benefit for SMA patient. And that includes treating more than 14,000 patients with a well-established safety profile based on data in patients treated up to eight years. In addition to RESPOND, Biogen is conducting the ASCEND and DEVOTE studies that together aim to address remaining unmet need and inform treatment decisions for the SMA community. Our late-stage pipeline expanded for the second consecutive quarter with the start of a pivotal program for IONIS-FB-LRx in patients with IgA nephropathy.

We now have eight drugs in late stage development advancing in a total of 10 separate indications. GSK recently presented new data for bepirovirsen in chronic HBV patients, our other medicine that started a robust Phase 3 development program earlier this year. The data presented at EASL showed that bepirovirsen treatment resulted in a durable response in responders from the B-Clear Phase 2b study. GSK plans to present new data later this year from the B-Together study, which is evaluating bepirovirsen in combination with pegylated interferon. In totality, we have had an eventful first half with many important positive data events and clinical advancements. In the second half of this year, we remain on track for a number of key additional events, including U.S. eplontersen approval and regulatory filings outside the U.S. as well as Phase 3 data for olezarsen in FCS, our next potential medicine to launch after eplontersen.

We will keep you updated on our progress on these events and more throughout the rest of the year. And with that, I’ll turn the call over to Beth.

Beth Hougen: Thank you, Richard. In the second quarter, we continued to make progress on our goal to further strengthen our financial foundation in support of our strategic priorities. Our financial results for the second quarter reflect our ability to generate meaningful revenue to fund investments in key growth opportunities across our business. We earned revenues of $188 million and $319 million for the second quarter and first half of this year respectively. Our revenues increased 40% for the quarter and 16% year-to-date over the same periods last year, driven by significant partner payments. As anticipated, our operating expenses and operating loss for the second quarter and first half of this year increased over the same periods last year as we advanced our commercial readiness activities and our pipeline, especially our late stage programs.

We remain well capitalized with $2.4 billion in cash and investments at the end of June, enabling us to continue deploying our financial resources to bring transformational medicines to the market. In the second quarter, we opportunistically refinanced our 2024 convertible notes and were able to accomplish all our objectives. We retained our cash to continue making key value driving investments in our pipeline. We extended the maturity of our 2024 notes to 2028 while maintaining a low coupon. And importantly, we retained the flexibility to repay the new notes with cash, equity or a combination of the two, enabling us to mitigate potential equity dilution. We retired approximately 80% of the 2024 convertible notes. And as a result, our cash balance at the end of June included approximately $115 million we have earmarked to address the remaining 2024 notes.

SPINRAZA’s global sales were $437 million for the second quarter and $880 million year-to-date. As a result, we earned $61 million and $111 million in royalty revenue for the corresponding period. SPINRAZA’s global sales were essentially flat compared to the same periods last year, reflecting SPINRAZA’s resilience against emerging competition in the U.S. and abroad. By working to expand existing markets while also generating important efficacy data from SPINRAZA’s robust Life Cycle Management Program, Biogen is making good progress on their goal of returning SPINRAZA to consistent growth. We earned R&D revenue of $110 million in the second quarter and $173 million year-to-date, both of which increased substantially compared to the same periods last year.

Our significant R&D revenue reflects the value Ionis’ technology is creating as numerous partnered programs advance. Notable payments earned in the second quarter included $40 million from AstraZeneca for eplontersen, which included development cost sharing payments, and the $20 million license fee for Latin America rights. $20 million also from AstraZeneca for advancing ION839 into a Phase 2b study for NASH and a $16 million milestone payment from Biogen for QALSODY U.S. approval. As planned and aligned with our goal to invest for revenue growth, our non-GAAP operating expenses increased in the second quarter and year-to-date compared to last year, as most of our ongoing Phase 3 studies are either fully enrolled or approaching full enrollment.

As you would expect, our clinical study costs increased, which resulted in higher R&D expenses. Additionally, as we prepared to launch eplontersen, olezarsen and donidalorsen, our SG&A expenses also increased modestly year-over-year. Our results for the first half of this year keep us on track to meet our 2023 financial guidance, including our P&L and cash guidance. Looking ahead, with many partnered programs advancing, we continue to have numerous opportunities to earn additional R&D revenue. We anticipate revenue in the second half will be weighted towards the back end of the year. For example, we are eligible to earn a $50 million milestone payment for the U.S. approval of eplontersen, and we expect to recognize additional amortization revenue from our recently expanded collaboration with Novartis.

We project operating expenses to continue to gradually increase over the course of this year. Consistent with our guidance, which includes expenses related to our capital intensive Phase 3 studies, we estimate our full year R&D expenses will increase between 20% and 25% year-over-year, excluding the Metagenomi upfront payment from last year. We also continue to project our full year SG&A expenses to increase approximately $35 million year-over-year as we prepare to bring eplontersen, olezarsen and donidalorsen to the market. For example, as we move closer to launching eplontersen, assuming an approval in late December, our SG&A expenses will include our share of the cost to build out the eplontersen sales force as well as additional launch readiness expenses.

