Good morning and welcome to Ionis Pharmaceuticals 2017 Financial Results Conference Call. As a reminder, this call is being recorded. At this time, I would like to turn the call over to Wade Walke, Vice President, Corporate Communications and Investor Relations to lead off the call. Please begin.

Thank you. Good morning. Thank you for joining us on today's call. With me today, we have Stan Crooke, Chairman of the Board and Chief Executive Officer, Sarah Boyce, Chief Business Officer, Brett Monia, our new Chief Operating Officer, and Beth Hougen, Chief Financial Officer. We also have Lynne Parshall joining us for Q&A. As a reminder to everyone that this conference call includes forward-looking statements regarding the financial outlook for Ionis, Ionis' business, the business of Akcea Therapeutics and the therapeutic and commercial potential of Ionis' technologies and products in development. Any statement describing Ionis' goals, expectations, financial or other projections, intentions or beliefs, including the commercial potential of SPINRAZA, inotersen, 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 to use as human therapeutics and any endeavor of building a business around such drugs. Ionis' forward-looking statements also involve assumptions that, if they never materialize or prove correct, could cause its results to differ materially from those expressed or implied by these forward-looking statements. Although Ionis' forward-looking statements reflect the good-faith judgment of its management, these statements are based only on facts and factors currently known by Ionis. As a result, you're cautioned not to rely on these forward-looking statements. These and other risks concerning Ionis' programs are described in additional detail in Ionis' Annual Report on Form 10-K for the year ended December 31st, 2016, and on the most recent quarterly filing which are on file with the SEC. Copies of these and other documents are readily available from the company as well. And with that, I'll turn the call over to Stan.

Thanks Wade and good morning everyone. Thank you for joining us on today's call. 2017 was an important year for Ionis, our antisense technology led to the discovery and development of SPINRAZA and the launch has been one of the most successful rare disease drug launches ever. All of us know that we are privileged to have been involved with fundamentally changing the lives of SMA patients and their families. Having submitted regulatory filings for inotersen and volanesorsen, we look forward to bringing substantial benefit to change as with TTR amyloidosis and FCS in the near future. Ionis is now on the verge of achieving our goal of being a multiproduct profitable company with innovation at our core. This is our strongest financial position ever. With 2017 revenues exceeding $500 million and cash exceeding $1 billion. For the second year in a row, we are profitable with pro forma operating profit in 2017 of more than $110 million. This success is driven by the strength of our business strategy, which leverages numerous sources of revenue with multiple opportunities for upside while reducing risk. As our partners advance, dollars for dollars we receive from partners increased, as reflected in our strengthening financial performance. For example, we recently earned $30 million from AstraZeneca when they licensed a new antisense drug to treat patients with kidney disease and $45 million from Roche, when they licensed our drug to treat patients with Huntington's disease. Our highly productive antisense platform has led to a broad and deep pipeline of first-in-class and best-in-class drugs. We pursue the development plan for each of the drugs in our pipeline that we believe will create the most commercial value. We have the flexibility to commercialize our drugs through Ionis commercial affiliates, as we're doing with volanesorsen or to identify…

Thank you Stan. We have two drugs in registration, which we plan to launch mid this year if approved, volanesorsen and inotersen. Volanesorsen, of course, is being commercialized by our affiliates, Akcea. While I will discuss volanesorsen briefly, if you would like additional detail about Akcea's commercial preparations, I recommend you listen to Akcea's earnings call from yesterday. Now, onto inotersen. Inotersen was granted priority review by the FDA, with a July 6 PDUFA date and was granted accelerated assessment by EU regulatory authorities. We have previously announced that the FDA does not plan to host an advisory panel to review inotersen. Our regulation review, in both the U.S. and EU, is proceeding smoothly. We are on track to launch inotersen immediately, following approval. Our EAP program is also going well. We are committed to maximizing the commercial value of inotersen and our participation in its commercial success. Over the past several months, we have conducted numerous advisory panels and discussions with key opinion leaders and other physicians, patients and patient advocacy groups. Based on these interactions, we are even more confident in inotersen's potential to address the unmet need of patients living with hATTR. This feedback also gives us great confidence in inotersen's significant commercial potential. Many of those we have spoken to feel that inotersen will be the drug of choice for many patients, because of its once weekly self-administration. From what we have heard, we believe that inotersen has great potential to transform the lives of patients. I am pleased with our progress in assuring launch readiness upon approval. We are building an industry-leading team. Our MSL team is already in field, and the buildout of our medical affairs team is largely complete. We have a detailed publication and medical education plan mapped out for the next…

