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ISIS Pharmaceuticals (NASDAQ:ISIS)

Presentation at 31st Annual J.P. Morgan Healthcare Conference

January 9, 2013 4:30.m. ET

Executives

Stan Crooke - CEO

Analysts

Matt Lowe - JP Morgan

Matt Lowe - JP Morgan

Welcome everybody. I’m Matt Lowe of the JP Morgan biotech team. Our next company to present is ISIS Pharmaceuticals. We’ll have a breakout in the Olympic room down the corridor afterwards. If I could just ask everyone to please turn their cellphones off. And now I’ll hand it over to the CEO, Stan Crooke. Thank you.

Stan Crooke

Good afternoon everyone, and thanks for joining me. I will be making a number of forward looking statements and of course they are associated with risks. This is the agenda that we’ll practice in the next few minutes. First, an update on Kynamro as it approaches commercialization.

And then I want to focus on the maturity of the pipeline. We have five drugs that we think can reach the marketplace in the next five years. We have nine drugs in 2013 that will encounter important Phase II or Phase III data points. And we’ll move at least two, probably three new programs into Phase III in 2013 as well.

So we have a pipeline that’s mature and is continuing to expand. We added three drugs at the end of the year and we’re particularly excited about the growth in our severe and rare disease program.

We continue to invest in the technology, and those investments are paying immediate divest in the performance of drugs in the clinic. I want to share some of that with you. And of course a central element of our business strategy is to partner. We think we’ve been very successful in partnering over this year, and we’re pursuing a specific strategy that I’ll share with you. And again, we think those successes in 2012 assure even more success in 2013. And finally, our goals for 2013.

We had a very busy month of December. Our two goals for 2012 business development were to partner the severe neurodegenerative program and to partner cancer, and we did that. We did three transactions with Biogen Idec in 2012 in aggregate worth about $2 billion in potential cash as well as double digit royalties.

And then at the end of December we partnered our STAT-3 program and another target with Astra Zeneca. That too is worth about a billion dollars of potential cash and double digit royalties.

We amended our TTR relationship with GSK to facilitate moving directly to Phase III. We received fast track designation for TTR. And we reported positive data from three different metabolic drugs: PDB1b glucagon and glucocorticoid. And I’ll be giving you at least an introduction to the very encouraging data we have in our first trial on our spinal muscular atrophy drug today.

We added three new drugs to the pipeline. That brings our total pipeline to 28 drugs in development. This is the pipeline. It’s getting a bit unwieldy, so we’ve divided it into those drugs that are in clinical development and then the next slide we’ll look at the preclinical development.

We continue to be committed to cardiovascular, metabolic, cancer, and inflammatory diseases, but as you can see, we’ve made a lot of progress in expanding our severe and rare disease program. This looks at the drugs that are unpartnered, ISIS owned.

And again, our approach to partnering is to partner what we want to partner, when we want to partner it, and retain those drugs that we think we can get to much higher value for our own account, and we think we’ve been quite successful at doing that.

This is the preclinical pipeline. Same format. These are the three drugs that we added to the pipeline at the end of the year. I’ll just talk about one, which is the PKK drug, at the very end of the presentation. And this, again, looks at the drugs that are in preclinical development that are still wholly owned by ISIS. And so we have a significant number of opportunities for our own account, as well as our partner’s accounts.

Now let’s move to Kynamro. I am pleased to tell you that Genzyme and the FDA are making solid progress. We think they’re closing in on final labeling. And so we’re very optimistic that we’ll receive approval in the U.S. on or before the PDUFA date of January 29.

We’re very pleased with the focus and the preparation of Genzyme for the commercial launch. We think the key challenges with this drug are to get these patients identified and referred to lipidologists. Kynamro has been thoroughly studied. The data have been published. The lipidologists around the world understand Kynamro well. And we think that they will use the drug effectively and it will be a successful commercial product. And that is the focus for the commercial launch, and we think it’s important.

We had a little bump in the road in Europe, but we’re very optimistic that the reexamination will be successful, and we expect to see the completion of that and hopefully approval in the second quarter of 2013. In addition, we continue to invest in the future. And the immediate future is Focus FH.

Focus FH is a 300-400 patient trial in patients with severe FH. We have a SPA approval for this, and it should support expansion of the label to include severe FH, both in the U.S. and Europe. So that’s very important. We hope to see enrollment completed by the end of this year, and that would support that expansion of the label.

Now, I mentioned that we have five drugs that could achieve commercialization over the next five years. I’ll talk about the top three. So let me just briefly mention OGX-011 and EXC 011. OGX-011 is an anticancer drug being developed by our partners OncoGenex and Teva. They plan to unblind the prostate cancer trial at the end of this year, and if that’s positive, of course that will be great news for patients with prostate cancer and our partners.

