Stan Crooke - Chairman, President & CEO Wade Walke - VP Corporate Communications & Public Relations Elizabeth Hougen - CFO Lynne Parshall - COO Paula Soteropoulos - Akcea, CEO

Jim Birchenough - Wells Fargo Chad Messer - Needham & Company Eric Schmidt - Cowan and Company Stephen Willey - Stifel Jessica Fye - JPMorgan Jon Eckard - Barclays Yale Jen - Laidlaw Varun Kumar - Leerink Partners

Welcome to the Ionis Pharmaceuticals Year-End 2015 Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over to Dr. Stan Crooke. Please go ahead.

Thank you. Good morning and thank you to everyone for joining us on today's conference call to discuss our 2015 year-end financial results and business highlights. By the way, I am still trying to recover from this horrible flu that's going around. So if I suddenly have to step off to cough or something, forgive me for that. On the call today, Beth will walk you through our financial results and 2016 guidance, then we will discuss the progress that we're making across our business, including with nusinersen and IONIS-TTRRx. Paula will provide update on Akcea's activities to prepare to commercialize [indiscernible] sources. I will then close by focusing on some of the advances we're making in our technology and upcoming events. Over the past several years we've advanced our pipeline so that we now have six drugs in Phase 3 development. We have also expanded our pipeline to nearly 40 drugs and we have continued to advanced technology. We've done all this while exercising sound fiscal discipline. As a result of our successes in business development over the last four years, our cash and revenues have grown steadily and our pro forma net operating loss has significantly improved. In addition, last year was the fourth year in a row in which we improved upon our guidance by exceeding business development and pipeline objectives. We finished 2015 with a pro forma operating loss of only $16 million and with $775 million in cash. In 2015, we completed a target of three different Phase 3 studies from three different for three different diseases. We're moving closer to completing two Phase 3 trials for nusinersen, our drug to treat infants and children with spinal muscular atrophy. At the same time, we're completing a Phase 3 study of IONIS-TTRRx in patients with peripheral neuropathy, a form of TTR amyloidosis and we're completing a Phase 3 trial of volanesorsen in patients with FCS. We plan to have data from all four of these Phase 3 studies in the first half of 2017. And so the regulatory preparations and launch planning are well underway for all three of these potentially transformational drugs. And 2015 was an important year for Phase 3 assets; 2016 and early 2017 will be a pivotal time for these drugs and for Ionis as we and our partners prepare to submit marketing applications and launch these important new medicines. Our Akcea team is making excellent progress advancing our current suite of lipid drugs. Akcea is focused on completing the development commercialization of these drugs which include volanesorsen, IONIS-APOCIII-LRx to treat patients with high triglycerides, IONIS-APOA-LRx to treat patients with diseases caused by elevated LP(a) and IONIS-angiopoietin-like 3 LRx to treat patients with a variety of lipid disorders, including [indiscernible]. Akcea is now preparing to launch volanesorsen. We will be telling you more about their activities today and throughout the year. We will also provide an update on the continued progress we and Akcea are making with the other drugs in Akcea's pipeline. Beyond our Phase 3 drugs, we have a large, exciting Phase 2 pipeline that includes IONIS-FXIRx and IONIS-APO(a)-LRx and other several important programs with key clinical data this year. We also expect clinical data from multiple drugs incorporating our LICA technology and our Generation 2.5 chemistry. In April, we will be presenting an update on many of our drugs to treat severe neurological diseases at the AAN meeting in Vancouver. This will give us an opportunity to showcase the progress in our strategic collaboration with Biogen and the progress of our neurology franchise. We look forward to sharing that with you. Joining me on today's call are Lynne Parshall, Chief Operating Officer; Elizabeth Hougen, Chief Financial Officer; Sarah Boyce, Chief Business Officer; Paula Soteropoulos, CEO; and Wade Walke, Vice President of Corporate Communications and Public Relations. Wade, will you read our forward-looking language?

Thanks, Stan. Reminded when this conference call includes forward-looking statements regarding the financial for Ionis, Ionis' business, the business of Akcea Therapeutics and the therapeutic and commercial potential of Ionis' technologies and products and development. Any statement describing that as a goal, expectation, financial or other projections, intentions or beliefs, including commercial potential of nusinersen, IONIX-TTRRx 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 any endeavor of building a business around such drugs. Ionis' forward-looking statements also involve assumptions that is if they never materialize or prove correct could cause its results to differ materially from those expressed or implied by forward-looking statements. Although Ionis' forward-looking statements reflect a good-faith judgement of its management, these statements are based only on 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' programs are described in additional detail on Ionis' annual report in Form 10-K for the year ended December 31, 2014 and its most recent quarterly report on Form 10-Q which is on file with the SEC. Copies of these and other documents are available from the Company. Now I would like to turn the call over to Beth.

