On February 28, 2017 NewLink Genetics Corporation (NASDAQ:NLNK), a biopharmaceutical company focused on bringing novel immuno-oncology therapies to patients with cancer, reported consolidated financial results for the fourth quarter and year ended 2016, as well as progress in its clinical development programs (Press release, NewLink Genetics, FEB 28, 2017, View Source [SID1234517892]). NewLink Genetics also outlined key 2017 business priorities related to the clinical development programs for the Company’s immuno-oncology pipeline.

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"NewLink Genetics has two separate and distinct IDO pathway inhibitors in clinical development. In 2017, we look forward to advancing clinical validation of IDO as an immuno-oncology target," said Charles J. Link, Jr. MD, Chairman, Chief Executive Officer and Chief Scientific Officer. "Our priorities going into 2017 are clear. For GDC-0919, we anticipate continued progress in the clinic in collaboration with our partner Genentech/Roche. We believe indoximod will emerge as one of the leading IDO pathway inhibitor programs in 2017."

2016 Highlights

The IDO pathway, which helps cancer escape the patient’s immune system, became increasingly validated as an immuno-oncology target, with clinical data coming from NewLink Genetics and others.
Presented early Phase 2 clinical data of indoximod plus gemcitabine/nab-paclitaxel for the treatment of patients with metastatic pancreatic cancer at the 2016 American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) Annual Meeting, suggesting evidence of safety and clinical activity.
Presented promising interim Phase 2 clinical data from a cohort of patients with advanced melanoma treated with indoximod plus pembrolizumab at the 2016 ASCO (Free ASCO Whitepaper) Annual Meeting.
Our Ebola vaccine candidate (rVSV∆G-ZEBOV GP), partnered with Merck, received breakthrough therapy designation from the FDA and PRIME status from the European Medicines Agency. In December 2016 the final results of the Guinea trial were published on-line in The Lancet and confirmed efficacy of the vaccine.
Finished 2016 with $131.5 million in cash and equivalents.
Anticipated Highlights in 2017

Our investigators have submitted an abstract to the American Association for Cancer Research (AACR) (Free AACR Whitepaper) on the Phase 2 study cohort of patients with advanced melanoma treated with indoximod in combination with pembrolizumab.
We have been informed by the AACR (Free AACR Whitepaper) committee that our abstract concerning our new chemical entity NLG802, a novel prodrug of indoximod, has been accepted for a poster presentation.
Genentech is expected to update on progress on a Phase 1b study of GDC-0919 in combination with atezolizumab for patients with solid tumors.
We intend to update progress from the Phase1b, dose-escalation study of indoximod and standard of care therapy in patients with Acute Myeloid Leukemia (AML).
We expect to finish the year with approximately $75 million in cash. This excludes potential payments from partners, the proceeds from any offering, and any costs associated with any strategic acquisitions.
"We are excited to be presenting clinical data for indoximod at upcoming scientific meetings in 2017 beginning at AACR (Free AACR Whitepaper) next month," said Nicholas Vahanian, M.D., President and Chief Medical Officer.

Financial Results

Cash Position: NewLink Genetics ended the year on December 31, 2016, with cash, cash equivalents, and certificates of deposit totaling $131.5 million compared to $197.8 million for the year ending December 31, 2015. The Company’s cash position is sufficient to fund current operations in the near and medium term.

R&D Expenses: Research and development expenses were $19.5 million and $93.3 million in the fourth quarter and year ended December 31, 2016 compared to $14.8 million and $71.4 million during the comparable periods in 2015. The increase year-over-year was due primarily to $11.1 million of charges incurred as a result of the restructuring during the second quarter of 2016, including a non-cash charge of $4.0 million related to impaired assets, with the remainder of the increase due to increases in contract manufacturing costs, supplies and equipment and clinical trial expenses.

G&A Expenses: General and administrative expenses in the fourth quarter and year ended December 31, 2016 were $7.2 million and $33.2 million compared to $7.7 million and $30.7 million during the comparable periods in 2015. The increase was due to an increase of $2.9 million in personnel-related expenses due to changes in transiently increased staffing levels, share-based compensation expense and compensation increases, an increase of $500,000 due to charges incurred as a result of the restructuring, offset by a decrease of $930,000 in consulting, legal and licensing fees, and supplies.

Net Loss: NewLink Genetics reported a net loss of $13.5 million or $0.46 per diluted share for the fourth quarter of 2016 and a net loss of $85.2 million or $2.94 per diluted share for the year ended December 31, 2016, compared to a net loss of $21.6 million or $0.75 per diluted share for the fourth quarter of 2015 and a net loss of $40.4 million or $1.41 per diluted share for the year ended December 31, 2015.