Thanks Sarah. SPINRAZA is an excellent example of what can be created using the power of antisense technology. With global sales of $884 million in 2017, its launch is one of the most successful for rare disease drugs. SPINRAZA is now the standard-of-care for all patients with SMA, which marks a groundbreaking advance in the field and we are very, very proud of this achievement. Today, thousands of SMA patients are being treated with SPINRAZA. Biogen recently reported that SPINRAZA was available in 34 markets and reimbursed in 14, with approximately 3,200 patients on therapy. Biogen has also noted that there are still large numbers of SMA patients, infants, children and adults, who are not yet receiving SPINRAZA, indicating strong potential for continued growth in the U.S. and around the world. We also expect further growth, as Biogen continues to presume regulatory approvals in additional countries. Last October, as Stan mentioned, SPINRAZA was selected to receive the prestigious Prix Galien USA Award for the Best Biotechnology Product in 2017. We are honored to be recognized and truly believe that SPINRAZA represents the very best of what our industry can achieve. The medical community has also recognized the profound breakthrough that SPINRAZA represents for the treatment of SMA patients, with two publications in the New England Journal of Medicine, the most just a few weeks ago. Our strategic collaboration with Biogen is just beginning to demonstrate its full value. This year, Biogen plans to complete a study with our drug IONIS-SOD1Rx in patients with ALS, and to initiate a study with IONIS [Indiscernible] also in ALS. And we will continue to advance an ongoing study with, IONIS-MAPTRx in patients with Alzheimer's disease. We also have several other research stage programs for diseases like Parkinson's disease and Angelman Syndrome that are moving…

Thank you, Brett. Because of the successes of our drugs last year, particularly SPINRAZA, we achieved three significant financial milestones. Our revenues exceeded $500 million, more than 45% increase from last year, and our sixth consecutive year of revenue drugs. Our pro forma operating income was $111 million, more than 150% increase from last year and our second consecutive year of pro forma operating income. And we ended 2017 with more than $1 billion in cash. We significantly exceeded our improved financial guidance for 2017 and ended the year in the strongest financial position in the company's history. The combination of substantial revenue from multiple sources, prudent expense management, and in-time contributions from our partners has allowed us to achieve sustained operating profitability much earlier than other companies preparing to launch their first drugs. Our 2017 revenue consisted of commercial revenue from SPINRAZA royalties and R&D revenue, primarily from milestone payments and licensing fees. SPINRAZA royalties were $113 million. The revenue we earned from SPINRAZA is essentially pure profit for us. We are in tiered royalties on SPINRAZA sales and paid six nominal third-party royalties that are not tiered. And the important point is that as SPINRAZA sales grow, our profit margin on those sales also grows. We finished 2017 with more than $385 million of R&D revenue. In 2017, our R&D revenue consisted of $134 million from milestone payment, $115 million from licensees, and $115 million from the amortization of upfront payments. Over the last five years, we increased our R&D revenue fourfold. The sources of our R&D revenue has changed over that time, but the consistent growth we have achieved demonstrates the sustainability of this component of our business. Our pro forma operating expenses for 2017 were $397 million compared to $321 million in 2016. We ended last…