Thank you, Wade. Over the past several years we have ended each year in a better financial position than we began and have successfully advance our technology and pipeline. During this time, we've created a sustainable revenue base from our partnerships while maintaining a moderate expense level. In addition, we have consistently increased our revenues in cash balance while decreasing our pro forma net operating process. And as we've done the last several years, we significantly improved upon our pro forma NOL guidance and substantially exceeded our cash guidance as a result of the successes we achieved across all areas of our business. We ended the year with a pro forma net operating loss of only $16 million and more than $775 million of cash. Two large contributors to our strong financial results were the cash and revenue we earned from our partners. In 2015, we receive more than $320 million of cash from our partners. We also earned revenues of $284 million, a 33% increase over 2014. Our revenue in 2015 included $150 million from milestone payments, $91 million from our license of IONIS-FXIRx to Bayer and $78 million primarily from the amortization of up-front fees and manufacturing services we performed for our partners. Our milestone payments come from numerous partnerships and drugs in various stages of development across multiple therapeutic areas. In addition to bolstering our financial results, the milestone payments we earn reflect a significant progress our partnered programs achieved in 2015. Consistent with our guidance, our 2015 pro forma operating expenses increased over 2014, primarily due to the progress of our Phase 3 drugs which are in their most extensive stage of development. In addition, 2015 expenses increased as Akcea began preparing to launch and commercialize volanesorsen. As we look at this year, we're projecting to earn more than $240 million in revenue which reflects continued advances in our pipeline this year. A meaningful portion of our revenue comes from the amortization of up-front costs and, as such, is predictable. We expect revenue from this source in 2016 to be approximately $70 million. The majority of our revenue, however, comes from milestone payments as our partner programs advance. Assuming we successfully complete the Phase 2 study of IONIS-FXIRx, we will earn a $55 million milestone payment. We also have the opportunity to earn a $25 million milestone payment assuming we move the drug into development under our cardiometabolic collaboration with AstraZeneca. We're also planning to advance this drug into development under our J&J collaboration for which we're eligible to earn a $10 million milestone payment and we also numerous opportunities to earn significant milestone payments as we advance research programs and drugs under our [indiscernible] collaboration. At the beginning of each year we list the milestone payments we could are based on the progress we expect to achieve in each of our partnered programs. We then assign probability to each of these payments based on our projected likelihood to achieve the payment in the current year. Milestone payments we project for late in the year will have a lower probability assigned to them than those anticipated earlier in the year. Our projected revenue for milestone payments is the aggregate of these probablized payments. As we advance our partner programs and meet milestones, we have the opportunity to improve upon our revenue and pro forma net operating loss guidance as we've done the last several years. Already this year we have heard $7 million in milestone payments from Biogen for advancing the Phase 3 program for nusinersen and advancing IONIS-BIIB4Rx and from GSK when they initiated the Phase 1 study for IONIS-HBV-L4Rx. This year we will conduct a multiple Phase 3 studies, advancing a broad pipeline of drugs, including over a dozen Phase 2 programs and continuing to build the organization and infrastructure necessary to commercialize volanesorsen. We're projecting to do all of this while keeping our expenses essentially flat compared to last year. So, all of this rolls up into our financial guidance of a pro forma NOL in the low $60 million range. This NOL guidance is only slightly higher than our NOL guidance at the beginning of each of the last several years even though we're supporting a much larger and later stage development pipeline. We're also projecting a year-end cash balance in excess of $600 million. As in the past, we've based our guidance on a conservative projection of our financial results which gives us the opportunity to meet or improve upon our guidance as we have done the last several years and as we move forward we intend to continue to achieve successes across all areas of our business while exercising sound fiscal discipline. Our ability to progress such a large and advanced pipeline with relatively modest resources is due in part to the efficiency of our [indiscernible] technology and in part to the significant contributions of our partners. Our partners provide more than just revenue and cash. They provide resources and expertise that augments and builds upon our internal capabilities. The work that our partners conduct is work that we don't have to do or pay for. A good example of this is the CARDIO-TTR Phase 3 study that GSK has planned for IONIS-TTRRx. This is a 500-patient study spanning multiple years that GSK will conduct and pay for. Our partners at Biogen, AstraZeneca and GSK are all conducting clinical studies for our programs. Our partners also had the global preference and capabilities to support large commercial opportunities for our drugs. For example, we licensed IONIS-FXIRx to Bayer last May. Bayer was the ideal choice for a partner to exploit the potential of this novel anti-thrombotic drug as they are an expert in and fully committed to the anti-thrombotic space. After we complete the current Phase 2 study of IONIS-FXLRx, Bayer will assume all future development and commercialization responsibilities. As Lynne will discuss next, efforts are under way to prepare for the commercial launch of our Phase 3 drugs, any one of which has the potential to make us profitable. We're looking forward to adding product revenues and royalties to our base of R&D revenue in the next few years. And now I would like this call over to Lynne.