EXC 011 is a drug now being developed by Pfizer and moving toward Phase III. It is the first and only drug that I’ve seen that produces significant positive responses in controlled Phase II trials in the treatment of unwanted scarring. That is an enormous commercial opportunity if you just have a look at the number of bad scars associated with plastic surgery.

Now, TTR. TTR, of course, is a fatal genetic disease. It affects about 50,000 patients worldwide. It’s caused because of a mutation in the TTR gene that makes a protein that doesn’t fold properly and as a consequence it precipitates and of course forms what are called amyloid deposits. It can form those amyloid deposits in peripheral nerves of the heart, and so it’s manifested in both ways as a disease.

Our drug works. We’ve demonstrated that it produces beautiful dose-dependent reductions of TTR in normal subjects, and in fact that at the top two doses, we reduced TTR by about 80%, and greater than 80% in some of these subjects.

That has led GSK us to move directly to a Phase III program. It will focus on the peripheral neuropathy and involve about 200 patients. It will involve 15 months of treatment, and we’ll be using the standard measures of neurological function as well as quality of life. That study is just about to get underway, and so we certainly look forward to getting that done.

We believe that our drug will be the drug of choice. It lowers both normal and mutated TTR. That’s very important. Once those plaques are laid down, it’s important to get rid of both. And we think it’s going to be a very easy to use, convenient, once a week dosing, with no special formulation. It can be administered by the patients themselves.

Of course, once we move along with the peripheral neuropathy, we’ll also be evaluating the drug in the cardiomyopathy as well. We have very attractive economics on this drug, and so, again, an exciting opportunity for us.

Now SMN. SMN is, again, a severe neuromuscular disease. It affects about 30,000-35,000 children worldwide. It is the most common genetic cause of infant death. It’s an awful situation, in which these poor children deteriorate progressively and lose muscle function and eventually die of respiratory failure. There is nothing to be done for these children today.

It’s caused by a mutation in the SMN1 gene, and as it happens, humans have another gene, SMN2, that would be capable of producing the protein, but that RNA isn’t processed correctly. So this [unintelligible] drug is working through a different mechanism from the rest of our drugs. It’s driving splicing of the RNA in a different direction.

We’ve shown that the drug works remarkably well in animal models of various sorts, and we’ve now just completed the first clinical trial in these children. We will be sharing the data in March at the Neurology meeting, but I’ll give you a flavor of it today. And it’s all good news.

First, we now know for sure that intrathecal administration of this drug - that is, direct injection in the spinal fluid - is well-tolerated in these little children. We didn’t know that before. That’s great news.

Second, the animal models were right. We’ll be able to dose this drug very infrequently, probably every six months, maybe as infrequently as once a year. Obviously that’s very important.

And then truly remarkably, and very surprisingly, we already have evidence, after single doses of significant clinically meaningful improvements in muscle function in a number of these children, it’s dose-dependent, with the high-dose group being quite significant. We’ll be reporting these data at a special presentation at the American Academy of Neurology, so stay tuned. We’re really quite encouraged by what we’re seeing.

That’s led to a Phase II program. We’re basically doing the same thing, but dosing the drug twice. That will be finished later this year, and then that will lead to a Phase III program that will involve both the severe form, [infant] onset, as well as childhood onset. We have great cooperation from the regulatory agencies. We have fast track status, and orphan drug status. And again here, we think we have very attractive economics. And we have a great partner in Biogen Idec.

The final drug that I’ll talk about in this segment is APOC3, and of course we all want to do something for these kids with SMA, and these people with TTR. But from a company perspective, I think APOC3 is by far the most exciting.

APOC3 is a protein that’s made in the liver. It works in blood, and inhibits the enzyme that degrades triglycerides. Triglycerides are degraded in blood, is the way you clear them. So APOC3 is itself a cardiovascular risk factor. Triglycerides are a risk factor, and it’s very obvious that the next key thing in lipids is to fix triglycerides with better drugs.

We think we have it. We’ve already demonstrated that this drug works, in every animal model and in humans. In our first in human trial, we showed dose-dependent reductions of APOC3 and fasting and post-prandial triglycerides in human beings, with essentially no side effects, no [AOT] increases or anything else.

We have two trials that will unblind this year. They’re both tremendously important to us, and I encourage you to watch these carefully. The first is a study in patients who have severely elevated triglycerides.

This is a rare disease-like opportunity. There are about 200,000 patients with severe elevated triglycerides in Europe and the U.S. These people, in addition to their cardiovascular risk, have a much higher incidence of recurrent pancreatitis. That, of course, is a medical and surgical emergency, and it eventually leads to pancreas death and brittle diabetes.

So it’s an opportunity that we think can be very quickly developed. We have a study in 100 patients at three different doses, plus placebo, that will unblind in the middle of this year. What we hope to see is dramatic reductions of APOC3 and triglycerides, improvements in HDL, as well as LDL. So this is a really important study, and sets the stage, then, for our Phase III program.

