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Isis Pharmaceuticals Inc. (NASDAQ:ISIS)

Q2 2009 Earnings Call

August 06, 2009; 8:30 am ET

Executives

Dr. Stan Crooke - Chairman & Chief Executive Officer

Lynne Parshall - Chief Operating Officer & Chief Financial Officer

Beth Hougen - Vice President of Finance

Kristina Lemonidis - Director of Corporate Communications

Analysts

Mark Monane - Needham

Ted Tenthoff - Piper Jaffray

Aaron Reames - Wells Fargo Securities

Salveen Kochnover - Collins Stewart

Shiv Kapoor - Morgan Joseph

Craig Gordon - Cowen

Lucy Lu - Citi

Operator

Welcome to Isis Pharmaceuticals 2009 second quarter financial results conference call. Leading the call today from Isis is Dr. Stan Crooke, Isis Chairman and CEO. Dr. Crooke, please begin.

Dr. Stanley Crooke

Thank you. Good morning and thanks everyone for joining us on today’s conference call to discuss our second quarter financial results. Joining us today on the call are Lynne Parshall, COO and CFO; and Beth Hougen, Vice President of Finance; and Kristina Lemonidis, Director of Corporate Communications.

The purposes of the call today are to report our financial performance for the second quarter of 2009 and to give you a brief update on what’s going on in the business. So Lynne as usual will go with financial results and then I’ll give you an update on the most recent advances, particularly regarding mipomersen; but first Kris, will you read our forward-looking statement.

Kristina Lemonidis

Sure, thanks Stan. Good morning everyone. A reminder to everyone that this webcast includes forward-looking statements regarding Isis’s business, the financial outlook for Isis, as well as Regulus, its majority owned subsidiary, and the therapeutic and commercial potential of Isis’s technology and products and development.

Any statement describing Isis’s goals, expectations, financial or other projections, intentions or beliefs is a forward-looking statement and should be considered an at risk statement. Such statements are subject to certain risks and uncertainties, particularly those inherent in the process of discovering, developing and commercializing drugs that are safe and effective for use of human therapeutics and in the endeavor of building a business around such products.

Isis’ forward-looking statements also involves assumptions that if they never materialize or prove correct, could cause its results to differ materially from those expressed or implied by such forward-looking statements. Although Isis’s forward-looking statements reflect the good faith and judgment of its management, these statements are based only on facts and factors currently known by Isis. As a result, you are cautioned not to rely on these forward-looking statements.

These and other risks concerning Isis’s programs are described in additional detail in Isis’s Annual Report on Form 10-K for the year ended December 31, 2008, which is on file with the SEC. Copies of these and other documents are available from the company.

I would now like to turn the call over to Lynne.

Lynne Parshall

Thanks Kris and good morning everyone and thanks for joining us today. I would like to provide a brief discussion of the financial highlights of this quarter. I’m assuming you’ve all read our release, so I’m not going to go through all of the details and I’ll be happy to take questions at the end of today’s call.

Clearly one of the highlights for our second quarter is that we ended the quarter in a very strong financial position with over $635 million in cash, and we’re on track to meet our guidance, which is to end this year with more than $550 million in cash. Already this year we reported two quarters of pro forma net income and we had $174 million in pro forma net income in the first half of 2009.

We expect to be profitable for the year with pro forma net income of more than $145 million. This will result in the second year in a row of profitability and increases in cash. We also remain on track to meet our year end guidance of the pro forma net operating loss in the low-to-mid $20 million range.

In the second half of 2009, we expect that our operating expenses will increase modestly as we continue to broad base free development of mipomersen, continue to expand our drug discovery activities into new and therapeutic areas, and continue to grow the Regulus business. I think it’s important to remind you that our revenue fluctuates from period-to-period based on the nature and timing of payments from our partners such as license fee and milestone payments.

For example in the second quarter, we earned two milestone payment, sold drug to one of our partners, and entered into a new collaboration with Alnylam. Assuming we have no new transactions our revenue will decrease when the $50 million up front license fee we received from Ortho-McNeil is fully amortized next quarter. Of course the new deal or the achievement of milestones have the potential to change all of that.

Our strong financial performance is the direct result of the success of our technology platform and business strategy. We and our partners are advancing a development pipeline of 19 drugs. Our partners not only move drugs forward towards the market, but they also provide us a significant short and intermediate term financial benefits.

We continue to show that our strategy is working, producing concrete results across the board, and enabling us to continue to advance the technology and fill the pipeline with more exciting new drugs. Just to give you some concrete examples, this year we’ve already moved one new drug into development and three drugs have advanced into Phase I trials. This dynamic maturation of the pipeline will continue throughout the year and beyond. In addition, we and our partners have presented encouraging data on multiple drugs.

