On August 9, 2016 Ionis Pharmaceuticals, Inc. (Nasdaq: IONS) reported that its financial results for the first half of 2016 were in line with the Company’s expectations and the Company is on track to meet its pro forma NOL and cash guidance for the year (Press release, Ionis Pharmaceuticals, AUG 9, 2016, View Source;p=RssLanding&cat=news&id=2194067 [SID:1234514400]).

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Ionis Pharmaceuticals (PRNewsFoto/Ionis Pharmaceuticals, Inc.)
"The recent announcement to file for regulatory approval of nusinersen based on positive results from an interim analysis of the Phase 3 ENDEAR study was an important next step in our goal to bring this potentially transformational medicine to the patients who desperately need it as quickly as possible. This is the first time a potential treatment for infantile-onset SMA has demonstrated a clinical benefit in a controlled clinical study," said B. Lynne Parshall, chief operating officer of Ionis Pharmaceuticals. "We are excited about the opportunity we now have to accelerate the advancement of nusinersen into regulatory review. We and Biogen are well along in preparing the U.S. and E.U. regulatory dossiers, and Biogen plans to file marketing applications in the U.S. and E.U. in the next few months, with other countries to follow. We are very pleased that our interactions with the FDA remain very constructive as we and Biogen continue to explore possible expedited mechanisms to accelerate the regulatory review timeline."

Biogen has exercised its option to license nusinersen and will be responsible for all development, regulatory and commercialization activities and costs going forward. Over the next several months, Ionis will be working closely with Biogen to transition patients in the ENDEAR and EMBRACE studies to an open-label study that will allow all patients in these studies to have access to nusinersen. Once these patients have been transitioned into an open-label study, Biogen plans to open an expanded access program to make nusinersen available to eligible patients with infantile-onset SMA (consistent with type 1). Ionis will continue to conduct the Phase 3 CHERISH study in childhood-onset SMA patients. Biogen will also continue to conduct the NURTURE study in pre-symptomatic SMA infants.

"We believe that Biogen is the right company to bring nusinersen to patients with this devastating disease. They understand the unique needs of the SMA community and the impact SMA has on patients and their families. Importantly, Biogen has the global commercial infrastructure and expertise needed to successfully launch and commercialize nusinersen. Nusinersen is the first antisense drug from our neurological disease collaboration with Biogen that we expect to advance to regulatory review, and we are excited about the possibility of bringing other therapies to patients with severe neurological diseases with limited or no treatment options," continued Ms. Parshall.

Financial Results

"We finished the second quarter in a strong financial position. In the first half of this year, we earned $75 million of revenue, including more than $15 million in milestone payments, the majority of which were related to the progression of our Phase 3 program for nusinersen, and $15 million from Kastle when Kastle acquired the global rights to develop and commercialize KYNAMRO. Consistent with the guidance we have provided, we expect our revenue to be significantly higher in the second half of this year. We are well on our way to achieving our second half projections with the revenue we have already earned in the third quarter from the nusinersen and Janssen license fees, which total $85 million," said Elizabeth L. Hougen, chief financial officer of Ionis Pharmaceuticals.

"We have continued to advance our Phase 3 programs and to prepare to commercialize volanesorsen through Akcea while prudently managing our expenses. As a result, we finished the first half of 2016 with a GAAP loss from operations of $104 million, which included nearly $40 million in non-cash compensation expense related to equity awards, that when excluded, resulted in a pro forma net operating loss of $64 million. We also ended the first half of this year with more than $660 million in cash. Neither our operating loss nor our cash balance at June 30th included the $85 million in license fees we have earned already in the third quarter. We are on track to meet our guidance of a pro forma NOL in the low $60 million range and a year-end cash balance in excess of $600 million. Importantly, with the projected accelerated timeline for approval of nusinersen, we have the opportunity to begin earning commercial revenue next year," concluded Ms. Hougen.