Thanks Beth. The financial results reported today exemplify the success of our business strategy, which is designed to maximize long-term innovation, take maximum advantage of the breadth of the opportunity and the efficiency of antisense technology, maximize the value and improve the potential for success of the drugs in our pipeline, and assure that we achieve sustainable profitability, thus increasing shareholder value. SPINRAZA is exemplary of the type of innovation we expect to continue for many years to come. It lays new ground and as a result, has changed the course of SMA and the lives of families dealing with disease in absolutely fundamental ways. As SPINRAZA was launched and we completed volanesorsen and inotersen Phase 3 programs, advanced our broad innovative pipeline of drugs and added eight new drugs to our pipeline while growing revenue and operating profits is a demonstration that our business strategy, coupled to the efficiency of antisense technology, is working. The continued productivity of our drug discovery programs and our work to advance antisense technology, are demonstrations of continuing innovation. All of this gives us a great deal of confidence that innovation will continue in the coming years and will be demonstrated by steadily enhanced performance and value of the drugs in our pipeline. So, this is an exciting time for us, and an exciting time for antisense technology. In 2018, together with our partners, we have the potential to put three new drugs on the market, bringing the total to five drugs that we and our partners will be commercializing. At the same time, in addition to launching inotersen and volanesorsen, we plan to advance other drugs in our pipeline, with more than six Phase 2 readouts and more than five new drugs moving into Phase 2 or Phase 2/3 trials. We now have more than 18 drugs that we are developing as wholly-owned programs, which we can commercialize through our commercial affiliate. In short, we're now on the verge of achieving our goal of being a multiproduct, profitable company, delivering innovative medicines to patients and generating great value for those patients and for our shareholders. And with that, now I'll open up the call for questions and answers. Brandon, if you can set us up, please?

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Jim Birchenough with Wells Fargo Securities. Please go ahead.

Hi, thanks for taking questions. This is Yanan dialing in for Jim. So, first question is on the expanded access program for inotersen. Could you share your experience with the program so far? Such as, how many sites are open? How many patients have been enrolled? And what does demand look like and what is the profile of patients being treated, such as if -- are any patient -- are there patients with cardiomyopathy? Thanks.

Hi, this is Sarah. So, just to answer your question, we're not going to go into details of the number of sites or number of patients. I think we all know this as a competitive program. But we have been very pleased with the number of sites that are taking part in the study. It's actually more sites than we had originally anticipated. So, we expanded to accommodate those sites, as well as also a network of referring sites. From a patient perspective, we hear consistently from the physicians at the sites and then also from patients and the patient efficacy groups, there is also a great deal of excitement about being able to enroll in the inotersen expanded access program. A lot of that is driven by the patients having a once a week injection that someone can give themselves on their own schedule is so important to them, from reducing that time and burden to the clinic. So, we're really pleased with how the program is going overall. And we will do further updates as we get close, but at this time, I wish I could, but we're not going into disclosing the number of sites or number of patients.

Thanks for providing the answer.

Our next question comes from Chad Messer with Needham & Company. Please go ahead.

Great. thanks for taking my question. I have one on the inotersen LICA follow-on. Just wondering if there's anything you can share about how you would see an expedited pathway for that. What would you see that looking like?

Hi Chad, this is Brett. Good to hear you., So as we've reported previously, we have a great looking LICA drug for TTR, the inotersen version of our GalNAc molecule targeted delivery. Based on our data to-date preclinically, it looks just like our best LICAs that are in the clinic now, showing more than 30-fold improvement in potency with pristine safety. That study is wrapping up tox now -- or that's really wrapping up tox now and it's just going extremely well. We expect to be in our Phase 1 study later this year. And we have a number of options available to us to really have a streamlined approach to moving this to commercialization as rapidly as possible. Particularly, in the hereditary population, we have plans to move it very quickly using a streamlined plan, using -- and taking advantage of all the data we generated from the inotersen program. While that population may be a little less streamlined, because that population has not been extensively studied to-date and we think that will go a little bit longer. And it would probably look something similar as others have done in that type of population. But for the hereditary population, we think that the streamlined -- the path will be extremely fast, and we can easily move from Phase 1 to Phase 3.