NewLink Genetics ended 2016 with 29,163,673 shares outstanding.

On February 28, 2017 Jazz Pharmaceuticals plc (Nasdaq: JAZZ) reported financial results for the full year and the fourth quarter of 2016 and provided financial guidance for 2017 (Press release, Jazz Pharmaceuticals, FEB 28, 2017, View Source [SID1234517889]).

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"In 2016, we delivered solid growth for two of our key products, Xyrem and Defitelio, completed multiple corporate development transactions, including the Celator acquisition, received NDA approval and launched Defitelio in the U.S., began the rolling NDA submission for Vyxeos, and advanced and expanded our development pipeline, including two new oxybate product candidates that may offer new therapeutic options for narcolepsy patients," said Bruce Cozadd, chairman and chief executive officer of Jazz Pharmaceuticals. "We are looking forward to a busy and productive 2017, building on our investments in internal and acquired R&D programs over the last few years. We believe that 2017 will be an exciting year for Jazz as we remain focused on delivering new and improved therapeutic options for patients and value to shareholders through expansion of our business."

GAAP net income attributable to Jazz Pharmaceuticals plc for 2016 was $396.8 million, or $6.41 per diluted share, compared to $329.5 million, or $5.23 per diluted share, for 2015. GAAP net income attributable to Jazz Pharmaceuticals plc for the fourth quarter of 2016 was $116.7 million, or $1.91 per diluted share, compared to $82.8 million, or $1.32 per diluted share, for the fourth quarter of 2015.

Adjusted net income attributable to Jazz Pharmaceuticals plc for 2016 was $627.2 million, or $10.14 per diluted share, compared to $595.5 million, or $9.45 per diluted share, for 2015. Adjusted net income attributable to Jazz Pharmaceuticals plc for the fourth quarter of 2016 was $165.6 million, or $2.71 per diluted share, compared to $176.5 million, or $2.81 per diluted share, for the fourth quarter of 2015. Reconciliations of applicable GAAP reported to non-GAAP adjusted information are included at the end of this press release.

Financial Highlights


Three Months Ended
December 31,



Year Ended
December 31,


(In thousands, except per share amounts and percentages)
2016

2015

Change

2016

2015

Change
Total revenues
$
396,621


$
340,881


16.4
%

$
1,487,973


$
1,324,803


12.3
%
GAAP net income attributable to Jazz Pharmaceuticals plc1
$
116,689


$
82,761


41.0
%

$
396,831


$
329,535


20.4
%
Adjusted net income attributable to Jazz Pharmaceuticals plc1,2
$
165,637


$
176,516


(6.2)
%

$
627,162


$
595,484


5.3
%
GAAP EPS attributable to Jazz Pharmaceuticals plc1
$
1.91


$
1.32


44.7
%

$
6.41


$
5.23


22.6
%
Adjusted EPS attributable to Jazz Pharmaceuticals plc1,2
$
2.71


$
2.81


(3.6)
%

$
10.14


$
9.45


7.3
%





1.
In the fourth quarter of 2016, the company adopted Accounting Standards Update (ASU) No. 2016-09, "Improvements to Employee Share-Based Payment Accounting" effective as of January 1, 2016. See footnote 1 to the table titled "Reconciliations of GAAP Reported to Non-GAAP Adjusted Information" at the end of this press release.
2.
Commencing with the second quarter of 2016, the company modified the calculation of its non-GAAP income tax provision in connection with the Securities and Exchange Commission’s May 2016 guidance pertaining to non-GAAP financial measures. This modification is reflected in the company’s 2015 and 2016 non-GAAP period results in the table above. See "Non-GAAP Financial Measures" below.


Total Revenues


Three Months Ended
December 31,

Year Ended
December 31,
(In thousands)
2016

2015

2016

2015
Xyrem (sodium oxybate) oral solution
$
291,204


$
251,752


$
1,107,616


$
955,187

Erwinaze / Erwinase (asparaginase Erwinia chrysanthemi)
56,771


50,440


200,678


203,261

Defitelio (defibrotide sodium) / defibrotide
29,672


18,472


108,952


70,731

Prialt (ziconotide) intrathecal infusion
6,055


6,496


29,120


26,440

Psychiatry
2,909


8,760


17,653


37,135

Other
6,003


3,004


13,242


24,065

Product sales, net
392,614


338,924


1,477,261


1,316,819

Royalties and contract revenues
4,007


1,957


10,712


7,984

Total revenues
$
396,621


$
340,881


$
1,487,973


$
1,324,803



Net product sales increased 12% in 2016 and 16% in the fourth quarter of 2016 compared to the same periods in 2015 primarily due to higher net product sales of Xyrem and Defitelio.

