ISIS Pharmaceuticals's CEO Discusses New Strategic Collaboration with Biogen Idec (Transcript)

Sep. 9.13 | About: Ionis Pharmaceuticals, (IONS)

ISIS Pharmaceuticals, Inc. (ISIS) Special Call September 9, 2013 11:30 AM ET


Stan Crooke - President and CEO

Wade Walke - VP, IR

Lynne Parshall - COO

Al Sandrock - Biogen Idec SVP, Neurology Research and Development

Frank Bennett - SVP, Research


Navdeep Singh - Goldman Sachs

Andrew Goldsmith – Canaccord Genuity

Chad Messer - Needham & Company

Rachel McMinn – Bank of America Merrill Lynch

Joseph Schwartz - Leerink Swann

Steven Wiley - Stifel


Welcome to the Isis Pharmaceuticals’ Conference Call to discuss its new strategic collaboration with Biogen Idec. Please note this event is being recorded. Leading the call today from Isis is Dr. Stan Crooke, Isis Chairman and CEO. Dr. Crooke, please begin.

Stan Crooke

Good morning and thanks for joining us. We are pleased to announce today that we have chosen Biogen Idec as our long term strategic partner to bring new antisense drug to the market to treat patients with neurological disorders.

Most of you know that since the beginning of last year, Biogen Idec and Isis have completed four transactions focused on creating new medicines based on the antisense technology that we have developed to treat patients with neurological diseases. In the aggregate then they represent a broad strategic committed shared by the two companies. We believe that together we can enhance our understanding in neurological diseases, make important advances in the treatment of these diseases and create value for both Biogen Idec and Isis shareholders.

It is an invaluable opportunity for us at Isis to be able to create a neurological disease franchise in close collaboration with the leader in the field. Coupling antisense technology with Biogen Idec internal and external network of disease knowledge from basic science through complex cutting edge clinical development holds great promise for both companies and for our shareholders and of course for our patients.

So the purpose of the call is to describe the newest transaction. We call it Biogen 4, and Biogen calls it Isis 4 and we want to describe that in some detail because it is large and it is complex and then we will try to help you understand how all four Biogen Idec deals fit together to meet the strategic needs of both companies and create value for patients and for shareholders. And then very briefly at the end we will discuss how the Biogen relationship, these four transactions fit in our overall strategy at Isis.

Joining me on the call today are Lynne Parshall, Chief Operating Officer; Frank Bennett, Senior Vice President of Research; Wade Walke Vice President of the Corporate Communications and Investor Relations and our special guest is Al Sandrock, Biogen Idec Senior Vice President of Neurology Research and Development.

Lynne will begin by summarizing the four transactions with Biogen Idec and describe how they fit together to create what we think is a very important strategic relationship for both companies. Then, she will get into more detail about the newest collaboration Biogen 4. She will finish by showing how this series of relationships between Isis and Biogen has potential to create something neither company could create alone, which is a world-class neurological disease franchise based on antisense technology. I will then conclude with broader prospective on how the Biogen Idec relationship fits into our strategy.

The decision to expand our relationship with Biogen Idec is about much more than just money and a commercial partner. So I want to describe our reasons for selecting Biogen Idec as a strategic partner and our hopes for the collaboration. Al Sandrock who has been a critical player and positive force in the relationship with Isis and Biogen Idec since it began, who heads up the neurology R&D at Biogen, will be available to answer the questions that you have for our friends at Biogen and of course we will look forward to having those questions and hearing what Al has to say.

So with that, Wade can you lead our forward looking language statement please?

Wade Walke

Yes, thanks, Stan. A reminder to everyone that this webcast includes forward-looking statements regarding Isis’ business, including Isis’ strategic alliances with Biogen Idec, Isis’ research and development opportunities in neurological diseases and that Biogen Idec brings to the discovery and development of new drugs for a potential for Isis to receive milestones, license fees and royalties from Biogen Idec and potential development and commercialization of SMNRx and Isis DPMKRx and the potential for additional commercial drugs to arise from Isis’ collaboration with Biogen Idec.