We’re also looking at this drug in diabetics who have moderately elevated triglycerides. Of course, we expect to see APOC3 and triglycerides reduction, and we hope to see improvements in insulin sensitivity. So those two studies this year, then, allow us to move to Phase III at the end of this year in these patients with this severe hypertriglyceridemia. This is a program that we own entirely ourselves.

I mentioned that we have nine drugs that will encounter critical Phase II/Phase III milestones. The point of showing you this slide is to simply emphasize the breadth and diversity of these opportunities that run from cancer, to cardiovascular, to metabolic, and rare diseases as well. So it’s going to be a very important year for us.

I mentioned that we will advance a number of other drugs into Phase III and II studies. This is a list of drugs that are beginning Phase II or III this year. TTR, ready to begin, SMN has already begun Phase II, and a number of these other drugs. Big year.

And these are the drugs that we want to keep to the end of Phase II, because we think their value will inflect, because the results will be dispositive, particularly APOC3, Factor XI, and CRP, we believe can be licensing opportunities that exceed what we got for Kynamro. EIF4 is another opportunity.

Now, I want to just focus on two new drugs, two additional drugs. The first is Factor XI. Obviously the antithrombotic segment of the market is enormous, and it still represents an unmet need, because even the Factor Xa inhibitors are associated with significantly increased bleeding.

And we think Factor XI is what the Factor Xa inhibitors would like to be. And we think that because it’s a potent antithrombotic that works both arterially and venously, and at no dose, at any level of reduction, do you see an increase in bleeding, major or minor, or even an increase in bruising.

This is a study in one of many animal models. We’re comparing the effects of Warfarin, Factor Xa small molecule, and our Factor XI. And you can see all three in the blue lines are effective antithrombotics. But at about the same dose, you get good antithrombosis, but you get bleeding, except for Factor XI. No bleeding.

And we’ve proven that’s the case in man. This drug is tremendously potent. We were going to do 400 mg. We stopped at 300. At 200 and 300 mg, most of these subjects got below the cutoff for Factor XI. Many of these had undetectable Factor XI. We saw no major bleeding, no minor bleeding, no bruising, nothing. So that is a really exciting drug.

Right now we have a study in total knee replacements, about 400 patients. Basically prophylaxis for total knee replacement. Three different doses, compared to an enoxaparin. We hope to see decreased DVTs and essentially no bleeding. That will unblind by the end of the year. We think that will be an asset of real value.

The next is CRP, which is always fun for me to talk about, because it’s controversial. We know that CRP is elevated in many, many diseases. And we know where it’s elevated, the outcome of the disease is worse.

So the question we’re asking is not whether CRP causes disease, but whether if we lower it, will we make diseases better. We think we will, and we think if we demonstrate that lowering it makes any disease better, it will open up the thinking about the opportunity across the board in all these many diseases.

And we know that we have the only selective CRP inhibitor to ever work in man. We showed a 70% reduction of CRP in normal volunteers. And we have two studies that will unblind this year, both tremendously important to us.

The first is an endotoxin study, where you take normal volunteers, give them endotoxin, which causes a giant increase in CRP. We hope we’ll be the first drug to ever demonstrate blunting of CRP in this severe model. And then of course we’ll be looking at inflammatory mediators, so we’ll have a chance to look at the feed forward loops that CRP may engage in. That study is nearly completed. We’ll be telling you about it before the middle of the year.

The second study is our first therapeutic study in patients with rheumatoid arthritis. Of course they come in with elevated CRP. What we want to see is dose-dependent reductions in CRP, and improvements in joints counts, and we’ll be sharing those data somewhere in the middle of the year. Very important studies.

And we begin, just now, our first cardiovascular indication, in atrial fibrillation. We’re not trying to be antiarrhythmic. We’re lowering CRP, which reduces the inflammatory drive, and we believe that should lower the incidence of recurrent atrial fibrillation, and also make it easier to cardiovert these people.

This is the severe and rare disease program. We’re proud of it, so I show it twice. It also gives me the opportunity to talk about the latest addition, which is our PKK drug. Hereditary angioedema is very rare, but it’s also very serious. It’s associated with episodic capillary leak, and so you end up getting terrible edema such as this woman has here. But what, of course, is the real problem is you get cardiovascular and respiratory collapse, so it can be fatal.

Treatment is terrible, prophylaxis is equally bad. Our drug, we think, works. It reduces prekallikrein, which is clearly on the pathway that leads to capillary leak, and works in all of the animal models. That drug is now in tox, and we’ll get that into man as quickly as we can, and so that will be another exciting rare disease opportunity for us.

I mentioned that we continue to invest in antisense, and the progress in antisense ramifies across the entire portfolio, and it’s important. We introduced, this year, two new mechanisms into the lexicon. The first is our first splicing inhibitor in these children. We already have evidence that this drug may be working.

