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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 strategic value-driven partnerships that leverage our partner's resources, disease expertise, and commercial infrastructure as we're doing with our drugs targeting Factor XI with Bayer and our LICA drugs, targeting LP(a) and APOCIII with Novartis and Akcea.
Our collaboration with Biogen is a good example of synergy. Innovation represented by SPINRAZA and the value it's providing to patients with SMA were recognized when Ionis and Biogen were awarded the prestigious Prix Galien prize for SPINRAZA. Working together with Biogen, we've been able to achieve what neither company could achieve alone.
As we move into 2018 and beyond, we look forward to realizing even more of the broad potential of our Ionis platform. Our increasing financial strength provides us with the flexibility to advance, broaden and deepen our pipeline, retain our drugs longer, and build an ever growing pipeline of drugs we tend to commercialize through commercial affiliates.
And as we invest our pipeline of antisense drugs and achieving important milestones on our collaboration, we expect to continue to provide substantial and increasing value to the patients we serve and to our shareholders.
Now, I'll turn the call over to Sarah, who will provide an update on our commercial preparations of inotersen and volanesorsen. Brett will then review our key pipeline accomplishments, and Beth will discuss our financial performance in more detail. Finally, I'll quickly summarize and then open the call for Q&A.
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 18 months to support the global launch.
This also includes a significant presence of upcoming medical congresses. Our sales organization is also taking shape, and we have built out a detailed training program for our growing field sales team.
As we successfully build a high quality commercial infrastructure to support inotersen's launch, we have raised the bar for potential partners, which has allowed us to narrow down our potential choices. We look forward to making a decision on partnering shortly.
Currently, our team is focused on building the awareness of TTR amyloidosis and identifying patients. As part of these efforts, we have implemented a disease education program. We are continuing to identify more and more patients through our team's efforts to increase the awareness of TTR amyloidosis, and the burden the disease places on these families -- on these patients and their families.
In conjunction with Rare Disease Day tomorrow, we will launch a disease education website designed to be a resource for patients and their families. Tomorrow, we will also launch a separate website for healthcare practitioners.
We are also putting the finishing touches on our supply and distribution infrastructure. Importantly, we already have our launch supply of drug ready and waiting to be labeled. We are pleased that the monitoring system across our studies is working well, so that practitioners and patients have the information they need in a timely manner. This system has been readily accepted by those investigators and patients.
Over the next few months, we will be presenting data from our Phase 3 NEURO-TTR study, and conducting advisory panels at key medical conferences, including the American College of Cardiology, the American Academy of Neurology, and the International Symposium on Amyloidosis.
One of the most remarkable observations from the NEURO-TTR study, is how consistent and substantial the TTR reductions with inotersen were and how consistent and substantial the related benefits and study endpoints from TTR lowering were. The complete study results from the NEURO-TTR study should be published in a prestigious medical journal in the next coming weeks.
Now, let's focus on volanesorsen. Thanks to Akcea's efforts, the awareness of FCS as a severe disease is growing. As outlined in Akcea's earning call yesterday, two of Akcea's most important achievements have been to bring to light the terrible burden that FCS imposes on patients and to support broader patient education about the disease.
Akcea has brought a substantial amount of new knowledge about the disease to all relevant stakeholders. As a direct consequence, there's a growing appreciation around the world today of the impact of FCS on patients and their families. Enhancing diagnosis is, of course, a critical first step in preparing for the volanesorsen launch.
Akcea is heavily focused on identifying FCS patients, making the diagnosis of FCS straight forward, and getting these patients the care they need. As is often the case in having a drug approaching approval, it can greatly enhance the awareness of the disease and identification of patients. We believe the benefit that volanesorsen may bring to FCS patients should drive early diagnosis and sustained treatment of these patients.
Volanesorsen is advancing through the regulatory process smoothly. We believe it is receiving the attention appropriate to a significant development in the treatment of a severe, rare disease for which patients have no therapeutic alternative. The combined Akcea and Ionis team is preparing for a planned May 10th Advisory Committee Meeting.
We look forward to discussing with the FDA and the panel the substantial amount of clinical data supporting volanesorsen NDA and the importance this drug may have in the lives of patients with FCS.
Akcea is on track to launch volanesorsen globally, following anticipated approvals. Akcea has teams -- Akcea has teams on Board in key markets, not only in the U.S. and Canada, but also in Europe.
Its U.S. sales team is largely in place, and is currently focused onto these education. In addition, Akcea has built all the necessary teams and infrastructure to support commercial operation, medical affairs, patient support, and market access.
Once volanesorsen is launched, the team will focus on identifying patients, getting them treated and retaining patients on therapy. We are pleased that the monitoring system we have put in place is working well, so that practitioners and patients have the information they need in a timely manner.
