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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning and welcome to Ionis Pharmaceuticals First Quarter 2018 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, Vice President, Corporate Communications and Investor Relations to lead off the call. Please begin.
Thank you, Brian. Before we begin, I encourage everyone to go to the investors section of the Ionis website to find the press release and related financial tables, including a reconciliation of the GAAP to pro forma financial measures that we will discuss today. We believe pro forma financial results better represent the economics of our business and how we manage our business. We have also posted slides on our website that accompany our discussion today.
Before I introduce our speakers for the call today, I would like to introduce you to the latest member of our communications team. Roslyn Patterson has joined us as Vice President of Communications. She will be working closely with me to strengthen our Investor Relations and Communications functions and we are already working closely on this front.
Now, let me introduce the speakers for the call today. With me today are Stan Crooke, Chairman of the Board and Chief Executive Officer; Beth Hougen, our Chief Financial Officer; Sarah Boyce, President of Akcea Therapeutics and Brett Monia, Chief Operating Officer.
I would like to point out that today, we will be making forward-looking statements, which 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 our risk factors discussed in the SEC filings that we have on our website or available from the company for additional detail.
With that, I'll turn the call over to Stan.
Thanks, Wade and good morning and thanks everyone for joining us on today’s call. And let me add my welcome to Roslyn, delighted to have you join us Ros.
Before we get into our financial results, let me start with the news on inotersen, which we now refer to by its commercial name TEGSEDI. As Akcea announced yesterday, the FDA decided they needed additional time to review the TEGSEDI NDA and the data analysis we provided them and responses to their standard information requests. The new PDUFA date is October 6, 2018. We are confident that TEGSEDI will be highly competitive in the marketplace. The early access program is continuing to enroll patients and the demand continues to be high. The Akcea team is ready to launch as soon as TEGSEDI is approved.
Now, turning to our first quarter earnings update. We began 2018 in our strongest position ever, both operationally and financially on the verge of becoming a multiproduct profitable company with innovation at our core. Since our last earnings call, we further strengthened our financial position and we continue to be profitable with pro forma operating profit in the first quarter of 2018 of 25 million, driven by a 25% increase in revenue compared to the first quarter last year. We earned 144 million of revenue and we ended the first quarter with more than $1 billion in cash.
Plus, we received a $1 billion payment from Biogen, under our expanded collaboration for neurological disease for approximately $2 billion in cash. This increase financial strength reflects the value of our antisense technology and the pipeline we've created combined with our development and commercialization strategy in which we create tailored plans for each of our drugs.
We consider the efficiency and breadth of opportunity of our antisense technology to be two of the strategic advantages of technology. By using the technology to its fullest to create a very large, diverse and broad innovative pipeline, we transform the strategic advantages of the technology into the largest possible strategic business advantage, as we convert those drugs in the pipeline to a large product line. We then leverage those strategic advantages massively by coupling them to our partnering strategy.
By partnering those opportunities that need a large infrastructure to develop and commercialize, while retaining opportunities that can be developed and commercialized with our infrastructure. In that way, we maximize the opportunities, while minimizing risk. Recent extension and expansion for Biogen research collaboration in neurological diseases and our investment in commercialization of TEGSEDI globally through our affiliate Akcea are excellent examples of our strategy and action.
Our development and commercialization strategy is designed to maximize the potential benefit to patients, maximize the potential for success of each drug, optimize our participation in the commercial success of these drugs and then fully exploit the breadth of the opportunity provided by our antisense technology. Our strategy is succeeded in delivering on these goals today.
We have demonstrated the value of antisense technology to patients in many therapeutic areas. Our research collaborations are more strategic in nature and are focused on advancing our technology in select therapeutic areas, such as neurological diseases and cancer. These therapeutic areas share many similar characteristics. It represents enormous therapeutic spaces. They involve multiple targets and a variety of diseases or disease manifestations. This means that they often require ID specialized knowledge about many diseases, access to and understanding of a wide range of complex disease models and experience with clinical testing paradigms, novel approaches to measuring pharmacological benefit.
Development and/or use of challenging clinical endpoints, non-deposit phase 2 studies and large costly developing commercialization infrastructure. Neurological diseases, especially those with large patient, need -- large patient population need all the criteria just listed. See why it made sense for us to form a strategic collaboration in neurological diseases with Biogen.
We believe that the breadth of the need and the breadth of the opportunity argue strongly that combining the intellect, experience and expertise of Ionis and Biogen teams is the best approach to achieving the broadest possible success. This new collaboration builds on the foundation of our already very productive relationship, which produced SPINRAZA and fixed drugs in development and a broad portfolio of research stage programs. SPINRAZA is now the standard of care for SMA and its launch is one of the most successful rare disease drug launches ever.