Thank you, Beth. As Beth highlighted, we ended the year in a very strong financial position. Year-over-year we've consistently maintained solid financial growth while continuing to make equally strong progress in advancing our maturing pipeline and expanding the reach of our technology. We believe the value we're creating for patients and for Ionis' shareholders with our diverse pipeline of first-in-class and best-in-class drugs is tangible and the successes of 2015 set us up for an event-filled 2016. This coming Monday, February 29, is Rare Disease day. At Ionis, we're committed to bringing new drugs to patients with rare diseases and we have one of the largest severe and rare disease pipelines in the industry. Last year, our most exciting achievements brought us one step closer to the market for three of our severe and rare disease drugs. In 2015, we completed target enrollment in three Phase 3 studies for our three most advanced drugs in development, nusinersen, IONIS-TTRRx and volanesorsen. As we work to complete these studies, we and our partners are gearing up for multiple regulatory filings and product launches. We believe the robust development plans we're implementing for these drugs support the significant commercial potential of our late-stage pipeline. Last month, we provided an update on our ongoing Phase 2 open label study in infants with SMA treated with nusinersen. We showed for the first time a Kaplan-Meier plot comparing events of death or permanent ventilation in our study from last August with those captured in similar patients in the PNC or natural history database. The Kaplan-Meier provided nice visual representation of the very different event profile in the nusinersen treated infants in our study compared to that which would be predicted by the natural history of this devastating disease. The babies, now toddlers, who are continuing in our study are all over two years old and we have yet to hit a median event-free age. This compares to the median event free age of between 6-1/2 and 10-1/2 months predicted by natural history studies. While the data we reported was from an August data analysis, we also reported that there were no new events of death or permanent ventilation in the Phase 2 open label study during the entire year of 2015. Importantly, the infants in our study are not only living longer, but they continue to improve in their motor function as evidenced by their improved CHOP INTEND scores and their achievement of motor milestones. We have babies who can now sit unaided, a development milestone infants with Type I SMA are never expected to reach. We even have a toddler who is walking unassisted. We plan to provide another update from this Phase 2 study at the AAN meeting in April. Our Phase 2 data gives us confidence in the design and potential results from our ongoing Phase 3 studies. We've completed enrollment in Phase 3 study in children with SMA and we're close to completing enrollment in the Phase 3 study in infants with SMA. [indiscernible] Phase 3 data from both of these studies in the first half of 2017 and to file for marketing authorization shortly thereafter, assuming the data are positive. Biogen continues to make significant investments in supporting the new [indiscernible] program. In addition to the studies we're conducting, Biogen is currently enrolling infants in the Nurture study. Nurture is a Phase 2 study in presymptomatic newborns who are genetically diagnosed with SMA. The Nurture study is designed to enhance our understanding of the value of early diagnosis and therapeutic intervention to potentially change the course of the disease. Biogen is also conducting the Phase 2 study Embrace in both infants and children with SMA and that study is now fully enrolled. We feel keenly the urgency to bring nusinersen to patients. Our communications with regulatory agencies in both the United States and Europe are going well and we continue to engage in regular and productive discussions. All of our positive regulatory interactions give us the confidence that we're on the right track to achieve approval of nusinersen as early as possible. We and Biogen are actively preparing for registration in the United States and Europe as well as globally so that we will be ready to file for marketing authorization at the earliest possible day. Biogen is also actively preparing for the global launch of nusinersen. Biogen is building out its commercial team and is ramping up multiple pre-launch activities, including medical education and disease awareness to support their commercialization of nusinersen. Our TTR program is on pace with our SNA program. IONIS-TTRRx has the potential to be the first-in-class and best-in-class drug to treat patients with all forms of TTR amyloidosis. In 2015, we reported further data supporting the consistent, robust TTR reductions we've observed in multiple clinical studies and in multiple patient populations. Based on the monogenic nature of this family of diseases, we believe the TTR reductions we're observing should translate into significant therapeutic benefit. IONIS-TTRRx is convenient and easy-to-use by the patients in our trial. Patients give themselves one simple injection once a week. Moreover, having one direct for all forms of TTR amyloidosis provides significant benefit for the development commercialization of IONIS-TTRRx and should streamline the regulatory process, physician education and sales efforts to reach patients with all forms of the disease. We completed enrollment in the 15-month Phase 3 study called NEURO-TTR in patients with the familial polyneuropathy form of TTR amyloidosis. The NEURO-TTR study includes robust primary and secondary end points, such as measures of motor function which we believe will support the value of IONIS-TTRRx to position patients of payers and the cardiac sub study should provide early and important evidence on the treatment of FAC. In addition, we've had less than half of the dropouts we had originally projected. This low dropout rate allowed us to complete target enrollment in the Phase 3 study late last year with 172 patients. We're on track to report data from this 15 month study in the first half of 2017. We and GSK have already started preparing to file for marketing authorizations as quickly as possible after reporting data, assuming the data is positive. GSK plans to initiate a Phase 3 study of IONIS-TTRRx in patients with both forms of TTR cardiomyopathy, wild type and FAC. This new study, called CARDIO-TTR, is a robust clinical outcome study intended to provide a wealth of definitive data to support the value of IONIS-TTRRx with physicians, patients and payers. We know from the work GSK conducted that although patients with FAC and wild type TTR cardiomyopathy have different genetic causes of their disease, their disease progression is essentially the same. This means that with a single study GSK believes it can support marketing approval for IONIS-TTRRx in all patients with the cardiomyopathy form of TTR amyloidosis. So with NEURO-TTR and CARDIO-TTR we have two studies for a single drug that we believe has the potential to help patients with all forms of TTR amyloidosis. Competitive target product profile and robust development plans should support the broadest label for IONIS-TTRRx which will be important to establish optimal reimbursement and rapid penetration into the market. GSK is also initiating a Phase 3 study in Japan evaluating IONIS-TTRRx in patients with FAC to support their plans for global commercialization of the drug. GSK is well along in preparing for the global launce of IONIS-TTRRx. They are committed to maximizing the value of the drug and were impressed with how they are systematically implementing their launch preparations. And finally, let's discuss volanesorsen, our Phase 3 drug that our wholly-owned subsidiary, Akcea Therapeutics, will commercialize. We have two Phase 3 studies under way and two distinct ultra-rare genetic diseases. Familial chylomicronemia syndrome or FCS and familial partial lipodystrophy or FPL, are both life-threatening, chronic, rare diseases associated with significant morbidity and premature death. Our Phase 3 study in patients with FCS, the APPROACH study, is fully enrolled and we're on track to report data in early 2017. Our Phase 3 study in patients with FPL, the BROADEN study, is well under way and we expect it will be fully enrolled late this year or early next year. As the Phase 3 program progresses, we and Akcea are preparing regulatory filings that will be in a position to file for marketing authorization very soon after we receive the Phase 3 data, assuming the data is positive. The Akcea team is also actively preparing for the global commercial launch of volanesorsen. So, with that, I will turn the call over to Paula to tell you more about what Akcea is doing.

