On February 27, 2019 Ionis Pharmaceuticals, Inc. (Nasdaq: IONS) reported financial results for the fourth quarter and full year 2018 and reviewed highlights of its successful year (Press release, Ionis Pharmaceuticals, FEB 27, 2019, View Source [SID1234533727]).
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"We begin 2019 in the strongest position in our 30-year history. Building on this foundation, we believe we are positioned for continued growth," said Stanley T. Crooke, M.D., Ph.D., chairman of the board and chief executive officer of Ionis. "In 2018, we launched TEGSEDI globally through our affiliate, Akcea, adding revenue from TEGSEDI sales to our substantial commercial revenue from SPINRAZA. We also achieved many important milestones in our pipeline, particularly among the medicines within our late-stage pipeline. This week, Novartis exercised its option to license AKCEA-APO(a)-LRx for which we earned $150 million. Novartis plans to initiate a Phase 3 cardiovascular outcomes study and initiation activities are already underway. We and Akcea are finalizing Phase 3 study designs for the AKCEA-TTR-LRx pivotal program that we plan to initiate in the second half of this year. In addition, our late-stage neurological disease programs recently achieved important milestones. Roche is now enrolling patients in the Phase 3 study of IONIS-HTTRx for Huntington’s disease and Biogen is planning to add an additional cohort to the ongoing study of IONIS-SOD1Rx for patients with SOD1-related ALS that has the potential to support marketing approval. We achieved these successes while growing revenues, investing in the commercialization of TEGSEDI, advancing our broad and diverse pipeline, and consistently leading our industry in innovation – demonstrating the success of our business model and robust technology platform."
2018 Financial Results and Highlights
Revenues increased by 17 percent compared to 2017
Total revenue was $600 million compared to $514 million in 2017.
Commercial revenue from SPINRAZA for 2018 was $238 million, more than double compared to 2017.
TEGSEDI sales were $2.2 million in the fourth quarter of 2018, with commercial sales commencing in the EU in October and in the U.S. in December.
Commercial revenue was over 40 percent of total revenue in 2018 compared to less than 25 percent in 2017, reflecting Ionis’ transition to a commercial-stage company.
Achieved third consecutive year of non-GAAP operating profitability
GAAP operating income was $11 million for the fourth quarter and an operating loss of $61 million for the full year 2018, compared to an operating loss of $6 million and operating income of $31 million for the same periods in 2017.
Non-GAAP operating income was $45 million for the fourth quarter and $70 million for the full year 2018, compared to operating income of $16 million and $117 million for the same periods in 2017
Operating expenses increased in 2018 primarily due to investment in the commercialization of TEGSEDI.
Strong financial results trigger the recognition of a significant tax benefit
In 2018, Ionis reported GAAP net income attributable to Ionis common stockholders of $274 million, primarily driven by a $291 million one-time non-cash income tax benefit Ionis recorded in 2018 related to its income tax assets.
Because of Ionis’ strong financial performance over the past few years and its outlook regarding the continued growth of its business, the Company believes it is more likely than not that it will be able to use the significant amount of income tax assets it has accumulated to offset future taxable income.
Substantial cash position of over $2 billion enables continued investment in commercial products and pipeline
2019 Financial Guidance
"Building upon our success in 2018, we expect to continue our momentum this year and beyond. We anticipate both commercial and R&D revenues to contribute to our overall earnings growth this year, potentially making 2019 our fourth consecutive year of non-GAAP operating profitability. And for the first time, due to our strong financial performance in recent years and strong confidence in our future, we are projecting to be profitable on the bottom line on a non-GAAP basis in 2019. We believe our ability to be profitable while investing in commercial activities, fully exploiting our pipeline and advancing our technology, clearly sets us apart from our peers," said Elizabeth L. Hougen, chief financial officer of Ionis.
All non-GAAP amounts referred to in this press release exclude non-cash compensation expense related to equity awards. Please refer to the reconciliation of non-GAAP and GAAP measures, which is provided later in this release. In prior financial results releases, Ionis referred to amounts that excluded non-cash compensation expense related to equity awards as "pro forma". Additionally, Ionis has labeled its prior period financial statements "as revised" to reflect the revenue recognition accounting standard the Company adopted on January 1, 2018.
Business Highlights
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SPINRAZA – the worldwide standard-of-care for the treatment of all people with spinal muscular atrophy
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In 2018, SPINRAZA sales nearly doubled to $1.7 billion compared to 2017, driven by growth in the U.S. and outside the U.S., as reported by Biogen.
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As of the fourth quarter of 2018, more than 6,600 SMA patients from over 40 countries were on SPINRAZA, including commercial patients and patients in the expanded access program and clinical trials.
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In the fourth quarter of 2018, the number of adult patients on therapy in the U.S. grew by over 20 percent compared to the third quarter, accounting for more than 50 percent of new patient starts in the U.S.
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TEGSEDI (inotersen) – launch underway in multiple markets for the treatment of polyneuropathy of hereditary transthyretin amyloidosis (hATTR) in adult patients
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TEGSEDI generated $2.2 million in sales from the U.S. and EU in its first quarter of launch.
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PTC Therapeutics, Ionis and Akcea’s commercialization partner in Latin America, filed for marketing authorization for TEGSEDI in Brazil and was granted priority review.
Key Upcoming Events
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Roche plans to present data from the OLE study of IONIS-HTTRx in patients with Huntington’s disease in 2019.