Any statement describing Isis' 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 as human therapeutics, and in the endeavor of building a business around such drugs.

Isis' forward-looking statements also involve 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' forward-looking statements reflect a good faith 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' programs are described in additional detail in Isis' Annual Report on Form 10-K for the year ended December 31, 2012, and its most recent quarterly report on Form 10-Q, which are on file with the SEC. Copies of these and other documents are available from the Company.

Now, I will turn the call back over the Lynne.

Lynne Parshall

Thank you, Wade. I am happy to be able to talk you today about our newest collaboration with Biogen Idec. With Biogen 4, we have created a long term strategic relationship that's intended to bring novel treatments for neurological disorders to the market and to patients who desperately need them. Over the next six years our teams at Biogen Idec and Isis who worked closely together helped build a world class neurological disease franchise for Isis that we hope will produce many novel medicines to populate the Biogen Idec and Isis pipelines.

As many of you may recall, our relationship with Biogen Idec started a little more than two years ago, as we were considering a partnership for our spinal muscular atrophy program. This is the program in which numerous major pharmaceutical companies were interested and we were looking for a partner with some various specific attributes. Because no medicine have been approved to treat this devastating disease and the clinical path was uncharted, we were looking for partner with very strong expertise in developing drugs to treat to neurological disorders. We were looking for a partner who was innovative, creative and firmly committed to scientific excellence and who would match the intensity with which the Isis teams approach moving drugs towards the market. We chose Biogen Idec as our partner for our SMA program because we felt that they met all of these criteria. And over the last year and half we’ve been proven right in that choice time and time again.

Following our spinal muscular atrophy collaboration, it was easy for the teams to decide to pursue another novel antisense target, our DMPK program to treat patients with myotonic dystrophy. This collaboration recently had a significant success. We’re pleased to announce that in only a year we’ve identified the drug ISIS-DMPKRx, which we plan to advance into human clinical trials. And we start IND-supporting toxicology program a little later this fall, we will earn $10 million milestone payment.

This program exemplifies the synergy between the two teams and the speed with which we can create new drugs. While we’re employing our expertise to discover and develop our promising antisense drug towards the clinic, we were also working closely with the Biogen Idec teams on designing the clinical program and on selecting and optimizing biomarkers to provide us with robust measured activity when we start the clinical trials.

In partnership with the Myotonic Dystrophy Foundation, the Marigold Foundation, the Muscular Dystrophy Association, and the NIH, Biogen Idec is conducting a natural history study led by Dr. Charles Fortin and Richard Mosely at the University of Washington in mytonic dystrophy patients to validate biomarkers and clinical outcomes to support clinical trials.

Results from this joint effort will aid in design of our clinical program and enhance the probability that it would be successful. So as you can see, the first two programs are progressing well. For the Isis SMNRx program, we plan to initiate two registration directed trials early next year and Isis DMPKRx should begin clinical trials next year as well.

The progress we’re making in these two programs is very evident but what isn't as obvious is the close collaborative working relationship and mutual respect the two scientific teams have developed. When our scientific teams get together they always discuss what’s next and what more could we do to combine the powers of our two companies?

That was the impetus for our Biogen 3 collaboration, which we initiated at the end of last year. In this collaboration we’re looking at three neurological disease targets that the Biogen Idec team is extremely interested in but for which the choice of the therapeutic modality was elusive. Antisense of course provides a solution to that problem. Our teams are now working closely together to create antisense drugs for these three targets with the goal of having the first development candidate out of this collaboration in the first half of next year.

This most recent collaboration with Biogen Idec, Biogen Four, reflects the strong relationship our teams have created over the last two years as our teams have been working closely together. This collaboration represents a win-win situation: first, through this collaboration we fully exploit the potential of antisense for neurological disorders. An effort this extensive would be impossible without the funding and resources Biogen is providing.