Great. And maybe just a follow-up there on inotersen. I know at one point, there was talk of a separate registrational cardio study. Although you have put out data on cardio patients both from the [Indiscernible] study and from your Phase 3. Is that still something you think you might need to do or perhaps not necessary?

For inotersen, we continue to seek a broad label for the hereditary population, which would include the [Indiscernible] phenotype, the cardiac patients, and the polyneuropathy patients. And those negotiations are ongoing with regulators. For the LICA, we would seek the same thing for the hereditary population, broad label. We target both polyneuropathy and the cardiac patients. We view these patients as really having one disease with multiple manifestations of their disease.

For the LICA, we think there will be great value in conducting an outcome study in patients with the cardiac disease and we think that's going to be something that we will want to do of course.

Thanks for the info [ph].

Thanks Chad.

Our next question comes from Josh Schimmer with Evercore ISI. Please go ahead.

Thanks. Just a couple of questions. You projected 2018 R&D and SG&A, what component of each of that is coming from Akcea?

This is Beth. Hi Josh. So, the break out of those, we obviously haven't done a breakout. But you can imagine that Akcea is getting ready to launch volanesorsen. So, significant amount of commercial expenses are related to that. And they are advancing the rest of the drugs in their pipeline, as well as the Phase 3 study out broaden for FPL and so they have a fair amount of the development expenses in the R&D expense pool as well.

And then, on the collaborative agreement revenue, it's been consistently above $300 million a year, but it's obviously lumpy and dependent on milestones. So, two questions on that. What component of that amortization of upfront? And is $300 million a sustainable level of revenue that we can expect over the next five to 10 years? Or is it going to be as lumpy on an annual basis as it is on a quarterly?

So, the amortization going into 2018 is probably going to be similar to what it was in 2017. That was about $115 million to about $120 million in that range. In terms of the sustainability of the R&D revenues, as our pipeline continues to expand and our drugs continue to advance, the payments we receive from our partners increase relative to the value that we're creating for them. And so what I would anticipate is that you would see the R&D revenues continue to increase as well. And that is -- those are our projections. And then on top of that, we, of course, are adding SPINRAZA growing revenues from royalties as well as we hope inotersen and volanesorsen revenues once we launch mid this year.

Thank you.

Next question please.

Our next question comes from Jessica Fye with JP Morgan. Please go ahead.

Great. Thanks for taking my questions. I guess, first, as you review the ongoing inotersen data you're collecting from expanded access, do you see any association between any platelet movement and patient weight? And second one is a financial question. Can you help me understand how much of the year-over-year increase in SG&A spend is driven by commercial prep for inotersen relative to volanesorsen? Sort of trying to get the time horizon within which either of those products could be breakeven just if we don't think about the R&D investment that went into them. Thank you.

Beth, why don't you handle that part of the question and I'll deal with the first part.

You want me to go first?

Yes.

Okay. Hi Jess. So, the increase in SG&A was primarily for volanesorsen and we obviously were preparing to commercialize volanesorsen for the full year. We began our commercial prep up activities for inotersen primarily in the fourth quarter. So, I think you should think about it from that perspective. Does that help?

For 2018?

So, as you think about 2018, then we're preparing to launch inotersen in the U.S. and we're also preparing volanesorsen globally. And so, you should think about it from that perspective.