We’ve also continued to deliver on our promises. We concluded the first of our Phase III mipomersen trials on time, reporting positive data in patients with homozygous FH and Stan will go over the design of and the data from that trial in a few minutes. We’re continuing this strong momentum.

The drugs in our pipeline are advancing and showing promise and we continue to receive money from our partnerships which should ensure that we have the financial security to take our business to the next level. This has been another successful quarter, and our achievements have provided the drive in financial strength for continued success as we progress through 2009.

So with that, I’ll turn the call back to Stan and he’ll give you a quick update on our development progress.

Dr. Stan Crooke

Thanks Lynne. In today’s call I’m going to focus strictly on the progress that we’re making with Mipomersen. Of course with the pipeline as large as ours, there are lots of other exciting things going on, but I will deal with those items in the Q-and-A.

This quarter, together with our partners at Genzyme, we reported significant progress on mipomersen. This progress is crucial in supporting our efforts to move mipomersen towards the market and making the drug available to patients’ in-need.

First, we reported very positive results with our first Phase III trial, the trial in which we treated patients with homozygous FH. Second, we more precisely defined the regulatory path for mipomersen in both the U.S. and EU, based on informal conversations with regulators. Additionally, we continue to make excellent progress in the other clinical trials planned to be available for the first registration of mipomersen.

So, now let me focus on the results of the Phase III trial. As you know, we completed this trial on schedule and issued a press release. In the press release, we only reported top-line results to preserve the opportunity to present the data at the scientific meeting.

Unfortunately, because of the limited amount of information that we could provide, I think there has been some confusion about the results of the trial. So without providing additional data, I am going to take some time to clarify why we are thrilled with the study results, why Genzyme is thrilled, and why key opinion leaders with whom we have shared the detailed data are thrilled.

We reported that mipomersen produced a highly statistically significant reduction in LDL cholesterol of 25%, and highly significant reductions in all of the secondary endpoints. In fact, since patients entered the trial with LDL levels greater than 400 milligrams per deciliter, mipomersen lowered LDL cholesterol levels on average, more than 100 milligrams per deciliter; that is more than a 2 millimole drop in LDL.

Cardiovascular risk has been shown to be reduced by 25% for every millimole reduction in LDL. This test result is not just statistically significant, but medically very important. Furthermore, we’ve shown in Phase II trials, that mipomersen lowers all atherogenic lipids, and in this trial we had equally positive effects on all of the secondary endpoints that measured other types of lipids.

Homozygous FH patients are the sickest and most drug resistant patients that we will be treating with mipomersen. It is also the patient group with which we had the least experience in Phase II. So for all of these reasons, we considered this trial to be the least predictable of the Phase III trials that we’re conducting. So getting a positive result in this trial is particularly gratifying.

Now, let me put the trial that we just completed in a broader context. This trial was the largest controlled study ever conducted in homozygous FH patients. It was a randomized, double blind, placebo controlled trial, in which patients on maximum tolerated lipid therapy were treated with either placebo or a fixed dose of 200 milligrams of mipomersen for 26 weeks, though changes in the doses of background medications or mipomersen were allowed. There were 34-patients randomized to receive mipomersen, and 17 randomized to receive placebo.

As you know, this study is part of a broad Phase III program designed to study mipomersen and support approval of mipomersen in several types of patients. Thus for the entire Phase III program, we chose a dose of 200 milligrams per week. Remember, that 200 milligrams per week is half of the highest dose of 400 milligrams that we evaluated in Phase II trials.

Also remember, that we’ve shown that mipomersen has a linear dose response curve. In fact, at 400 milligrams a week, in just 10 weeks in our Phase II trials, we were able to reduce apoB undetectable level in a number of patients. So, if we want more lipid lowering in the patient, we can simply raise the dose.

In fact in time, we imagine that most of these homozygous FH patients, who are managed by very specialized physicians and very specialized clinics, will be treated by titrating the dose of mipomersen they need individually up or down, but if that happens it will be in the future, after we gain approval for this very conservative dose and learn a lot more about the drug.

We performed and reported in the press release, the most stringent analysis of the data possible. The data we reported represented a conservative intent to treat analysis at the primary end point of 28 weeks. Everyone who got a dose of mipomersen was included in the analysis. The mean that we reported obviously represents the results of all the patients at a moment in time, 28 weeks after the first dose.

Homozygous FH patients have inherited defective genes for LDL receptors from both parents. Thus they’re very rare patients and it’s likely that they have other mutations in metabolic genes that affect their response to drugs, including drugs like mipomersen. Given that, it would not be surprising to see greater variability in this patient population, than any other population we’ve studied in Phase II, perhaps even some non-responders.