SPINRAZA’s sales remain strong. We look forward to continued growth in SPINRAZA sales. We’re also encouraged by our progress in discovering next generation drugs for SMA. Together with Biogen, we've created an industry leading pipeline of drug to treat patients from neurological diseases and we hope to create more SPINRAZA like drugs.
Our new partnership with Biogen is an important strategic step for Ionis. We had several goals for the collaboration. First, to ensure that Biogen’s commitment and focus would match ours and that the relationship would be strategic for both companies and that the intellect support and focus on this important mission would be unwavering.
Second, to ensure that Ionis’ financial participation would appropriately reflect the advances we've made and the value we've created in our technology, not just upfront, but through the collaboration, with the focus on significantly increased participation in the commercial value created. And third, to maintain our ability to work our own programs on neurological diseases outside of the Biogen collaboration. This new collaboration achieves all these goals.
Our strategy also includes commercializing drugs ourselves through commercial affiliates. We consider commercializing ourselves for those drugs that have these attributes. This positive Phase 2 clinical endpoints, manageable pivotal trials, commercialization with a small focused high touch patient support, commercial effort similar to those for rare diseases such as Akcea is focusing on now.
And then therapeutic areas that match our expertise. In March, we invested in the commercialization of TEGSEDI by licensing the drug to Akcea. Commercializing TEGSEDI ourselves through Akcea should provide substantial benefit to Ionis and our shareholders. Most importantly, it strengthens our ability to successfully launch TEGSEDI upon approval by leveraging the commercial preparations already completed by Ionis along with Akcea’s commercial infrastructure.
It provides Ionis with very substantial participation in commercial success of TEGSEDI. With 60% profit share of the substantial revenue and earnings growth, we believe TEGSEDI should generate milestones of up to $1.5 billion. And it ensures that Ionis can stay focused on where we create national value and what we do best, innovation and advancing our antisense technology.
We believe investing in the commercialization of drugs coming out of our pipeline is one of the best uses we could make of our cash. With greater than $2 billion in cash following the close of the transaction with Biogen, we plan to invest in commercializing even more of our drugs through our commercial affiliates. We are continuing to focus aggressively on bringing the greatest value to the broadest range of patients and maximizing the commercial potential of our drugs. And we believe we've been addressing this.
Now, I’ll turn the call over to Beth who will discuss our financial performance in more detail. Sarah will then provide an update on our commercial preparation for TEGSEDI and volanesorsen, now WAYLIVRA. And Brett will review our key pipeline accomplishments. Finally, I'll summarize very briefly at the end of the call and we’ll open up the call for questions.
Thank you, Stan. In the first quarter, we continued our strong financial performance from 2017 and made further progress toward our goal of being a multi-product profitable company. We ended the first quarter with operating income of $25 million and net income of $27 million, both on a pro-forma basis. Our strong Q1 results were driven by a 25% increase in revenue, primarily from the royalties we earned from SPINRAZA sales.
In the first quarter, we earned $144 million of revenue, including 41 million of commercial revenue from SPINRAZA. Completing our seventh consecutive quarter of pro forma operating income keeps us on track to achieve our third consecutive year of pro forma operating income.
As a reminder, we earned tiered royalties on annual SPINRAZA sales and pay nominal fixed third party royalties that are non-tiered. This means that at the beginning of this -- each year, we started to leverage loyalty tier and progressed through the tiers throughout the year as sales grew. We advanced through the royalty tiers fairly quickly and for this reason, our share of SPINRAZA’s product sales was increased during the rest of 2018.
In addition to commercial revenues, in the first quarter of 2018, we had more than $100 million of R&D revenue, which was on par with the first quarter of last year. R&D revenue in Q1 included 32 million of amortization, $60 million we earned from AstraZeneca for licensing two drugs and $6 million we earned for services we performed for our partners.
Our pro forma operating expenses for the first quarter of 2018 were $119 million. And as we anticipated, our first quarter expenses increased compared to the same quarter in 2017. The increase was primarily related to the expenses we incurred, as we continue to prepare to launch both TEGSEDI and WAYLIVRA this year.
We also ended the first quarter with more than $1 billion in cash and investments, which will grow to $2 billion when we received the upfront payment for Biogen later this quarter. In the first quarter, we expanded our strategic research collaboration with Biogen and license TEGSEDI to Akcea. Each of these transactions reflects our strategy to identify the best development and commercialization plan for each of the drugs in our pipeline.
This strategy enables us to create the most value for each program, while keeping the core of our company focused on innovation. This morning, I’ll describe how we anticipate each of these transactions will improve our financial performance in the near term and over the coming years.
As the Biogen collaboration demonstrates, partners today are willing to pay a substantially higher price for access to our antisense technology. Under the Biogen collaboration, Biogen will pay us an upfront payment of $1 billion. 500 million of this payment is for stocks that Biogen is purchasing. So you can view the other $500 million as a fee to access our antisense technology for neurological diseases.