And secondly, we enabled single strand RNA to be used, stable single strand RNA, as an RNAi. We think that’s the key step in making RNAi a commercial reality, because it means you’ll be able to give these drugs without special formulations, and you can have the potential for activity in organs other than the liver. In fact, we showed very broad activity in animals.

We enabled two new groups of delivery. Intrathecal we now know is safe, both in adult and children, and intradermal we know works. So we now have a platform that can be administered intravenously, intramuscularly, subcutaneously, by aerosol, intrathecally. We even have a drug that’s given as an enema for pouchitis. And, as we’ve shown, we have oral viability with Kynamro.

And finally, we’re seeing better performance out of the drugs that we have, both because of advances in screening and because of advances in basic science. What do I mean by better performance?

What this table does is compare three of the newer second generation drugs. So exactly the same chemistry, exactly the same design, as Kynamro. And it compares them to Kynamro, which in the past was the most potent second generation drug we had. And these are all proteins that are made in the liver and exported in blood, all normal volunteer studies, all four-week studies, and all the same doses.

And what we can see, very consistently, across the board, is about a twofold increase in potency. And that’s good news. That means we have the potential to lower the dose or get a greater effect for the same dose.

In addition, based on the experience that we’ve had with Kynamro and other drugs, we’ve introduced some new screening processes over the last few years that weed out local inflammatory sequences. And as a consequence, we’re seeing much less of the nuisance side effects and injection site reactions and flulike syndromes, which of course means we have more potent drugs, better tolerated drugs, a much bigger commercial opportunity, across the pipeline.

Finally, in this vein, generation 2.5. Generation 2.5 should give us about a tenfold increase in potency. So you can think about a dose of 10-20 mg a week. What that increase in potency is designed to do is to allow us to access the few tissues that are difficult for us to get to, like skeletal muscle and some cancers, B cell lymphomas, for example. And then it will also make commercially reasonable the opportunity for oral administration for some indications.

We’ve had great news, much sooner than we expected. The first drug of our 2.5 chemistry, STAT-3, it’s a cancer drug. As it happened, in the Phase I study, we had two patients come into the study with end-stage diffuse B cell lymphomas. Both of these people were pre-hospice. They both failed 8, 10, 12 different chemotherapy regimens. And remarkably, both had prolonged and substantial partial responses. And that led to, what, five companies wanting to license the drug, and we ultimately decided to license it to Astra Zeneca.

What’s exciting for the technology is that this is a tumor type that there is, at no dose, with the second generation drug, could we have expected to see activity. It’s also exciting as a commercial opportunity, because this is a very early indication for us. A Phase II program has already been initiated to look at a number of patients with the B cell lymphomas, and you should see those data this year as well. If they’re positive, then I think there’s a very rapid route to registration for this drug.

We learned a lot as we did Kynamro, and I don’t think the lessons about the technology have been fully appreciated. First, Kynamro is going to be approved for a severe disease that’s nevertheless a lifelong disease in the metabolic division, in a place where everything gets compared to statins. That’s good news.

Second, we did this remarkable study where we looked at every possible cytokine and chemokine that could be elevated, with careful time courses, and showed no evidence of systemic inflammatory mediator elevations. That’s great news for the technology. It resolves a worry.

I think the injection site reactions and so on of Kynamro have been exaggerated by us and others, but along the way we’ve learned how to deal with them. And we learned, really, just education and pre-filled syringes will take care of most of it, and we just don’t see many dropouts anymore.

And we reported two clean carcinogenicity studies, with absolutely no clinically relevant findings. All of that is great news for the technology, ramifying across the pipeline.

As I say, our strategy is to partner, and our strategy is to partner the high risk, low value Phase II programs and retain those dispositive Phase II programs that we think can generate great value. We’ve been successful at doing that. In cash, in the door, about $2 billion dollars so far at ISIS. And the level of interest in our technology and our pipeline is at an all-time high. So you should assume that you’ll hear a lot more on the partnering front from us in the coming years.

That puts us in a very strong financial position, and with all the licensing opportunities we have, we have a lot of dials to turn, so we can assure that while we’re developing 28 drugs and advancing the technology, we remain financially strong while we wait for Kynamro revenues to make us profitable.

So these are our goals. Get Kynamro commercialized and see it be successful. Advance Focus FH. We want to finish these Phase II/III programs. We intend to report all nine, and we think there’s a high probability that many of them, most of them, will be positive. We want to initiate these additional Phase III trials. We expect to initiate additional Phase II trials. We will create additional licensing opportunities that we think can be Kynamro quality licensing opportunities. And all of that will assure that we end 2013 in a strong position, just as we started.

And with that, I thank you very much.

Question-and-Answer Session

None.

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