Xyrem net product sales increased 16% in both 2016 and in the fourth quarter of 2016 compared to the same periods in 2015.

Erwinaze/Erwinase net product sales decreased 1% in 2016 and increased 13% in the fourth quarter of 2016 compared to the same periods in 2015. In 2016, the company continued to experience supply challenges, which resulted in fluctuations in inventory levels and temporary disruptions to the company’s ability to supply certain markets, including the U.S. The company expects that these temporary supply interruptions will continue in 2017.

Defitelio/defibrotide net product sales increased 54% in 2016 and 61% in the fourth quarter of 2016 compared to the same periods in 2015 primarily due to the U.S. launch of Defitelio in April 2016. Net sales in the U.S. were $26.3 million in 2016 and $9.7 million in the fourth quarter of 2016.

Operating Expenses


Three Months Ended
December 31,

Year Ended
December 31,
(In thousands, except percentages)
2016

2015

2016

2015
GAAP:







Cost of product sales
$
33,656


$
24,030


$
105,386


$
102,526

Gross margin
91.4
%

92.9
%

92.9
%

92.2
%
Selling, general and administrative
$
127,141


$
125,555


$
502,892


$
449,119

% of total revenues
32.1
%

36.8
%

33.8
%

33.9
%
Research and development
$
44,158


$
29,455


$
162,297


$
135,253

% of total revenues
11.1
%

8.6
%

10.9
%

10.2
%
Acquired in-process research and development
$
—


$
—


$
23,750


$
—

Impairment charges
$
—


$
31,523


$
—


$
31,523




Three Months Ended
December 31,

Year Ended
December 31,
(In thousands, except percentages)
2016

2015

2016

2015
Non-GAAP adjusted:







Cost of product sales
$
32,177


$
22,209


$
100,797


$
98,452

Gross margin
91.8
%

93.4
%

93.2
%

92.5
%
Selling, general and administrative
$
108,204


$
87,409


$
404,837


$
355,422

% of total revenues
27.3
%

25.6
%

27.2
%

26.8
%
Research and development
$
39,619


$
26,017


$
146,466


$
96,678

% of total revenues
10.0
%

7.6
%

9.8
%

7.3
%


Operating expenses changed over the prior year periods primarily due to the following:

Selling, general and administrative (SG&A) expenses increased in 2016 and in the fourth quarter of 2016 compared to the same periods in 2015 on a GAAP and on a non-GAAP adjusted basis primarily due to higher headcount and other expenses resulting from the expansion of the company’s business, and included a one-time contract termination fee of $11.6 million to eliminate potential future royalty payments related to VyxeosTM (cytarabine and daunorubicin liposome injection).
Research and development (R&D) expenses increased in 2016 and in the fourth quarter of 2016 compared to the same periods in 2015 on a GAAP and on a non-GAAP adjusted basis primarily due to increased expenses for the development of JZP-110; increased investments in oxybate-related R&D programs; the initiation of a clinical study of defibrotide for the prevention of veno-occlusive disease (VOD); costs related to the rolling new drug application (NDA) submission for Vyxeos; and an increase in headcount required to support these activities. GAAP R&D expenses for 2015 included a $25.0 million milestone in connection with the acceptance for filing by the U.S. Food and Drug Administration (FDA) of the NDA for defibrotide.
Acquired in-process research and development expense in 2016 related to upfront and option payments totaling $15.0 million to Pfenex Inc. under an agreement in which the company was granted worldwide rights to develop and commercialize multiple early-stage hematology product candidates and an upfront payment of $8.8 million that the company made in connection with its acquisition of intellectual property and know-how related to recombinant crisantaspase.
Impairment charges of $31.5 million in 2015 resulted from the termination of the JZP-416 study.
Cash Flow and Balance Sheet

As of December 31, 2016, cash, cash equivalents and investments were $426.0 million, and the outstanding principal balance of the company’s long-term debt was $2.1 billion. Cash, cash equivalents and investments decreased from December 31, 2015 primarily due to the acquisition of Celator for approximately $1.5 billion, repurchases of $278.3 million under the company’s share repurchase program and a $150.0 million milestone payment triggered by FDA approval of Defitelio on March 30, 2016, partially offset by net borrowings of $850.0 million under the company’s revolving credit facility and cash flows from operations of $590.5 million. During 2016, the company repurchased 2.2 million ordinary shares at an average cost of $124.09 per ordinary share.