We will begin to amortize the technology access fee in the second quarter, which should provide more than $30 million of revenue this year. Beginning next year, the amortization will be approximately $50 million annually. In addition to the technology access fee, we can earn milestone payments and license fees of up to $270 million per drug.
With the productivity we are expecting from this collaboration, these payments constitute a substantial economic opportunity for Ionis. In addition as drugs from this collaboration reach the market, we will earn royalties of up to 20%. Under the collaboration, we will work on approximately five targets per year to identify drugs that are ready to enter development.
Whilst we identify a drug, Biogen will be responsible for it and pay for it, all development activities thereafter. The value of this in tied contribution is meaningful and not included in the dollars I just enumerated for each program. The hundreds of millions of dollars required to develop a drug through commercialization will all be paid by Biogen.
Importantly, this means that all of the milestone payments, license fees and royalties we earn after identifying the drug drop directly to our bottom line as profit for us. We also realize significant financial benefit because we can leverage Biogen resources, infrastructure and expertise throughout the development process. And in doing so, we can focus our internal Ionis resources to advance and expand our development pipeline, including our pipeline of Ionis owned drugs.
We expect the impact of this new collaboration on our future financial results to be substantial. Our existing Biogen collaboration has been financially successful and we expect this new collaboration to be even more so. Historically, in our Biogen relationships, we have earned on average over $100 million per year in revenue from amortizations, milestone payments and license fees and our revenue is increasing every year.
We expect that once this new collaboration gets going, it will be at least as productive as their previous collaboration. This means we should be adding on average over $100 million per year in revenue from milestone payments and license fees together with approximately $50 million per year of amortization from the upfront technology access fee.
And of course, we expect to continue to receive milestone payments and license fees from our previous collaborations as programs advance. When drugs are commercialized from either the existing or new collaboration, we will add royalties from those drugs to our growing commercial revenue as we're currently doing with SPINRAZA.
Of course, Biogen is not our only partner, so we expect a substantial growth in our R&D revenue that we have shown over the last six years to continue and we expect to add to that, not only our growing SPINRAZA commercial revenue, but also commercial revenue from TEGSEDI, WAYLIVRA, plicamycin and then other drugs from our pipeline in advance to the market.
Our substantial and growing cash balance increases our ability to advance and expand our pipeline, retain our drugs longer and build a growing pipeline of drugs for our own account. It also enhances our ability to make strategic investments like the one we recently made with TEGSEDI. As we discussed on our recent conference call, we considered a range of options for commercializing TEGSEDI.
After thoroughly considering all of our options, we concluded that by far, the best approach to assuring the maximum commercial success and achieving a substantial market share was to pull TEGSEDI and the TEGSEDI team into Akcea. Assuming TEGSEDI is the commercial success we believe it will be, we benefit in several ways from investing in TEGSEDI’s commercialization through Akcea.
The most important benefit is the potential to maximize TEGSEDI sales. Also, we will realize significant increases in cash from the up to $1.5 billion in milestone payments and the 50% of TEGSEDI’s profits that we received from Akcea. Also because we consolidate Akcea’s financial results with ours, we will record 100% of TEGSEDI product sales on our P&L, driving our top line revenue growth.
And as Akcea successfully commercializes TEGSEDI, we expect TEGSEDI to generate substantial earnings growth typical for successful rare disease drugs. In addition to these independent drivers of value for Ionis, as Akcea’s market cap increases, the value of our 75% ownership increases. We believe our investments and TEGSEDI’s commercialization through Akcea should maximize the commercial value of both TEGSEDI and WAYLIVRA and Ionis’ participation in this value for both drugs.
Now turning to two housekeeping items. First, as many of you are aware, beginning this year, companies are required to adopt new accounting rules for revenue recognition. We adopted the standard retrospectively, which means that we adjusted prior periods for these new rules and show updated amounts for all the periods we present in our financial statements. We chose this adoption method so that when we compare it to prior periods, we are using an apples to apples comparison.
This adoption method ensures that historical trends in our revenue are meaningful. The primary change resulting from the new standards and how he recognize revenue from milestone payment. Previously, we recognized milestone payments we earned for performing R&D activity in full when we achieved the milestone event.
Under the new guidance, we will now amortize those payments over the period we're obligated to perform R&D activities for our partners. We will continue to recognize milestone payments we earn based on our partners’ activities in full when the milestone is achieved.
Secondly to aid in understanding how Ionis’ and Akcea’s financial statements work, in our earnings press release, we include a schedule that shows the standalone P&Ls for Ionis and Akcea. The intercompany transaction had Ionis’ consolidated P&L. We also include a schedule that shows the same information for the company's balance sheet. We are on track to meet our 2018 P&L guidance, consistent with our goal of being a multi-product profitable company, we project 2018 will be our third consecutive year of pro forma operating profitability, even as we prepare to launch TEGSEDI and WAYLIVRA.
