On May 4, 2016 Ionis Pharmaceuticals, Inc. (Nasdaq: IONS) reported its financial results for the first quarter were in line with the company’s expectations (Press release, Ionis Pharmaceuticals, MAY 4, 2016, View Source;p=RssLanding&cat=news&id=2164982 [SID:1234511917]).

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"2016 is off to a strong start. Target enrollment is complete in four Phase 3 studies across nusinersen, IONIS-TTRRx and volanesorsen. These important new drugs are now one step closer to potentially reaching the market and being available to patients. We are actively engaged in NDA preparations for all three of these drugs in anticipation of Phase 3 data from each in the first half of next year," said B. Lynne Parshall, chief operating officer of Ionis Pharmaceuticals. "We are pleased to have chosen a new commercial partner for Kynamro. We believe Kastle Therapeutics has the rare disease expertise, financial resources and initiative to expand the market potential for Kynamro. Already Kastle has begun to identify new patients to bring onto Kynamro therapy in the United States, and it is initiating activities to pursue marketing approval in other countries."

"Just last month at the AAN meeting, we provided an update on our Phase 2 open-label study with a data cut-off of January 26, 2016 in infants with SMA treated with nusinersen. The infants in this study are continuing to improve. At the AAN meeting, we reported that we had no deaths or events of permanent ventilation since late 2014. All of the continuing infants are over two years old and several have passed their third birthday. We are especially encouraged by continued improvements in motor function in these infants, as evidenced by both continued increases in muscle function scores and achievement of developmental milestones that infants with Type 1 SMA are never expected to achieve, including sitting, standing and even walking. These data give us further confidence in our two Phase 3 studies in infants and children with SMA, from which we expect to have data in the first half of 2017. We continue to work closely with our partner, Biogen, who is preparing to bring this drug to the market for infants and children with SMA," continued Ms. Parshall.

"Also at the AAN meeting, we and our collaborators presented more than a dozen presentations and posters highlighting our broad neurological disease pipeline, which is focused on treating diseases that have been largely untreatable using other therapeutic modalities. Over the last several years, we have substantially expanded the reach of our technology to address a large number of disease targets in the central nervous system," said Ms. Parshall. "We continue to increase the value of our pipeline and technology by expanding the use of our antisense technology into new disease areas, new targets, new tissues and new mechanisms. We hope that you will join us in July for our R&D day during which we will be discussing our broad, innovative pipeline and the groundbreaking work we are doing to continue to broaden the application of our technology," concluded Ms. Parshall.

Financial Results

"We finished the first quarter of 2016 with a pro forma net operating loss of $35 million and more than $700 million in cash. On a GAAP basis, our operating loss was $55 million. In the first quarter, we earned $37 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. As nusinersen and our other partnered programs advance, we have the opportunity to earn significant revenue this year. We are eligible to earn up to $95 million in upfront and milestone payments from Kastle, $15 million of which we will recognize in the second quarter. We will receive a ten percent common equity position in Kastle’s parent company. Starting in 2017, we are also entitled to royalties that average in the mid to low teens on global sales of Kynamro. Additionally, our financial projections include numerous significant milestone payments in the second half of this year, including a $55 million milestone payment from Bayer related to advancing IONIS-FXIRx, compared to 2015 when our revenue was more evenly spread throughout the year. We also have the opportunity to earn a $25 million milestone payment for advancing the first drug under our cardiometabolic collaboration with AstraZeneca and a $10 million milestone payment for advancing the first drug under our J&J collaboration. We also have numerous opportunities during the remainder of 2016 to earn meaningful milestone payments as we advance research programs and drugs under our Biogen collaborations," said Elizabeth L. Hougen, chief financial officer of Ionis Pharmaceuticals.

"Our pro forma operating expenses for the first quarter were $71 million, a significant portion of which were associated with the five Phase 3 studies and three open-label extension studies related to these Phase 3 studies, we are conducting. In addition, Akcea continues to build its infrastructure and conduct the pre-commercialization activities necessary to launch volanesorsen. We are doing all of this while managing our expenses prudently. On a GAAP basis, our operating expenses were $92 million," continued Ms. Hougen.

"Our first quarter financial results were in line with our expectations and we are on track to meet our 2016 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 pro forma and GAAP measures, which is provided later in this release.

Revenue

Ionis’ revenue for the three months ended March 31, 2016 was $36.9 million, compared to $62.6 million for the same period in 2015. Ionis’ revenue in the first quarter of 2016 included the following:

$12.5 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
$22.9 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. The Company’s financial projections include numerous significant milestone payments in the second half or this year, compared to 2015 when its revenue was more evenly spread throughout the year.

Operating Expenses
Ionis’ operating expenses included costs to support the Company’s ongoing Phase 3 studies 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’ pro forma operating expenses were $71.4 million for the three months ended March 31, 2016, and increased compared to $58.6 million for the same period in 2015. On a GAAP basis, Ionis’ operating expenses for the three months ended March 31, 2016 were $91.5 million, compared to $71.9 million for the same period in 2015. Ionis’ operating expenses on a GAAP basis included non-cash compensation expense related to equity awards, which increased because the average fair value of unvested stock options has risen due to the increase in the exercise price of the stock options the Company has granted over the past several years.

Net Loss
Ionis reported a net loss of $62.9 million for the three months ended March 31, 2016, compared to a net loss of $16.7 million for the same period in 2015. Basic and diluted net loss per share for the three months ended March 31, 2016 was $0.52 compared to $0.14 for the same period in 2015. Ionis’ net loss increased for the three months ended March 31, 2016 compared to the same period in 2015 primarily due to variations in the timing of revenue from milestone payments and to a lesser extent, an increase in operating expenses primarily associated with the Company’s Phase 3 studies.

Balance Sheet
As of March 31, 2016, Ionis had cash, cash equivalents and short-term investments of $703.8 million compared to $779.2 million at December 31, 2015. Ionis’ cash balance decreased in 2016 primarily due to spending to support the Company’s ongoing Phase 3 programs for nusinersen, IONIS-TTRRx and volanesorsen. Ionis’ working capital was $639.4 million at March 31, 2016 compared to $688.1 million at December 31, 2015.