Good day, everyone, and welcome to Isis Pharmaceuticals Third Quarter Fiscal Results Conference Call. Please note that today's event is being recorded. Leading today's call from Isis is Dr. Stan Crooke, Isis' Chairman and CEO. Dr. Crooke, please begin.

Good morning, and thanks everyone for joining us on our call today to discuss the third quarter financial results and recent business highlights. On the call today, Beth will walk you through our financial results; Lynne will discuss the business highlights for the quarter; Paula will give you an update on EXC activities, and then I'll close by focusing on how the advances we're making in our technology translate into real value on our pipeline today. Our solid progress in all areas of our business is reflected in our strong financial results. In the first 9 months of the year, we reported a pro forma net profit of $25 million, and we ended the quarter with more than $800 million in cash. These are both significant increases compared to last year. We have 38 drugs in development with the potential to fundamentally change the way a wide range of diseases are treated. We have a pipeline of first-in-class or best-in-class drugs, on many of which we have reported positive clinical data already this year. We have potential near-term commercial opportunities in our 3 drugs that are completing Phase III in a large pipeline of drugs in Phase II. We expect to complete enrollment in both the Phase III studies were conducted for ISIS-SMNRx in the next several months. And now that the generic name for SMNRx has been approved going forward, we'll refer to the drug as nusinersen. Last week, we presented positive data from 2 clinical trials on our Phase III drug ISIS-TTRRx. These data provide additional support for the broad development plan that we and our partners at GSK are conducting for ISIS-TTRRx as a drug to treat all forms of TTR amyloidosis. We also provided more details on GSK's plans for the Phase III TTR cardiomyopathy study…

Thanks, Stan. A reminder to everyone that this conference call includes forward-looking statements regarding the financial outlook for Isis, Isis' business, the business of Akcea Therapeutics and the therapeutic and commercial potential of Isis' technology and products and development. Any statement describing Isis' goals, expectations, financial or other projections, intentions or belief, including the commercial potential of volanesorsen, ISIS-SMNRx, nusinersen and ISIS-TTRRx, is a forward-looking statement and should be considered an at-risk statement. Such statements are subject to certain risks and uncertainties, particularly those inherent in the process of discovering, developing and commercializing drugs that are safe and effective for use as human therapeutics, and in the endeavor of building a business around such drugs. Isis' forward-looking statements also involve assumptions that, if they never materialize or prove correct, could cause its results to differ materially from those expressed or implied by such forward-looking statements. Although Isis' forward-looking statements reflect the good faith and judgment of its management, these statements are based only on facts and factors currently known by Isis. As a result, you are cautioned not to rely on these forward-looking statements. These and other risks concerning Isis' programs are described in additional detail in Isis' annual report on Form 10-K for the year ended December 31, 2014, 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. And now, I'd like to turn the call over to Beth.

Thank you, Wade. We ended the third quarter on a strong financial position with a pro-forma operating income of $29 million and pro forma net income of $25 million. Our operating results in the first 9 months were significantly improved over the same period last year, in which we reported a pro forma net operating loss of $35 million and a pro forma net loss of $47 million. We also ended September with more than $800 million in cash. Our financial results reflect the successes of our drugs in development, which have generated nearly $300 million from our partners so far this year. During the first 9 months of this year, we earned $232 million of revenue, which was an 80% increase compared to the same period in 2014. Our revenue in 2015 was largely comprised of the $91 million we earned from our license of Isis Factor XIRX to Bayer and $90 million of revenue from milestone payments. In addition to bolstering our financial results, the milestone payments we earned reflect a significant progress our partnered programs have achieved this year. In the third quarter, we earned a $22 million milestone payment from Roche for initiating the Phase I, II study of ISIS-HTTRx, and $11 million of milestone payments from Biogen for advancing the Phase III studies of nusinersen. Furthermore, we earned $50 million of revenue through September 30 this year, primarily from the amortization of upfront payments from our partnerships. Consistent with our guidance, our year-to-date pro forma operating expenses increased by about $40 million over the same period last year, primarily because 4 of the Phase III studies we're conducting are nearly fully enrolled and have entered their most expensive stage. In addition, our expenses this year have increased as Akcea has begun to prepare to launch and commercialize volanesorsen. As we look at the fourth quarter, we've already earned $16 million in milestone payments, and we have the opportunity to earn additional milestone payments as our partnered programs continues to advance. We are projecting a continuing increase in our operating expenses as our Phase III programs progress, and we also expect Akcea's expenses to continue to increase as they make progress on the Phase III study of l volanesorsen in patients with similar partial lipid dystrophy, and build the commercial team and infrastructure to prepare to commercialize volanesorsen globally. As a result of our strong financial results so far this year, we expect to improve upon our revised guidance of a pro forma net operating loss in a low $30 million range and cash of more than $750 million. We plan to provide estimates of our 2015 year-end results in early January. And now I'll turn the call over to Lynne.