Recent Developments

In January 2017, the company enrolled the first patient in a Phase 3 clinical study comparing the efficacy and safety of defibrotide versus best supportive care in the prevention of VOD in adult and pediatric patients undergoing hematopoietic stem cell transplant who are at high risk or at very high risk of developing VOD.

In February 2017, the company enrolled the first patient in a Phase 2 clinical study evaluating the safety and efficacy of JZP-110 for the treatment of excessive sleepiness associated with Parkinson’s disease.

2017 Financial Guidance

Jazz Pharmaceuticals’ full year 2017 financial guidance is as follows (in millions, except per share amounts and percentages):

Revenues
$1,625-$1,700
Total net product sales
$1,617-$1,692
-Xyrem net sales
$1,220-$1,250
-Erwinaze/Erwinase net sales
$205-$225
-Defitelio/defibrotide net sales
$130-$150
-Vyxeos (CPX-351) net sales1
$10-$20
GAAP gross margin %
93%
Non-GAAP adjusted gross margin %2,5
93%
GAAP SG&A expenses
$515-$550
Non-GAAP adjusted SG&A expenses3,5
$440-$460
GAAP R&D expenses
$195-$220
Non-GAAP adjusted R&D expenses4,5
$165-$180
GAAP net income per diluted share
$6.55-$7.55
Non-GAAP adjusted net income per diluted share5
$10.70-$11.30

1.
Guidance assumes FDA approval and launch of Vyxeos (CPX-351) in the U.S. in 2017.
2.
Excludes $5 million of share-based compensation expense from estimated GAAP gross margin.
3.
Excludes $75-$90 million of share-based compensation expense from estimated GAAP SG&A expenses.
4.
Excludes $20-$25 million of share-based compensation expense and $10-$15 million of milestone payments from estimated GAAP R&D expenses.
5.
See "Non-GAAP Financial Measures" below. Reconciliations of non-GAAP adjusted guidance measures are included above and in the table titled "Reconciliation of GAAP to Non-GAAP Adjusted 2017 Net Income Guidance" at the end of this press release.

On February 28, 2017 Ionis Pharmaceuticals, Inc. (Nasdaq: IONS) reported that it outperformed its financial guidance by ending 2016 with pro forma operating income of $25.8 million and $665.2 million in cash, cash equivalents and short-term investments (Press release, Ionis Pharmaceuticals, FEB 28, 2017, View Source [SID1234517888]). The Company also reported a GAAP loss from operations of $46.3 million.

“2016 was a year of significant accomplishments for Ionis, culminating in the U.S. approval of SPINRAZA, in record time and with a very broad label. The approval of SPINRAZA is a testament to the efficacy, safety and tolerability that SPINRAZA demonstrated in multiple clinical studies in multiple SMA patient populations. We are pleased with Biogen’s early launch efforts in the U.S. and their actions directed to making SPINRAZA available to patients around the world as soon as possible,” said B. Lynne Parshall, chief operating officer of Ionis Pharmaceuticals.

“In 2016, we reported positive clinical data from 11 studies with six drugs. We also continued to advance over 36 drugs in development, including our Phase 3 drugs, volanesorsen and IONIS-TTRRx, which will complete pivotal trials shortly. We also added five new drugs to our pipeline, including our first Generation 2.5 LICA drug and our first oral locally acting drug for gastrointestinal autoimmune diseases.

“In the first week of 2017, we and our subsidiary, Akcea, initiated a collaboration with Novartis to develop and co-commercialize AKCEA-APO(a)-LRx and AKCEA-APOCIII-LRx for patients with cardiovascular disease. Our partner for our Factor XI program, Bayer, is advancing IONIS-FXIRx and is expanding the program by initiating development of the LICA follow-on, IONIS-FXI-LRx. In addition, our broad strategic collaborations with Biogen and AstraZeneca continue to be productive. We believe our constellation of partnerships demonstrate the potential of our antisense drugs to address a wide variety of diseases with both large and small patient populations.

“In 2017, we expect to be breakeven or profitable at the operating line on a pro forma basis, driven in part by revenue from SPINRAZA. Biogen anticipates EU approval mid-year and has filed for regulatory authorization in Japan, Canada and Australia, and is planning to file additional applications in other countries this year. Approval in additional markets could broaden access to SPINRAZA and further bolster our revenues. We and Akcea expect to report Phase 3 data in March from the APPROACH study of volanesorsen in patients with familial chylomicronemia syndrome. Together with Akcea, we are preparing the regulatory submissions and plan to file for marketing authorization in the U.S., EU and Canada this year, provided the Phase 3 data are positive. Akcea has also made progress in preparing to launch volanesorsen. In the second quarter, we plan to report Phase 3 data from the NEURO-TTR study with IONIS-TTRRx in patients with familial amyloid polyneuropathy. We and our partner, GSK, are preparing to file an NDA before year end if the Phase 3 data are positive. While progress in these late-stage programs represents key visible catalysts for the year, we also plan to provide updates from our large and diverse pipeline throughout the year.