Second, the scientific quality of the effort is significantly enhanced by allowing us to access the breadth and depth of neurology expertise and experience that Biogen Idec possesses as well as the extensive scientific network they have created in the neurology community. We think that with Biogen Idec we found a truly complementary partner. This provides benefits across the board, many of which are immediately tangible.

In Biogen Four, Biogen will be providing important genetic and epigenetic information tools, which the teams will use to identify novel targets to treat neurological disorders. They bring to the table significant in-vitro and in-vivo that they’ve developed both in-house and through their extensive collaborator network, many of which we would not be able to access in any other way. They bring substantial expertise in biomarker development and clinical trial design, which are already recruiting and valuable in our SMN and DMPK collaborations and which we believe will be even more valuable in the novel target areas we’re pursuing in Biogen Four.

Of course they have proven, successful capabilities in global clinical development and commercialization and significant regulatory presence to support both. Most importantly, we believe the trust and respect the teams have developed should form the basis for a very productive relationship. Biogen trusts and respects the strong research focus Isis brings to the table and they have confidence in the effective science and efficient drug discovery capabilities of our antisense platform. We have tremendous respect for Biogen’s disease expertise from research through the clinic, their strong commitment to the patient and their tremendous work ethic. We appreciate the ability to access additional modalities when appropriate for promising neurological disease targets and of course having Biogen as a commercial partner for these programs should bring great value.

Four collaborations represent a very significant investment by Biogen Idec in our antisense technology. Antisense drugs are an important component of their strategy moving forward to fill their neurological disease pipeline. These four transactions that provided Isis with more than $170 million in upfront payments and we have the potential to earn milestone payments from licensing fees in excess of $4 billion as well as double digit royalties.

The four collaborations that we’ve completed with Biogen Idec have a number of features in common. They all represent what we call option transactions, in which Isis receives upfront payments that allow our partner to lock in an option to license drugs at a future date as those drugs progress through target validation, drug discovery and then through the clinic. We're eligible to receive pre licensing milestone payments to compensate us for the value we're creating in moving drugs forward.

For example, prior to Biogen taking a license for Isis SMNRx, we were eligible to receive $18 million in milestone payments related to the progress of the infant onset program, of which we've already received 3.5 million and a $27 million milestone payment related to initiating the childhood onset program as we proceed with registration directed studies. The option structure allows us to do what we do best, early drug discovery and development. We retain control during the drug discovery and developmental process through the first proof of concept study with significant Biogen input and advice.

At proof of concept Biogen Idec had the opportunity to license the drug on pre negotiated terms that are intended to reflect the arm's length licensing terms appropriate for a drug at that stage of development. Benefits to Isis are obvious. We retain control of development through Phase 2 proof of concept. By delaying licensing until Phase 2 proof of concept, our economics in terms of licensees, milestones and most importantly royalty payments are much more significant than they would be if we license the drug at an earlier stage of development, and yet we gain a valuable partner to aid in the progress of the program before licensing, and one that's intimately familiar with and invested in the program when it comes to licensing and commercializing the drug.

There are some important aspects of Biogen 4 that are different from the earlier transactions that we've done. I'd like to go over those now, because they're some of the very exciting parts of what we're going to be doing together moving forward.

First of all a significant part of the front end of this collaboration involves disease research to help us rigorously identify the best targets to form the basis for the collaboration's drug discovery activities. We're combining our knowledge and expertise in neurological diseases with the extensive internal and external knowledge and networks that Biogen Idec has developed. We conduct a disease research program intended to explore multiple different targets for neurological diseases.

This rigorous exploration of targets is something that antisense technology uniquely facilitates. We believe the power of this disease research component of the relationship is very significant. We're hopeful that we'll be successful on validating two or more targets a year as very exciting and potentially novel targets for neurological diseases. One exciting initial focus of the disease research program will on ALS, a disease that both we and Biogen Idec are very interested in and committed to.