Thank you, Beth. We reported encouraging data on all of our Phase III drugs this year, substantially de-risking these programs. These data demonstrate that our drugs have the potential to fundamentally change the way diseases are treated. Any one of these events would have made 2015 a successful year for Isis. The culmination of all of these events further illustrates our growth trajectory. Our SMA program is progressing well. We expect to complete enrollment of both of our nusinersen Phase III studies by early next year. Data from our open-label Phase II studies suggests the drug may bring significant benefit to patients with spinal muscular atrophy. Importantly, since our last data cutoff in April of this year, there have been no new events of death or permanent ventilation reported in the Phase II open-label study in infants with SMA. This means that we have had only 1 event in over a year in this study. Over 70% of the infants who enrolled in the 12-milligram cohort remain on study, and these children are all over 21 months old with an average age of well over 2 years. In fact, in the study, we now have a child with Type I SMA who's older than 3 years of age. SMA is a heartbreaking and fatal disease in its most severe form, with no approved therapies. As we've recently said to the SMA community, we're doing everything we can to advance nusinersen through development and approval as rapidly as possible. An early and important step that helped us move more rapidly was receiving fast-track designation from the FDA. This has facilitated our positive interactions with the FDA. Our communications with regulators in both the U.S. and EU are going well, and we're continuing to engage in regular and productive discussions with health…

Thank you, Lynne. At Akcea, we are building a high caliber development and commercialization company. Our focus is to bring transformative medicines to patients through our robust lipid portfolio of targeted antisense drugs. Akcea's first priority is to realize the significant near-term commercial opportunity that volanesorsen presents. We are conducting 2 Phase III studies in 2 distinct ultrarare genetic diseases, both familial chylomicronemia syndrome or FCS and familial partial lipodystrophy or FPL, are life-threatening chronic ware diseases that are associated with significant morbidity and premature death. The Phase III study in patients with FCS is progressing according to plan, and we expect to complete enrollment by the end of the year. The FPL Phase III study has also begun and is progressing well. Our pre-commercialization activities are underway and momentum is building. Among those physicians who understand and have treated FCS and FPL patients, there is an acute sense of unmet need. Our focus is to further identify Isis care throughout the patient journey. We plan to work with Centers of Excellence of leading KOLs to increase the medical understanding of both of these rare diseases. In this way, we will significantly raise disease awareness that should lead to earlier diagnosis and earlier and aggressive treatment. Our growing commercial organization is also working closely with the development group to assure optimal regulatory and reimbursement access for volanesorsen. We are building a dedicated team that can deliver this transformative drug to our patients. There's scientific and clinical experts who have proven expertise in selling rare disease drugs. We're also bringing in the right talent to support our patients ensuring long-term compliance. At Akcea, in addition to the near-term rare disease indications that present opportunities for volanesorsen, we have a deep pipeline of medicines targeting additional lipid and cardiovascular diseases. And this…