Thank you, Lynne. We made significant progress in 2015 in establishing Akcea as the leading development in commercialization company focused on cardiometabolic diseases caused by lipid disorders. We have also made significant progress in our pre commercial activities for volanesorsen in two rare disease indications, FCS and FPL. We have hired seasoned professionals whose collective experience includes multiple rare disease launches over two decades plus deep clinical and commercial experience with a focus in lipids, cardiology and endocrinology. This extensive knowledge and expertise is exactly what we need to develop and commercialize our pipeline of drugs. Most recently, we have pointed to Dr. Louis O'Dea as our chief medical officer. Louis is a board certified physician specializing in endocrinology and metabolism and a 22-year industry professional. He has an impressive track record of success in global drug development and regulatory approvals. Louis has led 13 clinical NDAs, including four orphan drug approvals which makes him the perfect person to lead the medical, clinical and regulatory activities for volanesorsen as well as guide the development of all of the drugs in our pipeline. With that Phase 3 FCS study for volanesorsen nearing completion, our pre commercial activities for volanesorsen are accelerating. To build a successful marketing campaign for volanesorsen we detailed the patient journey to understand how physicians make treatment decisions for their patients with FCS and FPL. We spoke to patients, [indiscernible], traditional advisory boards and practicing physicians. We also visited hospitals and conducted market research projects engaging all of the key healthcare providers from acute care to ongoing care. Our work confirmed what we already knew, that the clinical profile of volanesorsen holds tremendous promise for patients with FCS and FPL. Physicians told they were most impressed by the substantial 70% average reduction in triglycerides across multiple patient populations we observed in our Phase 2 studies and which have been published twice in the New England Journal of Medicine. They said they've not seen this magnitude of triglyceride lowering in any drug to date, including those currently available or in development. Through our research we confirm that patients with FCS and FPL are initial seen by a variety of physicians and that it can take some time for these patients to be accurately diagnosed and referred to lipid specialists, who are the right physicians to treat these patients. Our goal is to get these patients diagnosed earlier and refer to a lipid specialist as quickly as possible. Based on what we've learned, we have developed a clear plan to do this. First, we will improve earlier identification of these patients by sure patients and physicians know and consistently use the correct names for these diseases. Today, it's often the case that FCS and FPL patients are not told the correct name of their disease. Our efforts to streamline patient identification will also include helping to organize the patients intercommunity where they can share their experiences and provide support and education for each other. In fact, we have already made good progress on this front. Last year, we held first ever patient advisory board for FCS patients and their caregivers in the U.S. This event was so successful we're planning another multi-country patient advisory board in Europe this quarter. Second, we will accelerate referral of these patients to lipid specialists by working with experts to simplify the diagnosis using the straightforward and recognizable clinical profile associated with these patients. For example, FCS patients are patients who have extreme, persistent treatment refractory triglyceride levels, most commonly with a history of pancreatitis or abdominal pain for which other causes, like gallstones and alcoholism, have been ruled out. And since both FCS and FPL are genetic diseases, if we find one patient with the disease, we can often identify relatives with the disease. Finally, we will have streamlined the patient journey by developing much-needed disease education material and hosting forums to educate and raise awareness about the diseases among lipid specialists. We're beginning to identify and document where these patients are to support a seamless transition to therapy as we prepare for the launch of volanesorsen. Now turning for a minute to the other drugs in our pipeline. Coming along behind volanesorsen is the IONIS-APO(a)LRx, the first and only drug to selectively and robustly reduce LP(a) in patients by inhibiting APO(a). Managing LP(a) is considered the next frontier in managing cardiovascular disease risk. LP(a) is a recognized independent genetic driver of premature cardiovascular disease, including coronary heart disease, atherosclerosis plaque formation and calcific aortic valve stenosis or CAVS. IONIS-APO(a)LRx is our first LICA drug in development. We've shown in a recent clinical study that it has the potential to be given as an easy to take low-dose self-injection with flexibility to be dosed weekly, monthly or quarterly. These attributes should afford good patient compliance which are critical components for cardiovascular prevention treatment that must be taken for life. IONIS-APO(a)LRx has the potential to treat not only the tens of thousands to hundreds of thousands of patients who have cardiovascular disease driven by severely LP(a), but also the millions of patients who are at risk for unaddressed cardiovascular disease due to elevated LP(a). Given this commercial potential, our development plan for this drug is aggressive. It first addresses the most acute, highest risk patients, those with premature recurrent CVD. These patients have early cardiovascular disease, suffer from multiple events and are already maxed out on available therapies. This represents the highest unmet need in a smaller orphan size patient population of approximately 50,000 to 90,000 patients globally. We plan to initiate Phase 2-3 critical study later this year in this definable patient population. We believe the severity of unmet need in these patients will allow us to reach the market without an outcome study. In addition, we plan to initiate a second Phase 2-3 clinical study this year in patients with calcific aortic valve stenosis whose disease progression is accelerated by LP(a). This is a patient population estimated at 175,000 to 300,000 patients globally. Our studies in this patient population would be modest-sized studies with echo imaging as the primary midpoint. And, finally, our long term development plan will be for the potentially millions of patients with cardiovascular disease and LP(a). For this much larger patient population we plan to conduct a secondary prevention outcome study. In addition to volanesorsen for high triglycerides, we're developing the LICA drug, IONIS-APO(c)III-LRx for a broader group of patients with elevated triglyceride levels. We plan to initiate a clinical study on this program this year. And, finally, we have begun a Phase 1-2 to study with IONIS-angiopoietin-like 3 LRx in healthy volunteers with elevated triglycerides and a small set of patients with familial hypercholesterolemia. This drug targets angiopoietin like-3, a protein associated with a variety of cardiometabolic disorders, including mixed dyslipidemia. We're developing IONIS-angiopoietin-like 3-LRx for these patients and potentially for patients with fatty liver disorders, such as treating NAFLD to delay and prevent NASH. And now I would like turn the call over to Stan.

