On February 27, 2018 Ionis Pharmaceuticals, Inc. (NASDAQ: IONS) reported its financial results for the fourth quarter and full year 2017 and highlighted recent progress in advancing its business and drug pipeline (Press release, Ionis Pharmaceuticals, FEB 27, 2018, View Source [SID1234524209]).
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"In 2017, our accomplishments were remarkable. The historic launch of SPINRAZA and the acceptance of our regulatory filings for inotersen and volanesorsen, which set up potential launches of these two drugs in 2018, combined with our strong financial performance, demonstrate our ability to execute across all areas of our business. We also advanced our pipeline of novel drugs with positive data readouts from 11 clinical studies, including five with our LICA drugs, and introduced eight new drugs to the pipeline, further highlighting the broad capabilities and potential of our antisense technology platform," said Stanley T. Crooke, M.D., Ph.D., chairman of the board and chief executive officer.
"Looking ahead, we believe 2018 could be an important turning point for Ionis. Most important will be the launch of inotersen and volanesorsen, if approved. We also expect to report data from at least six Phase 2 studies, initiate at least five Phase 2 programs and report data from multiple proof-of-concept clinical studies. These important events build on our recent momentum, solidifying Ionis as a multi-product, commercial company delivering innovative antisense medicines to patients in need," continued Crooke. "As we advance our pipeline of antisense drugs and achieve important milestones in our collaborations, we expect to continue to provide substantial value to our shareholders and the patients we serve."
Financial Results and Highlights
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Revenues for 2017 increased by more than 45%
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For the fourth quarter and full year 2017, revenue was $172 million and $508 million, compared to $160 million and $347 million for the same periods in 2016.
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Commercial revenue for 2017 was $113 million from SPINRAZA royalties and $9 million from other licensing and royalty payments. R&D revenue for 2017 was $386 million and increased by nearly 20% from 2016.
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Operating income for 2017 increased by more than 150%, driven by strong revenues and reflecting prudent expense management
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GAAP operating income was $25 million for 2017, compared to a GAAP operating loss of $46 million for the same period in 2016. Pro forma operating income was $111 million for 2017, compared to $26 million for the same period in 2016.
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Operating expenses increased at a much slower rate than revenue with the increase primarily due to higher SG&A expenses as Ionis prepares to commercialize volanesorsen and inotersen this year.
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Substantial cash position enabled pipeline progress
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As of December 31, 2017, Ionis had cash, cash equivalents and short-term investments of more than $1 billion compared to $665 million at December 31, 2016.
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During 2017 Ionis received over $580 million in partner payments. Additionally, Ionis’ cash balance at December 31, 2017 included proceeds from Akcea’s 2017 IPO and Novartis’ strategic investment in Akcea.
"2017 was our first year of commercial revenue in which we earned $113 million in SPINRAZA royalties. It was also our sixth consecutive year of revenue growth, driven by our focus on high-value, innovative drugs like SPINRAZA and multiple other exciting programs in our pipeline," said Elizabeth L. Hougen, chief financial officer of Ionis. Our goal is to be a multi-product, sustainably profitable company. Consistent with this goal, we project 2018 will be our third consecutive year of pro forma operating profitability even as we prepare to launch two new drugs. For 2018, we are projecting R&D expenses of $360 million to $390 million and SG&A expenses of $180 million to $210 million both on a pro forma basis. We project that we will end 2018 with more than $800 million in cash."
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 pro forma and GAAP measures, which is provided later in this release.