Thanks, Paula. It is certainly very exciting to see the progress that's being made at Akcea and couple that excitement to the advances in the pipeline of first-in-class drugs to reduce under-treated lipid caused cardiovascular disease. But perhaps the highlight of the quarter is clinical performance of ISIS-APO(a)-LRX. This is important implication for our LICA platform and for the 7 other LICA drugs that we have in our pipeline today. Given how potent our current generation 2-plus drugs are, we hoped that we might see as much as 10-fold increase in potency by adding LICA. The fact that we achieved more than a 30-fold increase in potency in humans with superb tolerability is potentially another game changer that once again suggest broadened and enhanced opportunities for our platform. Just to put this in a perspective, a greater than 30-fold increase in potency supports our ability to potentially does with ultra-low volumes making the subcutaneous injection almost unnoticeable. This also supports the potential to dose weekly, monthly or quarterly or even less frequently. So with our LICA technology, we've created a platform, a technology platform that brings value, enhances tolerability, improves the convenience and ease of administration and provides the flexibility to optimize treatment schedules to support uptake and adherence in different patient populations. Since we have 8 LICA drugs in development, with more on the way next year, this advance is much more important than just improving the performance of a single drug. In the coming months, we will have additional clinical data from a number of the LICA drugs that we have in development. And as Paula said, we'll be getting the Phase 2b program underway on ISIS-APO(a)-LRx. We have a great pipeline of first-in-class drugs that are performing very well. We are reaping the rewards of years of…

[Operator Instructions] Our first question today comes from Jessica Fye from JPMorgan.

First, I'm not sure if this is for Paula, but on APO(a)-LRx for LP(a) you have a few different sizes at the potential target patient populations you're going after over time, but I think your taking the LICA version forward for all of those groups. And clearly, it looks better than the original version, but can you talk about how you think about pricing for a product like this with those varying population sizes?

Sure. Jessica, so what we need to remember is that value creation is the most important thing, and so the product will be priced in accordance with the value that it brings. So starting with the rare disease, and then being priced according to the value as we expand the indication.

Okay, got it. And just a couple more, if I can. For TTR, question about the FAP study endpoints, I guess, if there's some scenario where you missed on a CV primary endpoint, but for example, show a clear benefit on 6-minute walk and TTR knockdown, is that still a fileable study, is that still -- does that work for registration in your eyes?

We think so. We think that it's entirely feasible. In fact, I think, those are endpoints that are being used by others in the effort to get approval for FAP. So, yes.

Okay, got it. And just last one on SMA. Can you talk about when we might see the next say, conference presentation or next open-label update for that Phase II infant study?

I don't want to be precise about that because we have a good many conversations in progress at this point, and so what I'd like to do is to say that we remain highly encouraged by what we're seeing and encouraged by the conversations that we're having with regulatory agencies, and that's our primary focus. And then we will, of course, share the information that we have as soon as consistent with getting the drug approved in the most rapid way.

Our next question comes from Eric Schmidt from Cowen and Company..

May be a follow-on question of Jessica's on nusinersen. Lynne, I'm not sure you're going to have much of an answer for this one either Stan or Lynne, but I think Lynne mentioned that the conversations with regulators are proceeding well, but that this takes time. I guess, my question is, when do you think we'll have clarity on a filing timeline or strategy here?

That sounds like a question that I should let Lynne answer.

I was hoping you're going to answer, Stan. The discussions we're proceeding well until they're finished. We can't give you any more clarity, but I will say that we're working closely together with regulators to be able as rapidly as possible to make the drug available. And one point I would make, and it's probably obvious to everybody on the phone is that when you file is much less important than when you actually get approved. And so we're working on a path that we and the regulators have confidence will be a positive path to approval.

Let me add to that, Eric, that there's not -- there is never a minute when the team at Isis is not aware of how urgent the need of these infants and their families to have therapy, and we're pushing as absolutely hard as we can consistent with the outcome that's needed, which is an approval at the rapidest -- at the earliest time with the least amount of delay.

Okay, I mean, there's, I guess, been speculation in investment circles that as you get closer and closer to the end of the Phase III studies, it makes it maybe more awkward to file for approval or receive approval just months or weeks before you might be unbinding a pivotal trial. Do you sense that concern at the agencies?

No.

No, we don't.

And I think, it's speculation -- it has the timelines a little different from what are in our minds. So we haven't experienced any significant negativity or any concerns about any of that in our conversations either in the U.S. or the several countries in Europe with whom we've spoken.

And just last one for me, maybe for Beth. You're going to hit a couple of milestones in terms of completing enrollment in nusinersen, the Type I study and a TTR FAP study, are those -- are either of those associated with the milestones you can disclose?

We do have a number of milestones coming up in the fourth quarter and also early next year as we progress those studies. But the major next financial payments that come with both of those studies are going to be the licensing events. And we haven't disclosed timing of those other than to say that they will happen after the conclusion of the Phase III studies.

