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Executives

Lynne Parshall - Chief Operating Officer

Analysts

Dave Friedman - Morgan Stanley

Isis Pharmaceuticals, Inc. (ISIS) Morgan Stanley Global Healthcare Conference Call September 10, 2013 2:05 PM ET

Dave Freedman - Morgan Stanley

All right. Thanks everyone for joining us. Dave Freedman biotech analyst joined by Lynne Parshall, who is the Chief Operating Officer of Isis Pharmaceuticals. And I think it will be great if this was interactive. So, if anyone has any questions all the way, anything to say, feel free to raise your hands and we will make sure that we get a microphone to you. So, thanks again for coming. And maybe if you could just give a brief overview of you guys very unique platform, to everyone so that people have a sense of what are ISIS and then we will jump in to some Q&A.

Lynne Parshall – Chief Operating Officer

Sure. Thanks David. And thank you all for coming. I’m happy to be able to here and talk about ISIS’ existing times for us. ISIS is the leading company and the company really pioneered the sealed of antisense therapeutics. And really I can say that today where the point, where the technology is validated its working, it’s working the board. And if you use that technology to create a pipeline of 30 drugs in developments really a almost remarkable pipelines for a small company with that 350 people.

So, our productivity per employee is really quite impressive and it’s supported by the incredible efficiency the technology platform that we have built. The pipeline is a very mature pipeline. We have a drug KYNAMRO on the market, which is the first systemic antisense drug to reach the market.

We now have one drug in Phase 3 clinical trials. We are developing ourselves our drug to treat transthyretin amyloidosis. There are two other drugs in our pipeline that we are developing, which we plan on having in Phase 3 clinical trials really next year spinal muscular atrophy drug and our triglyceride lowering drug ISIS-APOCIIIRx. So, I know we are in large pipeline. It’s a pipeline it’s maturing rapidly with a lot of assets that have the opportunity to be on the market in the next several years since though it’s really exciting time for U.S.

I think one of the things we are going to talk about is our partnering strategy as well because it’s a foundational to our business model and one where we had a number of successes including very large transaction with Biogen Idec that we just announced yesterday.

Dave Freedman – Morgan Stanley

Absolutely. So, we can get this started on that. I guess in terms of your overall strategy, you guys have some products that are partnered early, some products are partnered likely later, post Phase 3 you have orphan programs. You have very large market programs. How do you think about creating your pipeline on these axes and which ones you are going to partner early versus later how do you sort of makes your algorithm to making these decisions.

Lynne Parshall – Chief Operating Officer

Sure. One of the great things that having a technology platform, in particular our antisense technology platform is that it’s very prolific. So, we are able to add three to five new drugs every single year to the pipeline and our pipeline continues to grow. It also is that the technology platform, but it’s very broadly applicable to lots of different types of diseases both were disorders, large disorders. So, we have programs in metabolic disease and cardiovascular disease and cancer and variety of inflammatory diseases as well as our large and growing neurology and rare disease programs.

For every drug that we put in development and actually even for many of our late stage research programs, we have an individual business development plan. So, when we want to partner that asset. We are all tied in to our fundamental business strategy, which is we want to, what we do best, which is research and early stage development. To apply the technology is broadly as possible create as many valuable drug as possible, but at the right stage of development for that particular asset to turn it over to pharmaceutical company partner to potentially finish the development work for some assets and to commercial the drug. So, in other words, our business strategies, not to market and sell drugs, it’s to do things up to marketing and selling. It’s the biggest business strategy that works very well for us.

As David mentioned that strategy is quite differently to different assets, there is some assets, where we want to take the drugs through Phase 2 proof-of-concept, where we think Phase 2 proof-of-concept represents a very significant value and flexion point and getting to Phase 2 proof-of-concept is relatively straightforward. So, type 2 diabetes strategy, for example, which we have three year good example of that doing a three to six months study with HbA1C as an endpoint is a pretty straightforward thing to do and showing the value of these novel targets in glucose controls will dramatically change the value of those assets when we partner them. That being said the development path host proof-of-concept is relatively larger, relatively longer, relatively more expensive and so, it's one that we're happy to share with an experience partners.