Moreover, because of the defective LDL receptors that these patients have, they clear LDL more slowly than other patients. So you might expect that peak effects of mipomersen may not even be achieved by the 28 week primary end point.

Of course, in an intent to treat analysis any drop-outs would have an effect on the mean LDL-C reduction we reported. In this study, we had six dropouts in the mipomersen arm, which is consistent with expectations for this type of trial. Because we wanted to preserve the data for presentation, I can’t go through the dropouts in detail with you, but I do want to give you a context under which to consider them.

This was a very intrusive, very demanding protocol. Patients had to come to the clinic weekly for injections and for blood to be drawn. Many of these patients had to travel substantial distances to get to the specialized clinics that take care of them. We had one and only one patient, who reached extremely conservative liver enzyme stopping rules. We had no patient reach eight to 10 times upper limited normal in their ALT levels, there were no incidents of highs of all cases, and no other signs of liver toxicity; that is great news.

The other dropouts were consistent with the challenges of participation in this type of intrusive study, and getting a subcutaneous injection weekly. Of course we’re working to assure that when the drug is commercialized, the injections will be associated with even less concern, and in fact, we are seeing better compliance in the other trials that are moving along very well.

My main point is that one can pars the data from this trial in quite a number of ways, that’s looking at responders only or completers only, or looking at results beyond 28 weeks, and of course we’re doing all of those analyses and a lot more, but even with the most conservative analysis, the intent to treat analysis that we reported, this study is extraordinarily positive. It is the greatest reduction in LDL reported in a randomized trial in patients with homozygous FH.

Now let me deal with safety. Again, here we have very encouraging news. In our Phase II studies of mipomersen, the longest dosing in a controlled study was 13 weeks. One of the concerns that you do have when you double the time and number of injections in a controlled trial, and expand significantly the number of patients that you’re treating of a particular type, is that you may encounter new side effects or side effects will worsen with more prolonged dosing.

I’m pleased to tell you that we encountered no new side effects and certainly the side effect profile wasn’t worse in this trial. Also, since a large fraction of patients from this and the other trials are rolling over into open label extended dosing studies, our experience with long term dosing is growing and again we are extremely encouraged by what we’re seeing.

So bottom line, the results from the first Phase III trial are extraordinarily positive. Perhaps equally importantly, they give us added confidence that the remaining studies and progress will be positive too. Remember, each of these trials is identical. The dose, the schedules are all the same. The only difference is that we’re testing the drug in less sick, easier to treat patients, in whom we have much more Phase II experience than the homozygous FH patients that we treated in our first Phase III trial.

The second area I want to highlight is the progress that we and Genzyme have made in clarifying the regulatory paths in the U.S. and Europe for mipomersen. Genzyme reported on this progress at the Analyst Day, but to some extent I think the importance of the progress here hasn’t been fully appreciated. So, what I’m going to do is just reiterate what Genzyme said.

First, we’re now more confident that our first filing in the U.S. will be for an indication in patients with severe high cholesterol and high cardiovascular risk. This indication of course includes homozygous FH, but may not be limited to homozygous FH.

Second, we’re now much more confident that we will make a contemporaneous filing for a similar indication in Europe. Genzyme projects filing in the United States in the second half of 2010, and a contemporaneous filing in Europe. Genzyme has estimated that their 25,000 to 30,000 patients in the U.S. and Europe would be candidates for the use of mipomersen with this indication.

Additionally Genzyme indicated that in 2012, we plan to file in Europe for an indication in heterozygous FH. In Europe, Genzyme estimates that there will be 20,000 to 25,000 new patients who will be candidates to take the drug when we have this additional indication. I actually think this number is very conservative, but the important point is that we’re now confident we will meet the EU requirements for that second filing.

Finally, in the U.S. and Europe we plan to file to treat the broader polygenic population after completion of the plan to outcome study, as Genzyme indicated in their analyst day. We’re making steady progress on designing the outcome study, but we are taking our time. We’re taking our time so that we can take advantage of all that we learned from the ongoing trial and be sure that we get the outcome study right. What’s important is to get it right and to get it done in a reasonable timeframe, but first and foremost, to get this trial signed so it gives us a true answer.

So we believe that the progress on mipomersen is very gratifying. In the years since we’ve completed our deal with Genzyme, we’ve initiated all of the trials we planned, we just reported that mipomersen lowered the LDL levels by more than 100 milligrams per deciliter in homozygous FH patients, the toughest patients in our riskiest Phase III trial.