The second important component of the collaboration is core research focus on expanding our understanding of how to optimize antisense drugs for the treatment of neurological disorders. We believe this investment over time will expand the opportunities for use of antisense drugs in both the central and the peripheral nervous systems. A $100 million upfront payment we're receiving on initiation of this new collaboration provides Biogen Idec with exclusive access to our neurological disease program for six years and allows us to invest in additional infrastructure and resources needed to support this research and discovery effort. Our headcount will increase modestly to support our expand and research and discovery initiatives in neurological disease and in core research focused on the brain, while also leveraging the expertise and contributions made by Biogen Idec.

Now let me give you some more details about how Biogen 4 will work operationally and financially. Potential targets for inclusion in the collaborative effort will be chosen by the joint team based on the best scientific information available. Ever increasingly the team will rely on genetic and epigenetic information, much of which will be proprietary and generated by Biogen Idec and collaborators. The joint team will then rigorously evaluate the potential targets. When a molecular target for a neurological disease is validated, the joint team will decide whether the target is interesting enough to initiate formal drug discovery activities.

At this point one of three choices will be made. The team can decide that antisense technology is the best modality with which to pursue drug discovery for that target. We expect that this will be the most frequently made decision. In this case Isis will receive an additional $10 million milestone payment and has the opportunity to earn an additional $250 million in pre commercial milestone payments and licensing fees plus double digit royalties for each antisense drug that's developed by the collaboration. Isis will usually be responsible for drug discovery in our early development of antisense drugs and as a rule Biogen Idec will license the antisense drugs after Phase 2 proof of concept and will be responsible for later phase development and commercialization. However the collaboration is designed to provide the partnership flexibility to make the best decisions for the drug depending on the nature of the disease and types of clinical trials required.

Alternatively the team can decide that other modalities such as small molecules or monoclonal antibodies should be used for drug discovery and development for a target. In this event Isis will receive an additional $5 million milestone and will have the opportunity to receive an additional $85 million in pre commercial milestone payments and single digit royalties as these new medicines are developed and commercialized. Biogen Idec will be responsible for all of the drug discovery and development activities in this case. There's another aspect to the transaction that's very exciting to us. We use antisense technology to validate targets, then pick the best modality for drug discovery and even if the choice is to develop non antisense drugs, Isis benefits financially as these drugs progress through development to the market.

And thirdly if, Biogen Idec is not interested in pursuing drug discovery for a target, Isis is then free to develop the drug on our own or partner the drug with someone else. So that’s a deal at very high level. There are of course additional details that I'm not describing that will work to assure that the best decisions are made by the joint team and that each partner benefit appropriately.

These four collaborations with Biogen Idec have the potential to contribute significantly to Isis financial strength. Beyond the $170 million in upfront payment we have or will soon receive from the collaboration, we have a number of short term milestones. We plan to begin Phase 2/3 clinical trials for the both childhood onset and infant onset forms of spinal muscular atrophy early next year, which represent more than $40 million in potential milestones.

We will earn a $10 million milestone payment when the toxicology studies for Isis DMPKRx initiate later this year and then another milestone payment in 2014 tied to start of Phase 1 trial. We will earn $10 million milestone payment when we identify the first development candidates from the Biogen 3, and initiate tox studies on that drug which we plan right now from mid-2014.

We hope that the next year we’ll have multiple attractive targets in Biogen 4 reaching target sanction, each of which will result in a milestone payment as large as $10 million. In short, this very attractive set of partnership which we believe enables Isis to be a strong player in neurological disease also rewards us handsomely for focusing our antisense technology in this area.

When combined with the first three collaborations, using what we think a reasonable assumptions about the success of the various programs, with the caveat that of course most of these programs are very early stage, Isis revenue potential exceeds $4 billion plus royalties.

By creating a neurology pipeline with Biogen Idec in this way, we will believe we’re creating a unique opportunity to create shareholder value. Without a partner like Biogen Idec, we’d not been able to build such a robust program. We believe Biogen’s contributions will significantly increase the value and probability of success of these programs.