This system has been readily accepted by investigators and patients across all of our studies, including the EAP program. FCS is just the beginning for volanesorsen. Our Phase 3 study in patients with FPL, a triglyceride storage disease is on track for completion in 2019.
So clearly, 2018 is an exciting year for Ionis. We look -- we are looking forward to the launch of two drugs, each of which has the potential to transform the lives of patients who have severe rare diseases with no good treatment options today. As part of our celebrations of Rare Disease Day tomorrow, these patients are at the top of our minds.
And now, I'd like to turn the call over to Brett to talk about SPINRAZA and the progress of other drugs in our pipeline.
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 toward development. In addition, we recently entered into a new collaboration with Biogen to identify even more innovative antisense drugs for the treatment of patients with SMA.
Today, looking at our neurological disease pipeline beyond SPINRAZA, we have 12 drugs in development and more than 20 programs in research. And our success and rapidly growing experience in this area makes us as enthusiastic as ever for the great potential that antisense offers for the treatment of neurological diseases.
Our productivity in the neurological disease area is a result of both, the efficiency of our antisense technology and the substantial contributions of our partners, especially Biogen. These contributions go well beyond the money our partners pay us. They include considerable expertise in the neurological disease area, including substantial development and commercial experience, access to extensive networks of specialists, physicians, researchers and consultants.
Experience in the development and implementation of biomarker strategies to support clinical development and commercialization, and the design and conduct of primary and supporting clinical studies, such as natural history studies.
As we continue to benefit from the significant productivity of our Biogen collaboration, we are building and advancing, in parallel, our own neurological disease pipeline independent of Biogen.
For example, we plan to start developing activities for three neurological disease drugs on our own, adding two this year and one early next year to our pipeline. We look forward to significantly expanding our wholly-owned neurological disease pipeline and developing these and other programs ourselves for the treatment of rare diseases.
Turning to other highlights. We recently announced positive results from our Huntington's disease program. Our Phase 1/2 study was a three-month study in patients in the early stages of Huntington's disease. Our goals for this study were to demonstrate that IONIS-HTTRx is safe and well-tolerated and that the drug could reduce levels of the toxic mutant Huntington protein in a dose-dependent manner, as measured in the cerebrals spinal fluid of patients.
We're pleased that we achieved these goals and that the magnitude of mutant Huntington protein reduction exceeded what we believe is needed to provide benefit in patients with Huntington's disease, based on our extensive preclinical data.
Later this week, we will present data from this study at the CHDI Foundation's Annual Huntington's Disease Conference. We also plan to hold a webcast at 11 A.M. Eastern time on Friday, March 2nd to review the results and answer questions.
Based on the positive data from this study, Roche licensed, IONIS-HTTRx and paid us $45 million. We are working closely with Roche, as they now prepare to conduct a definitive study to determine the benefits of decreasing mutant Huntington protein, with IONIS-HTTRx for patients with Huntington's disease.
Now, turning to the progress we've made with our ligand-conjugated antisense or LICA drugs. The first of our LICA drugs, are GalNAc-conjugated drugs targeting the liver. These drugs complement our commercial and clinical stage programs in many ways. We believe that our LICA technology is a game-changing advance for many of our programs, and are a major driver of value for us.
This last year, we saw more encouraging data from our LICA drugs, which continue to consistently perform well in humans and display excellent safety and tolerability profiles. Having clinical data now in nine programs, we're pleased with the consistency of the increases in potency of 30-fold or greater, compared to non-LICA counterparts.
We've also now shown that we have the ability to dose these drugs weekly, monthly or less frequently. Today, we have 12 LICA drugs in development, and four currently in Phase 2 studies.
We also have LICA follow-on drugs, successfully advancing in development, the LICA form of volanesorsen, AKCEA-APOCIII-LRx is now in the longer term Phase 2 trial. We plan to enroll approximately 100 patients with high triglycerides in established cardiovascular disease and treat them for up to a year.
We are looking forward to sharing data from this study next year. As you may recall, in the Phase 1/2 study in patients with high triglycerides, AKCEA-APOCIII-LRx demonstrated a pristine safety and tolerability profile, with remarkable reductions in both APOCIII and triglycerides, including, in patients who were treated with four monthly doses.
Our most advanced LICA drug, AKCEA-APO(a)-LRx recently completed enrollment in a Phase 2 study, in more than 270 patients with high Lp(a) levels and established cardiovascular disease. These patients are being treated for up to one year also and we are very pleased with the safety profile experience to-date. We look forward to reporting topline data from this study in the second half of this year.