Further, other trials important for our first two registrations are going really well. In fact, we have completed enrollment of our heterozygous FH trial and again, we’re very encouraged by the behavior in that trial, of course obviously the trial is still blinded. Once more, we and Genzyme have made progress and substantially clarified the regulatory paths in the major commercial opportunities in the U.S. and Europe.

Of course, we focus a lot on the U.S. and Europe, but we shouldn’t forget that there is a great potential commercial opportunity for the drug in places like South America and Asia and the Middle East, particularly India. So as you think about the overall commercial opportunity of mipomersen, while we talk about the U.S. and Europe, we and Genzyme are certainly thinking about markets that would expand the commercial opportunity outside those two geographic areas.

So in short, there’s a lot to be excited about with mipomersen and in the next year, we’ll make great progress towards registration and enhancing mipomersen’s commercial potential. We’re at another great year at Isis and we expect to continue to be successful with mipomersen leading the way.

With that, I’ll open up the call for questions. Tom, if you can set us up for questions, I’d appreciate it.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Mark Monane with Needham; please proceed.

Mark Monane - Needham

Good morning everybody and thanks for reviewing your progress with us. A couple of questions here; you presented some nice data on the efficacy of mipomersen, can you please update us on the safety profile in animals? I know you’re doing the mouse and the rat studies. What’s the status of those projects?

Dr. Stan Crooke

You are referring to the carcinogenicity studies, Mark?

Mark Monane - Needham

Yes, please.

Dr. Stan Crooke

Yes, well you know, we finished the entire toxicology package, except for the carcinogenicity studies and we are confident that the preclinical data support the registration. The news from the CARC studies is equally great news. We have completed the mouse CARC study, and I’m pleased to tell you that the drug performed great and there are no significant findings. So that’s great news.

The rat study, the dosing continues and again, it’s going to be a satisfactory study that is, that animals are surviving adequately. So the drug looks great past that mouse, and we believe the rat looks every bit as good.

Mark Monane - Needham

That was helpful, and then going back to people, can you describe for us, in 2010 what data will be available for that package that you brought up earlier, in which the population will be 25,000 to 35,000? Can you review that for us?

Dr. Stan Crooke

Yes, we will have the homozygous FH trial, which is about 120 plus patients. As I say, the enrollment is complete and that study is progressing nicely. We will have the severe hypercholesterolemia patient study, people who look a lot like homozygous FH patients but aren’t genetically diagnosed, homozygous FH patients. That will be in the range of probably somewhere around 50 patients.

We’ll have the high cholesterol, high cardiovascular risk study, that will be in about 180 patients and then we’ll have the statin-intolerant study, which is about 30 patients. In addition, we will have significant information from some larger safety studies that we’re doing, and finally, we will have quite a significant number of patients who will have been followed for a year and two years in the open label rollover studies, to which all of these patients and all of these trials are being admitted for long term follow up.

So for this indication, I think somewhere between 700 or so total patients exposed and we’ll have a significant fraction of patients who will have been treated longer than a year, and some out two plus years.

Mark Monane - Needham

You said that there will be heterozygous patients in this core too, but the label for heterozygous is something in Europe for 2012, is that correct?

Dr. Stan Crooke

We want to get there first. There will be heterozygous and there will be routine high cholesterol, we’ll have all of these data available.

So I don’t think there is any question about efficacy. I think the reason that we’re accumulating all of these patients is safety and so what we want to do is to bring the drug to the market for the most severely needy patients, gain experience there and add to the safety database before we expand to the heterozygous FH patients as a specific indication, and then likewise, gain experience there before we expand to the routine high cholesterol, high risk patients.

So this has been the development path that we have been describing since we began mipomersen. I think it’s a prudent, cautious way to develop the drug that gives us a great deal of safety information as we progress down that pyramid from highest unmet medical need to somewhat less needy people.

Mark Monane - Needham

Very good, and one pipeline question; Inflammation still continues to be in the forefront of people thoughts concerning cardiovascular disease, so maybe you can update us on the CRP 353512 project.

Dr. Stan Crooke

It’s in the medical dose part of the Phase I trial and progressing well. We expect to finish the Phase I trial later this year and we hope to be able to begin Phase II trials after that.

Mark Monane - Needham

Thanks very much for the added information and congrats on your progress.

Dr. Stan Crooke

Thanks very much.

Operator

Your next question comes from the line of Ted Tenthoff of Piper Jaffray. Please proceed.

Ted Tenthoff – Piper Jaffray

Great, thank you very much. Thanks for the update. One quick question just sort of following up on Mark, when it comes to pricing thought in that initial target population, clearly we’re still below orphan numbers. Do you think this would be considered orphan drug pricing? Do you intend to go after that for these ultra high cholesterol indications?