I do think that the short answer to your question is, Eric, is, yes.

Yes, they'll each be associated with some milestones undisclosed?

Yes.

Our next question comes from Stephen Willey from Stifel.

I know yesterday at the triple meeting, there was a presentation, I think, a KRAS targeting all of the -- yourselves and Zeneca are working on, has that been formally announced, I guess, as one of the candidates to be moved forward as part of the collaboration? And then can you just remind us how many targets are remaining under the AstraZeneca collaboration?

There are 2 collaborations with AstraZeneca, Steve. The first is the cancer collaboration and then the second is the broader collaboration in the cardiometabolic disease. Right now, AZ is developing androgen receptor and STAT3 and KRAS is not yet formally a collaboration development candidate. We're excited about the data. And I think our friends at AZ are excited about the data, and we're interested in the target, but it's not a development candidate yet. On the cardiometabolic side, that program is all -- is brand new. I think we just had the kick off meeting a few weeks ago, right, Richard? And so it's a little early to talk about specific drugs and specific targets there, but that's a fairly broad collaboration in cardiometabolic disease, and we hope we'll generate several development candidates for us and AZ.

Okay. And then lastly, I know there was, obviously, a bit of reorganization of R&D priorities at Biogen, and there's still obviously, highlighting SMA and I believe DMPK as well, in terms of being priorities for them. But just wondering if the reorganization has any impact on the pace at which some of these new targets that are available under the broader collaboration get identified in this flow?

We expect the pace to be quickening if anything. I think, the effort with Isis was strengthened in the reorganization, and I think, a part of the reorganization was to assure that there was flexibility in managing all the opportunities that Isis is bringing forward in the Biogen relationship. But, Lynne, do you want to add or subtract anything from that?

I would just -- second to what you said, Stan, which is our programs are all in the key strategic areas that Biogen is focusing on, and as a result there is an even greater emphasis on the areas in which we're working together.

Our next question comes from Yale Jen from Laidlaw & Company.

The first one is for the LICA programs that you indicated yesterday that's about 30-fold, or greater than 30-fold increase in potencies. Do you see this range is for all of the LICA programs you have right now in terms of compared to earlier version, or does that range of this potency sort of enhancement?

Well, what we've seen to date is very consistent behavior across the board, but will there be some modest range in the potency gains? I imagine there will be. I think, a number to keep in mind is 4.5 milligrams per week. 4.5 milligrams a week is the ID50 dose. And my best sense right now is that we should see potencies, ID50 doses in that range for all of our LICA drugs, that -- based on all the information we have, I think, that's a legitimate expectation. Of course, as the next series of LICA results from the clinic are acquired, and they'll be quite a number over the next few months, we'll have a much better sense of what the actual range would be. But there's every reason to believe that the ID50 doses will be in the same range. And the other thing is important is that, I think, we're quite confident that the tolerability profile will be consistent and it's both the increase in potency, reduction in the volume and the better tolerability that makes it such a powerful addition. So no ISRs and no flu-like syndrome, are we going to have absolutely 0 forever? Well, no. I mean, you must know that if you're going to inject a drug subcutaneously, occasionally, you might get a bruise because you hit a vessel or something like that. But we do expect the tolerability to be very consistent and very attractive.

Great. And just one follow-up that for the TTR programs, you're heading for the 2 FAC and the wild-type TTR next year for the Phase III study. My question is just for some reason the study [indiscernible] was met for 1 indication, 1 patient cohort versus the other patient, would that affect your filing for approval or you can do that separately?

Richard, do you want to deal with that?

Of course. Our plans, along with GSK, are to file as quickly as possible with the first indication, which is the polyneuropathy indication. So it is absolutely the case that success on one would support that particular very different manifestation or phenotype, and the plan is therefore, to move forward with that in mind.

Our next question comes from Josh Schimmer from Piper Jaffray.

There've been now a few iterations of the antisense platform and we're now on to the LICA conjugate version, which is looking pretty exciting. Wondering if you think there's still room for improvement beyond LICA or there's still efforts to further optimize the platform, or do you feel like LICA is now a stable point to move all the programs going forward to, and even kind of rework some of the priorities?

