Welcome to the Ionis Pharmaceuticals Second Quarter Financial Results Conference Call. [Operator Instructions]. I would now like to turn the conference over to Dr. Stan Crooke, Ionis Chairman and CEO. Dr. Crooke, please begin.

Good morning and thanks everyone for joining us on today's call to discuss our second quarter financial results and business highlights. On the call today Beth will walk you through the financial results. Lynne will provide more color on the positive step forward that we recently announced with nusinersen and the plans to file regulatory dossiers around the world this year. And then I'll wrap up the call with an update of the status of our other phase 3 drugs and the progress we're making in the technology. I'll start with the most recent news about nusinersen. As we announced last week, the Phase 3 ENDEAR study met the prespecified primary endpoint for the interim analysis. Infants treated with nusinersen achieved motor milestones substantially greater than infants who did not receive nusinersen. The difference was highly statistically significant. Data from all other endpoints we reviewed were all strongly in favor of the treated infants. Nusinersen's safety profile continued to be consistent with the attractive safety profile that we've observed in the open label studies. We're therefore bringing the ENDEAR study to an immediate conclusion, a decision which our data safety monitoring board supported and transitioning all patients to an open label study. This means all patients, including control patients, will now be treated with nusinersen. We're certainly very pleased that all patients in the control arm of the study will now have the opportunity to receive nusinersen. Working with us, Biogen will now file marketing applications in the U.S. and EU in the coming months, with filings in other countries to follow shortly. Importantly, Biogen plans to open a global expanded access program for patients with the infantile-onset SMA this fall. We're also pleased that we continue to have highly constructive interactions with the FDA on an ongoing basis. With nusinersen we believe have a drug that has the potential to dramatically improve patients' lives and fundamentally change the course of infantile-onset SMA. We're pleased that we're accelerating the time when nusinersen could be approved and we know that every day matters to these patients and their families. As you'll see from Beth's report, we remain a strong financial position and on track to meet our 2016 financial guidance. After the financials and Lynne's comments, I'll finish up with some highlights from our current -- most recent R&D Day, including the status of our other phase 3 programs, our investigations on platelets and our progress in advancing our antisense technologies. Joining me on today's call are Lynne Parshall, Chief Operating Officer; Beth Hougen, Chief Financial Officer; Sarah Boyce, Chief Business Officer; and Wade Walke, Vice President of Corporate Communications and Investor Relations. Now, Wade, would you please read our forward-looking language statement?

Thanks, Stan. A reminder to everyone that this conference includes forward-looking statements regarding the financial outlook for Ionis, Ionis's business, the business of Akcea Therapeutics and the therapeutic and commercial potential Ionis's technologies and products in development. Any statement describing Ionis's goals, expectations, financial or other projections, intentions or beliefs, including the commercial potential of nusinersen, IONIS-TTR RX and volanesorsen 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 the endeavor of building a business around such drugs. Ionis's forward-looking statements also involve assumptions that, if they never materialize or prove correct, could cause results to differ materially from those expressed or implied by such forward-looking statements. Although Ionis's forward-looking statements reflect the good faith judgment of its management, these statements are based on known 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's programs are described in additional detail in Ionis's annual report on Form 10-K for the year ended December 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. And now I'd like to turn the call over to Beth.

Thank you, Wade. We maintained our strong financial position by ending the second quarter with more than $660 million in cash which does not include the $85 million we've generated so far this quarter from the license of nusinersen and our first development candidate under our Janssen collaboration. To date in 2016, we have generated more than $145 million in payments from our partners, including approximately $95 million from Biogen. In the second quarter Kastle acquired KYNAMRO from us for which we received a $15 million upfront payment. Under our agreement with Kastle, we can earn up to a total of $95 million. Beginning next year, we're entitled to royalties in the mid to low teens on sales of KYNAMRO. We also received a 10% equity stake in Kastle which provides us with the opportunity to share even more in Kastle's success with KYNAMRO. We finished the first half of 2016 with a pro forma net operating loss of $64 million. Our financial results for the first half of this year were in line with our expectations and we remain on track to meet our financial guidance of a pro forma net operating loss in the low $60 million range and a year-end cash balance in excess of $600 million. In the first half of this year we earned $75 million of revenue, including more than $15 million in milestone payments, majority of which were related to nusinersen and the $15 million from Kastle. We have projected 2016 revenue of more than $240 million. As we've said, we expect revenue to be significantly higher in the second half of this year. And in fact, we're well on our way to achieving our second-half projections as we have already earned $85 million from license fees. We also have numerous opportunities to…