Dr. Stan Crooke

Well, pricing is Genzyme’s province, and no pricing decisions have been made yet, and they shouldn’t be until we get closer into the market. What I can say to you is that a two millimole drop in LDL at the very worst, and in a profile that is in my view perfect for a drug that lowers LDL, every attribute that you would want in a drug that lowers LDL, if you were a cardiologist or a patient in need, I think this drug is going to give you.

So we bring incredible benefit, two millimoles of reduction with LDL and we will do better than that, means of course a dramatic reduction in risk of heart attack, stroke, other events. So if you think through the kind of value this drug is bringing to these patients who are in desperate need, I think we’re very confident that it will support pharmaco economically, a very high value pricing proposition. That’s about as much detail as I feel confident to provide Ted.

Ted Tenthoff - Piper Jaffray

That’s helpful. I appreciate it. I guess switching gearing a little bit to 715 diabetes drug, we’re still on track to receive that data this quarter, is that correct?

Dr. Stan Crooke

Yes. The study is finished, patients who are in follow up we’re collecting the data. There is an awful lot of data, all kinds of measurements and these patients were dosed in mostly Eastern Europe. So it’s taking a little while to gather all the data, but it’s on track to be analyzed in just a little bit.

Ted Tenthoff - Piper Jaffray

Okay, and can you put in perspective what you think we should be looking from that study? I know it’s a three month end point. How comfortable are you with the centers that are included in the study?

Dr. Stan Crooke

How comfortable I am in what?

Ted Tenthoff - Piper Jaffray

I’m sorry?

Dr. Stan Crooke

I didn’t hear the last part Ted.

Ted Tenthoff - Piper Jaffray

How comfortable are you with the centers being over in Eastern Europe?

Dr. Stan Crooke

To answer that part of the question; first, I think we’re very comfortable. Most of the centers that we’re using, worked in the initial Phase II experience with mipomer with 715 and we’ve seen pretty good performance in the trials. The central problem that we worry about in these trials is just the tender loving care placebo effects. These people come in and get real diet control and real good care for their diabetes and so we continue to expect a significant placebo response from all that.

So the thing that we are looking for, what we have to do is to decide whether this drug or this target merits additional investment and what we want to see is a profile. We want to be confident that it lowers glucose in a meaningful way. We want to reproduce that it lowers LDL; that’s a crucial element of the profile of this drug. That would be just a tremendous benefit if it is an insulin sensitizer that actually reduces LDL instead of as some do, increase it.

We want to be sure that it’s weight neutral and continues to show the potential to be a weight loss drug. If we get that profile; good reductions in glucose, good reductions in LDL and weight neutrality, suggestive of the ability of the drug to reduce weight, I think we’ll be very happy proceeding forward. So that’s what we’re looking for. Remember, it’s only 13 weeks and so measuring the difference in the hemoglobin A1c is not our most important concern. Our most important concern is the profile.

Ted Tenthoff - Piper Jaffray

Great, thank you very much.

Dr. Stan Crooke

Okay.

Operator

Your next question comes from the line of Aaron Reames with Wells Fargo Securities; please proceed.

Aaron Reames - Wells Fargo Securities

Thanks for taking my question and thanks for the update as well. I was wondering, if there’s any conclusions or comfort that can be made from the recent approval of Pitavastatin.

I know that the drug was originally developed by Novartis. It was dropped due to an association with elevated liver enzymes. So I didn’t know if you had any background information on the profile of that agent and/or the clinical program that supported its professional that could provide us with maybe the way the agency is thinking currently.

Dr. Stan Crooke

I don’t know enough about the summary basis of approval and all of that to comment specifically about that drug. I’m just getting the information to look at now, Aaron. Here’s the message that’s we have gotten and I think it’s been very consistent.

That is, as Doctor Maddrey says, the price of admission for changing lipids is ALT elevations. So it is just simply fact that statins of all sorts cause significant increases in ALTs, and that increase in ALT is absolutely dose dependent. So I think the FDA is well aware of that and it’s approved all of these drugs.

What has been made absolutely clear to us is that the FDA is principally concerned, as is the European Regulatory Agency, with the potential for the drug to produce severe liver toxicity, and the consensus of the scientific community is that the best measures of the potential to do that are whether the drug produces any patients with Hy’s Law, that is a concomitant increase in ALT and bilirubin.

Whether the drug produces any suggestions of liver toxicity, real liver toxicity, such as reductions in albumin or a change in clotting factors or an increase in bilirubin, and whether the drug results in any ALT elevations that are in the 10x or thereabouts range, that has been the consistent position of the FDA in a very dynamically changing world, since we’ve been developing this drug, and we have seen in all of the subjects treated with mipomersen, not a single incidence of Hy’s Law, we’ve seen not a single incidence of evidence of liver toxicity.