We are looking forward to adding revenue from these two drugs to what we believe will be growing SPINRAZA revenue and our substantial base of R&D revenue that beginning in the second quarter will include revenue from our new Biogen collaboration. For 2018, we’re 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.
These expense levels reflect our commitment to retain a significant portion of the commercial value of our drugs by launching TEGSEDI and WAYLIVRA. They also reflect the investment we are making in advancing and expanding our pipeline. With the $2 billion of cash due to have shortly, we expect to significantly exceed our cash guidance of more than $800 million of cash at year end.
Our substantial cash position supports our ability to advance, broaden and deepen our portfolio, retain our drugs longer and build a growing pipeline of drugs for our own accounts. This also means we can make strategic investments like the one we recently made with TEGSEDI. In 2018, we expect the commercial revenues from SPINRAZA, TEGSEDI, WAYLIVRA and plicamycin coupled with revenue from our partners will help us achieve our goal of being a multi-product profitable company, delivering important medicines to patients with serious illnesses.
And now, I'd like to turn the call over to Sarah to provide an update on TEGSEDI and WAYLIVRA.
Thank you, Beth. We are in late stage discussions with regulator authority on finishing our preparation to launch both drugs. We have an advisory committee meeting for WAYLIVRA next week and we look forward to forcing the committee to review WAYLIVRA’s data rich package.
First, some additional detail about the FDA decision to extend the review time for the TEGSEDI NDA. This extension was related to the volume of information that we provided the FDA in response to the standard information requests. Let me give you some context for this extension.
The FDA determines that the information we provided represented major amendment to the NDA. To clarify, no new data were requested and no new clinical or preclinical studies were requested. The succession of the PDUFA date is to allow the FDA time to review existing data. We appreciate the close collaborative relationship we have with the neurological division of the FDA and we’ll continue to work closely with them to advance the review of our filings as quickly as possible.
Additionally, our discussions with the EU and Canada continue to progress well. We have received priority review designation from Health Canada for TEGSEDI, again underscoring the severity and significant unmet need in the treatment of HATTR amyloidosis.
We believe we are prepared to successfully launch both TEGSEDI and WAYLIVRA following their approval. We have built highly skilled teams across the critical functions needed to successfully launch both of these drugs. This morning, I will talk briefly about our progress. For additional details about our commercial preparations, I think you will find Akcea’s earnings call from yesterday quite informative.
The major advantage of licensing TEGSEDI to Akcea is that it enhances our readiness for successful launch. In addition, due to the similar needs of both drugs, there are a number of synergies that we are taking advantage of that will support greater profitability, meaning we’re offending more efficiently, such as patient support, distribution and market access. Our patient support program includes support with modern strength, diet nutrition, injection training and in the US, reinvestment. We believe we have a built a robust, high touch program to meet our goal of promoting long term adherence to and thus optimizing patient benefit from TEGSEDI and WAYLIVRA.
We’re using the same supply chain strategy for TEGSEDI and WAYLIVRA, which should provide us with valuable operations and operational synergies in the US. Our specialty pharmacies and third party logistic providers are replaced in the US, EU and Canada and are ready for launch. Importantly, our launch for both TEGSEDI and WAYLIVRA are ready and waiting to be labeled.
We are advancing our market research activity, including house economic and pricing research. We’re also engaging with payers in our initial market. Our goal is to ensure patients have access to these transformative medicines and that the economics of these drugs reflect the potential substantial value to patients and the healthcare system.
Importantly, our field sales and medical teams are making excellent progress with disease awareness and patient identification. We continue to build and transform time to the physicians, KOLs and the patient advocacy community building on the strong foundation created, while Ionis and Akcea were advancing TEGSEDI and WAYLIVRA in clinical trials.
We have had several high visibility presentations of TEGSEDI data at ISA and AAM, demonstrating the long term potential benefits of the safety of TEGSEDI in patients with hereditary ATTR amyloidosis. In addition, the medical symposium we held at both of these meetings were very well attended with standing room only.
And finally, the expanded access programs for TEGSEDI and WAYLIVRA are well under way and patients are enrolling rapidly. In response to the enthusiasm from physicians and patients, we continue to expand the number of sites in the expanded access program. We are poised to successfully launch both of these drugs quickly after approval with the goal to transform the life of the patient living with these debilitating, life threatening diseases.
And now, I’d like to turn the call over to Brett to talk about SPINRAZA and the progress of other drugs in our pipeline.
