Ionis Pharmaceuticals Reports Financial Results and Highlights for Third Quarter 2016

CARLSBAD, Calif.,Nov. 9, 2016/PRNewswire/ -- Ionis Pharmaceuticals, Inc. (Nasdaq:IONS) today reported income from operations of$16.1 millionand a loss from operations of$87.5 millionfor the three and nine months endedSeptember 30, 2016, respectively.  The Company also reported pro forma operating income of$33.7 millionand a pro forma net operating loss (NOL) of$30.5 million, both excluding non-cash stock compensation, for the same periods.  Ionis ended the third quarter with cash, cash equivalents and short term investments of$687.8 million.  The Company is on track to meet its pro forma NOL and cash guidance for the year.

"This week, we and Biogen announced positive data from an interim analysis of CHERISH, our Phase 3 study in children with later-onset (consistent with Type 2) spinal muscular atrophy (SMA).  We are very encouraged with the positive SPINRAZATMdata from both of our controlled Phase 3 clinical trials supporting potential benefit not only in infants, but also in children with SMA.  We are pleased that our partners at Biogen are already making SPINRAZA available to patients with SMA who have no therapeutic alternatives through a broad Expanded Access Program.  In about four weeks after Biogen filed for marketing approval for SPINRAZA, the FDA and the EMA each have accepted their respective application.  Importantly, the FDA has granted Priority Review and the EMA has granted Accelerated Assessment, both of which can reduce the standard review time.  We look forward to seeing SPINRAZA quickly and successfully advance through the regulatory review process so that it will be even more broadly available to SMA patients through commercial channels.  On the basis of these positive data, we will stop the CHERISH study and afford all patients in the study the opportunity to receive SPINRAZA in the ongoing open-label study, SHINE.  These data follow the positive results from ENDEAR, our Phase 3 study in infants with the most severe form of the disease, infantile-onset (consistent with Type 1) SMA, which formed the basis for the regulatory filings in the U.S. and E.U., and the filings in progress for other jurisdictions.  This was followed by encouraging data from the Phase 2 NURTURE study in pre-symptomatic infants with SMA, which supports the potential beneficial effect of earlier treatment with SPINRAZA in infants with SMA.  These data serve to confirm the positive data we have observed in our Phase 2 open-label studies in infants with Type 1 SMA and children with Type 2 or Type 3 SMA, in which we have patients continuing to benefit from SPINRAZA for nearly five years.  We believe the totality of these results provide compelling evidence of the broad transformational potential of SPINRAZA for patients with SMA.  These results further illustrate the potential of our antisense technology to target severe diseases that other therapeutic modalities are unable to adequately address," saidB. Lynne Parshall, chief operating officer of Ionis Pharmaceuticals.

"In addition, last week we announced positive results from our Phase 2 study with IONIS-FXIRxin patients with end-stage renal disease on dialysis.  Results from the study demonstrated robust, statistically significant reductions in Factor XI activity in treated patients.  IONIS-FXIRxalso displayed a good safety and tolerability profile. In patients treated with 200 mg or 300 mg of IONIS-FXIRxthere were no clinically meaningful platelet declines and no increase in major or clinically relevant non-major bleeding.  These results provide further support for the potential benefit IONIS-FXIRxcould have for patients who need to prevent clotting but who have increased risk of bleeding," continued Ms. Parshall.

"We ended the third quarter of this year with net income primarily because of the$85 millionin license fees we earned, including$75 millionfrom Biogen for licensing SPINRAZA.  Through the first nine months of 2016, we have earned more than$186 millionin revenue from license fees and milestone and other payments from our partnered programs.  We have the opportunity to add to our strong base of revenue from partnerships with commercial revenue from SPINRAZA," said Elizabeth L. Hougen, chief financial officer of Ionis Pharmaceuticals.

"Through the first nine months of 2016, we have continued to advance our Phase 3 programs and Akcea is preparing to commercialize volanesorsen while we have prudently managed our expenses.  As a result, we finished the first nine months of 2016 with a GAAP loss from operations of$87.5 million, which included nearly$57 millionin non-cash compensation expense related to equity awards, that when excluded, resulted in a pro forma net operating loss of$30.5 million.  We also ended the first nine months of this year with more than$685 millionin cash.  We are on track to meet our guidance of a pro forma NOL in the low$60 millionrange and a year-end cash balance in excess of$600 million," concluded Ms. Hougen.

All pro forma amounts referred to in this press release exclude non-cash compensation expense related to equity awards. Please refer to the reconciliation of GAAP to pro forma measures, which is provided later in this release.