Recent Pipeline and Technology Highlights
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SPINRAZA for SMA – one of the most successful orphan drug launches in history
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SPINRAZA, commercialized by Biogen, generated 2017 global sales of $884 million
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Results from the ENDEAR study and CHERISH study, in which people with infantile-onset and later-onset SMA, respectively, were treated with SPINRAZA, were published in The New England Journal of Medicine
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Prestigious 2017 Prix Galien USA Award for Best Biotechnology Product awarded to Ionis and Biogen for SPINRAZA
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New collaboration with Biogen initiated to discover new antisense drugs with enhanced properties to treat SMA
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Inotersen for hATTR – potential to transform the lives of people with hATTR
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Marketing applications accepted, no FDA Advisory Committee recommended, Priority Review in the U.S. and Accelerated Assessment in the EU
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Preparations for global launch, planned for mid-2018, progressing
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Phase 3 NEURO-TTR study met both primary endpoints demonstrating benefit compared to placebo in multiple measures of quality of life and disease severity; 50% of inotersen-treated patients experienced improvement from baseline in quality of life
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Volanesorsen for FCS and FPL – potential first treatment for people with FCS
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Marketing applications accepted in the U.S., EU and Canada with Promising Innovative Medicine designation in the UK and Priority Review in Canada
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Preparations for global launch for FCS, planned for mid-2018, progressing
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Phase 3 APPROACH study met primary endpoint of reducing triglyceride levels in people with FCS
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Pipeline Programs (early and mid-stage) – advancing wholly owned and partnered programs
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Positive results from seven Phase 2 studies reported, including:
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Positive data from Phase 1/2 study of IONIS-STAT3-2.5Rx in combination with AstraZeneca’s Imfinzi reported for people with head and neck cancer
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Robust, dose-dependent reductions of mHTT observed in people with Huntington’s disease treated with IONIS-HTTRx
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Positive clinical data on five LICA drugs reported, demonstrating consistent, positive performance and sustained target reduction with potential for monthly or less frequent dosing
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Positive results from six Phase 1 studies reported
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Nine Phase 2 studies and four Phase 1 studies initiated across multiple therapeutic areas to treat people with both broad and rare diseases
"In 2017, we and our partners advanced key programs in all of our therapeutic areas, including cardiometabolic, oncology, neurology and, severe and rare disease. Of the eight new drugs we added to the pipeline, six were drugs that use our more potent LICA technology or Generation 2.5 chemistry, and two were drugs to treat neurodegenerative disorders. We also added to our pipeline our second orally delivered, locally acting drug for a GI autoimmune disease. These achievements demonstrate the success of our wholly owned and partnered programs," said Brett P. Monia, Ph.D., chief operating officer and senior vice president of antisense drug discovery and translational medicine at Ionis Pharmaceuticals. "Looking ahead, we plan to pursue only those partnerships with infrastructure and resources that complement our own. Simultaneously, we plan to continue to build our wholly owned pipeline of drugs to treat patients with rare and serious diseases."
Expected Events Through Mid-2018
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Launch of inotersen for people with hATTR, if approved
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Launch of volanesorsen for people with FCS, if approved
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Report results from five Phase 2 programs, including data from studies with IONIS-HTTRx in people with Huntington’s disease and data from a 6-12 month study with AKCEA-APO(a)-LRx in people with high Lp(a) and cardiovascular disease
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Initiate up to six Phase 2 or Phase 3 studies and three Phase 1 studies, including the initiation of a clinical study with follow-on LICA drug, IONIS-TTR-LRx
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Revenue
Ionis’ revenue for the fourth quarter and full year 2017 was $172.3 million and $507.7 million, compared to $160.3 million and $346.6 million for the same periods in 2016. Ionis’ revenue in 2017 consisted of the following:
Commercial Revenue:
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$113 million from SPINRAZA royalties; and
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$9 million from other licensing and royalty payments.
R&D Revenue:
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$118 million in milestone payments from Biogen, including $90 million in milestone payments for SPINRAZA, $15 million for validating two undisclosed neurological disease targets and $10 million for initiating a Phase 1/2 study of IONIS-MAPTRx;
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$65 million from Bayer for the license of IONIS-FXI-LRx;
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$48 million from Roche primarily for the license of IONIS-HTTRx;
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$10 million from Janssen for license of IONIS-JBI2-2.5Rx and initiation of Phase 1 study of IONIS-JBI1-2.5Rx;
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$115 million from the amortization of upfront fees; and
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$30 million from services Ionis performed for its partners, of which more than half related to manufacturing services.
Ionis’ R&D revenue may fluctuate quarterly 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.