I think the other way to think about is, Jessica, is inotersen has a much more sizable commercial potential in our mind than does volanesorsen so our investment will be appropriate to that level of opportunity. To answer the first part of your question, let me just step back for just a minute, because I think to some extent it relates to volanesorsen as well. Remember that FCS patients as part of their disease have very large excursions in platelet counts. In fact, Dr. [Indiscernible] data show that platelet counts can be as low as in the 42,000 platelets, just as a function of the disease. We know that as we administer volanesorsen patients who have -- well that maybe a little exacerbated. We -- and if you think through what we need to do, FCS patients have a severe disease with severe day-to-day symptoms. There is no drug to treat them, but volanesorsen. So, the monitoring management system is designed to give them maximum amount of volanesorsen and to protect them from any untoward events that occur with platelet declines and it's working perfectly. And in fact, example of yesterday is perfect -- that was discussed on the Akcea call is a perfect example the system is working. With inotersen -- I mean with volanesorsen, we have learned -- and I think this is an important step forward for the drug that patients who are extremely low body weight have a -- as you might expect, a greater propensity toward more serious platelet declines. We're using that information to manage the drug. And as we manage the drug better, makes it a better drug. So, we think that all of this is going to contribute to volanesorsen being even more successful. Now, the algorithm for dosing is extremely simple. That is people with low body weight get every other week dosing and people with normal body weight get weekly. We know from our Phase 3 study that the benefit of every other week was extremely high and we know that there's also a weight relationship in people with extreme reduction. And so we think the fact that this is the only drug available for these patients the fact that is working, allows us to manage all this and to price effectively as well. With inotersen, we don't have the background platelet declines that are disease-related in FCS, so the incidence of platelet decline is low. And we don't feel that there's any need to adjust dose in any way with inotersen with regard to platelets. I hope that answered your question, it's a little longer than it should've been I guess.

No, that's helpful. Thank you.

In our open-label extension study with inotersen, we continue to see great performance, excellent compliance and we've not had any severe platelet declines.

Our next question comes from Eric Schmidt with Cowen & Company. Please go ahead.

Maybe a couple of quick ones for Beth. I just didn't quite catch whether in 2018 you expect to be profitable on a GAAP basis or pro forma basis or both. And can you give us the estimated stock compensation expense in your pro forma numbers as well or actually outside your pro forma numbers for expense guidance? Thanks.

Sure. So, we expect to be profitable at the operating line on a pro forma basis this year. In terms of the stock comp, I believe for FY 2017, it was about $86 million and that split about 75%, 25% between R&D and SG&A. And it'll -- for 2018, it'll be roughly the same, may go up a little bit because Akcea will be building its team and so therefore, stock expense will likely go up as newer players come on Board.

As will inotersen.

As will inotersen, exactly.

Thank you.

Our next question comes from Stephen Wiley with Stifel. Please go ahead.

Yes, thanks for the questions. I guess just maybe one on the expansion of the wholly-owned CNS pipeline. I guess most of the Ionis connection to the CNS space has occurred via collaborations and just kind of wondering how this represents the potentially broader change in the longer term development strategy. And when might we hear about the diseases and targets of interest? I think there were three programs that were mentioned specifically that are kind of moving along in preclinical development. Thanks.

It doesn't represent a change in strategy. Our strategy is always been to have a broad relationship with Biogen, which continues to be tremendously productive, but identifying drugs that are appropriate for us to develop ourselves. And so it just represents success of that strategy. The characteristics of the drugs that we want to develop ourselves our drugs in the central nervous systems for rare -- severe rare disease that we feel is -- are amenable to relevantly small scale clinical trials, fairly rapid proof-of-concept and commercialization through a commercial affiliate that would have a small focus salesforce. In contrast, diseases like Parkinson's disease, Alzheimer's disease, I mean the other things that we're pursuing in collaboration with Biogen have very different characteristics and require the scale and the knowledge as well as the commercial infrastructure by Biogen. We think this is our general strategy period not just with neuro and we think it's working extraordinarily well. So, and we will be talking about these targets as they move forward into development and there's some exciting opportunities there.

Okay, so should we be thinking about these as probably 2019 IND filings?