Thanks, Paula. I hope that you agree that these are important and exciting times at Ionis. I am and confident that there will be consistent stream of news. In 2016, beginning with the focus on our growing and advancing group of drugs for severe neurological diseases led by nusinersen. We plan to present an update on the ongoing Phase 2 open label study in infants with FMA in April at the American Academy of Neurology meeting. As Lynne mentioned, we continue to be encouraged with what we're seeing in this study in which the infants who are now toddlers are achieving developmental milestones they would not be expected to achieve. At the AAN meeting there will be a dozen presentations and posters highlighting the potential of our technology to address previously untreatable diseases like SMA, Huntington Disease, myotonic dystrophy type 1 and a host of other neurological diseases. Pre-clinical data from our DM1 program as well as the study design and the ongoing study will be topics at the AAN meeting. DM1 is a devastating disease for which no treatment exists. The information we gain from our ongoing Phase 1-2 to study together with the natural history data we advise are collecting will help inform the next clinical studies for this drug. We look forward to sharing the data from this program with you later this year. IONIS-HTTRx will be the topic of a presentation at the AAN meeting as well. IONIS-HTTRx is the first drug to enter clinical development designed to directly target the cause of Huntington's disease. Phase 1-2 study is well under way and we plan to report data from this study in 2017. We and our partner, Roche, are looking forward to evaluating its potential benefit. In addition to these clinical programs, we have a host of earlier stage programs that will be highlighted at the conference. The breadth and scope of her neurological disease franchises showcases the progress in our strategic collaboration with Biogen and the potential of our technology to address neurological diseases that are currently untreatable. We look forward to advancing many of these neurological disease programs into the clinic over the next several years. A truly remarkable feature of where we stand today is the fact that the technology, despite being fully validated, continues to advance rapidly and these advances are having tangible, immediate benefits on the pipeline. Today, we have eight LICA drugs in develop. LICA is a gamer changer because it lowers the dose needed for a 50% target reduction to approximately 5 mg per week. This means that our drugs should be even better tolerated and can be given weekly, monthly, quarterly or even less frequently. We also have four-generation 2.5 drugs that are about 10 times as potent as generation 2+ drugs and enable us to engage in targets and tissues like muscle and tumor cells. We expect to have a LICA generation 2.5 drug enter development this year and that could reduce dosages to 1 milligram a week or so. In addition to our LICA and 2.5 advances, we and our collaborators at UCSD recently published a paper, the proceedings in National Academy of Sciences on the application of our new [indiscernible] used to enhance the gene editing CRISPR technology. We were able to create CRISPR RNase that could increase the potency and specificity of the CRISPR system. These synthetic CRISPR RNase are significantly shorter and up to 75 [indiscernible] more potent than a modified CRISPR RNase. Importantly, the specificity of these shorter synthetic CRISPR RNase resulted in far fewer off-target effects which has been a major concern about the potential application of CRISPR technology as a human therapeutic. Additionally, these new CRISPR RNase should in vivo delivery without the need for viral vectors. We believe that these advances could provide a new strategy to unleash the power of the CRISPR Cas9 [indiscernible] to create new drugs to treat diseases. Of course what I've discussed about the advances when breaking in the technology is simply the tip of the iceberg. As the year progresses, we plan to share many more important advances in our technology with you, so stay tuned. In that vein, let me conclude with a very quick summary of some of our goals and upcoming [indiscernible]. We plan to complete the Phase 3 studies for nusinersen, IONIS-TTRx and volanesorsen and report data from these studies in the first half of 2017. We plan to report clinical data on a number of our drugs in the pipeline, including open label data from nusinersen and IONIS-TTRx, clinical data from our cancer drugs, IONIS-STAT3-2.5Rx and IONIS-AR-2.5Rx. We plan to initiate multiple clinical trials, including the Phase 3 CARDIO-TTR study, the GKS plans to conduct on IONIS-TTRx. This large outcome study is designed to broaden the market opportunity beyond FAC into patients with cardiomyopathy form of TTR amyloidosis. GSK plans to initiate a small Phase 3 study that will support marketing approval of IONIS-TTRx in Japan with patients with FAC. We will continue to advance technology. This year we plan to report data from a number of our LICA drugs. And with three Phase 3 drugs poised to read out data in the first half of 2017, we're looking forward to adding product revenues and royalties to our already strong financials. We look forward to sharing more with you throughout the year as well as at our upcoming R&D day in New York on July 13, so mark your calendars for that and we will be sending out more details on this event shortly. With that we will bring the call to conclusion and open it up for questions. Kate, if you could set us up, please.

[Operator Instructions]. The first question comes from Jim Birchenough of Wells Fargo. Please go ahead.

A couple of questions. First just I want to make sure understand the financial guidance and you've got roughly a $60 million NOL but looks like cash burn closer to 175 million, is that just related to timing of milestones and to some non-cash revenues around amortized revenue of prior milestones. Could you maybe just help us understand that and I wanted to follow up with some questions on the pipeline.

Yes. You are right the real disconnect their the $70 million of our revenue is related to the amortization of upfront payments and the other point is that we have a number of very large milestone payments that are anticipated later in the year and when those are achieved the cash will actually be received in early 2017 and so there's sort of an artificial disconnect there just because of the December 31 cut off.

And just on the pipeline, when we think about TTR, could you remind us of the primary endpoint of the Phase 3 and some of the key secondary endpoints and I'm interested in the clinical relevance when you think of the morbidity of this disease what are the key metrics we should be looking for in the Phase 3?

Sure, Jim. The primary endpoint for the study is a modified neurological impairment scoring system that was designed by us and our consultants to be specifically relevant to patients with TTR. And so it's a customized but very similar to the NIS +7 scoring system and it does directly look at changes in motor function in these patients over time.

Is there a fairly good correlation between TTR accumulation and that endpoint when we think about the substantial TTR reduction you show what would be the evidence connecting that to improvement in the endpoint?

So we think so. Obviously one of the things that we looked at in designing the endpoint is the changes in neurological impairment in the [indiscernible] trial where we had the [indiscernible] data and so we do believe that if you slow or stop the growth of plaques in patients, you should see significant benefit in terms of reducing the progression of disease in these patients. Remember what happens in these patients is plaque is formed and then the TTR continues to populate the plaque and the plaque spreads and that is what causes the progressive neurological impairment and eventually organ involvement in these patients. So if you reduce the progress or stop the progress of the plaque growth you should see a benefit in terms of patients not succumbing to the neurological and motor function of the progression of disease. In addition, one of the things we're doing in the study that is very interesting is we do have cardiac substudy where we're looking at a subset of the patients who have cardiac involvement and looking at the progression of their cardiac involvement over the course of the study and it's interesting because these patients aren't patients who necessarily have cardiac symptoms. They are patients who in an incoming echo imaging in the study we identified plaques in their heart and so we're able to study these patients. We think that's going to give us very interesting data to help inform our cardio TTR results in the Phase 3 study looking at cardiomyopathy form of the disease.