We have never gotten to 10x upper limit of normal at any dose with this drug, in patient that has been treated, including these patients who are very, very sick and on having on-drugs that produce increases in ALTs. An 80 milligram dose of tolerated statin will give you a significant increase in ALT’s in a significant fraction of patients. So I take the fact that they approved this drug, as simply being consistent with their stated positions, and their positions in the given guidelines.

Aaron Reames - Wells Fargo Securities

Okay, thank you. Then you’ve got a number of agents in the pipeline, and from an investors standpoint, can you point us to the one or two agents that may represent either the greatest advancement either in antisense technology itself, where positive results emerge or the greatest advancement, potential disease management as we start to evaluate the prospects of some of the other assets during development?

Dr. Stan Crooke

Let me answer the question in two parts. What are the compounds that are closest to commercial opportunities that look the most interesting to me today? OGX-011, obviously it’s a Phase II result in cancer, but I think the Phase II results are quite encouraging. I think it merits Phase III work and we’re looking forward to OGX-11 getting a partner and really beginning robust Phase III studies.

We also, in the cancer space are encouraged by surviving and we’re hoping that really moves that drug along at a brisker pace. The VLA-4 data, set that drug up for longer term evaluation and those data were certainly as positive as anything that Tysabri showed in the early studies with Tysabri. So, those are three important drugs.

715, even when we finish this study, we’ll probably not be ready for Phase III. We’ve got other work we need to do before we decide on the right Phase III program. Six month studies in metformin and Sulfonylurea patients for example, but 715 continues to be very encouraging to us.

In terms of advancing the technology, there I look at new roots as quite important, and so the performance of our IL-4 receptor alpha drug in the hands of Altair, one of our satellite companies in Phase I was very encouraging and they’re progressing along in Phase II. So, assuming that continues to be as positive as we’ve seen, that will expand the use of the drug into aerosol and then opens up a whole new root of delivery for antisense.

In SGLT2, because this is the first drug that we are developing in man, with the target that’s in the kidney and really only the kidney, so that will help us understand how working in that organ in human beings is going to be. Those are sort of at the top of my mind today.

Aaron Reames - Wells Fargo Securities

Okay great. Thanks for that update and for taking the questions.

Dr. Stan Crooke

You bet.

Operator

Your next question comes from the line of Salveen Kochnover with Collins Stewart; please proceed.

Salveen Kochnover - Collins Stewart

Thanks for taking my questions. Just Stan, given your recent discussions with the FDA, can you maybe comment on how they are defining severe high cholesterol?

Dr. Stan Crooke

I can’t really amplify it or clarify it anymore than to say that they are the standard definitions of high risk, which boils down to a point system, depending on whether you’ve had previous cardiovascular venture cholesterol levels, and then other risk factors. Their definition is straight from as far as I know, from the definitions that the cardiovascular community has made.

Salveen Kochnover - Collins Stewart

Are there any plans to start new mipomersen trials prior to filing in the second half 2010?

Dr. Stan Crooke

Yes. We will continue to have a very active program, and don’t forget that the long term safety and short term safety studies will be progressing, and we will begin to get, at some point, we don’t have the date yet, the outcome study under way.

Over the next year, all of the data from the existing trials will be emerging. So it’s a little difficult to know exactly which one will come. Well, I mean heterozygous will be first, but it’s a little difficult to know how the others will finish and exactly how we’ll present the data, because we will be trying to get them into scientific meeting.

But all the studies that I described, including the added safety information is all planned to be available for that first filing in the second half of 2010, so all of that information will roll out over the next year.

Salveen Kochnover - Collins Stewart

Are we still on track to see the full data from the Phase III homozygous study at the end of this year or by the end of this year?

Dr. Stan Crooke

Yes. We hope sooner than that. We’re just submitting it to meetings, and trying to get into the best meeting that we can, but one way or another you’re going to see all of the data and hopefully you will be as excited as we are.

Salveen Kochnover - Collins Stewart

Great and then just one last question, in terms of the Ibis acquisition by Abbot, can you maybe comment on how that partnership I guess is progressing?

Dr. Stan Crooke

Yes, I think it’s going remarkably well. I think bottom-line, it was exactly the right thing to do, at exactly the right moment. It’s very obvious; it’s more obvious now than it was when it was ours, that we would not have had the muscle to do the marketing around the world for the Ibis technology that Abbott is.

So my sense of it is, first, that sales of the Ibis Instrument and the platform are going nicely, that the T-6000, which is the new instrument is progressing toward commercialization and again, I’m giving you this at very distant levels, but my sense is its going very well and there are significant orders for the system.