Thanks, Beth. As you can imagine, we're very excited about the recent positive news from the nusinersen program. The results confirms what we saw during the phase 2 open label studies, in which we saw infants achieving milestones that SMA infants would not normally achieve, like rolling, sitting, standing and walking. I want to thank the SMA community for their support and trust in us and I want to especially thank the parents of infants who participated in our trials. We received many wonderful commentaries from the patients' parents and advocacy groups and we thank you all for your kind words. I also want to thank the extraordinary physicians who care for these infants. We at Biogen are very focused on making sure this drug makes it as quickly as possible to regulatory review in the U.S. and Europe. To achieve that, we believe we're submitting a regulatory package that has strong potential to achieve marketing authorization as rapidly as possible. This is the first time a potential treatment for infantile-onset SMA has demonstrated a substantial clinical benefit in a controlled clinical study. We're pleased that this provides hope and encouragement to patients and their families. We keenly feel the urgency to bring nusinersen to patients with SMA as rapidly as possible. As Stan said, Biogen intends to file marketing applications for nusinersen with regulatory authorities in the U.S. and the EU in the next few months, with filings in other countries following soon after. We believe our regulatory dossiers will provide a strong data package. Importantly, the interim analysis endpoints were designed in consultation with the FDA, with the intention of identifying the most rapid path to filing and potential approval. Because we believed there was a good chance the interim analysis would be positive, we and Biogen have…

Thanks, Lynne. I think it's obvious from this call and from previous calls that we've had, that all of us have for some time felt a profound urgency to bring nusinersen to the patients in the SMA community as rapidly as possible. So the recent development and advance preparations we and Biogen have made on both regulatory and commercial fronts bring us closer than ever to having this important new medicine to the patients who desperately need it. For that, we're very excited and very grateful. Nusinersen is a prime example of the power of antisense technology. It is the solution to the core problem, the lack of SMN protein. By specifically correcting the missplicing of the SMN2 pre-mRNA which results in increased SMN protein production. This is a mechanism that is only accessible to antisense technology and I'm sure you recall the data that we've reported from clinical trials that indeed prove that the drug is working via the mechanism it's designed to work by. It's also a great example of the efficiency of antisense technology. We were able to move rapidly in the course of only half a dozen years of so, from understanding the cause of the disease, to discovering a drug candidate, to where we're today. This program also highlights our ability to address traditionally undrugable targets that work in many tissues by many routes of administration. Nusinersen is just the first in a large neurological disease pipeline that has grown to more than 25 programs in just six years. We have demonstrated that our CNS drugs distribute broadly in the CNS. They are well-tolerated and are working the way we designed them to work. Today, in addition to SMA, we're developing drugs that address neurological and neuromuscular diseases in both rare and broad patient populations…

[Operator Instructions]. Our first comes from Jim Birchenough from Wells Fargo. Please go ahead.

A couple questions. First, on nusinersen, I'm wondering if you could provide any incremental detail on what paths you might have to more rapid approval for type II SMA? And how confident you might be in having a broader label than the type I? And to the except you can't comment on that, the broader platform question as it pertains to platelet effects, the Factor XI program is quite a psychrophile program. Any comment on what you've seen with regards to platelets there? And on the platform, when you talk about the 2.5 and the LICA chemistry, how quickly can you convert this pipeline you have to those advanced chemistry? Thanks.

Why don't I go in reverse order and I'll answer several of them and then I'll ask Lynne to comment on the regulatory process and label. With regard to converting the pipeline to LICA and 2.5 LICA, I think we're already almost finished. If you look at what we've done, we now have eight LICA drugs. In some cases we decided to go ahead and develop the parent like we have done with the volanesorsen and Factor XI RX and then follow with a LICA. In other cases we've actually replaced an existing very good drug with a drug we thought was better, such as we did with APOA LRX. You can assume that our pipeline will be essentially generation 2-plus LICA or generation 2.5 or 2.5 LICA for all intents and purposes going forward, with the exception of the drugs like TTR RX and Factor XI RX and volanesorsen, that are completing late-stage development. We think we're almost there. You'll remember that we advanced 2.5s cautiously because we wanted to be sure that we had sufficient safety information to know what we were doing, certainly with the data that we have on the antrum receptor. And in muscles in animals and hopefully in man, we think we're getting the performance out of 2.5 that we hoped. From animal data we know that 2.5 and LICA combine and can give us doses that we project to be in the 1 milligram per week range. So we're moving fast now that we're confident that the technologies work and the drugs are safe. With regard to Factor XI, we have taken a very close look at the ongoing phase 2 trial in patients with renal failure and we've seen no significant serious platelet declines at all. We're confident that Factor XI RX is behaving well. You'll remember that in the phase 2 experience in more in, I think, a little more than 300 patients if I remember correctly, we fully anticoagulated patients before they had total knee surgery and we saw no increase in bleeding of any sort. Again, that is a great comfort to us as well. Then on nusinersen, I think I would refer you to the last update of the open label study that we gave. Obviously we haven't updated that very recently, but those data gave me a great deal of encouragement. And certainly everything we're hearing from the field and everything else that we see certainly encourages us to believe the benefit that nusinersen is bringing to infants will be seen again or similar, in patients with the older children with the type 2 disease. And Lynne, you want to comment on regulatory and label?