And maybe one final question. Just on SMA as we think about what appears to be a pretty substantial difference in the Kaplan-Meier curve with the historical control. Can you maybe speak to the identification of these patients has type I SMA both in the historical cohort and in the study just so we know that it's an apples to apples comparison that these are true type I SMA patients that were not somehow misidentifying type II patients. Could you maybe speak to how these patients are identified as type I and how we should feel comfortable with the historical control.

Absolutely. There are two very important things about that is well it is the case that as a certain percentage between 10% 20% of patients with two copies of the SMA two gene may eventually turn out to be type II patients, what really distinguishes patients who are going to be type I and type II is there age of symptom onset and their age of diagnosis. So in both our open label Phase 2 study and in our Phase 3 study the bulk of the patients that we have are patients who show symptom onset before three months of age and are diagnosed close to four months of age. Patients who have two copies of the SMA two gene and go on to be type IIs generally and of course there are exceptions to all of this but generally don't show symptoms until seven, eight, nine months of age and frequently are diagnosed closer to their first birthday. And so physicians treating these patients feel very much like they are able to tell the difference between a two copy [ph] baby who is going to be type I and a two copy baby who is going be type II. Importantly we have done sensitivity analyses on the PNCR database and looked at all these sorts of things like what difference does it make if you look at time of symptom onset? What difference does it make if you look at time of diagnosis and we have chosen the best match set from PNCR to match those same characteristics in patients in our open label study.

Remember that the PNCR was performed by basically the same physicians as in our study and we do have access to all those data so over time we have presented different ways of looking at the PNCR data so that you can see that any way you look at it whether you look at only the most perfectly matched or the generally matched or whatever the differences remained quite large. So I think that we have a lot of confidence that we're comparing apples to apples.

The next question comes from Chad Messer of Needham & Company. Please go ahead.

Can you just repeat back for me the list of programs that got rattled off that we should be looking for data at AAN obviously, nusinersen I heard Huntington's but I think there was at least one or two others you mentioned and then if I'm not mistaken there's still a couple of unnamed programs in the Biogen collaboration, I don’t know if we’re getting new data on those or if anything that you can say there?

We're debating whether I am going to get through my answer without coughing or somebody else should take it. In the meantime, I am coughing. Well nusinersen and there will be a lot of information about nusinersen in a variety of ways, HTT, DM1 those were all clinical programs and there will be information about all of those and then there will be data presented on a wide range of other programs as many of which are progressing pretty rapidly towards the clinic that should give you a pretty good idea of the breadth and scope of the collaboration and how tremendously successful it's been in such a short time.

And I think in the next several weeks or so once they put out the timelines for posters and presentations we do plan on putting on our website so can see when the various things that we're going to be presenting.

Looking forward to that. One thing that wasn't mentioned, I'm sure there is a lots of things you guys haven't mentioned, you only have so much time for the call but in January you got Kynamro back, given how important cardiovascular and lipid diseases are to ISIS, can you just talk about what your plans are there and what we should expect?

Yes, so as of early January we got the right to Kynamro back Genzyme at the moment is continuing to supply drugs to patients who are currently receiving it and right now we're in a process of identifying a new partner for Kynamro. We are early in the process so it's probably would be premature for me to go in a lot of detail suffice to say that we have found that there has been quite a great deal of interest with regards to new partners in taking on a commercializing Kynamro.

We do think that Kynamro is a drug that brings value, that there are patients you are on Kynamro who should continue on Kynamro and patients of the variety of sources should consider Kynamro as a treatment option and so we're committed to finding a solution for these patients. Our primary focus here is to be sure the patients who really need the drug can get the drug in a way that ensures that they will be able to do that on a consistent basis. We will have updates for you in the next few months for sure.

Might we learn how many patients are on Kynamro?

Right now that’s not information that Genzyme and Sanofi have made public.

I know but it's your drug now.

We're not currently commercializing it.

It's a little complicated. It is the case that we and Genzyme have agreed in a partnership and it is the case, we have the rights to drug back but it's still the case that Genzyme has the NDA and is continuing to sell and do all the things that relate to that and they have all that information we do not.

The next question is from Eric Schmidt of Cowan and Company. Please go ahead.

Maybe for Paula, first on volanesorsen sounds like you're really getting moving on the pre-commercial efforts both in FCS and FPL. Are you going to target a number of patients who would like to have identified by launch and are you going to provide Wall Street with updates on your patient identification progress?

So we're already actively starting to identify patients and it's an important part of our activity to not only reach out to build a community but to actually have them identify to that we can improve getting them on to the drug or make that an easy process that isn't something that we will be reporting over time from now to launch as to how many patients we've identified from this period or that wouldn’t be something that we would do.

Okay, one more moving to LP (a), I think you said you don't expect to be required to perform an outcome study in the severest of population, if you had a chance vent that view already with regulatory authorities?

So for the severest patient populations these are patients that I'm just reminding is the premature, recurrent CBD, these are patients that are have had an event at fairly young age and have continuing events with max out on therapy and they are only risk factor is LP (a) and so we see these patients as a very significant high unmet need. We're planning to have those discussions with regulators but that is as we pull together a full package as to our full development plan so that we can work with the regulators so that first of all understanding this very severe unmet need but then also what our plans are for developing the program all the way through those other indications that I mentioned the calcific aortic valve stenosis and then the broader patient population. So the whole development plan is an important part of the conversation. Equipment for Beth on a 2016 financial guidance. Revenues of greater than 20 $40 million. It wasn't clear to me whether that that figure contemplated in the new business development activity or could be achieved on the existing arrangements.