We have some programs that we want to partner early and neurological disease franchisee the basis for our new actually our four partnership and our newest partnership with Biogen Idec. Our areas where in addition to money, we were looking for partners to bring additional things to the table that we thought really enhance the value of the programs, the robust and the programs and the likelihood of success. For example, neurological disease a new area for us, but an area where we are very excited about applying the technology being able to tap in to the extensive resources and experience internal and external to Biogen Idec as they build over a very long period of time and to be able to build our antisense neurology program on that foundation is tremendously valuable to U.S.

So, for programs like that partnering early, to get access not just the dollars, but to resources and expertise and experience are things that are very valuable to us in our programs. In addition to that there are number of assets, which now that we are in really strong financial position, we want to hold on too longer and so APOCIII triglyceride lowering drug is a good example of that. This is the drug and which we had three sets of very positive Phase 2 data in the last couple of months and we plan to take in to Phase 3 clinical trials early next year and we plan to conduct those trials ourselves to find the partner for that drug. Once we have Phase 3 data and hand our in the late stage it’s the Phase 3 program, which again will represent a very significant value and flexion point we believe in terms of partnering that asset.

Dave Freedman - Morgan Stanley

And so maybe just given the Biogen one is very fresh, if you can just review the terms of it and the timeline of when we might start seeing clinical programs pop out.

Lynne Parshall - Chief Operating Officer

Sure. This is our fourth relationship with Biogen. We did three transactions with Biogen last year, one in our spinal muscular atrophy drug, one in our Myotonic Dystrophy program, which we just announced yesterday that we now development candidate for and the third was the basic research collaboration on free target that Biogen folks where extremely interested and pursuing and extremely interested in antisense as the therapeutic modality that might actually make these targets accessible in terms of drugs.

The new collaboration really grew out of the various close working relationships that our teams have four over the course of putting those three transactions together and working on them and this is a real strategic neurological disease focused collaboration that starts with a disease, where search component, where we and Biogen Idec are going to be looking at a large number of potential targets for neurological diseases with heavy emphasis initially on ALS disease that both we and Biogen Idec are very interested in and committed to and where we are going to really work on finding the very best target to then feed in to drug discovery. We have gotten $100 million upfront both to give Biogen Idec access broadly to our antisense technology to use for neurological diseases as well as to conduct our part of the participation in this disease research phase of the collaboration.

Once we identify attractive targets we don’t move the best of those in to drug discovery identify drugs and then take them through development and hopefully commercialization. And if they're antisense drugs, Isis will receive milestone payment when we choose that target and that’s $10 million milestone payment. Isis will done the drug discovery work, we’ll do the Phase 1 and Phase 2 clinical trials typically although that’s because of the breadth of the collaboration, it's pretty flexible in terms of making those decisions. And once we had human proof-of-concept data, Biogen Idec has the opportunity to license those drugs for a large license fee, milestones, and ascending double-digit royalties.

If we validate a target and look at it and decide based on things we’ve learned about the profile but an alternative modality would be a better a thing to pursue. So, we’ve learned something that the drug that suggest that maybe small molecule approach that’s feasible. Isis still gets to participate finically, so then we’ll get a $5 million milestone and up to $85 million additional dollars as the drug proceeds forward. But Isis won’t do that work, Biogen Idec will do that work obviously it’s outside of our technology platform areas.

So, it’s a very broad collaborations intended to find novel and unique targets for neurological disease and intended to help Isis, dealing very robust neurological disease focused program based on our antisense technology. So we think it’s a great thing for us and for the future of our programs. In terms of timing, our goal to the collaboration is to think about once we get up and running that two targets for year, obviously in the first six months you don’t expect to see one of those but over time I think that’s probably a realistic run rate.

Dave Freedman – Morgan Stanley

Great. Any questions people on the Biogen collaboration at all? I guess maybe well we’re on that topic if we can just address the SMA program because that’s one that’s rather along. And there is been Phase 2 data, maybe we can just give an update on where that program stands and what type of opportunity size is that?