Yes, I think we'll be able to -- we'll be moving at least two of them into development this year. And when we do, that's the time when we'll have a chance to chat with you about what the indications are and why we're excited about them.

Great. Thanks for taking the question.

You bet.

Our next question comes from Gena Wang with Barclays. Please go ahead.

Thank you for taking my questions. Just two quick questions. First one is for volanesorsen, can you just remind us the frequency of the platelet monitoring? Would that be once weekly or once every other week?

We expect to be able to monitor every other week.

Every other week? Okay, great. And then also for the HTT program, what kind of clinical measurement should we expect on the March 2nd? And what data will make you confident that you don't need to go dose higher and you've reached the optimal dose for efficacy?

We're going to cover that in a great deal of detail this Friday. So, I want to just answer that very briefly. Huntington's disease is a slowly progressive disease and we're treating patients that are what's called very early manifest that is they just have minimal disease. So, our expectations for this trial have been exceeded and that we have great safety and we have substantial target reduction that exceeds what we think is necessary for the drug to produce benefit. And -- as the Roche -- and as we treated longer, we will began we hope to see additional evidence of benefit. We're quite confident that we have a does that's the right does and we'll share all that with you on Friday.

Okay, great. Thank you.

You bet.

Our next question comes from Yale Jen with Laidlaw & Company. Please go ahead.

Good morning. And it could be a little bit early but I'm just curious as the inotersen as well as volanesorsen that's reach -- regularly reaching the market. Have you guys started talking to the payer and what kind of pricing and other aspects in a commercialization work to be?

Just before I turn it over to Sarah, I am pleased to tell you that the regulatory processes both in the U.S. and Europe have gone extremely well. We're very encouraged by the energies invested by the regulatory agencies and the obvious sense that these patients need our drug. And so we're looking forward to continue that progress registration. And I'll let Sarah then handle the payer and pricing all part of the questions.

Thanks Stan. Hi Yale. So, we -- I think as you would expect to have done a lot of pretty detailed work, both from a pricing, but also reimbursement strategy to figure out what our market access approach. It's really going to look like we've drilled down both from quantitative and qualitative research, as well as we're now in the process of conducting Advisory Board with payers to make sure that we both present a really good value case from the value dossier as well as health economic modeling of our budget impact modeling. I'm not going to get into giving you a price at the point. That's something we'll announce pretty much at the time of launch. Suffice to say that clearly inotersen is a transformational drug for a orphan disease. So, it would be a pricing strategy that would be keeping with the value that we believe inotersen brings to these patients. We've had very good feedback from payers, again, consistent with patients and physicians about the excitement about having a subcutaneous drug. And how that being something that is much more acceptable to them and also recognizing the ease of use from a patient aspect to be able to give themselves the drug on their schedule. So, that's also been consistent from a payer feedback as well.

Okay, great. And that's a very detailed answer. Thanks a lot.

Well, thank you very much for your interest. I want to wrap-up with just a quick comment on volanesorsen. We're excited about volanesorsen. Our colleagues at Akcea are excited about volanesorsen. The regulatory process is going smoothly. And the observation of platelet decline in patient in the ongoing study, it's actually strong evidence that the monitoring system is doing exactly what they're supposed to do. The dosing algorithm, which would allow us to even make volanesorsen a better drug is very simple. Extremely low body weight patients will get less drug. And volanesorsen, we believe will be approved and it will be the first drug to bring any benefit at all to patients with FCS. We think that's a tremendous advance and we're confident that these patients will be benefited by our drug and we're confident that compliance will be excellent. So, with that, I think the points that we wanted to make in this call are that our business model is delivering the value that we'd hope it would. We're launching two drugs simultaneously, advancing 45 drugs in development, and still are profitable at the operating line -- it will continue to be profitable at the operating line. We think that coupled to the breadth and excitement of the pipeline and the continued innovation that our model supports bodes for -- well for our long-term future is being even more exciting than -- very exciting today. Thank you very much.

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