“We believe we have the key elements in place to achieve sustained, long-term financial growth. We have multiple drivers of revenue; a partnership strategy that leverages partner resources; a mature, broad and rapidly advancing clinical pipeline; and an innovative, more efficient drug discovery platform that enables us to continue developing new drugs with the potential for significant commercial opportunity in both rare and more prevalent diseases. We are now closer to achieving our goal of becoming a profitable, multi-product company delivering innovative medicines to patients with serious diseases,” concluded Ms. Parshall.

Ionis’ 2017 goals and a list of corporate and drug development highlights can be found at the end of this press release prior to the financial tables.

Financial Results

“2016 was marked by continued progress, highlighted by the approval of SPINRAZA. We earned substantial license fees and milestone payments from our many achievements, which led us to significantly improve upon our revenue, pro forma net operating loss and cash guidance for 2016. In 2016, we generated $347 million of revenue, an increase of 45 percent compared to our guidance of $240 million. Importantly, we were able to achieve all of our 2016 accomplishments with only a nominal increase in our expenses over 2015. We ended 2016 with a GAAP loss from operations of $46 million, which included $72 million in non-cash compensation expense related to equity awards resulting in pro forma operating income of $26 million. In addition, we reported GAAP and pro forma net income for the third and fourth quarters. During the year, we received more than $190 million from our partners and ended the year with $665 million in cash, exceeding our year-end cash guidance by $65 million. This cash balance does not include more than $100 million that we earned in 2016 and received payment for in 2017,” said Elizabeth L. Hougen, chief financial officer of Ionis Pharmaceuticals.

“We are pleased to add commercial revenue from SPINRAZA to our already significant revenue from partnerships. Over the past five years, we have consistently increased our revenue, reflecting the successes of our partnered programs and drugs. This R&D revenue provides a base of revenue that funds most of our pro forma operating expenses. While in any year the specific sources of our R&D revenue change, the consistent growth in revenue we have achieved over the last five years supports the sustainability of this component of our operating model. In 2017, we expect to continue to have a strong R&D revenue base that funds most of our pro forma operating expenses. To that revenue base, we are adding commercial revenue from SPINRAZA royalties. This revenue is nearly all profit to us, in other words we have only a nominal amount of corresponding expense associated with it. For 2017, we expect our operating expenses to be essentially flat compared to 2016; however, the composition of our expenses will change to reflect the evolution of our business. We plan to continue to increase our commercial spending for volanesorsen as our subsidiary, Akcea, prepares to launch volanesorsen globally in 2018. These increases will be offset by a decrease in our R&D expenses, reflecting the fact that our current Phase 3 programs are coming to a close. Because of the efficiency of our technology, we can advance our earlier stage drugs and add new drugs to our pipeline while still decreasing our research and development expenses. The combination of a solid base of R&D revenue, SPINRAZA commercial revenue and prudent spending, support our projection that we will be breakeven or profitable at the operating line on a pro forma basis for 2017. As we have more visibility on SPINRAZA sales, we will provide more detailed guidance. Already in 2017, we have generated more than $250 million in cash from our partnered programs. As such, we are projecting a year-end cash balance of over $825 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.

Revenue

Ionis’ revenue for the three and twelve months ended December 31, 2016 was $160.3 million and $346.6 million, compared to $51.6 million and $283.7 million for the same periods in 2015. Ionis’ revenue in 2016 consisted of the following:

·
$170 million from Biogen for FDA approval, licensing and advancing the Phase 3 program for SPINRAZA;
·
$53 million from AstraZeneca for advancing and licensing IONIS-KRAS-2.5Rx and selecting IONIS-AZ4-2.5-LRx to move into development;
·
$15 million from Janssen for licensing IONIS-JBI1-2.5Rx and validating an undisclosed target to treat patients with a gastrointestinal autoimmune disease;
·
$15 million from Kastle Therapeutics for acquiring Kynamro;
·
$8 million from Biogen for advancing IONIS-SOD1Rx, IONIS-BIIB4Rx and IONIS-BIIB6Rx;
·
$61 million from the amortization of upfront fees; and
·
$25 million primarily from its partners for the manufacturing services Ionis performed.