Thank you, Sarah. As Stan mentioned in his opening, we are in our strongest position ever as a company. This strong position is directly fueled by the successes of our drugs in treating patients with a wide range of diseases, both in clinical trials and in the commercial setting. Our success today and in the future is supported with the advances we continue to make in our antisense technology.
Our productivity across our broad and deep pipeline is at an all-time high. We continue to leverage the substantial expertise, contributions and resources of our partners to advance both our Ionis owned and partnered programs and to expand the utility of our antisense technology.
SPINRAZA is an exceptional example of the type of first and best in class drugs that we can create by combining unique advantages and efficiency of our antisense technology coupled with strategic contributions from hand-picked partners like Biogen. SPINRAZA is the first commercial drug from our neurological disease franchise and with global sales of $364 million in the first quarter of 2018, its launch continues to be one of the most successful rare disease drug launches in history.
Biogen’s goal is to significantly grow the number of treated patients globally and Biogen continues to put substantial resources into SPINRAZA’s commercialization. Q1 saw meaningful progress toward this goal, both in US and outside the US. In the US, the number of patients on SPINRAZA increased by over 25% from last quarter to approximately 4100. While Biogen believes there is still significant growth opportunity with infant in pediatric patients in the US, they believe the largest long-term growth opportunity in the US is to reach older patients.
We are encouraged by Biogen’s efforts to reach these older patients, as evidenced by the increase in adult patients treated in the first quarter. Outside the US, Biogen secured access in seven additional markets, bringing the total to 24 countries that are reimbursing SPINRAZA treatment and Biogen expects to receive reimbursement in an additional 7 countries by the end of this year.
We believe Biogen’s efforts will lead to additional growth in SPINRAZA sales over the course of the year. To build upon our success with SPINRAZA and our already very productive relationship with Biogen, we're very pleased to expand the collaboration on neurological diseases to produce more SPINRAZA like drugs over the next 10 years. Our opportunity in neurological diseases is very broad and covers a range of diseases.
We and Biogen are doubling down on our investment and focus in this area, yes, we are confident in our abilities to directly target the root causes of neurological diseases with antisense technology. We aim to take advantage of new mechanisms, new chemical classes, evaluate novel pathways and address many types of neurological diseases.
In parallel, we will also continue to build in advance our own neurological disease pipeline and plan to commercialize these drugs ourselves through an affiliate. We currently have 5 Ionis owned programs for rare neurological diseases. These are TEGSEDI and its likely follow-on, Akcea TTR-Lrx, Lafora disease, Alexander’s disease and [indiscernible] and over the next 18 months, we expect to add several more.
Our antisense technology’s unique advantages make it well suited to create drugs to treat a broad range of diseases, including neurological diseases. We've been very successful in this therapeutic area and have built an industry leading neurological disease franchise with a blockbuster commercial drug, SPINRAZA. TEGSEDI, under regulatory review, four drugs in development, including Ionis HTTrx for Huntington’s disease, 6 drugs in preclinical studies and more than 20 discovery stage programs.
The breadth of our success in neurological diseases was recently highlighted by the major presence of our antisense drugs at the American Academy of Neurology annual meeting. Ionis researchers and study investigators gave 14 presentations on our drugs for several neurological diseases, including SMA, hereditary ATTR amyloidosis, Huntington’s disease, Alzheimer’s disease, or ALS and Lafora disease.
In addition, there was a special two hour session at the conference that was dedicated to antisense as a major therapeutic platform for neurological diseases. Dr. Sarah Tabrizi highlighted new data from our Huntington’s disease program during the plenary session of the meeting. She reported that in addition to the substantial reduction in mutant huntingtin protein, we observe the correlation between reduction of mutant huntingtin protein and improvements in certain clinical measures of Huntington's disease.
Roche is working to advance this drug into a pivotal study later this year. In addition to the substantial progress we've made in neurological diseases, we've also advanced our technology in oncology, cardiac, renal and metabolic diseases with AstraZeneca. We currently have five drugs advancing in development with AstraZeneca that use our generation 2.5 and generation 2.5 LICA technologies.
In the first quarter, AstraZeneca licensed their second and third antisense drugs under our cardio, renal and metabolic collaboration. The AstraZeneca pipeline now includes two drugs for cancer and three drugs out of our cardio, renal and metabolic collaboration. The first drug, AstraZeneca licensed under our cardio, renal and metabolic collaboration is our first generation 2.5 LICA drug IONISAG42.5-Lrx. This drug is being developed for people with cardiovascular disease and is expected to enter a phase 1 study later this year.
This drug along with our generation 2.5 LICA drug to treat patients with NASH incorporates many of the recent advances we have made in our antisense technology. By combining generation 2.5 and LICA, we generate drugs that have both higher affinity chemistry and efficient cell specific targeting. This combination provides us with drugs that are substantially more potent than either generation 2.5 or LICA and supports infrequent administration at very low doses.