Ionis' revenue for the three and nine months endedSeptember 30, 2016was$110.9 millionand$186.3 million, compared to$49.1 millionand$232.1 millionfor the same periods in 2015.  Ionis' revenue in the first nine months of 2016 consisted of the following:

• $96.9 millionfrom Biogen for licensing and advancing the Phase 3 program for SPINRAZA and advancing IONIS-BIIB4Rx;

• $15 millionfrom Kastle Therapeutics for acquiring Kynamro;

• $10 millionfrom Janssen for licensing IONIS-JBI1-2.5Rx;

• $1.5 millionfrom GSK for advancing IONIS-HBV-LRx; and

• $62.9 millionprimarily from the amortization of upfront fees and manufacturing services Ionis performed for its partners.

Ionis' revenue in the first nine months of 2015 included$91.2 millionin connection with the exclusive license agreement with Bayer,$89.8 millionin milestone payments from partnered programs and$51.1 million, primarily from the amortization of upfront fees and manufacturing services Ionis performed for its partners.

Ionis' revenue fluctuates based on the nature and timing of payments under agreements with its partners and consists primarily of revenue from the amortization of upfront fees, milestone payments and license fees.

Operating ExpensesIonis' operating expenses included costs to support the Company's five ongoing Phase 3 studies and three open-label extension studies related to its Phase 3 programs for SPINRAZA, IONIS-TTRRxand volanesorsen.  In addition, Akcea continued to build a global organization and prepare for the commercial launch of volanesorsen.  As such, Ionis' operating expenses on a GAAP basis for the three and nine months endedSeptember 30, 2016were$94.8 millionand$273.7 million, respectively, and on a pro forma basis, were$77.2 millionand$216.8 million, respectively.  This is compared to GAAP operating expenses of$97.3 millionand$245.0 millionand pro forma operating expenses of$82.3 millionand$203.0 millionfor the same periods in 2015.  In addition, Ionis' operating expenses for the first nine months of 2016 on a GAAP basis increased due to an increase in non-cash compensation expense that resulted from an increase in the exercise price of the stock options the Company has granted over the past several years.

Net Income (Loss)Ionis reported net income of$7.4 millionand a net loss of$112.4 millionfor the three and nine months endedSeptember 30, 2016, respectively, compared to a net loss of$35.8 millionand$16.8 millionfor the same periods in 2015.  Basic and diluted net income per share for the three months endedSeptember 30, 2016was$0.06.  Basic and diluted net loss per share for the nine months endedSeptember 30, 2016was$0.93.  This is compared to a basic and diluted net loss of$0.30and$0.14for the three and nine months endedSeptember 30, 2015, respectively.

Balance SheetAs ofSeptember 30, 2016, Ionis had cash, cash equivalents and short-term investments of$687.8 millioncompared to$779.2 millionatDecember 31, 2015.  Ionis' cash balance decreased in the first nine months of 2016 primarily due to spending to support the Company's ongoing Phase 3 programs for SPINRAZA, IONIS-TTRRxand volanesorsen.  Ionis' working capital was$623.4 millionatSeptember 30, 2016compared to$688.1 millionatDecember 31, 2015.  The decline in Ionis' working capital was a result of the cash used in operations and a decline in the Company's investment in Regulus Therapeutics resulting from a decline in Regulus' share price.

Conference CallAt9:30 a.m. Eastern Timetoday,November 9, 2016, Ionis will conduct a live webcast conference call to discuss this earnings release and related activities.  Interested parties may listen to the call by dialing 877-443-5662 or access the webcast atwww.ionispharma.com.  A webcast replay will be available for a limited time at the same address.

ABOUT IONIS PHARMACEUTICALS, INC.Ionis is the leading company in RNA-targeted drug discovery and development focused on developing drugs for patients who have the highest unmet medical needs, such as those patients with severe and rare diseases.  Using its proprietary antisense technology, Ionis has created a large pipeline of first-in-class or best-in-class drugs, with over a dozen drugs in mid- to late-stage development.  Drugs currently in Phase 3 development include volanesorsen, a drug Ionis is developing and plans to commercialize through its wholly owned subsidiary, Akcea Therapeutics, to treat patients with either familial chylomicronemia syndrome or familial partial lipodystrophy; IONIS-TTRRx, a drug Ionis is developing with GSK to treat patients with all forms of TTR amyloidosis; and SPINRAZA (nusinersen), a drug Ionis is developing with Biogen to treat infants and children with spinal muscular atrophy.  Ionis' patents provide strong and extensive protection for its drugs and technology.  Additional information about Ionis is available atwww.ionispharma.com.

