Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) Q4 2022 Earnings Call Transcript February 22, 2023

Operator: 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.

Wade Walke : Thank you, , Navin. 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.

Brett Monia: 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 3 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 3 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.

Eugene Schneider: 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 week 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 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 2 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.

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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 Donidolorsen to be best-in-class prophylactic treatment in HE. 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 beavers. 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 better reverse 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.

Onaiza Cadoret: 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 2 years, our field medical team has been engaging with thought leaders and educating HCPs on ATTR elevated triglyceride diseases and more recently, hereditary anted. 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 more 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 SCS 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.

Beth Hougen: 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. Increase was driven primarily by higher development, CMC and medical affairs expenses to support our 3 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 6 Phase III studies for 4 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.

Brett Monia: 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 2 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 launched 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?

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