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Biogen plans to present data from the completed portions of the Phase 1/2 study of IONIS-SOD1Rx in 2019.
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Ongoing regulatory discussions on WAYLIVRA in the EU, and if approved, launch.
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Ionis and its partners plan to report data from numerous Phase 2 studies including IONIS-FXIRx, IONIS-HBVRx and IONIS-GHR-LRx.
Revenue
Ionis’ revenue in the three months and year ended December 31, 2018 was $192 million and $600 million, respectively, compared to $168 million and $514 million for the same periods in 2017 and was comprised of the following (amounts in millions):
The increase in revenue in 2018 compared to 2017 was primarily due to increasing commercial revenue from SPINRAZA royalties, which more than doubled. Additionally, Ionis earned more than $2 million from TEGSEDI product sales in the fourth quarter of 2018.
Ionis’ R&D revenue demonstrates the Company’s ability to generate sustainable revenue from its numerous partnerships. R&D revenue from the amortization of upfront payments increased over $25 million in 2018 compared to 2017. The increase in amortization was primarily due to Ionis’ 2018 strategic neurology collaboration with Biogen. Also, in 2018, Ionis added amortization revenue from its new collaboration with Roche to develop IONIS-FB-LRx. Ionis’ R&D revenue from milestone payments, license fees and other services for 2018 continued to make a significant contribution to Ionis’ financial results.
Already in the first quarter of 2019, Ionis has earned $185 million. The Company earned $150 million from Novartis when it licensed AKCEA-APO(a)-LRx and $35 million from Roche when it enrolled the first patient in the Phase 3 study of IONIS-HTTRx in patients with Huntington’s disease.
Operating Expenses
Operating expenses for the three months and year ended December 31, 2018 on a GAAP basis were $181 million and $661 million, respectively, and on a non-GAAP basis were $147 million and $530 million, respectively. These amounts compare to GAAP operating expenses for the three months and year ended December 31, 2017 of $174 million and $483 million, respectively, and non-GAAP operating expenses of $152 million and $397 million, respectively. The full year increase in operating expenses in 2018 compared to 2017 was principally due to Ionis’ investments in the global launch of TEGSEDI. The Company’s SG&A expenses also increased due to an increase in fees the Company owed under its in-licensing agreements related to SPINRAZA, due to increased SPINRAZA product sales.
Income Tax Benefit
Ionis reported an income tax benefit of $292 million and $291 million for the three months and year ended December 31, 2018, respectively, compared to $7 million and $6 million for the same periods in 2017. Ionis’ tax benefit increased significantly in 2018 primarily due to a one-time non-cash tax benefit related to its deferred income tax assets. In the fourth quarter of 2018, the Company released a large portion of the valuation allowance associated with its deferred tax assets. Because of Ionis’ strong financial performance over the past few years and its outlook regarding the continued growth of its business, the Company determined that it is more likely than not that it will be able to utilize most of the deferred income tax assets it has accumulated to offset future taxable income.
Net Loss Attributable to Noncontrolling Interest in Akcea
At December 31, 2018, Ionis owned approximately 75 percent of Akcea. The shares of Akcea third parties own represent an interest in Akcea’s equity that Ionis does not control. However, because Ionis continues to maintain overall control of Akcea through its voting interest, Ionis reflects the assets, liabilities and results of operations of Akcea in Ionis’ consolidated financial statements. Ionis reflects the noncontrolling interest attributable to other owners of Akcea’s common stock in a separate line called "Net loss attributable to noncontrolling interest in Akcea" on Ionis’ statement of operations. Ionis’ net loss attributable to noncontrolling interest in Akcea for the three months and year ended December 31, 2018, was $17 million and $59 million, respectively. Ionis’ net loss attributable to noncontrolling interest in Akcea for the three months and year ended December 31, 2017, was $6 million and $11 million, respectively.
Net Income (Loss) Attributable to Ionis Common Stockholders
Ionis reported net income attributable to Ionis’ common stockholders of $320 million and $274 million for the three months and year ended December 31, 2018, respectively, compared to a net loss of $3 million and net income of $0.3 million for the same periods in 2017, all on a GAAP basis. On a non-GAAP basis, Ionis reported net income attributable to Ionis’ common stockholders of $351 million and $394 million for the three months and year ended December 31, 2018, respectively, compared to $18 million and $85 million for the same periods in 2017. The increase in 2018 net income attributable to Ionis’ common stockholders was primarily due to increases in revenue and the income tax benefit Ionis recognized in the fourth quarter of 2018.
For the three months ended December 31, 2018, basic and diluted net income per share were $2.32 and $2.21, respectively. For the year ended December 31, 2018, basic and diluted net income per share were $2.09 and $2.07, respectively. For the three months ended December 31, 2017, basic and diluted net loss per share were each $0.03. For the year ended December 31, 2017, basic and diluted net income per share were each $0.15. All amounts are on a GAAP basis.
Balance Sheet
As of December 31, 2018, Ionis had cash, cash equivalents and short-term investments of $2.1 billion compared to $1.0 billion at December 31, 2017. The increase in Ionis’ cash, cash equivalents and short-term investments was primarily due to the $1 billion Ionis received from Biogen for the 2018 strategic neurology collaboration.
Webcast and Conference Call
Today, at 11:30 a.m. Eastern Time, 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 at www.ionispharma.com. A webcast replay will be available for a limited time.