An important thing to me is that of course I still see the Ibis people a lot, and I think they all seem very happy with their move, and Abbott is building to house the Ibis people just down the street from us, and I drive by that building every morning and it looks like they’re making progress there. So all-in-all, I think it’s going well and we think that 5% earn outs would be a lot of money for our shareholders over the years.

Salveen Kochnover - Collins Stewart

Great, thank you.

Operator

Your next question comes from Shiv Kapoor with Morgan Joseph; please proceed.

Shiv Kapoor - Morgan Joseph

Thanks for taking my questions. I’ve got a couple; I’ll start with the easier one. Beyond Michael Merson, what do you consider to be your two or three next key drivers, as far as the next key products are concerned?

Dr. Stan Crooke

Well, I could just reiterate the answer I gave earlier. I look at OGX-011 surviving DLA for 715, as sort of immediate and then behind them CRP, IL-4 and SGLT2 and glucagon. Glucocorticoid is not yet in the clinic, so I can’t comment on that. So the reason for OGX-011 and VLA-4 and survivin being on the list at the top, we think each of those is either ready or getting ready to be in Phase III.

I haven’t mentioned the work going on with wound healing by one of our partner companies Excaliard, which is another interesting addition to antisense, because that will be the first time that we use an antisense drug topically. It’s a drug designed to enhance healing and reduce scarring. So again, I think we’ll be learning about how antisense drugs behave as topical administered drugs for that kind of indication as well this year.

Shiv Kapoor - Morgan Joseph

Thanks. A couple of questions on your clinical and regulatory strategy on mipomersen; based on the ongoing data that you have from the ongoing trials and the homozygous Phase III trial, what kind of refinements or changes have you made to your clinical and regulatory strategy over the past three to six months?

Dr. Stan Crooke

The drug is performing as we hoped and the conversations with the agencies have clarified the path and I went through those on the call. So I think the most important thing that’s happened is that working with Genzyme, I think we’ve gotten a lot greater clarity about the regulatory paths.

We’re now confident that we will meet the safety requirements, and that we’ll have a contemporaneous filing in the EU for that first indication. We’re now confident that we can file for heterozygous FH, given the safety package we have in the EU in 2012 and we are planning our outcome study, inline with everything that we’re learning.

So I think the regulatory situation has clarified dramatically. That’s great progress, particularly when you consider the kind of issues that we were grappling with just a year ago with the FX at the FDA about all drugs in the cardiovascular space, and trying to figure out what they really wanted. So I think that the most important thing is we now are very clear that we have clear paths to significant commercial opportunities in both the U.S. and Europe.

On the clinical trial side, we’re just gaining a lot more experience. The more experience we gain, the more comfort we have that the drug is well tolerated and we’re building longer term experience into our database. I don’t think there’s ever really been much of a question about whether mipomersen works. It’s only a question of how it was going to behave with longer term treatment and so far, so good.

I guess the final thing that I mentioned in an answer to a question that Mark asked, is that one other element of risk is gone, and that is, we finished the mouse CARC study, and those results look great. So, I look at it and what I say is the risk of not having a successful homozygous FH trial has gone; it’s positive and it sets us up with great confidence that the other trials are going to be good.

The regulatory risk has declined dramatically. We now know what we need to do and we have a clear path and the animal toxicology risk is obviously to a large extent behind us as well.

Shiv Kapoor - Morgan Joseph

Thanks. Well, one last tactical question on regulatory tactics; when discussions are being held with the FDA or data is sent to them or data is received from the FDA, is that interaction happening just with Genzyme or are some people from Isis also involved in that in that action?

Dr. Stan Crooke

Genzyme’s in the lead, we are in all the meetings or most of the meetings. The meetings that are relevant.

Shiv Kapoor - Morgan Joseph

Okay, thanks a lot.

Dr. Stan Crooke

The other thing to remember is that the CMC manufacturing, all that stuff is solid. The building has been remodeled, it’s making drugs, so all of the backroom stuff that you have to get done with the drug is in hand. This drug is ready to be commercialized and so far, cooperating with us in a very nice way.

Shiv Kapoor - Morgan Joseph

Great. Thanks a lot.

Operator

Your next question comes from the line of Craig Gordon with Cowen.

Craig Gordon - Cowen

A couple of questions; the remaining trials for Heterozygous Familial Hypercholesterolemia patients that are slated to finish enrollment, when do you think those will complete enrollment?

Dr. Stan Crooke

The Heterozygous trial has finished enrollment.

Craig Gordon - Cowen

Well, the two remaining Phase III trials that are ongoing in high risk population. I’m sorry.