In comparison, Ionis’ revenue in 2015 included $115.7 million in milestone payments from partnered programs, $91.2 million in connection with Bayer’s exclusive license of IONIS-FXIRx, $56.2 million from the amortization of upfront fees and $20.6 million primarily from the 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 Expenses
Ionis’ operating expenses for the three and twelve months ended December 31, 2016 on a GAAP basis were $119.2 million and $392.9 million, respectively, and on a pro forma basis were $104.0 million and $320.8 million, respectively. This is compared to GAAP operating expenses of $114.5 million and $359.5 million and pro forma operating expenses of $97.1 million and $300.2 million for the same periods in 2015. The increase in operating expenses was primarily due to Phase 3 programs for SPINRAZA, IONIS-TTRRx and volanesorsen that Ionis conducted in 2016. The Company completed target enrollment in four of the Phase 3 studies at the end of 2015, and as a result, these studies were in their most expensive stage during 2016. In addition, Akcea continued to build a global organization and prepare for the launch of volanesorsen. In addition, Ionis’ operating expenses for 2016 on a GAAP basis increased due to an increase in non-cash compensation expense related to equity awards that resulted from an increase in the exercise price of the stock options the Company has granted over the past several years.

Loss on Retirement of Debt
In December 2016, Ionis refinanced a majority of its 2¾% convertible senior notes due 2019 (2¾% Notes). In the refinancing, Ionis reduced the interest rate to 1% by issuing an additional $185.5 million of its 1% convertible senior notes due 2021 (1% Notes). Ionis also significantly reduced the potential dilution from its convertible notes and extended the maturity to November 2021. As a result of the early repurchase of the 2¾% Notes, Ionis recognized a $4.0 million non-cash loss.

Income Tax Expense
Ionis recognized income tax expense of $2.9 million for the year ended December 31, 2016 compared to $0.4 million in 2015. Ionis’ tax expense increased in 2016 compared to 2015 primarily due to an increase in taxable income resulting from Ionis’ strong financial performance in 2016.

Net Income (Loss)
Ionis reported net income of $25.9 million and a net loss of $86.6 million for the three and twelve months ended December 31, 2016 on a GAAP basis, respectively, compared to a net loss of $71.4 million and $88.3 million for the same periods in 2015. Ionis recorded pro forma net income of $41.0 million for the three months ended December 31, 2016 compared to a pro forma net loss of $54.0 million for the same period in 2015. For the twelve months ended December 31, 2016, the Company had a pro forma net loss of $14.4 million compared to a pro forma net loss of $29.0 million in 2015. Basic and diluted net income per share for the three months ended December 31, 2016 on a GAAP basis was $0.21. Basic and diluted net loss per share for the twelve months ended December 31, 2016 was $0.72. This is compared to a basic and diluted net loss of $0.59 and $0.74 per share for the three and twelve months ended December 31, 2015, respectively.

Balance Sheet
As of December 31, 2016, Ionis had cash, cash equivalents and short-term investments of $665.2 million compared to $779.2 million at December 31, 2015. Ionis’ cash balance decreased in 2016 primarily due to spending to support the Company’s ongoing Phase 3 programs. Ionis’ cash balance at the end of 2016 did not include $107 million the Company earned in the fourth quarter of 2016 and received in 2017. Since the end of 2016, Ionis has generated more than $250 million primarily from its Novartis and Bayer partnerships. Ionis’ working capital was $664.1 million at December 31, 2016 compared to $688.1 million at December 31, 2015.

On February 28, 2017 Ionis Pharmaceuticals, Inc. (Nasdaq: IONS) reported that it outperformed its financial guidance by ending 2016 with pro forma operating income of $25.8 million and $665.2 million in cash, cash equivalents and short-term investments (Press release, Ionis Pharmaceuticals, FEB 28, 2017, View Source [SID1234517888]). The Company also reported a GAAP loss from operations of $46.3 million.

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

                  Schedule Your 30 min Free Demo!

"2016 was a year of significant accomplishments for Ionis, culminating in the U.S. approval of SPINRAZA, in record time and with a very broad label. The approval of SPINRAZA is a testament to the efficacy, safety and tolerability that SPINRAZA demonstrated in multiple clinical studies in multiple SMA patient populations. We are pleased with Biogen’s early launch efforts in the U.S. and their actions directed to making SPINRAZA available to patients around the world as soon as possible," said B. Lynne Parshall, chief operating officer of Ionis Pharmaceuticals.

"In 2016, we reported positive clinical data from 11 studies with six drugs. We also continued to advance over 36 drugs in development, including our Phase 3 drugs, volanesorsen and IONIS-TTRRx, which will complete pivotal trials shortly. We also added five new drugs to our pipeline, including our first Generation 2.5 LICA drug and our first oral locally acting drug for gastrointestinal autoimmune diseases.

