On November 9, 2016 Ionis Pharmaceuticals, Inc. (Nasdaq: IONS) reported income from operations of $16.1 million and a loss from operations of $87.5 million for the three and nine months ended September 30, 2016, respectively (Press release, Ionis Pharmaceuticals, NOV 9, 2016, View Source;p=RssLanding&cat=news&id=2220881 [SID1234516565]). The Company also reported pro forma operating income of $33.7 million and a pro forma net operating loss (NOL) of $30.5 million, both excluding non-cash stock compensation, for the same periods. Ionis ended the third quarter with cash, cash equivalents and short term investments of $687.8 million. The Company is on track to meet its pro forma NOL and cash guidance for the year.
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"This week, we and Biogen announced positive data from an interim analysis of CHERISH, our Phase 3 study in children with later-onset (consistent with Type 2) spinal muscular atrophy (SMA). We are very encouraged with the positive SPINRAZATM data from both of our controlled Phase 3 clinical trials supporting potential benefit not only in infants, but also in children with SMA. We are pleased that our partners at Biogen are already making SPINRAZA available to patients with SMA who have no therapeutic alternatives through a broad Expanded Access Program. In about four weeks after Biogen filed for marketing approval for SPINRAZA, the FDA and the EMA each have accepted their respective application. Importantly, the FDA has granted Priority Review and the EMA has granted Accelerated Assessment, both of which can reduce the standard review time. We look forward to seeing SPINRAZA quickly and successfully advance through the regulatory review process so that it will be even more broadly available to SMA patients through commercial channels. On the basis of these positive data, we will stop the CHERISH study and afford all patients in the study the opportunity to receive SPINRAZA in the ongoing open-label study, SHINE. These data follow the positive results from ENDEAR, our Phase 3 study in infants with the most severe form of the disease, infantile-onset (consistent with Type 1) SMA, which formed the basis for the regulatory filings in the U.S. and E.U., and the filings in progress for other jurisdictions. This was followed by encouraging data from the Phase 2 NURTURE study in pre-symptomatic infants with SMA, which supports the potential beneficial effect of earlier treatment with SPINRAZA in infants with SMA. These data serve to confirm the positive data we have observed in our Phase 2 open-label studies in infants with Type 1 SMA and children with Type 2 or Type 3 SMA, in which we have patients continuing to benefit from SPINRAZA for nearly five years. We believe the totality of these results provide compelling evidence of the broad transformational potential of SPINRAZA for patients with SMA. These results further illustrate the potential of our antisense technology to target severe diseases that other therapeutic modalities are unable to adequately address," said B. Lynne Parshall, chief operating officer of Ionis Pharmaceuticals.
"In addition, last week we announced positive results from our Phase 2 study with IONIS-FXIRx in patients with end-stage renal disease on dialysis. Results from the study demonstrated robust, statistically significant reductions in Factor XI activity in treated patients. IONIS-FXIRx also displayed a good safety and tolerability profile. In patients treated with 200 mg or 300 mg of IONIS-FXIRx there were no clinically meaningful platelet declines and no increase in major or clinically relevant non-major bleeding. These results provide further support for the potential benefit IONIS-FXIRx could have for patients who need to prevent clotting but who have increased risk of bleeding," continued Ms. Parshall.
Financial Results
"We ended the third quarter of this year with net income primarily because of the $85 million in license fees we earned, including $75 million from Biogen for licensing SPINRAZA. Through the first nine months of 2016, we have earned more than $186 million in revenue from license fees and milestone and other payments from our partnered programs. We have the opportunity to add to our strong base of revenue from partnerships with commercial revenue from SPINRAZA," said Elizabeth L. Hougen, chief financial officer of Ionis Pharmaceuticals.
"Through the first nine months of 2016, we have continued to advance our Phase 3 programs and Akcea is preparing to commercialize volanesorsen while we have prudently managed our expenses. As a result, we finished the first nine months of 2016 with a GAAP loss from operations of $87.5 million, which included nearly $57 million in non-cash compensation expense related to equity awards, that when excluded, resulted in a pro forma net operating loss of $30.5 million. We also ended the first nine months of this year with more than $685 million in cash. 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," 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 nine months ended September 30, 2016 was $110.9 million and $186.3 million, compared to $49.1 million and $232.1 million for the same periods in 2015. Ionis’ revenue in the first nine months of 2016 consisted of the following:
$96.9 million from Biogen for licensing and advancing the Phase 3 program for SPINRAZA and advancing IONIS-BIIB4Rx;
$15 million from Kastle Therapeutics for acquiring Kynamro;
$10 million from Janssen for licensing IONIS-JBI1-2.5Rx;
$1.5 million from GSK for advancing IONIS-HBV-LRx; and
$62.9 million primarily from the amortization of upfront fees and manufacturing services Ionis performed for its partners.
Ionis’ revenue in the first nine months of 2015 included $91.2 million in connection with the exclusive license agreement with Bayer, $89.8 million in milestone payments from partnered programs and $51.1 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.
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 SPINRAZA, IONIS-TTRRx and volanesorsen. In addition, Akcea continued to build a global organization and prepare for the commercial launch of volanesorsen. As such, Ionis’ operating expenses on a GAAP basis for the three and nine months ended September 30, 2016 were $94.8 million and $273.7 million, respectively, and on a pro forma basis, were $77.2 million and $216.8 million, respectively. This is compared to GAAP operating expenses of $97.3 million and $245.0 million and pro forma operating expenses of $82.3 million and $203.0 million for the same periods in 2015. In addition, Ionis’ operating expenses for the first nine months of 2016 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 net income of $7.4 million and a net loss of $112.4 million for the three and nine months ended September 30, 2016, respectively, compared to a net loss of $35.8 million and $16.8 million for the same periods in 2015. Basic and diluted net income per share for the three months ended September 30, 2016 was $0.06. Basic and diluted net loss per share for the nine months ended September 30, 2016 was $0.93. This is compared to a basic and diluted net loss of $0.30 and $0.14 for the three and nine months ended September 30, 2015, respectively.
Balance Sheet
As of September 30, 2016, Ionis had cash, cash equivalents and short-term investments of $687.8 million compared to $779.2 million at December 31, 2015. Ionis’ cash balance decreased in the first nine months of 2016 primarily due to spending to support the Company’s ongoing Phase 3 programs for SPINRAZA, IONIS-TTRRx and volanesorsen. Ionis’ working capital was $623.4 million at September 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.