Lynne Parshall – Chief Operating Officer

Sure. Spinal muscular atrophy is the leading genetic cause of death of infants. And the disease really comes in two basic versions, the infant-onset form, which is diagnosed relatively early, typically between two and four months when baby is essentially feeling to thrive and failing to grow and develop. The type one infant-onset form of the disease is lethal. And infants are typically die before their second birth day, some of them as soon as early in their – much early in their life. The childhood-onset form of the disease is typically diagnosed later, these are children who have a wide range of different disabilities from children who can’t roll over can’t sit up on assistant can’t feed themselves to children who at some points in their lives maybe ambulatory or walk with a walker, most of it into wheelchair-bound.

So, it’s a very debilitating disease that these kids have. And it’s a very interesting disease in terms of the application of antisense technology because the fundamental defect that occurs in spinal muscular atrophy is that the children don’t make protein called SMN1. And we have vestigial protein that’s pretty much non functional SMN2 from the SMN2 genes that were make and basically what we’re doing in this program is different from what we do in our other antisense programs, it’s our first splicing drug. And so this drug interferes with the machinery that splices out an exxon from SMN2 that makes it a dysfunctional protein. So, in other words it causes the inclusion of the exxon.

So that’s the protein that’s made from the SMN2 gene in fact looks identical to the SMN1 protein that these kids are missing. And so we’re – this is our first program we were augmenting something rather than decreasing something so it’s very exciting to us scientifically it’s also very exciting to us because of devastating disease which should like to intervene. We’ve completed a Phase 1 clinical trial in which we saw the drug was facing well tolerated and we saw some early preliminary but encouraging data in which number of the children treated with the drug did it at the highest doses did improve functionally. We now have ongoing two Phase 2 clinical trials one in the infant form of the disease the Type 1 patients and one in the childhood-onset form of the disease the Type 2 3 patients.

These are studies that are principally designed to test multiple dose safety and to get pharmacokinetic data so that we can finalize our dosing schedule for our Phase 3 programs which we plan to begin next year. We’ll have data from both of the Phase 2 studies late this year or early next year and then we do plan on starting Phase 3 studies in both of these indications early next year. This is a partnered program that’s partnered with Biogen Idec we and Biogen are both very excited about this opportunity.

Dave Friedman - Morgan Stanley

Yes, go ahead.

Question-and-Answer Session

Unidentified Analyst

The sizeable.

Lynne Parshall

Well, the sizeable population, I'm sorry it’s about 35,000 patients it’s a similar size in orphan disease, but it's similar in size for cystic fibrosis for example.

Dave Friedman - Morgan Stanley

Any other questions on these Biogen programs, if any, yeah. So, maybe if you can just give us an update on KYNAMRO? Anything that you can talk about in terms of sort of the progress as the drug is launching, anything interesting that you've learned about the sort of real world use of antisense, given that this is the first sort of systemic drug? Is there – there have been anything sort of unexpected positive or negative that you've been seeing in either the safety database or physician attitudes or anything?

Lynne Parshall

Sure. The launch is going well. This drug is a drug for patients who are genetically free dispose to extremely high LDL cholesterol, the homozygous familial hypercholesterolemic patients. The drug was launched earlier this year by our partners at Genzyme, and Sanofi. And we’re very pleased with the activities that they’re pursuing. One of the disadvantages of selling a large company partner is they aren’t very interested in us for to get all of their confidential information about the details of the launch and so I'm not going to be able to tell you as much as you might like to hear.

Dave Friedman - Morgan Stanley

Okay.

Lynne Parshall

But, we are working with them on our real more quantitative launch update that we will put out in February in our year end earnings call. In terms of on the profile of the drug and what we’re learning so far I’d say it’s early days, there is certainly nothing negative coming out of the patient uptake or the safety or anything like that. And we think actually when you think about when we first started clinical trials in KYNAMRO there is really the first injectable drug that was going into this lipid cardiovascular type space, but now, with our drugs and the PCSK9 inhibitors and what not and we’re finding that the physicians and the nurses assistants and as the result the patient are much more comfortable with the idea of injectable drugs in this space. So, I think we’re feeling actually very good about the role of this drug is going to have overtime in this lipids space.

Dave Friedman - Morgan Stanley

And so maybe if we jump to APOCIII since sort of another one in this world although slightly different, so, you guys have just recently presented some data on this drug, so if you can just quickly review the sort of high points of the data and then we can talk about the next steps?