"In the first week of 2017, we and our subsidiary, Akcea, initiated a collaboration with Novartis to develop and co-commercialize AKCEA-APO(a)-LRx and AKCEA-APOCIII-LRx for patients with cardiovascular disease. Our partner for our Factor XI program, Bayer, is advancing IONIS-FXIRx and is expanding the program by initiating development of the LICA follow-on, IONIS-FXI-LRx. In addition, our broad strategic collaborations with Biogen and AstraZeneca continue to be productive. We believe our constellation of partnerships demonstrate the potential of our antisense drugs to address a wide variety of diseases with both large and small patient populations.

"In 2017, we expect to be breakeven or profitable at the operating line on a pro forma basis, driven in part by revenue from SPINRAZA. Biogen anticipates EU approval mid-year and has filed for regulatory authorization in Japan, Canada and Australia, and is planning to file additional applications in other countries this year. Approval in additional markets could broaden access to SPINRAZA and further bolster our revenues. We and Akcea expect to report Phase 3 data in March from the APPROACH study of volanesorsen in patients with familial chylomicronemia syndrome. Together with Akcea, we are preparing the regulatory submissions and plan to file for marketing authorization in the U.S., EU and Canada this year, provided the Phase 3 data are positive. Akcea has also made progress in preparing to launch volanesorsen. In the second quarter, we plan to report Phase 3 data from the NEURO-TTR study with IONIS-TTRRx in patients with familial amyloid polyneuropathy. We and our partner, GSK, are preparing to file an NDA before year end if the Phase 3 data are positive. While progress in these late-stage programs represents key visible catalysts for the year, we also plan to provide updates from our large and diverse pipeline throughout the year.

"We believe we have the key elements in place to achieve sustained, long-term financial growth. We have multiple drivers of revenue; a partnership strategy that leverages partner resources; a mature, broad and rapidly advancing clinical pipeline; and an innovative, more efficient drug discovery platform that enables us to continue developing new drugs with the potential for significant commercial opportunity in both rare and more prevalent diseases. We are now closer to achieving our goal of becoming a profitable, multi-product company delivering innovative medicines to patients with serious diseases," concluded Ms. Parshall.

Ionis’ 2017 goals and a list of corporate and drug development highlights can be found at the end of this press release prior to the financial tables.

Financial Results

"2016 was marked by continued progress, highlighted by the approval of SPINRAZA. We earned substantial license fees and milestone payments from our many achievements, which led us to significantly improve upon our revenue, pro forma net operating loss and cash guidance for 2016. In 2016, we generated $347 million of revenue, an increase of 45 percent compared to our guidance of $240 million. Importantly, we were able to achieve all of our 2016 accomplishments with only a nominal increase in our expenses over 2015. We ended 2016 with a GAAP loss from operations of $46 million, which included $72 million in non-cash compensation expense related to equity awards resulting in pro forma operating income of $26 million. In addition, we reported GAAP and pro forma net income for the third and fourth quarters. During the year, we received more than $190 million from our partners and ended the year with $665 million in cash, exceeding our year-end cash guidance by $65 million. This cash balance does not include more than $100 million that we earned in 2016 and received payment for in 2017," said Elizabeth L. Hougen, chief financial officer of Ionis Pharmaceuticals.

"We are pleased to add commercial revenue from SPINRAZA to our already significant revenue from partnerships. Over the past five years, we have consistently increased our revenue, reflecting the successes of our partnered programs and drugs. This R&D revenue provides a base of revenue that funds most of our pro forma operating expenses. While in any year the specific sources of our R&D revenue change, the consistent growth in revenue we have achieved over the last five years supports the sustainability of this component of our operating model. In 2017, we expect to continue to have a strong R&D revenue base that funds most of our pro forma operating expenses. To that revenue base, we are adding commercial revenue from SPINRAZA royalties. This revenue is nearly all profit to us, in other words we have only a nominal amount of corresponding expense associated with it. For 2017, we expect our operating expenses to be essentially flat compared to 2016; however, the composition of our expenses will change to reflect the evolution of our business. We plan to continue to increase our commercial spending for volanesorsen as our subsidiary, Akcea, prepares to launch volanesorsen globally in 2018. These increases will be offset by a decrease in our R&D expenses, reflecting the fact that our current Phase 3 programs are coming to a close. Because of the efficiency of our technology, we can advance our earlier stage drugs and add new drugs to our pipeline while still decreasing our research and development expenses. The combination of a solid base of R&D revenue, SPINRAZA commercial revenue and prudent spending, support our projection that we will be breakeven or profitable at the operating line on a pro forma basis for 2017. As we have more visibility on SPINRAZA sales, we will provide more detailed guidance. Already in 2017, we have generated more than $250 million in cash from our partnered programs. As such, we are projecting a year-end cash balance of over $825 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.