Historically, payments from our partnerships have represented a significant portion of Isis revenues. For example since 2008, we’ve generated an excess of $1 billion in cash and earned more than $600 million revenue from partnerships, with approximately $200 million in cash so far this year.

This transaction if successful, has the opportunity to enhance our financial strength for years to come. Just considering this year, the completion of this transaction significantly adds to our financial position. We will be updating our 2013 financial guidance to include this transaction in our Q3 earnings call early in November.

With that I will turn the call back over to Stan.

Stan Crooke

Thanks, Lynne. At Isis, our strategy begins with a simple sounding but tremendously difficult to achieve and very important goal and that is to create a prolonged cycle and of course in our business that means 20 or more years of innovation based productivity. To do this, we created a new more efficient drug discovery technology and we coupled that to a unique business model and culture. Antisense technology is taking its place today as the third major platform for drug discovery. We are confident that we validated the platform and that we have created something that’s important and we control it through our numerous patents and patent applications.

We believe that what is most needed is an evergreen pipeline of new medicines that bring great therapeutic value. To deliver that we believe we need to stay focused on innovation and remain small and relatively simple as an organization. In short our goal is to avoid becoming a fully integrative pharmaceutical company. This means that products created by Isis will eventually be partnered.

As we’ve matured, our partnering strategy has evolved to address two questions. First, how do we retain an even larger portion of commercial revenues; and second, how do we assure that our partners perform in an outstanding fashion.

To answer these questions, we divided the programs of Isis into three groups; one of which includes a drug that we will retain into or through Phase 3 programs. These drugs that have affordable, dispositive Phase 2 studies and manageable Phase 3 programs. Isis APOCIIIRx is the first example of this but we expect there will be many more. The goal is here to retain control of these drugs through the clinical phase of initiation and implementation of the Phase 3 plan and long term toxicology studies.

No one understand our technology better that we. We believe that working on our own will allow us to be in more efficient, leading to less costly, more rapid and more successful Phase 3 programs. This approach also supports commanding of course a larger fraction of commercial revenues.

Now at the same time, we decided to partner our neuroscience and cancer programs earlier, but in a fashion that left us substantial control through clinical proof of concept. These are both franchises with costly complex Phase 2 studies and even more costly and challenging Phase 3 studies.

Neurological disease is a complex area and one that we have just entered. Therefore it was important to identify an experienced partner early in development who would partner with us to successfully navigate through these drug development and regulatory challenges.

Having articulated this approach just two years ago, we’re very pleased with our successes. The four transactions with Biogen Idec and the collaboration with Roche on our Huntington's disease program take care of the neurological diseases and our partnerships with AstraZeneca position our cancer program for success.

Now the third and largest groups of drugs are drugs that we will partner after Phase 2 proof of concepts. These are drugs that are likely to yield high value dispositive Phase 2 results but that require extensive Phase 3 studies, drugs like the metabolic drugs and factor 11 and these criteria.

At the beginning of 2013, I indicated that we had an additional long term partnering goal. Over time we hope to create a handful of strategic relationships focused on specific therapeutic areas. There are good reasons to do this. By establishing a long term relationship with a preferred partner we assure that we gain a partner who becomes expert in our technology and our drugs and stays current with the progress that we’re making.

We also acquired disease area expertise and commercial knowledge that helps them target disease selection, clinical trial design and execution and strategic marketing activities. Furthermore over time our partner becomes an expert in marketing antisense drugs.

Other advantages should also accrue to Isis from these relationships. First we can reduce the time and effort focused on partnering. Second our financials should become a bit more predictable. Third based on our experience over the years partners often do not pursue all potentially valuable drug programs. This of course provides Isis the opportunity to develop these assets for ourselves or re-partner them.

Having said all that though it's obvious that creating such relationship needs to be done very cautiously. So we really like the way the Biogen Idec relationship has evolved. It began small as a single drug license in collaboration, and the collaboration has grown to a strategic relationship as the organizations has proved that they were together and shared complementary knowledge and experience. So certainly one of the attractive models we will consider as we evaluate the creation of other strategic relationships.