Lynne Parshall

Sure. ISIS APOCIIIRx is a drug that lowers APOCIII and by lowering APOCIII it lowers triglyceride so this is a triglyceride lowering drug. And the first indication for this drug that we’re going after is patients with severely high triglycerides that patients with triglycerides that are over 880 milligrams per deciliter. So they are really, really high triglyceride patients, who are at high risk of cardiovascular disease. They are at high risk of pancreatitis but they also frequently have diabetes other such glucose metabolism problems pre-diabetic and that syndrome sort of the metabolism syndrome goes together with glucose control on triglyceride. This is a drug that we haven’t tested in Phase II clinical trials right now. We’ve had three different pieces of data that we presented over the last couples of months. The first set of data was from a study, where we looked at patients with moderately high triglycerides, who also had type 2 diabetes. To test the hypothesis of whether reducing triglycerides was in fact going to have a benefit in terms of glucose metabolism or influence sensitivity. And this was the first study from which we reported triglyceride lowering data as well. What we find in the study was that we dramatically reduced triglycerides over 70% we increased HDL cholesterol or good cholesterol by over 40% and in addition to that we should positive benefit in terms of glucose control some shorter term measures glucose control fructosamine, and glycated albumin as long as HbA1c and we showed improvements in insulin sensitivity. So this was the first data that we got really connecting the dots between triglycerides lowering. And positive benefits in terms of glucose control.

The second study that we reported data from was a combination study. We were adding our drug to stable doses with fibrates to look at what additional benefit the patients will get on top of the benefits they were already getting on fibrates and this was the study and patient was slightly higher triglycerides. The data were remarkably consistent with what we saw in our first study. We saw 64% reduction in triglycerides and an over 50% increase in HDL cholesterol in this study.

Most recently, we presented interim data from an ongoing study looking at ISIS-APOCIIIRx as a monotherapy so added to any other triglyceride lowering drugs and again we saw greater than 70% reduction in triglycerides and more than 50% increase in HDL cholesterol. We have two more data events coming up from this program this year. The first will be in two weeks at the National Lipid Association where we will present data from a small study that we did in patients with familial chylomicronemia syndrome, FCS, it's easier to say the acronym, but these are patients who are genetically predisposed for extraordinarily high triglycerides, and we will present those data in just two weeks. And then, in American Heart Association, we will ramp up all of the data from all of these programs including the final data from the Monotherapy study at a podium presentation that we have scheduled at AHA.

Dave Friedman – Morgan Stanley

And what happens to the LDL level in these patients if they are elevated?

Lynne Parshall

Actually many of these patients don’t have elevated LDL, but what we have seen so far in the dataset that we have is some of the studies, it goes up a little, and some of it goes down a little. We actually don't expect any meaningful effect on LDL and what we are thinking is most important to look at is actually non-HDL cholesterol and we have seen a consistent reduction in non-HDL cholesterol.

Dave Friedman – Morgan Stanley

Got it. And in terms of that these three I mean do you have sense of what the Phase 3 program could look like for this and there is an area where big outcome study is necessary or there sort of more well defined high risk groups that you can address.

Lynne Parshall

For our first indication for this drug, we plan to be patient with triglycerides over 880 milligram per deciliter. So, severely high triglycerides. That’s a relatively small, but meaningful patient population of about 50,000 patients in the United States. So, it is an indication where we think the filing package will be not a really large filing package. We're putting together all of the Phase 2 data and in preparation for meaningful both the FDA and the EMA, which will have later in the year. And but we do believe based on preliminary discussion that percent reduction of triglycerides will be the clinical endpoint, not an outcome study. It's very difficult to even conceive of an outcome study in a 50,000 patient population.

Dave Friedman – Morgan Stanley

Yes. And then, is there sort of a step after that? I mean, do you start working your way down the triglyceride-level scale or what would be the approach sort of subsequent?

Lynne Parshall

We may do that with this drug and that will be the subjective further discussion with the FDA about outcome studies or not outcome studies as you go to large patient populations. We also have a new generation of chemistry that we've instituted, a generation 2.0 chemistry, which is much more potent. It's about ten times as potent as the generation of chemistry, generation 2.0 that we are using today. And so we could also consider to distinguish the two drugs in the two different market a follow-on compound that would reflect the generation 2.0 chemistry. And those are dialogues that we are still having internally before we have those discussions with regulatory agencies.