We're also rapidly progressing IONIS-TTR-LRx, our LICA form of inotersen into development, with plans to pursue a streamlined clinical program to bring this drug rapidly to the market.
Based on the data from our other LICA programs, as well as our preclinical experience with IONIS-TTR-LRx, this LICA inotersen follow-on is expected to be even more potent and convenient to use.
Finally, we are very excited that our first LICA drug, using Generation 2.5 chemistry is planned for clinical testing this year as part of our cardiometabolic collaboration with AstraZeneca.
Generation 2.5 LICA drugs are expected to be even more potent than our generation 2 LICA drugs, based on the inherent potency of Generation 2.5 chemistry, potentially allowing us to lower doses 10 folds more over Generation 2 LICA drugs.
This chemistry will potentially allow us to dose just a few milligrams of drug monthly or quarterly and even opens up the possibility of oral delivery. We're looking forward to sharing more date on our Generation 2.5 LICA chemistry later this year.
Looking ahead, we have important milestones in 2018 across our pipeline of 45 drugs. We are continuing to advance a growing number of wholly-owned programs in this portfolio and we plan to report Phase 2 data for more than six studies this year.
Several of these studies, such as those for Huntington disease, hypertriglyceridemia, and ALS are being developed for rare disease populations, and therefore, are expected to move quickly into pivotal registration studies.
We plan to initiate more than six new Phase 2 or 3 clinical studies this year and several of these drugs are also being developed for rare disease populations. And as such, could also move quickly into pivotal studies. In fact, our Huntington program and our STAT3 oncology program have the potential to enter pivotal Phase 2/3 studies this year.
We also plan to initiate and complete multiple Phase 1 studies this year. So, we have another eventful year ahead of us with the potential launches of inotersen and volanesorsen, and the progress we are making with the many other drugs in our pipeline. We look forward to continuing to create great value for patients and shareholders by advancing our growth and innovative pipeline.
With that, I'll turn the call over to Beth.
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 year with pro forma R&D expenses of $310 million compared to $289 million in 2016. This slight increase was primarily related to expenses, such as regulatory filings, manufacturing initial launch supplies, and medical affairs activities in support of inotersen and volanesorsen.
If you exclude these expenses, our R&D expenses decreased year-over-year, demonstrating we can prudently manage our R&D expenses even while advancing and expanding our pipeline, because of the efficiency of antisense technology and the contributions of our partners.
Our pro forma SG&A expenses were $87 million in 2017 compared to $32 million in 2016. This significant increase reflects our investment in preparing to launch inotersen and volanesorsen, plus the licensing expenses related to SPINRAZA sales.
During 2017, we added a significant amount of cash to our balance sheet, which allowed us to end 2017 with more than $1 billion of cash. During the year, we received more than $580 million from our partners, primarily from Biogen, Novartis, and Bayer.
As many of you are aware, beginning this year, most companies are required to adopt new accounting rules for revenue recognition. Since we're already two months into 2018, I thought I would briefly highlight the impact the new standard will have on our financial statement.
The primary impact relates to when we recognize milestone payments. Previously, we recognized milestone payments wherein for performing R&D activities, in-fold when we achieve the milestone event.
And then under the new guidance, we will now amortize those payments over the period we are performing R&D activities for our partners. We will continue to recognize milestone payments in full when the milestone is achieved for those payments we are -- and based on our product activity.
We're adopting the standard retrospectively and do not anticipate that there will be a significant impact to our previously reported revenue. I'll talk some more about the effects the new revenue recognition guidance is having on our financials in our first quarter earnings call.
Consistent with our goal of being a multiproduct, profitable company, we project 2018 will be our third consecutive year of pro forma operating profitability, even as we prepare to launch inotersen and volanesorsen. We are looking forward to adding revenue from these two drugs to, what we believe, will be growing SPINRAZA revenue and our substantial base of R&D revenue.
For 2018, we are projecting R&D expenses of $360 million to $390 million, and SG&A expenses of $180 million to $210 million, both on a pro forma basis. These expense levels reflect our commitment to retain a significant portion of the commercial value of our drugs, while preparing to launch inotersen and volanesorsen. They also reflect the investment we are making in advancing and expanding our pipeline.
With more than $1 billion of cash at the end of 2017, we are well-positioned to invest in our technology and our pipeline. In doing so, we project that we will end 2018 with more than $800 million in cash. We believe these investments have the potential to create substantial value for patients and our shareholders in the near-term and longer term.
In 2018, we expect the commercial revenues from SPINRAZA inotersen, and volanesorsen, coupled with revenue from our partners, will help us achieve our goal to be a multiproduct, profitable company delivering important medicines to patients with serious illnesses.
And now I'll turn the call back to Stan.
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.
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