Sure. You'll remember that we have data, as Stan pointed out, from our open label study in children. Those data will be included in our nusinersen filing. We're also having discussions, Biogen is, with regulatory agencies, as we said and our last conference call, to identify ways that we may be able to accelerate CHERISH. We and Biogen are both very committed to making this drug as broadly available as possible, as rapidly as possible. That being said, of course, it's much too early to comment on exactly what the label will be and looking forward to having those dialogues with the regulatory agencies.

Our next comes from Eric Schmidt from Cowen. Please go ahead.

Just another quick one for Lynne on nusinersen. Clarification on the CHERISH trial. You guys at Ionis are continuing to conduct and finish that trial? And Biogen's now picking up the tab on an ongoing basis? Is that how that works?

Yes. We're. They been paying for our work on that study all along and we will finish that study up. We're transitioning a variety of activities to Biogen. We've got a good and detailed transition plan that transitions some things sooner and other things later, to deal with resources and ensure that we're being as effective and efficient as we can in bringing all of this stuff to conclusion.

And if there were to be an interim analysis of the CHERISH trial, much like ENDEAR, I guess that would be a decision that you would make jointly with Biogen and the FDA would have input in that as well?

Yes.

Our next comes from Stephen Willey from Stifel. Please go ahead.

I know that there's been -- it's just a quick question on nusinersen -- I know there's been some prior mention on prior calls regarding some of the work that Biogen's been doing regarding the petitioning of states in an effort to get SMA on the newborn screening panel. Wondering if you can talk about where those efforts currently stand and if you would expect the vast majority of states to be screening at launch. And then I have a follow-up. Thanks.

I think we need to let Biogen comment on that.

Yes, I would simply add that I think the key to all of this is always data. You'll recall in our experience in the infant study, the earlier we treated, the better the chance for the drug to work. And so I think a key study that's in progress that Biogen is conducting is the NURTURE study which is treating -- trying to identify patients and treating then pre-symptomatically. I think there will be data to encourage earlier identification of patients, I hope, when that study is finished. Beyond that, I would say that's a question you should ask Biogen.

And then with respect to DNPK, I know that's going to be a data read-out that's been flagged for the back half of this year. As we get close to that, wondering if you could provide a little bit of color around what kind of interim data we should be expecting out of that study? Thanks.

Yes. Of course safety. And pharmacology, what we're doing is looking at reduction of the target and then using muscle biopsies. And then changes in splicing that would be predicted to occur if muscle bine were working. You'll see some pharmacology. I don't think the study's long term enough that you should expect to see substantial changes in muscle performance. But our key test is whether we get the molecular effects that we would expect based on biopsies of muscle.

And then I believe that there was a high dose that was added to that study fairly recently. Will we be getting some of that pharmacology and biopsy data out of the high-dose cohort as well?

You'll get up to 600 milligrams, if I remember correctly, Steve.

Our next comes from Yale Jen from Laidlaw. Please go ahead.

Again, get back the nusinersen. I understand the neutral study will be conducted by Biogen. But given that the potentially type I patient and earlier will be most vulnerable, would you be able to provide any updates in terms of current progress of that study? And any color on that?

Sure. The NURTURE study is right on track and Biogen will be providing data updates as we go through the year.

Just one more question here. You have a drug for the FGFR4 for the [Technical Difficulty] data could be reported this quarter. Trying to get a little bit color in terms of what should we anticipate and maybe tell us a little bit more about the rationale as well as mechanism of actions and why this one may work in this indication?

Yes, the notion of FGFR4 was fundamentally to increase another factor FG, FG19, I think it is. The idea behind it then was to drive a shift into greater energy utilization in tissues. The only drugs that have been found to be able to do that in the past are, of course, thyroid. And no one has ever figured out how to make a thyroid egg that didn't produce significant tachycardia. So that's the idea and it was a long shot. It remains an idea that's challenging and there are many challenging aspects to it. One of them is just how do you study it? The results that we'll be showing are from a study done at a single center in which they have metabolic chambers and can actually measure oxygen consumption and energy utilization and a whole bunch of very precise measures. So what we'll tell you about is whether we saw any signal in that study that's sufficient to warrant going forward with the drug. The signal we need to see is a significant change in the way energy is used and oxygen consumption. That's what we'll be looking at.

Our next comes from Jessica Fye from JPMorgan. Please go ahead.