And then a quick one for Beth on the 2016 financial guidance revenues of greater than $240 million, it wasn’t clear to me whether that figure contemplated any new business development activity or could be achieved on existing arrangements.

So that 240 million contemplates the amortization of upfront from existing relationships as well as milestones from our existing collaboration. It doesn't contemplate any significant new BD activity.

As a general Eric, we have never done that just because we feel it's more conservative and more sensible to see that as an upside and of course I guess that’s one reason why we keep beating our guidance so easily, but I don't think it's sensible to count on a deal you don't have.

The next question comes from Stephen Willey of Stifel. Please go ahead.

Maybe an additional question for Paula. I guess in addition to the patient identification work that you are doing I mean obviously it sounds like you're working on trying to streamline the diagnosis and just kind of wondering if you could maybe provide a little bit more clarity around what you think some of the challenges would be with respect to delaying another diagnostic algorithm for physicians. I guess it seems like FCS would be slightly harder diagnosis perhaps than FPL because it is maybe a bit more differential in nature and then I guess you also mentioned the notion a lot of these patients have genetic mutations and just wondering I guess how the mutational screening if at all becomes incorporated into that diagnostic pathway.

First of all actually what I mentioned both FCS and FPL have the ability to have very streamlined, simple diagnostic from a clinical perspective and so with FCS as I mentioned you may not look at them and see that they a disease whereas the FPL they actually can be clinically diagnosed by their appearances [ph] in some cases. With FCS it really is the clinical manifestations when these patients present with pancreatitis normally in the emergency room they are in the ICU, triglycerides are automatically measured. It's not even a question, they are automatically measured. So these patients have very high triglycerides, they have had pancreatitis, again if they roll out the other causes like alcohol, gallbladder that is something that right today a lot of times these patients are just told you have a genetic cause of your high triglyceride, you need to not eat any fat. And so what we're trying to do is educate on giving that true diagnosis, that disease a name but that is something that we’re working on through doing for example an electronic medical record studies where we can go in with that criteria and look at triglyceride level, history of pancreatitis and narrow down those patients and find those. So those are a lot of the types of activities that we'll be doing this year to begin to find more patients, educate and make sure those are streamlined. On the partial lipodystrophy side again there is the clinical diagnosis that there is visual side but it's also you’ve patients who have for example a low BMI but extreme insulin use and so there are criteria again like that that we would use an algorithm through electronic medical records and education, so actually both of them have that opportunity where you could get a very good clinical diagnosis without the genetic testing. Now in our clinical studies we're doing the genetic testing and confirmation but we do believe that moving forward that is likely not to be needed commercially.

In the end, Steve these triglyceride diagnosis. So a patient with a triglyceride that is extremely elevated should be considered in FCS or FPL patient and other things excluded and so I think the steps that Paul and his team are taking are first make sure that the dangers of disease are well used and well understood. They've been changing in the last few years, to work with the patient efficacies and the learned societies to heighten awareness in the general physician and specialists community and to then get these patients into the treatment care places that they didn’t need to get. It's not so much the diagnosis that's the problem, it's recognition of the diagnosis by the practitioners that encounter these patients first that's the challenge.

And then I guess with the NextGen LICA conjugated, ApoCIII, should we be thinking about clinical development essentially is this trying recapitulate some of the prior Phase 2 data that's been generated with the first generation product. I guess maybe just in an effort to try to characterize what the dosing efficiency is with the LICA conjugate

Well we expect the does to be at the same range as the APO (a) but of course until we get the experiment down we don’t know. So the Phase 2 program will be abbreviated to simplify because we already know what we need to know. Now we just need to get enough experience with the LICA in Phase 2 so we can move aggressively into more advanced clinical trials. We don't really feel we have a lot of questions that need to be answered in Phase 2 other than to define the dose and schedule that we want to use.

You'll remember that one of the important things that we learned from the Phase 2 study with volanesorsen is that we got the same triglyceride lowering regardless of incoming triglyceride levels so we treated patients with extremely high triglycerides all the way down to patients with sort of modestly elevated triglycerides and saw very consistent reductions. And so we don't feel like -- that's mechanistic and we don't feel like we need to go back through and do all of that work over again for LICA.

And then maybe just one last question, Stan you mentioned that PNS paper which I thought was pretty interesting. Just wondering if you can may be characterize it if there has been any strategic interest at least in terms of inbound BD opportunities and I guess if so is that something that you would try to keep as an exclusive relationship or do you feel that that is something that you could license out on a nonexclusive basis to multiple parties I guess specifically in the contest of kind of where CRISPR priority is?

We’re rolling over it right now. I think they CRISPR technology has meaningful potential, I think there are many, many challenges that have to be overcome before it can be fully realized and we certainly believe that we made in advance and that gives us control in this space that we want to take advantage of. So the best strategy to exploit all that is something that we're going to make a decision about over the next few months. And I think I will just leave it there, Steve.

The next question is from Jessica Fye of JPMorgan. Please go ahead.

Two questions for you, first on TTR can you talk about any differences if there are any in the natural history or event rates that you expect in the cardio TTR study for the FAC patients relative to the wild type cardiomyopathy patients, if you determine what the mix?

I mean there has been a good bit of background work was done in thinking about cardio study. And a lot of work looking at the rate of progress after diagnosis so the main difference between the wild type and the mutant is in the agent which the symptoms present but since we're only going to be treating patients with symptoms the important question to ask was after diagnosis what is the rate of progression and the message that we got back this was the work that GSK did and it also came from all kinds of conversations with the experts in the field, is that the rates of progression of those two types of TTR cardiomyopathy are roughly the same and so that was the basis for doing the study as we did it. We think the data that support that are quite sound.