Revenue

Ionis’ revenue for the three and twelve months ended December 31, 2016 was $160.3 million and $346.6 million, compared to $51.6 million and $283.7 million for the same periods in 2015. Ionis’ revenue in 2016 consisted of the following:

·
$170 million from Biogen for FDA approval, licensing and advancing the Phase 3 program for SPINRAZA;
·
$53 million from AstraZeneca for advancing and licensing IONIS-KRAS-2.5Rx and selecting IONIS-AZ4-2.5-LRx to move into development;
·
$15 million from Janssen for licensing IONIS-JBI1-2.5Rx and validating an undisclosed target to treat patients with a gastrointestinal autoimmune disease;
·
$15 million from Kastle Therapeutics for acquiring Kynamro;
·
$8 million from Biogen for advancing IONIS-SOD1Rx, IONIS-BIIB4Rx and IONIS-BIIB6Rx;
·
$61 million from the amortization of upfront fees; and
·
$25 million primarily from its partners for the manufacturing services Ionis performed.

In comparison, Ionis’ revenue in 2015 included $115.7 million in milestone payments from partnered programs, $91.2 million in connection with Bayer’s exclusive license of IONIS-FXIRx, $56.2 million from the amortization of upfront fees and $20.6 million primarily from the 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 Expenses
Ionis’ operating expenses for the three and twelve months ended December 31, 2016 on a GAAP basis were $119.2 million and $392.9 million, respectively, and on a pro forma basis were $104.0 million and $320.8 million, respectively. This is compared to GAAP operating expenses of $114.5 million and $359.5 million and pro forma operating expenses of $97.1 million and $300.2 million for the same periods in 2015. The increase in operating expenses was primarily due to Phase 3 programs for SPINRAZA, IONIS-TTRRx and volanesorsen that Ionis conducted in 2016. The Company completed target enrollment in four of the Phase 3 studies at the end of 2015, and as a result, these studies were in their most expensive stage during 2016. In addition, Akcea continued to build a global organization and prepare for the launch of volanesorsen. In addition, Ionis’ operating expenses for 2016 on a GAAP basis increased due to an increase in non-cash compensation expense related to equity awards that resulted from an increase in the exercise price of the stock options the Company has granted over the past several years.

Loss on Retirement of Debt
In December 2016, Ionis refinanced a majority of its 2¾% convertible senior notes due 2019 (2¾% Notes). In the refinancing, Ionis reduced the interest rate to 1% by issuing an additional $185.5 million of its 1% convertible senior notes due 2021 (1% Notes). Ionis also significantly reduced the potential dilution from its convertible notes and extended the maturity to November 2021. As a result of the early repurchase of the 2¾% Notes, Ionis recognized a $4.0 million non-cash loss.

Income Tax Expense
Ionis recognized income tax expense of $2.9 million for the year ended December 31, 2016 compared to $0.4 million in 2015. Ionis’ tax expense increased in 2016 compared to 2015 primarily due to an increase in taxable income resulting from Ionis’ strong financial performance in 2016.

Net Income (Loss)
Ionis reported net income of $25.9 million and a net loss of $86.6 million for the three and twelve months ended December 31, 2016 on a GAAP basis, respectively, compared to a net loss of $71.4 million and $88.3 million for the same periods in 2015. Ionis recorded pro forma net income of $41.0 million for the three months ended December 31, 2016 compared to a pro forma net loss of $54.0 million for the same period in 2015. For the twelve months ended December 31, 2016, the Company had a pro forma net loss of $14.4 million compared to a pro forma net loss of $29.0 million in 2015. Basic and diluted net income per share for the three months ended December 31, 2016 on a GAAP basis was $0.21. Basic and diluted net loss per share for the twelve months ended December 31, 2016 was $0.72. This is compared to a basic and diluted net loss of $0.59 and $0.74 per share for the three and twelve months ended December 31, 2015, respectively.

Balance Sheet
As of December 31, 2016, Ionis had cash, cash equivalents and short-term investments of $665.2 million compared to $779.2 million at December 31, 2015. Ionis’ cash balance decreased in 2016 primarily due to spending to support the Company’s ongoing Phase 3 programs. Ionis’ cash balance at the end of 2016 did not include $107 million the Company earned in the fourth quarter of 2016 and received in 2017. Since the end of 2016, Ionis has generated more than $250 million primarily from its Novartis and Bayer partnerships. Ionis’ working capital was $664.1 million at December 31, 2016 compared to $688.1 million at December 31, 2015.