This press release includes forward-looking statements regarding Ionis Pharmaceuticals' financial position and outlook, Ionis' business, the business of Akcea Therapeutics, Inc., a subsidiary of Ionis Pharmaceuticals, and the therapeutic and commercial potential of Ionis' technologies and products in development, including SPINRAZA (nusinersen), IONIS-TTRRxand volanesorsen.  Any statement describing Ionis' 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.  Ionis' 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 Ionis' forward-looking statements reflect the good faith judgment of its management, these statements are based only on facts and factors currently known by Ionis.  As a result, you are cautioned not to rely on these forward-looking statements.  These and other risks concerning Ionis' programs are described in additional detail in Ionis' annual report on Form 10-K for the year endedDecember 31, 2015, 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.

In this release, unless the context requires otherwise, "Ionis," "Company," "we," "our," and "us" refers to Ionis Pharmaceuticals and its subsidiaries.

Ionis Pharmaceuticals™ is a trademark of Ionis Pharmaceuticals, Inc.  Akcea Therapeutics™ is a trademark of Ionis Pharmaceuticals, Inc. SPINRAZA™ is a trademark of Biogen. KYNAMRO® is the registered trademark of Kastle Therapeutics.

Recent SPINRAZA (formerly nusinersen) Accomplishments:

• The FDA accepted the NDA filing and granted Priority Review in the U.S. for SPINRAZA for the treatment of patients with SMA.

• The EMA validated the MAA and granted Accelerated Assessment in the E.U. for SPINRAZA for the treatment of patients with SMA.

• Biogen and Ionis reported positive data from an interim analysis of the Phase 3 CHERISH study in patients with later-onset (consistent with Type 2) SMA.

• Biogen and Ionis presented new positive clinical data with SPINRAZA at the World Muscle Society Congress supporting the companies' efforts to rapidly make SPINRAZA available to patients with SMA, including:Safety results from the interim analysis of the Phase 3 ENDEAR study in patients with infantile-onset (consistent with Type 1) SMA;Encouraging preliminary results from NURTURE, a Phase 2 open-label study in pre-symptomatic infants; andA recent analysis of the ongoing Phase 2 open-label study in patients with later-onset SMA.

• Ionis reported positive data from an interim analysis of the ENDEAR Phase 3 study in patients with infantile-onset (consistent with Type 1) SMA. Biogen paid Ionis$75 millionto license SPINRAZA.

• Safety results from the interim analysis of the Phase 3 ENDEAR study in patients with infantile-onset (consistent with Type 1) SMA;

• Encouraging preliminary results from NURTURE, a Phase 2 open-label study in pre-symptomatic infants; and

• A recent analysis of the ongoing Phase 2 open-label study in patients with later-onset SMA.

Recent Progress across Ionis' Pipeline:

• Ionis and Dr.Merrill Bensonreported positive data from the IONIS-TTRRxprogram at the International Symposium on Amyloidosis (ISA) meeting. In line with previously reported data from his investigator-initiated study, Dr. Benson observed continued evidence of cardiac disease stabilization in eight TTR cardiomyopathy patients treated for 12 months with IONIS-TTRRx.

• Akcea and Ionis received Orphan Designation in the E.U. for volanesorsen for the treatment of patients with Familial Partial Lipodystrophy (FPL).

• Ionis reported positive, top-line Phase 2 data with IONIS-FXIRxdemonstrating robust, statistically significant reductions in Factor XI activity in patients with ESRD receiving chronic hemodialysis.  IONIS-FXIRxwas safe and well tolerated in treated patients with no clinically meaningful platelet declines and no increase in major or clinically relevant non-major bleeding.

• Ionis reported positive interim data from a Phase 2 dose-optimization study of IONIS-GCGRRxin patients with type 2 diabetes demonstrating that doses of 75 mg and 50 mg could produce reductions in HbA1c of greater than two percent and one percent, respectively, with minimal to no effects on liver enzyme elevations.

• Ionis reported positive data from a Phase 2 study of IONIS-AR-2.5Rxin patients with prostate cancer showing durable prostate-specific antigen (PSA) responses with prolonged stable disease in heavily pre-treated castrate-resistant prostate cancer patients.

• Akcea and Ionis published clinical results with Lp(a)-lowering drugs, IONIS-APO(a)Rxand IONIS-APO(a)-LRx, inThe Lancetdemonstrating robust reductions in Lp(a) levels, regardless of a patient's starting Lp(a) level.

