Isis Pharmaceuticals, Inc. (

ISIS

)

Q4 2011 Earnings Call

February 29, 2012 8:30 am ET

Executives

Stan Crooke - Chairman and CEO

Lynne Parshall - COO and CFO

Beth Hougen - VP, Finance

Kristina Lemonidis - Director of Corporate Communications

Analysts

Jim Birchenough - BMO Capital

Eric Schmidt - Cowen & Company

Laura Ekas - Collins Stewart

Ted Tenthoff - Piper Jaffray

Carol Werther - Summer Street

Presentation

Operator

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Welcome to Isis Pharmaceuticals' yearend financial results conference call. Leading the call today from Isis is Dr. Stan Crooke, Isis Chairman and CEO.

Stan Crooke

Good morning, and thanks everyone for joining us on today's conference call to discuss our yearend financial results. Lynne will walk you through our financials for 2011 and our guidance for 2012, after that I'll focus on what looks like a very busy year that we have ahead for us and our key goals for 2012.

Joining us on today's call are Lynne Parshall, COO and CFO; and Beth Hougen, Vice President of Finance; and Kristina Lemonidis, Director of Corporate Communications. Kris, will you read the forward-looking language statement please?

Kristina Lemonidis

Thanks, Stan. Good morning everyone. A reminder to everyone this webcast includes forward-looking statements regarding Isis' business, the financial outlook for Isis business, therapeutic and commercial potential of Isis technology and products in development. Any statement describing Isis' goals, expectations, financials or other projections, intentions or beliefs including the planned commercialization of KYNAMRO is 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 in human therapeutics, and in the endeavor of building a business around such drugs. Isis' forward-looking statements also involve assumptions that, if 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 judgment of its management, these statements are based only on facts and factors currently known by Isis, and 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 on Isis' annual report on Form 10-K for the year ended December 31, 2010 and its most recently 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 with that, I'll turn the call over to Lynne.

Lynne Parshall

Thanks, Kris, and good morning everyone, and thank you for joining us. On today's call I want to review our 2011 financial results and discuss our 2012 financial outlook.

2011 was another successful year in which we achieved many accomplishments. Most important of which was Genzyme submission of the marketing application for KYNAMRO in Europe. We maintained a strong financial position with nearly $344 million in cash and a pro forma NOL of $61 million.

Had we received the $25 million milestone payment related to FDA filing of the KYNAMRO NDA, we would have significantly exceeded our guidance and ended the year with nearly $370 million in cash and a pro forma NOL of approximately $36 million. The NDA submission is on track for this quarter, so we expect to earn this milestone shortly.

Our continued financial strength is the best evidence of our unique and successful business strategy, which provides us with numerous ways to generate cash and revenue, while prudently managing our expenses.

First, I'd like to focus on revenue. As a reminder, our revenue consists of separate components including amortization of upfront fees we received from our partners, R&D revenue we earned from our collaborative relationships, milestone payments and the sale of drug to our partners.

In 2011, we had new revenue from all of these sources, including new revenue from the amortization of fees from GSK for expanding that collaboration to include a fixed target and some CHDI for extending that partnership. We also earned revenue from milestones from GSK, as we advanced our TTR drug into Phase 1 studies and our alpha-1 antitrypsin drug into development. And we received almost $6 million from Genzyme for the sale of drug and preparation for the KYNAMRO launch. In total we earned revenue of nearly $100 million.

As you can see our business strategy provides us with many opportunities to generate revenue and cash, as we form new partnerships and advance partner drugs. This provides us with a consistent and predictable revenue stream. In 2012, we expect our revenue to increase by more than $30 million, driven primarily by the $50 million in KYNAMRO milestone payments.

Upon the FDA's acceptance of KYNAMRO NDA submission, we will earn a $25 million milestone payment from Genzyme. Genzyme plans to submit the NDA this quarter, so we expect to earn this milestone in the first half of 2012. Genzyme also plans to request priority review for KYNAMRO, so that we can get this drug on the market rapidly in the U.S. for patients who are in desperate need.

Priority review would create an opportunity to approval on launch this year and that is what Genzyme is planning for. Upon U.S. approval of the NDA, we will receive a second $25 million milestone payment from Genzyme. Although, the two KYNAMRO milestone payments will be most significant source of revenue for us in 2012, we have numerous opportunities to earn milestone payments from many of the other drugs in our pipeline.

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