This is Ryan on for Jess. I appreciate you taking our questions. Maybe a financial question. With transitioning the new nusinersen program to Biogen, is there a potential that we could see a little bit of lower R&D spending in the second half of this year?

As Lynne mentioned, we're going to be executing on the transition plan with Biogen over the course of the next several months. So I would not expect to see a reduction in our R&D spend during the transition period. Probably you'll see that reduction next year, early next year. But just as a reminder, Biogen, as they always have, continues to pay us for the work that we're conducting, to cover all of the costs of that work plus a little bit of extra on top of that.

In the next -- between now and the middle of next year -- we'll wrap up phase 3 studies on volanesorsen and IONIS-TTR RX, in addition to our wrapping up right now phase 3 work on nusinersen. Doing multiple phase 3 trials on multiple drugs has certainly been challenging and also costly. So there will be lots of changes next year. We're just beginning to look at next year's numbers now. Certainly, there's a significant change in the workload that we'll be experiencing in terms of phase 3 effort.

Our next comes from Salveen Richter from Goldman Sachs. Please go ahead.

I just wanted to confirm with regard to CHERISH, that you do not have an interim analysis planned currently? And then with regard to the Hammersmith motor function endpoint in the study, how do you manage for the heterogeneity of the type II patients in the 2 to 12 year range when you're looking at -- that you're enrolling when you're -- when you're looking at a walking endpoint here? And then just another follow-up, but with regard to the Factor XI data we're seeing by year end, will we only see safety data here? Thanks.

With Factor XI you will see safety data and I believe that we'll probably report Factor XI reduction. The most important set of questions that we wanted to ask in this study was, in such patients as these, what is the dose that we're going to want to use going forward into broad studies? Because we don't believe that we will need 300 milligrams. So from our perspective, an outcome for the study that we're driving toward is to help us pick a dose. And that dose, I believe, will be meaningfully lower than 300 milligrams. With regard to the CHERISH study, I'll answer part and then Lynne can answer the rest. Remember that in the open label study we divided patients into those that are ambulatory and those are not. The Hammersmith motor was used in the non-ambulatory patients. And that's what it's designed for. The six minute walk test was used for the ambulatory patients. Lynne, maybe you can take the rest of the questions on that.

Sure. With regard to an interim analysis for CHERISH, what I can say about that is, as we've said, we're exploring all possible opportunities to accelerate that study. Certainly an interim analysis would be one possible way that we could do that. And to amplify on what Stan said about Hammersmith, our open label study included both type II and type III patients. CHERISH includes only type II patients. While we're hopeful that some of those children will get to the point of walking, we have ways of measuring that, that are built into the protocol and the analysis. But we actually have a much narrower group of children in terms of Hammersmith scores than we did in the open label study where we had a broader patient spectrum.

One of the things that we learned out of our phase 2 experience was that once there are scalable deformities, the principal problems that these patients have with their disease are really just a mechanical levels of being able to sit straight and walk and so on. A lot of that was built into the study design.

Our next comes from Michael Schmidt from Leerink Partners. Please go ahead.

This is Varun Kumar on behalf of Michael Schmidt. Thanks for taking my question. I have a question on the quick timeline update for APOA and HBV programs that uses LICA platform. Can you, specifically for HBV, tell us when should we expect to see first antigen reduction data from the patient?

You'll remember at R&D DAy, we showed data from three different LICA programs that confirm that somewhere around 5 milligrams per week would be the ID 50. We've never specifically identified HBV. We've called it, I think, a GSK number, right, Wade?

We recently revealed that target.

Was it HBV that we showed at R&D Day, then?

No.

It was another one. The data are going to be similar.

[Operator Instructions]. Our next comes from David Lebowitz with Morgan Stanley. Please go ahead.

Given that the open label phase 2 trial did include SMA3 patients and the CHERISH does not, what is your strategy on eventually potentially adding SMA 3 patients to a label?

We think all patients with spinal muscular atrophy should benefit from nusinersen. Those kinds of decisions are now in Biogen's hands fully. Again, we look forward to continuing development of nusinersen long after its initial commercial encounter. Lynne, do you want to add anything?

Yes. I agree with what you said. I would just say Biogen is very committed to making the drug as broadly available to patients with spinal muscular atrophy over time.

Are any of the current trials in the works set up to be able to include enough SMA 3 patients for that purpose? Or would have to be a new trial?

Our ongoing Phase 3 study does not include patients who, when they enter the trial, are type III patients.

And I think that brings us to the end of the questions. So I want to thank everyone for their attention. To sum up, the next few months are going to be consumed by intense activities to bring nusinersen forward as rapidly as possible for as broad a group of patients as possible. And to finishing up the phase 3 work that we have on IONIS-TTR RX and volanesorsen. As we discussed, the rest of the pipeline is moving forward in a solid way and we look forward to giving you updates about all those things in the coming months.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.