We're also anticipating our next set of commercial opportunities with multiple drugs that we or our partners plan to advance into clinical studies in the next year or so. This include IONIS-HTTrx for patients with Huntington's disease, or IONISSAG32.5Rx for patients with head and neck cancer and Akcea [indiscernible] driven cardiovascular disease. We're also focusing on our Ionis owned drugs that have the potential to move quickly toward the market, including IONIS GHS LRX for patients with and IONIS6lRx for patients with beta thalassemia.
With the potential launches of TEGSEDI, WAYLIVRA and plicamycin and the progress we're making with so many other drugs in our pipeline, we expect 2018 to be another exciting year.
With that, I’ll turn the call over to Stan to close.
Thanks, Brett. The financial results we've reported today demonstrate that we are in our strongest financial position ever. With more than over $2 billion in cash, potential for growing commercial and R&D revenues and increased commercial participation and drugs in our pipeline, we've made important progress toward continuing our financial success, our strong position needs, we can invest more aggressively in advancing our current pipeline of Ionis drugs – owned drugs while adding new drugs.
So this is an exciting time for us. We’ve made substantial progress already this year and we're not slowing down. Together with our partners, we have the potential to put three new drugs on the market this year. We plan to deepen our late stage pipeline with multiple drugs that we and our partners plan to advance into pivotal studies in the next year or so. We also have more than 6 days to read out this year. The drugs from these studies could also grow our late stage pipeline and increase our commercial potential opportunities in the next few years.
We now have more than 18 programs that we are developing as Ionis owned programs, many of which are candidates to commercialize ourselves through one of our commercial affiliates. With the recent successes and the many exciting events on the horizon, we are on the verge of becoming a multiproduct profitable company delivering innovative medicines to patients with a range of diseases and generating substantial value for the patients we serve and our shareholders.
And with that, I’ll now open the call for Q&A. Brian, if you can set us up please.
[Operator Instructions] Our first question today comes from Jessica Fye with JPMorgan.
I want to ask about TEGSEDI and specifically can you elaborate on whether the responses the FDA needs more time to review related to questions on safety or efficacy? And can you also just explain the mechanism through which the FDA extended the PDUFA, i.e., did they kind of go ahead and characterized your responses as a major amendment in order to be able to extend it by three months.
The question is focused primarily on just understanding the drug broadly. So, there is a great deal of information and a lot of it has to do with safety. So, they're focused on getting, just having the time to understand the drug well. And they didn’t use the opportunity to use the mechanism by calling this a major amendment.
And on WAYLIVRA can you also just set expectations setting into the briefing documents and adcom next week, I think particularly some folks have been focused on safety for that product too. So can you maybe set the stage for what we should expect when we see those documents and then the potential focus of the advisory committee?
I think the focus will be on both benefit and risk. We think that the benefits of WAYLIVRA are obvious and substantial, particularly in the context of the type of studies that can be conducted in a rare disease patient population. And of course there will be extensive focus on safety as it should be. And there will be a focus on monitoring and how we manage the information to assure that patients are dosed properly.
As we reported, excursions in platelet counts are a common feature of the disease FDS. And clearly, WAYLIVRA in some patients exacerbates those excursions in platelet counts. And so we certainly have to manage the -- monitoring of platelets in response to the disease and the drug. And then of course there will be the other laundry list of additional concerns that the FDA will want to discuss with the panel. And I believe there will be a meaningful focus on monitoring and managing the side effects from the dosing.
Next question comes from Yale Jen with Laidlaw & Company.
My first two here. First one is that you currently have or to have roughly 2 billion cash and Beth, I know you mentioned a few things the company would do, but could you elaborate a little bit more in terms of any other specific things you could contemplate with this amount of cash in hand.
So, I think with $2 billion in cash, obviously, in a technology as powerful and productive and efficient as antisense technology, the best use of our cash is to invest in the technology, in our pipeline and retaining our drugs longer, building our Ionis owned pipeline and investing in commercializing drugs out of our own pipeline for our I own account.
We will be providing more detail on our overall capital allocation plans somewhat later in the year, Yale. So, we consider that a very high quality problem.
And maybe one follow up here, the TEGSEDI, the PDUFA date pushed out to October, whereas that probably would be having entered the market probably ahead of you guys. Does that affect anything in terms of your marketing plan or any other dynamics?
Yeah. So can you just repeat the question please?
I mean, the TEGSEDI probably entered the market a little bit later than you anticipated, which will make potentially entered the market slightly earlier, if that’s the case, do you feel there is any impact on that or you feel that or lack of it?
Yeah. We don’t really feel that’s going to have any impact and the drugs will be close enough together from a launch perspective, not really to make any difference and was very well prepared to be ready to launch following approval.