Dave Friedman – Morgan Stanley

Okay. Any questions on APOCIII? So maybe in the last few minutes, we can talk about TTR, another sort of Phase 3 program for you guys. And so, number one, if you can just describe your current Phase 3 trial in terms of design and timelines and then also maybe just outline your relationship with GSK for this program?

Lynne Parshall

Sure. I think, ISIS-TTRRxis is one of our least appreciated assets and it is a drug that is actively in Phase 3 clinical trials. We plan to finish the stuff right now and have data in 2015. So it’s a late stage assets that we’re really excited about. TTR amyloidosis for people who don’t know it’s a progressive neurodegenerative disease that’s caused by the production of a mutant form of the TTR protein that begins the formation of plaques in your periphery you’ll lose function and patients it’s a disease that relatively young patients, patients are diagnosed typically in their between 30 and 50 and when you are diagnosed you’ve got 10-year life expectancy and its not a pleasant one. It’s a disease in the polyneuropathy form, which is what I just described in the 10,000 patients. There is another form of the disease a cardiomyopathy form, where the plaques rather than forming in your peripheral nervous system form instead in your heart that’s a disease that’s diagnosed later sort of 60 - in 60and 70 year old somewhat shorter life expectancy as those patients have a somewhat shorter life expectancy anyway and but it’s a larger indication about 40,000 patients worldwide.

So, our initial studies in the polyneuropathy form that’s the Phase 3 study that’s ongoing, it’s a 200 patient study with 15 months of dosing. The end point is a modified neurological impairment scoring system that we custom designed and gotten feedback from the regulatory agency so we custom designed for this particular disease and that is a program that’s partnered with GSK. We have a collaboration with GSK that dates back to couple of years. It was principally focused on six different rare disease targets and we have two of them in development right now actually this one and a drug that’s in our pipeline has unidentified antiviral drug and as that drug moves forward of course we’ll be able to stay with the target is. That collaboration has been very productive and we hope to have two more development candidates coming out of that in the next 12 months or so. So, its exciting targets for some exciting diseases.

It’s an options transaction that we’ve with GSK that’s very similar to our transactions Biogen Idec and AstraZeneca and Roche, where we get paid money upfront. We control the discovery in early development stages of the drug and when we have our first human clinical proof-of-concept data then our partner has the opportunity to license the drug for license fees and milestone. The money we get paid in advance of licensing more than compensates us for the work that we do and for the options that we granted to the partner. But when we license the drug we do it on terms that we think are reflective of late state licensing deals in terms of the license fee and the milestone payment.

Interestingly in the case of something like TTR, where our Phase 1 data were extremely robust and we and GSK with the benefit of regulatory advice from the U.S. and Europe went directly to a Phase 3 study. The first clinical proof-of-concept is going to be at the end of the Phase 3 study so that’s one, that’s when their licensing drug for this particular their licensing decision for this particular drug will occur.

Dave Friedman - Morgan Stanley

Got it and is it going to be the same drug for FAP as FAC or?

Lynne Parshall

It is.

Dave Friedman - Morgan Stanley

Okay.

Lynne Parshall

Yeah, yeah.

Dave Friedman - Morgan Stanley

And so is the plan to run to go right into a Phase 3 FAC trial, if FAP works is it going to be programs that overlap or is it sequential?

Lynne Parshall

So, we’re finalizing our plan for FAP right now. We plan to have a plan by the end of, by the end of the year. It would be the same compound and there is no need to wait. But we would do a Phase 2 study because FAC has not been studied before and you really want to spend a little bit of time looking at the different types of end points that you might put into your Phase 3 program before you dive right in. We had the benefit with FAP of being able to look at what have been done with (indiscernible) and so we’ve a little bit more natural history data and a little bit more data on the endpoint but here I think we take a little bit more traditional development path.

Dave Friedman - Morgan Stanley

Got it. And then it looks like we’re out of time. So, thank you everyone for joining us. And thanks, Lynne for joining us today.

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