• Ionis reported positive results from studies in normal volunteers with IONIS-ANGPTL3-LRxand IONIS-GSK4-LRxthat demonstrated these drugs had similar potency to IONIS-APO(a)-LRx, confirming the high potency of the LICA platform.

• Ionis added to its pipeline its first oral antisense drug acting locally in the GI tract for which Ionis earned a$10 millionlicense fee from Janssen.

Recent Corporate Highlights:

• Ionis' CEO, Dr.Stanley Crooke, received two awards, theE. B. HershbergAward from the American Chemical Society and the Lifetime Achievement Award from the Oligonucleotide Therapeutics Society recognizing his achievements in the field of oligonucleotide therapeutics.

• Ionis published a paper in Nature Biotechnology on the novel mechanism of action for antisense drugs that significantly expands therapeutic opportunities for the technology.

Three months ended,

Nine months ended,

September 30,

September 30,

2016

2015

2016

2015

Revenue:

(unaudited)

(unaudited)

Research and development revenue under collaborative agreements

$108,913

$48,918

$166,583

$230,469

Licensing and royalty revenue

2,014

203

19,689

1,664

Total revenue

110,927

49,121

186,272

232,133

Expenses:

Research, development and patent expenses

84,631

88,508

243,169

220,962

General and administrative

10,188

8,751

30,574

23,992

Total operating expenses

94,819

97,259

273,743

244,954

Income (loss) from operations

16,108

(48,138)

(87,471)

(12,821)

Other income (expense):

Investment income

989

1,384

3,912

3,146

Interest expense

(9,746)

(9,233)

(28,861)

(27,381)

Gain on investment in Regulus Therapeutics, Inc.

-

20,211

-

20,211

Income (loss) before income tax expense

7,351

(35,776)

(112,420)

(16,845)

Income tax expense

-

-

(1)

-

Net income (loss)

$7,351

$(35,776)

$(112,421)

$(16,845)

Basic net income (loss) per share

$0.06

$(0.30)

$(0.93)

$(0.14)

Diluted net income (loss) per share

$0.06

$(0.30)

$(0.93)

$(0.14)

Shares used in computing basic net income (loss) per share

120,989

119,979

120,795

119,560

Shares used in computing diluted net income (loss) per share

123,378

119,979

120,795

119,560

Three months ended,

September 30,

Nine months ended,

September 30,

2016

2015

2016

2015

(unaudited)

(unaudited)

$94,819

$97,259

$273,743

$244,954

Excluding compensation expense related to equity awards

(17,586)

(14,997)

(56,950)

(41,907)

$77,233

$82,262

$216,793

$203,047

$16,108

$(48,138)

$(87,471)

$(12,821)

Excluding compensation expense related to equity awards

(17,586)

(14,997)

(56,950)

(41,907)

$33,694

$(33,141)

$(30,521)

$29,086

$7,351

$(35,776)

$(112,421)

$(16,845)

Excluding compensation expense related to equity awards

(17,586)

(14,997)

(56,950)

(41,907)

$24,937

$(20,779)

$(55,471)

$25,062

Reconciliation of GAAP to Pro Forma BasisAs illustrated in the Selected Financial Information in this press release, pro forma operating expenses, pro forma income (loss) from operations, and pro forma net income (loss) were adjusted from GAAP to exclude compensation expense related to equity awards, which are non-cash.  Ionis has regularly reported non-GAAP measures for operating results as pro forma results.  These measures are provided as supplementary information and are not a substitute for financial measures calculated in accordance with GAAP.  Ionis reports these pro forma results to better enable financial statement users to assess and compare its historical performance and project its future operating results and cash flows.  Further, the presentation of Ionis' pro forma results is consistent with how Ionis' management internally evaluates the performance of its operations.

September 30,

December 31,

2016

2015

(unaudited)

Assets:

Cash, cash equivalents and short-term investments

$687,848

$779,183

Investment in Regulus Therapeutics Inc.

9,382

24,792

Other current assets

33,099

33,028

Property, plant and equipment, net

90,970

90,233

Other assets

22,287

20,664

Total assets

$843,586

$947,900

Liabilities and stockholders' equity:

Other current liabilities

$50,353

$81,554

Current portion of deferred contract revenue

56,539

67,322

1% convertible senior notes

356,440

339,847

2 3/4% convertible senior notes

51,570

49,523

Long-term obligations, less current portion

87,214

74,558

Long-term deferred contract revenue

101,831

134,306

Stockholders' equity

139,639

200,790

Total liabilities and stockholders' equity

$843,586

$947,900