Thanks for the question. I think, the thing that makes this moment in history for us so exciting is that we have drugs in generation 2 that are excellent drugs in works. And now we have LICA and 2.5 in the pipeline, I want to say it's now 11 drugs in the pipeline or 12 drugs in the pipeline if you add 2.5 and LICA up. And so the benefits of those endeavors are tangible and being felt in the pipeline immediately today. But the progress in the basic research is accelerating. The things that we're learning in what we call core antisense research today are just amazing to me, and they are already beginning to translate into new mechanisms, not just better potency doing the same thing we are doing, but new things that we can do. And we'll be talking about several new mechanisms in the coming months that we've invented that open horizons that no one ever dreamt, including me, that antisense would have. This is the most exciting time in the basic antisense platform expansion that we've experienced, nothing compares to it. You haven't even begun to see the tip of the iceberg of the things that are coming.

As to the specific question as to whether LICA represents kind of a stable platform to now fully advanced, or do you think you'll have additional improvements on the...

No, we're working on the different LICAs, if that was your question. Is the current LICA constructed for improving liver activity, likely to be fairly consistent, yes. But are there new LICAs that we're working on that improve other characteristics and entry into other organs? Yes, there are. So it's a little early to predict when and exactly what those are going to look like, but while the liver like a form that we have that chemistry is pretty well stable, other approaches are emerging and reserves that look very exiting to us.

Our next question comes from Jon Eckard from Barclays.

Most of mine have been asked, but with regards to LICA, if you could just remind us, of the -- you say of 7 or 8 that are in -- near the pipeline are coming out now, of the other existing collaborations that may not have a LICA to date, do these collaborations provide automatic access to LICA technology if the partner chooses or that be an extra add-on payment to those collaborations?

Lynne, do want to answer that?

So all of our collaborations provide our partners with the opportunity to access follow-on drugs for their programs. So for programs that are [indiscernible] targeted, the current version of LICA would -- could produce an attractive LICA-based follow-on. Of course, in order to come up with that, we had to do work and our partners would pay us to do work and to the extent that those follow-on drugs represent franchise extensions and continuations to build on the marketing and commercialization work our partners have done, they're very valuable not only to our partners, but also to us.

Great. And then yesterday, I remember the question came up about how to best strategically work with some of the new agents such as the APO(a) and the question about partnering came up. And I think, the answer was we'll assess that and maybe do at the right time. I guess, with a lot of these agents you have especially in the lipid space, is it reasonable to think that pulling after the orphan spaces or something that would be a standalone setting? And then if you ultimately get opportunities to broaden into larger places that those will be the settings, I guess how do you view keeping some of these strategic assets inside most effectively?

Well, we took this -- for us, long planned, hoped for and important step in forming Akcea for exactly that reason. And so we see Akcea as a commercial arm for the lipid drugs. And certainly Akcea will commercialize the rare disease forms, but I wouldn't want limit Akcea to just the rare diseases, we think Akcea will be able to over time expand to larger indications. For the very, very large indications, there, I think, we're much more willing to consider partnerships, because partners bring value, they bring the muscle to do outcome studies and large outcome studies, and they bring a sales force that is much larger and different from this kind of sales force that Akcea wants to create. So I do understand that it's complex, and that we can't give you a definitive -- here's our way of partnering on all of our pipeline or this part of our pipeline, but please understand that deciding to form Akcea was a big decision for us, and it is a commercial arm of Isis that we expect to see commercialized, the initial indications for these exciting lipid drugs. Paula, do you want to add anything to that?

That is consistent with what you said is that, of course our initial focus to build that commercialization is in the rare disease, but we also look to participate in the development and commercialization as we brought in but then also consider partnerships to really augment our ability to develop those very large diseases and increase the reach of this very large broad disease.

I guess, we really are feeling very good about the way the strategy has involved, and the flexibility it gives us to sort of maximally take advantage of the commercial opportunities that are on our plate today.

Our next question comes from Michael Schmidt from Leerink.

I just had a follow-up regarding the regulatory discussions that you and Biogen are having on the SMA program. And then I was wondering, do those discussions circle around the Type 1 infantile form of the disease or potentially both types?