Dr. Stan Crooke

Well, I can’t predict exactly when they will complete enrollment. What I have said and I can just reiterate it, is all of these trials that are in progress will be done in time for our filing next year.

Craig Gordon - Cowen

Great, and in terms of the outcomes, I know that no start date has been said. Do you still anticipate that could be mid year 2010 event?

Dr. Stan Crooke

It could be. I think what we have to do is to be sure that we know enough to do a good study. We are anxious to get that study underway, but we’re more anxious to learn what we need to learn from the trials that are ongoing. How to be sure that we minimize dropouts, for example; how do you do an outcome study with a subcu drug, never been done before.

These are all things that we are learning a lot about and dealing with a lot of consultants, and then eventually, we have to sit down with the design and go over that with the FDA. We want this study to be right.

As long as the study is well designed, I’m confident we will get a good outcome. Remember that in animals, we are able to basically wipe out atherosclerosis, and so there is no reason that we should get anything, but a positive outcome, unless we design a bad study.

Craig Gordon - Cowen

That sounds great, and one last question; as manufacturing has become a bigger issue, recently for several companies, have you guys made any manufacturing changes to the production of the drug, between Phase II and Phase III or as the Phase III’s have been ongoing?

Dr. Stan Crooke

No. The troubles that people are having are in fermentation and purification and management of natural products. These are chemically synthesized drugs. This is a process that we’ve developed over 20 years. The processes are well understood. The chemistry is clear-cut. The purity and CNC and all of that has been worked out extremely well.

This is not the kind of manufacturing issues that companies are dealing with as they try to make monoclonal antibodies or proteins and try to purify them and deal with all of the problems that are associated with that. This is straight-forward.

Craig Gordon - Cowen

Okay, great. Thank you very much and congratulations.

Dr. Stan Crooke

You bet, thanks. I’m going to take one more question because it is almost an hour.

Operator

Your next question comes from the line of Lucy Lu with Citi. Please proceed.

Lucy Lu - Citi

Great, thank you Stan. Can you just give us an update on the CRP program, the antisense drug, just the Phase I by our estimation, it should be almost done. Just wanting to see what you observed. Do you have the ideal peaked profile that you were hoping for and also when you would start Phase II, I’m what are the indications? Thank you.

Dr. Stan Crooke

The study is taking a little longer, because we have been trying to recruit patients with high CRP. I think that’s been a real problem for us. We thought that there would be people with high CRP that we would be able to get in pretty easily, hasn’t proven to be the case and so we’re finishing the multiple dose arm of the study today and we expect Phase II trials to begin this year and we’ve been planting our Phase II.

I think I mentioned in one other call that our Phase II program will be broad and we will focus on indications other than cardiovascular initially, because we think there are indications that are going to be easier to get than acute coronary syndrome, and we want additional safety. So the places that we are thinking of in Phase II range from myeloma, where CRP elevations are clearly associated with a very poor outcome, to Crohn’s, to rheumatoid arthritis, and Kikexia.

So the way you should think about this is the Phase II program will be more of a scan, to help us identify indications where we believe it will be relatively straight-forward to get an indication for CRP lowering in patients, and then overtime we’ll work our way into the acute coronary syndrome patients, but we want a lot of experience with the drug before we go to that patient group.

Lucy Lu - Citi

Then, why is it difficult to recruit high CRP level patients? Is it because you want healthy volunteers?

Dr. Stan Crooke

Yes, they’re normal volunteers and there was a lot of information that suggested that a lot of healthy volunteers walk around with CRP levels that are in the three to five and higher range. In the centers that we’re working with, that hasn’t turned out to be the case and I can’t explain why. It just hasn’t turned out to be the case.

Lucy Lu - Citi

Thank you.

Dr. Stan Crooke

I think that’s going to be the last question for the day. I do want to just quickly summarize the key takeaways that I think are important.

First, we’re in great financial shape. We didn’t spend any time in the formal remarks talking about the pipeline, but I think the Q-and-A allowed me to show you that the pipeline is rich, advancing and going very well.

The Phase III trial for mipomersen in homozygous FH was extraordinarily successful, and the profile of the drug that we’re seeing is everything that you could hope for. We have an absolutely clear path, both in the US and Europe to commercial opportunities.

We think that commercial opportunity is significantly larger than just U.S. and Europe. We think that the rest of the world, that Genzyme is beginning to plan toward and we think there are great opportunities there as well. So stay tuned, we’ve had a great half a year and I think we are going to continue to do that. Thank you very much.

Operator

Thank you for your participation on today’s conference. This concludes the presentation. You may now disconnect. Have a great day.

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Source: Isis Pharmaceuticals Inc. Q2 2009 Earnings Call Transcript
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