The Biogen Idec relationship is now clearly strategic. What began at the beginning of 2012 as a single drug transaction has evolved into what is now an exclusive relationship for Isis, based on the early successes that we have seen in the earlier collaborations. Our collaboration has already resulted in a drug ISIS SMNRx; we should plan to move into Phase 3 early next year, a second drug ISIS-DMPKRx currently in early development, and an increasing number of research programs.

The collaboration support Isis' continued advancement of our technology for neurological disorders, both as a part of the partnership and independently. We have proven that we can consistently bring antisense drugs focused on new targets into the clinic, advanced on rapidly through proof of concept and gain marketing approval for them. Biogen Idec is a leader in bringing novel drugs to the market for the treatment of neurological diseases. They've developed an extensive pipeline of drugs for the treatment of multiple sclerosis, which has transformed how the disease is treated today. They made a strong commitment to replicate this success for other neurological diseases and we are of course very pleased to partner with them to achieve this.

Given the success to date of the collaboration between Isis and Biogen Idec, my expectations for this collaboration are very high. And they are of course aligned with Biogen Idec's. We do expect to develop a good many first in class drugs that we hope will have a marked impact on patient's lives and to do that efficiently.

We hope to advance antisense technology focused on neurological disease and we look forward to creating a better understanding of these diseases and more effective use of biomarkers to enhance clinical development patient treatments. And like our friends at Biogen Idec we can imagine our relationship continuing to grow.

Of course drug discovery is full of surprise and challenges and it's only with the shared commitment to common goals and the commitment to pursue the science to wherever it takes us that we can solve the inevitable problems that crop up and achieve success for the partners, the patients and the shareholders we serve.

We're confident that with Biogen Idec we have shared purpose that shared vision, that shared set of complimentary fills and cultures and so we're looking forward to kicking this collaboration off and making it a success.

So with that I will now open up the call for questions. Emily if you can set us up please.

Question-and-Answer Session


Thank you. We will now begin the question-and-answer session. (Operator Instructions). Our first question comes from Navdeep Singh of Goldman Sachs. Please go ahead.

Navdeep Singh - Goldman Sachs

Trying to get a little more color on the deal; what triggered the deal? Is Biogen going this deal because of a signal they have seen in the SMN Phase 2 data or is this deal complete independent of SMN and then I have a quick follow up?

Stan Crooke

I will address that very briefly and then turn it over to Al. The deal is of course of course independent of the deal on SMN in the sense that they two separate deals. But they were also very connected in the context of the success of the partnership, the success of the relationship and the value that we assigned to what Biogen brings and the value that Biogen Idec has signed to what we bring. I think the fact we step wise move from a license of a drug and development to another license to smallish research relationship and now to an exclusive strategic relationship reflects all of the positive steps would be required to make those kinds of choices both by Isis and Biogen. Al do you want to comment on that from the Biogen side?

Al Sandrock

Sure. I think the main thing we are noticing from this partnership is how well the two companies work together. We have always admired at science that Isis but having worked together now we know that we can work well together. The data from the SMA trial had been presented. There is nothing about it that tells us that this shouldn’t be the way to go for other diseases but I would say the main thing is that working together on SMA and also on myotonic dystrophy, we found that there is a lot of chemistry between the two companies.


The next question is from Salveen Victor of Canaccord Genuity. Please go ahead.

Andrew Goldsmith - Canaccord Genuity

This is Andrew Goldsmith on the line for Salveen. Thanks for taking my question. Just a follow up on Navdeep's question. How does Biogen seem like the multi-dose SNM data?

Stan Crooke

Al, do you want to address that?

Al Sandrock

Yes, I think it’s premature to comment too much on the specific program. I think what we are seeing so far is encouraging. We look forward to progressing as Stan mentioned into the next phase of development but as I said it's really the fact that we find that we can work well together and we think it’s a very promising technology to -- we marvel at how efficient the drug discovery technology this is and we think we can get to proof of concept with a whole host of other neurologic diseases.