Over the next few years, we are poised to launch several medicines. As a result, we are in a period of investment. We project our operating expenses to grow modestly and importantly, by keeping more programs for ourselves, we are positioned to deliver significant revenue growth. Additionally, we continue to expect our substantial base of R&D revenues to contribute meaningfully to our overall revenue as our partners continue to advance numerous programs. And with three near-term commercial opportunities that have a combined multibillion-dollar peak sales potential and a steady cadence of medicines poised to follow closely behind, we are well positioned to drive substantial revenue growth and long-term value for shareholders. And with that, I’ll turn the call back over to Brett.

Brett Monia : Thanks, Beth. Looking forward to the rest of this year, we’re laser focused on advancing our key priorities with additional important regulatory and late-stage pipeline events planned for the second half. We’re well on our way to achieving our goal of delivering an abundance of new medicines to patients. We now have two breakthrough medicines to treat devastating neurological diseases on the market. And with the December PDUFA date, we could also add eplontersen to our commercial portfolio late this year. We’re on track with our go-to-market activities for each of our near-term commercial opportunities. Our first planned launch of eplontersen with AstraZeneca in patients with ATTR polyneuropathy is quickly approaching with our independent launches for olezarsen and donidalorsen following closely behind.

And with our rich late-stage pipeline, we’re well positioned to bring additional medicines to patients for many years to come. We also continue to make innovative technological advancements to enhance our leadership position in RNA therapeutics, positioning us to add to our steady cadence of new transformational medicines well into the future. And our strong financial foundation enables us to invest in areas with the greatest potential to drive increasing value. We look forward to sharing our progress as we advance our priorities. And with that, we’ll now open it up for questions. Operator?

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Q&A Session

Operator: [Operator Instructions] Today’s first question comes from Myles Minter with William Blair.

Myles Minter : Congrats on the quarters. First one is olezarsen. And I know that your stance in the severe hypertriglyceridemia trials is that you wouldn’t need to conduct an outcome study or not looking to. There’s been some language put out there from one of the peer companies developing in the space as well that they would be doing an outcome study? Has that language sort of changed your viewpoint on the need to conduct an outcome study in that population?

Brett Monia : Thanks, Myles. Absolutely not. We’re focused on patients with severely elevated triglyceride to genetically caused FCS for — severely elevated triglyceride where there’s no known genetic cause of disease. These are patients that suffer from severe metabolic diseases, particularly acute pancreatitis that can evolve to chronic pancreatitis, diabetes and all kinds of other morbidities. There is also a cardiovascular component to severely elevate triglyceride, but our focus is on getting patients out of harm’s way in the — to have — are suffering from severely elevated triglycerides. We’ve done a lot of research. We’re preparing the market, and we’re ready to — we’re preparing for launching olezarsen for FCS and SHTG. And I’d like to just maybe Onaiza to expand on Myles’ question.

Onaiza Cadoret: Sure. Myles, yes, as we’ve spoken before, we see a great unmet need for severely elevated triglycerides in the marketplace, over 500. This is a market where we have over 3.5 million patients. The standard of care is just not sufficient to actually meet the goals that these patients are required to meet or the medical guidelines, which is to get them below 500 or as close to 500 is possible to get them out of harm’s way for the risks that Brett just highlighted, particularly acute pancreatitis risk. So we have — we’re really looking forward to getting the drug on market for that, both for the rare disease, genetically defined as FCS. We expect to see the BALANCE data by the end of the year and then looking forward to launching into that and then — and ultimately, into the severe hypertriglyceridemia space.

Myles Minter : And second question is just on the week 85 data for ATTR polyneuropathy. I do also understand that there was vitamin A deficiency related ocular events that were discovered in that trial. Obviously, reduction that you get FDA deficiency and you can supplement that. But my question is, have you submitted that data to the FDA just for safety purposes only. I don’t think you’ve submitted it with the efficacy data, but will they see that safety data?

Brett Monia : Eugene?

Eugene Schneider : Yes. Thanks for your question, Myles. So we submitted all of the comprehensive safety information, including the information that was routine with a day 120 update as part of the NDA. So all of the safety data that was available at the time as well as the updates related to the day 120 update were submitted to the FDA and are under review.

Brett Monia : Everything on track, right, Eugene?

Eugene Schneider : Everything on track, absolutely.

Operator: The next question comes from Debjit Chattopadhyay with Guggenheim Securities.

Robert Finke: This is Robert on for Debjit. How does Ionis and AZN plan to compete against siRNA options in the ATTR-PN market. And does AZN’s presence potentially allow eplontersen to be first approval to any significant markets?

Brett Monia : Thanks, Robert. Onaiza, do you want to…?