All pro forma amounts referred to in this press release exclude non-cash compensation expense related to equity awards. Please refer to the reconciliation of GAAP to pro forma measures, which is provided later in this release.

Revenue

Ionis’ revenue for the three and six months ended June 30, 2016 was $38.5 million and $75.3 million, compared to $120.4 million and $183.0 million for the same periods in 2015. Ionis’ revenue in the first half of 2016 consisted of the following:

$15 million from Kastle Therapeutics in an upfront payment for KYNAMRO;
$14.5 million from Biogen for advancing the Phase 3 program for nusinersen and advancing IONIS-BIIB4Rx;
$1.5 million from GSK for advancing IONIS-HBV-LRx; and
$44.3 million primarily from the amortization of upfront fees and manufacturing services Ionis performed for its partners.
Ionis’ revenue in the first half of 2015 included $91.2 million in connection with the exclusive license agreement with Bayer, $56.8 million in milestone payments from partnered programs and $35.0 million, primarily from the amortization of upfront fees and manufacturing services Ionis performed for its partners.

Ionis’ revenue fluctuates based on the nature and timing of payments under agreements with its partners and consists primarily of revenue from the amortization of upfront fees, milestone payments and license fees. Already in the third quarter of 2016, Ionis has earned $85 million in license fee revenue consisting of $75 million from Biogen for nusinersen and $10 million from Janssen for the Company’s first oral antisense drug designed to act locally in the GI tract.

Operating Expenses
Ionis’ operating expenses included costs to support the Company’s five ongoing Phase 3 studies and three open-label extension studies related to its Phase 3 programs for nusinersen, IONIS-TTRRx and volanesorsen. In addition, Akcea continued to build its operations in preparation for the commercial launch of volanesorsen. As such, Ionis’ operating expenses increased for the three and six months ended June 30, 2016 and on a GAAP basis were $87.4 million and $178.9 million, respectively, and on a pro forma basis, were $68.1 million and $139.6 million, respectively. This is compared to GAAP operating expenses of $75.8 million and $147.7 million and pro forma operating expenses of $62.2 million and $120.8 million for the same periods in 2015. In addition, Ionis’ operating expenses on a GAAP basis increased due to an increase in non-cash compensation expense that resulted from an increase in the exercise price of the stock options the Company has granted over the past several years.

Net Income (Loss)
Ionis reported a net loss of $56.9 million and $119.8 million for the three and six months ended June 30, 2016, respectively, compared to net income of $35.6 million and $18.9 million for the same periods in 2015. Basic net loss per share for the three and six months ended June 30, 2016 was $0.47 and $0.99, respectively, compared to basic net income per share of $0.30 and $0.16 for the same periods in 2015. Diluted net loss per share for the three and six months ended June 30, 2016 was $0.47 and $0.99, respectively, compared to diluted net income per share of $0.29 and $0.15 for the same periods in 2015. Ionis had a net loss for the three and six months ended June 30, 2016 compared to net income for the same periods in 2015 primarily due to variations in the timing of revenue from license fees and milestone payments. For example, in the second quarter of 2015, the Company recognized $91.2 million in revenue related to its exclusive license agreement with Bayer.

Balance Sheet
As of June 30, 2016, Ionis had cash, cash equivalents and short-term investments of $664.1 million compared to $779.2 million at December 31, 2015. Ionis’ cash balance decreased in the first half of 2016 primarily due to spending to support the Company’s ongoing Phase 3 programs for nusinersen, IONIS-TTRRx and volanesorsen. Ionis’ working capital was $586.9 million at June 30, 2016 compared to $688.1 million at December 31, 2015. The decline in Ionis’ working capital was a result of the cash used in operations and a decline in the Company’s investment in Regulus Therapeutics resulting from a decline in Regulus’ share price. Ionis’ cash balance at June 30, 2016 did not include $85 million, comprised primarily of the $75 million from Biogen for the license of nusinersen, which it will add to its balance sheet in the third quarter.