In the end, it will be the profile of the two drugs that determine the market share and we’re confident that the profile at TEGSEDI is going to be attractive for many patients to use. We think both drugs will be used in the market and both drugs are good additions to the treatment of these patients.
The next question today comes from Stephen Willey with Stifel.
Just a couple on the pipeline actually. So, you've got more than a few oncology products in Phase 2 now. And I guess I'm just wondering how you're thinking about the utility of antisense as a treatment modality in oncology, specifically, with respect to not being able to achieve complete target inhibition. I guess I understand how modulation might be sufficient for something like stat 3, but curious how you think about that concept with respect to the antigen receptor in KRAS programs.
This is Brett and I'll try to respond to that. So, the development of generation 2.5 chemistry at Ionis was a real breakthrough and our ability to get actually very robust reductions in targets in cancer cells as well as in the cancer tumor microenvironment. And this was -- it has really enabled us to target tumors directly as well as conduct immunooncology strategies with generation 2.5 chemistry.
Our stat 3 program actually has the benefits of both mechanisms. We've shown – AstraZeneca has shown remarkable activity both pre-clinically and clinically in targeting tumor associated macrophages and T Cells and those sorts of things, which contribute dramatically to the tumor shrinkages, the tumor responses we’ve seen both preclinically and clinically. And we're applying that and they’re applying that to other programs too. We have the KRAS program, which has shown great preclinical data for direct tumor targeting and then we have a number of other programs that are emerging for too.
So we actually get much more robust reductions in target with our new chemistries than you may be suggesting, in both tumors and in tumor macro environment. AstraZeneca is currently developing the drug in late stage Phase 2 for head and neck cancer, both second line and first line and we expect news on the outcome of that study in the future development second half of this year.
And if something that’s perhaps gone a bit unnoticed in cancers for us, in addition to AZ, we've established a broad collaboration with MD Anderson and that program is going well and we think it is really an important extension of Ionis, because it gives us access to some of the best brains in cancer and so many interesting insights into new targets, new approaches to cancer as well as the strength that the MD Anderson has in developing drugs in cancer through clinical trials. So we're in a quite different position from what we were three, four years ago in cancer and we’re now confident that we have drugs that can provide benefit in cancer and we're confident because we're seeing it.
And then just one more, you’ve got a couple of cardio metabolic assets that are targeting the liver, which I believe don't utilize like a technology. I think this is the GCGR programs, should we expect these drugs to get push forward as it is or do you think about maybe trying to incorporate like a conjugation into the backbone of these things.
Yeah. So we are continuing to push forward these programs, Steve, but we also have like a strategy is coming behind them. We will make decisions based on the clinical data we see and what it is we want to approve, but certainly, we have preclinical data and we're ready to pull the trigger on like strategies for both of these programs at the right time.
And Steve, we’ve converted a number of programs directly to like, but for some others where the parent compound was a bit ahead and we felt there was real opportunity for the parent compound we’ve continued to develop the pipe, a lot of sources versus and the like. So, each drug in the pipeline reflects a very individual situation and what we try to do is optimize, make the best decision we can for each of the drugs.
The next question comes from Jim Birchenough with Wells Fargo Securities.
This is [indiscernible] for Jim. So first question. Is there a chance that TEGSEDI is approved ahead of the new PDUFA date, i.e., perhaps the FDA may not need all the three months allowed by the extension.
I think the date that you should focus on is the PDUFA date. I certainly am not going to predict what the FDA will do specifically. Of course, we hope for an earlier approval.
And then on the SPINRAZA launch, Biogen highlighted that they hope to have adult patients driving future growth with the proportion of the infant and the pediatric patients treated currently, they think that future growth could be driven by the adult patients. What's your thoughts on that hypothesis? How feasible would that be?
We think growth in SPINRAZA is going to come from additional growth in markets outside the US. And as Biogen has said, growth in the US, which will be to some extent driven by the addition of more and more adult patients, we’re also seeing more and patients who had been treated with the AveXis drug, now being treated with SPINRAZA. And obviously as new patients are born with SMA, those patients become candidates for SPINRAZA as well. So it’s a combination of all those things in our view.
Last question is about the neurology collaboration with Biogen, because I think the original collaboration you have, probably, five programs ongoing, so in terms of from the new collaboration, designation of diseases and we begin to see activity from the new collaboration, do you have a sense of when that might happen? Do you have to complete the first collaborations target before moving on to the second collaboration or it could happen in parallel?
Really quickly on the last part. You should think of this entirely organically. We – while we have different economics and different other elements of the contract, the basics of the research are exactly the same and the teams are working and has been working seamlessly assuming that we get this other transaction done. So I wouldn't think -- you shouldn’t be thinking about sort of event moving from the current partnership to the next partnership, much more that this is simply a much more attractive transaction for us and for Biogen and that it extends and expands the relationship that has already been so productive.