Andrew Goldsmith - Canaccord Genuity

And then just a quick follow up. I think I heard in the script you're thinking on the order of two targets a year. Is that fair or should we just think kind of two targets a year on average for six years that you hope to get from this?

Lynne Parshall

Stan, you or Frank and Al can comment also that's certainly what our goal is as a collaboration.

Stan Crooke

Again, this is research. This is drug discovery. So no one can predict exactly how it will work but we think we have resourced the program sufficiently to meet those objectives and we intend to meet them.


The next question is from Chad Messer of Needham & Company. Please go ahead.

Chad Messer - Needham & Company

This looks for Al. Can you, maybe help put this in perspective, this collaboration in terms of discovery, neurologic disease discovery at Biogen? How important -- how plugged in or how universal across of that research effort is this deal?

Al Sandrock

Well, one of the things we noticed when we worked with Isis and met with them is that the diseases on their list were very similar to the diseases on our list in terms of what diseases we were interested in. And so there was an overlap right from the very beginning.

We mentioned earlier in the call about ALS. We have been very interested in ALS. We have a consortium with academic investigators where we were investigating the disease itself. We believe antisense is a very nice way to access or learn more about how the disease progresses and how it's initiated. Also antisense provides a way for us to test not only in cells in animals but potentially in humans whether or not certain biological approaches make sense.

ALS is a good example of disease where our knowledge of it is actually expanding rapidly. For example now we know the genetic cause of more than 50% of cases of familial ALS and it turns out some of the genes that were identified for familial ALS also that that cause sporadic ALS. Understanding the genetic cause of the diseases immediately leads to antisense approaches that could be used to test proof of concept all the way to humans and so that’s the kind of thing that we saw and led us to pursue this deal.

Stan Crooke

Chad. Again I would say from the Isis prospective is this is a highly strategic transaction in neurological diseases. So the team contemplates evaluating opportunities in a very wide range of diseases, focusing initially a lot on neurodegenerative diseases but it certainly contemplates a much broader reach than that including severe pain.


(Operator Instructions) And our next question comes from Tanya Joseph of Bank of America Merrill Lynch. Please go ahead.

Rachel McMinn – Bank of America Merrill Lynch

Yes. It's actually Rachel McMinn. My question is also for Al. Two questions, just on the SMNRx program; is it fair for us to expect that you would license, formally license the program prior to a Phase 3 start. It sounds like you’re still encouraged. So I guess I wanted to get a better sense of when Biogen will be more formally involved in clinical development?

And then secondly, Al, your view of why antisense is an important technology for neuro-diseases. It looks like you’ve left an option in case other technologies would make sense but I just wanted to get your perspective on and whether you believe antisense is particularly well suited for neurologic disease and why?

Alfred Sandrock

Thanks Rachel. And on the first question I rather not get into specifics on the timing of when we would make a further commitment. But as you said we are encouraged and we want to move forward. In terms of neurological diseases, Isis and in part in collaboration with Biogen we’ve learned a lot about how antisense, after it’s injected into the intrathecal space, how it moves and gets into various parts of the central nervous system. And that’s very, very encouraging. We think that the drug can get to large portions of the central nervous system.

The other thing is that if you look at just ALS for example and SMA, the two programs that Isis has moved with antisense technology into the clinic, in the case of ALS they have an antisense against SOD. It’s a protein that’s considered to be toxic and the technology can decrease that protein. The case of SMA, there is a protein that’s efficient and the technology can increase that protein.

In the case of mytonic dystrophy, the most commonly sided hypothesis is that there is a toxic RNA and the technology can decrease the toxic RNA. That’s the potential. So we’ve seen now where you can actually increase levels of proteins that are needed, you can decrease toxic proteins and potentially we can decrease toxic RNA’s. This leads open a lot of options for neurologic diseases and it looks, if you look across at other diseases, it’s going to be very similar. We're going to decrease toxic proteins in some situations, increase needed proteins and others and I'm pretty confident there are other diseases that are likely due to toxic RNA species. So for that reason, plus the distribution and delivery that I talked about earlier, we’re very encouraged.