At the beginning of 2018, Ionis adopted the new revenue recognition accounting standard on a retrospective basis, which means that starting with the first quarter, Ionis will begin showing all periods presented using the new standard. The Company does not anticipate that there will be a significant impact to its previously reported revenue. Under the new standard, Ionis’ revenue for 2017 will increase by approximately 3%.
Operating Expenses
Operating expenses for the fourth quarter and full year 2017 on a GAAP basis were $174.0 million and $483.1 million, respectively, and on a pro forma basis were $151.7 million and $397.2 million, respectively. This is compared to GAAP operating expenses of $119.2 million and $392.9 million and pro forma operating expenses of $104.0 million and $320.8 million for the same periods in 2016. Operating expenses increased in 2017, compared to 2016, principally due to higher SG&A expenses as Ionis prepares to commercialize volanesorsen and inotersen in 2018. The Company’s SG&A expenses also increased in 2017 compared to 2016 because of fees it owes under its in-licensing agreements related to SPINRAZA.
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Net Income (Loss)
Ionis reported a net loss of $4.7 million and $17.3 million for the fourth quarter and full year 2017, respectively, compared to net income of $25.9 million and a net loss of $86.6 million for the same periods in 2016, all according to GAAP. On a pro forma basis, Ionis reported net income of $17.7 million and $68.7 million for the fourth quarter and full year 2017, respectively, compared to net income of $41.0 million and a net loss of $14.4 million for the same periods in 2016. Ionis’ GAAP and pro forma net loss improved for 2017 compared to 2016 primarily due to the addition of commercial revenue from SPINRAZA royalties and increased R&D revenue.
Additionally, in 2017, Ionis recorded two non-cash, non-recurring items in other expenses, which contributed to the Company’s net loss. These two items were the previously capitalized fair value of the potential premium Ionis would have received from Novartis if Akcea had not completed its IPO and the loss the Company recognized on the purchase of its primary R&D facility. In 2016, Ionis recorded a $4.0 million non-cash loss related to the early repurchase of its 2¾ percent convertible senior notes, which contributed to the Company’s net loss for 2016.
Net Loss Attributable to Noncontrolling Interest in Akcea Therapeutics, Inc.
Akcea sold shares of its common stock to third parties in its IPO in July 2017. From the closing of the IPO through the end of 2017, Ionis owned 68 percent of Akcea. The shares held by third parties represent an interest in Akcea’s equity that Ionis does not control. However, because Ionis continues to maintain overall control of Akcea through its voting interest, Ionis reflects the assets, liabilities and results of operations of Akcea in Ionis’ consolidated financial statements. Ionis reflects the noncontrolling interest attributable to other holders of Akcea’s common stock in a separate line called "Net loss attributable to noncontrolling interest in Akcea" on Ionis’ statement of operations. Ionis’ net loss attributable to noncontrolling interest in Akcea for the fourth quarter and full year 2017 was $7.4 million and $11.3 million, respectively. Ionis also added a corresponding account in its stockholders’ equity section on its balance sheet called "Noncontrolling interest in Akcea Therapeutics, Inc."
Net Income (Loss) Attributable to Ionis Common Stockholders
Ionis reported net income attributable to Ionis’ common stockholders of $2.7 million for the fourth quarter of 2017, compared to $25.9 million for the same period in 2016. For the full years 2017 and 2016, Ionis reported a net loss attributable to Ionis’ common stockholders of $6.0 million and $86.6 million, respectively. For the fourth quarter of 2017, basic and diluted net income per share were $0.02 compared to basic and diluted net income per share of $0.21 for the same period in 2016. For the full year 2017, basic and diluted net income per share were $0.08 compared to basic and diluted net loss per share of $0.72 for the same period in 2016.
Webcast and Conference Call
Today, at 11:30 a.m. Eastern Time, Ionis will conduct a live webcast conference call to discuss this earnings release and related activities. Interested parties may listen to the call by dialing 877-443-5662 or access the webcast at www.ionispharma.com. A webcast replay will be available for a limited time.