Yeah. I’ll just add to that Stan. It’s exactly right and of course, we have a very rich pipeline of drugs emerging towards clinical development from our prior collaborations with Biogen and that's just going to only continue with the new collaboration, it’s just going to continue with new drugs. We expect news be coming out from this partnership with Biogen for many, many years to come.
Of course, the fruits of the new targets that we’re working on, whether they're in the old collaboration or the new collaboration will become apparent as those -- as drugs from those targets begin to move in to the clinic and that takes a bit of time, but financially the way you should think about is it will be getting milestones from drugs that advanced from the old collaboration and then there will be milestones that begin to recruit from drugs from the new collaboration.
Next question comes from Gena Wang with Barclays.
Maybe the first one regarding SPINRAZA royalty and just try to understand, I think this quarter and last quarter, the revenue from a Biogen perspective, SPINRAZA revenue looks very similar, but the royalty from Ionis perspective seems like lower for this quarter. Just wanted to get a sense, I think this quarter, if we calculate, it is about 11.5%. For the last quarter, it was about 14.3%. So wondering if you can give us some color on that.
It’s Beth. So on the SPINRAZA royalties, they are tiered royalties and they start over at the lower tier at the beginning of each year. So -- and what you'll see is because we go through those tiers quickly, you'll see the effective royalty rate each quarter increasing up to those maximum levels. And so while the sales are up, the royalty is down a little bit, but you'll see tremendous growth as we continue to work through those levels over -- those tiers over the course of the year.
So, yeah, I mean, wouldn't that be actually royalty rate would be higher instead of lower, because this quarter actually is lower than last quarter, so is it tier, like usually, you would see increasing royalty rate?
Yes. The tiers, and we’ve said this publicly, the tiers are 11% up to 15% and they start over at the 11% each year. So at the beginning of the year, those first royalties are at the 11% rate. And then as we go through the tires, that rate will increase over the course of the year. So you don't stay at the top tier year after year after year. You start over at the lower tier and you work yourself through those tiers to the highest tier by through the year.
I see. So every first quarter, we should expect in the lower end of the range in terms of the royalty tier, right?
In terms of the percent, but of course as your sales grow, your absolute royalty dollars will be growing.
And another quick question is, I think it has been asked earlier, but wanted to ask slightly differently. In terms of the TEGSEDI’s commercial opportunity, I know it is one quarter delay and, but it is increasingly competitive market landscape, especially also [indiscernible] so every month actually counts. And just wondering what is your thought on this one quarter delay, the impact in terms of the commercial opportunity for TEGSEDI, any impact on profitability later this year with this delay?
So from our perspective, I just reiterated our original guidance, which is to be profitable for the third consecutive year. And I still -- we're still sticking to our original guidance for expense levels. So we don’t see a change in our guidance associated with this extension. And I think one of the key things in relation to TEGSEDI, we’ve got also to mention is that our standard access program. So the standard access program is open, we’re rapidly enrolling patients in the US. We actually opened additional sites because there's request to come in to the program. So from a patient access perspective, where there is that need in the physician, patients can start on TEGSEDI treatment today.
Thank you. I think in addition to that, well, any delay is a disappointment. I think in this case, it will boil down to profile and launch readiness and the extra time will give this a little more time to muffle up the launch readiness and as you know we've been working very hard to get ready, just by having the drug returned relative to late in its History.
Just a very quick follow up, regarding that, I know you have both -- expanded programs ongoing for both FCS and ATTR, just wondering if you can share with us the number of the patients being enrolled so far?
Yeah. We haven’t disclosed that.
What we can tell you is the demand is high, and because of that, we’re continuing to open new sites. And we're also pleased with the support that we have from KOLs, patient advocacy groups and so on. So we're really excited about TEGSEDI and we think the opportunity in the -- commercial opportunity is a very attractive opportunity.
We will take one more question, because it is getting close to the hour.
The last question will come from Laura Christianson with Cowen.
Just a quick one on the development timeline for TTRx, I’m just curious what’s rate limiting to initiating the phase 1 and how quickly you anticipate being able to move into phase 3. Thanks.
No rate limiting. These steps are simply to get the documents prepared for the IND and we expect the study to start later this year. And we expect to move very rapidly through initial studies and then move very quickly towards the key studies.
And with that, I think we’ll end the call and close. Once again, I want to thank everyone for your participation and for the questions, the opportunity to address them. We're excited about where we are. We have achieved, I think, substantial success and that sets the stage for the rest of this year being even more successful. We look forward next week to the WAYLIVRA panel meeting and to approval of both of these drugs as the year progresses. Thanks everybody.
The conference is now concluded. Thank you very much for attending today's presentation. You may now disconnect.