(Operator Instructions) And the next question comes from Joseph Schwartz of Leerink Swann. Please go ahead.

Joseph Schwartz - Leerink Swann

I was wondering if I could ask a common question slightly I think differently and that is probably directed towards Al as well. What that does Biogen Idec need to see in order to lead you to feel comfortable that you should exercise the option in SMA?

Stan Crooke

So, bit of a loaded question. There is two ways to be positive I think. One is that you can get proof of biology, either a biomarker or some other method by which you know that the SMA protein, the full length SMA protein, it goes up in the target tissue of interest. And then of course the best way to get encouraged would be to show some clinical effect. And so those were the two potential ways in which we could see proof of concept if you will.

Lynne Parshall

Stan, could I make comments that might help Rachel and Joe each out a little bit. Our transaction is structured so that Biogen’s license doesn’t need an option to license, doesn’t need to be exercised until the end of the first therapeutic study, which in this particular case we’ve defined as either the infant onset or the childhood onset Phase 3 study. So this is not a decision that Biogen Idec needs to make immediately.

With regard to Rachel’s question about clinical involvement, our teams are working extremely closely together on designing and managing both the ongoing trials as well as finalizing this design for the Phase 2/3 programs both in the infant as well as in the childhood onset disease.

So we have joint teams working on this and we are actually really benefiting from having our Biogen Idec colleagues involved in that planning process, both through ongoing trials as well as for the new trials that we plan to start next year.

Stan Crooke

And just to add to that the deal structures, these option deal structures that we've done are quite flexible. Most of the time the licensing decision is made after Phase 2 proof of concept, but we do leave it to the parties to decide what makes the most sense. For some drugs it makes more sense to have that decision come earlier and for other drugs it makes more sense to have that decision come later. Our focus is what's best for the drug. In The end that's going to be best for the patient and best for the partnerships. One more question.


Yes, the next question is from Steven Wiley of Stifel. Please go ahead.

Steven Wiley - Stifel

Stan, maybe just a question for you. I believe most of the intra deco (ph) candidates you're looking at now are 2.0 chemistry. Is that correct?

Stan Crooke

That's correct.

Steven Wiley - Stifel

And is it safe to say that what you plan to do in further collaborations will also be within this 2.0 or do you think that the higher potency 2.5 would have some kind of advantage within this compartment?

Stan Crooke

Well the technology continues to advance. The generation 2 drugs we're making today are better than the generation 2 drugs we made two or three years ago and we are exploring 2.5 and Frank can comment in a little more detail. With this program we're going to be exploring designs of ASOs and chemistries of ASOs specifically to optimize them for the administration for neurological diseases.

So you should assume that we’ll continue to invest in the technology and with this collaboration there will be a big technology component of the collaboration that will be geared to making even better ASO designs and chemistries for the specific applications in these diseases. And one final point I'd make is that this collaboration does also contemplate systemic administration for peripheral neuropathic diseases as well. Frank, do you want to add anything to that.

Frank Bennett

No, I would just agree with what you said is that we have a large chemistry toolbox that we're using to apply for CNS diseases and have a variety of different designs that we're really optimizing for the specific target and specific indication that we're going after. We found that for CNS applications designed the antisense drugs are little bit different than we use for peripheral administration but the good news is that we have a large toolbox in which we can optimize for each specific indication.

Stan Crooke

Emily, are there quite a few questions in the queue.


At this time, I'm not showing any further questions. So I'd like to turn it back over to you Dr. Crooke for any closing remarks.

Stan Crooke

I picked exactly the right moment. Well first of all, Al, thank you so much for joining us. We very much appreciate it. Thanks everyone for participating in the call. Stay tuned. I think we have an exciting fall and winter coming up for Isis and look forward to telling you more about this collaboration as it progresses. Thank you.


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