Lynne, do you want to handle that?

Yes, Michael, of course, our regulatory strategy and dialogue includes all of the opportunities for registration of the drug, but being able to make the drug available to the infants with Type 1 SMA who have rapidly degenerative and fatal disease is our highest priority.

Yes, and should there be the opportunity to obtain early access for patients? How would that affect your relationship with Biogen, if at all?

Lynne?

I'm not sure I understand the question. Do you mean if the drug is approved early, how -- what happens to our contract with Biogen?

Exactly. My understanding is that opt-in right after the full Phase III there so...

So we amended our contract Biogen about a year ago to anticipate exactly that situation. So now in addition to having opt-in rights at the completion of the first positive Phase III study, which is what the original contract said, they also have the rights and the obligation to make an opt-in decision upon acceptance of our first regulatory filing. So...

Upon filing.

Upon acceptance by the regulatory agency of the filing.

Not approval of the drug, but acceptance of the filing.

Yes, sorry, thank you for clarifying, Stan.

On next question comes from Doug Adams from Tocqueville Asset Management.

I have 2 questions. The first is, last week I noticed that Shire is acquiring Dyax for $5.9 billion plus, which was close to your market cap basically for hereditary angioedema, which I understand you have a drug in Phase I, and I was wondering how your prospects for that drug will change based on this acquisition?

You're right, we do have a drug for hereditary angioedema, and we think the profile of that drug is very attractive and competitive with the Dyax drug, so we don't -- we're not changing our strategy based on the acquisition by Shire of Dyax.

Maybe the question is to be how are you trying to accelerate the development of that -- of that asset? And in light of how large they consider that end market?

We're moving along. Our focus is primarily to make sure that our drug is significantly more attractive. I think, that's the key rather than -- we're not going to catch up, but are we going to have an agent that offers significant advantages to the Dyax drug? And that's where our focus is, Doug.

I have another question on Lp(a). And it seems like the FDA's breakthrough designation has accelerated the regulatory time lines for those drugs, with that designation, and Lp(a) certainly looks like the kind of drug that should qualify for it. Are you expecting to apply for that designation?

Lynne, do you want to handle that one?

Actually, when you look at the studies that have been done, breakthrough doesn't particularly accelerate -- what you hope to breakthrough to is an opportunity for more realtime discussions with the FDA and more access. So far, we don't think we have a problem with access. This particular division has not been forthcoming most of the early breakthroughs you see, of course, are in the oncology division. So it is something -- that's a long winded answer to the fact that, yes it's something that we're looking into, but the most important thing is we do have a regulatory strategy to begin to have access to the FDA to educate them about the this target and the patient populations, and we believe we're going to be able to do that with or without breakthrough.

And ladies and gentlemen, at this time we've reached the end of today's question-and-answer session. I'd like to turn the conference call back over to Dr. Crooke for any closing remarks.

Well, thanks everyone, for your interest. We think we've had an exciting year so far. And just before we close maybe a quick addition from Wade that just will remind you a few upcoming events.

Thanks, Stan. As you can imagine with a pipeline as large as ours, we have constant flow of important data releases and study initiations. Of course, we'll continue to provide updates on our TTR program from the open-label cardiomyopathy study that Dr. Benson is conducting, you see that coming up next year. And we anticipate giving you updates on our DMPK program, which is currently in Phase I, II in patients with myotonic dystrophy. In addition to that, of course, we will have data from about 4 Phase I programs with 3 of those being LICA drugs, and of course, with study initiations we'll have a number of Phase I initiations with 3 of those being LICA programs as well. So we've got a lot going on in the -- with our LICA platform. Additional study initiations next year include the Phase II for HPV, of course, the Phase III study in cardiomyopathy patients that GSK will be conducting and some others that we'll give you more details on as the year goes on.

You will also been hearing about technology advances that, I think, are really quite important to us. And obviously, you'll be hearing about study completions, a lot of study completions that are important. So we think we have a lineup of news that will continue to be flowing over next year that we hope will continue to be exciting for people. With that, why don't we bring the call to a close. I very much appreciate everyone's interest, and thank you once again for participating.

Ladies and gentlemen, that does conclude today's conference call. We do thank you for attending. You may now disconnect your telephone lines.