And Jessica, one thing I would add is that as you would imagine we have stratification between the two different types built into the study as well as into the ultimate analyses of the study.

Sure. So I imagine all the balanced between the arms but is there sort of an ideal mix that you want to see between those types of patients? Is that sort of consistent with the overall the breakdown in the overall populations or?

It's consistent with the overall breakdown, just roughly with the overall breakdowns in the populations.

Can you just clarify the SMA comment you made earlier on the call I know as of JPMorgan you said you had no events in the continuing infant study. I'm not sure if you can comment but is that still the case through today?

Well we don't update that study every call, but what we said in January it was true in January and remains true.

The next question is from Sylvan Richter [ph] of Goldman Sachs. Please go ahead.

This is Tom on for Sylvan. So first I was wondering if you can give us a little bit more clarity on the filing strategy for new centers and SMA type I, so you mentioned you’re having productive discussions with regulators just, wondering if you could maybe give us a high level sense of what they want to see in the data? Is it more safety or any commentary on that will helpful.

I'm sorry these are conversations that are taking place with the regulators constantly and so we've said all that we can say at this stage.

Okay. And then how should we be thinking about timeline for one, you might be able to communicate the outcome of these interactions with us?

When we have something definitive to communicate, we will communicate it. At this point, we're having -- our goal is to get the drug approved as rapidly as possible not to file as rapidly as possible as we've been able to see sometimes filing as rapidly as possible is not the most rapid route to approval. So we will -- if anything changes definitively we of course will communicate that.

The focus is getting this drug to these babies as quickly as we possibly can and that includes having a positive collaborative relationship with the regulatory agencies around the world. That is what we're working toward we feel the time pressure very keenly on this as does Biogen and we're doing our best there and beyond that it simply would not be in the interest of the infants to give more information about any of that.

One follow-up question you mentioned precommercial activities for new centers on ongoing with Biogen just wondering if you can give us a sense of whether you are looking to increase awareness for prenatal genetic testing for [indiscernible]?

Nurture is study that's really on point there, the idea of nurture is if we get to infants started sooner will they do better and the general belief is they will and they are. And so there will be a strong effort, Nurture itself represents the very first step in getting infants diagnosed as early as possible and into care facilities as quickly as possible and it's really urgent because we know that by the time an infant with type I SMA is three, four, five months old, it could already be too late and so absolutely that’s a long way of saying absolutely.

And Biogen is actively involved in both work to get SMAs screening on in different states of course because screening at birth is regulated on a state-by-state basis as well as raising awareness of prenatal screening and they have similar activities going on in Europe.

And it's more than just diagnosis it's managing to get that infant and the family into a tertiary center that can take care of the baby and obviously as it appears that there may be a treatment on the horizon the whole attitude shifts and awareness grows because of that. We also benefit greatly from the patient advocacy groups, [indiscernible] and others that are playing a great role here. So this is one of those situations where there is an urgent need to cut, the time is short and everything involved I think recognizes need to reduce the time to diagnosis and treatment.

The next question is from Jon Eckard of Barclays. Please go ahead.

Most of the key topics have been asked about so maybe FX XI, you’re going to have updated Phase 2 for stage renal disease, what additional information or insights do you think we could learn about this program based on this disease versus existing data?

This is a very straightforward program that answers one question really is there any difference in the behavior of the drug in patients who have almost the entirely dysfunctional kidneys and so the reason to answer the question is that getting buyer is getting ready to do a very large program in patients with renal dysfunction. We have atrial fibrillation and other reasons for anti-thrombosis. So it answers one simple question. Does the drug behave in the same way in-patients with no or very little real function as it does in normal humans?

And then quickly on the 2.5 generation 2.5 technology in some of the cancer programs what aspects of the results beyond just clinical efficacy would be important to watch with regards to the utility of this drug as you mentioned say in muscle or tumor cells for example, delivery of the drug, knock down of the target of the tumor, what other things we should be looking for from that data set?

I will tell you how I look at it. When we take a brand new chemistry into the clinic, we typically go first into diseases where safety where the clinical circumstances are severe enough that safety is not the primary issue. So that’s why we took the first two generation 2.5 drugs into patients with cancer. And what we've been watching is that’s going on as does the chemistry appear to be safe? Is there any new side effect that we might observe? And are we seeing evidence of activity that we would not have been expected with generation two. And I think we've reported that pretty much already with [indiscernible], in the energy receptor data gave us even more comfort because STAT3 as a target has some target related side effects. So you'll see more energy receptor data this year, we find them encouraging and then of course the next step once we finished with that foray into the clinic was to move into a real muscle targets. And so the most important thing for me in the coming year is what happens in the DM-1 study with our DMPKRx 2.5 drug that's going to tell us whether we've increased the ability to get in and be active in skeletal muscle. And what you should look for is any activity because in our RMs, just systemic dosing generation 2+ you don't see an activity in skeletal muscle so we want to see activity at some reasonable dose in skeletal muscle and that's the key test for us.

The next question is from Yale Jen of Laidlaw. Please go ahead.

I have two, one in the pipeline side and one is housekeeping. In the housekeeping side that you mentioned that this is 2016 expenses is roughly flat as to 2015 and I also noted in the fourth quarter the R&D expenses has increased quite more compared to prior quarter so with the fourth quarter be a sort of baseline moving forward or you will have a little bit reduction over the last 2016 in different quarters?

I would not use Q4 as a baseline for 2016 expenses. I look at total expenses in 2015 roughly around $300 million pro forma without stock comp and use that as a general baseline for 2016, Q4 obviously things were looking really good for us 2015 and so we had an opportunity to start some work that we had anticipated starting in 2016 a bit earlier. So I would not use Q4 as a run-rate.

And just a little bit of follow-up on that in terms of the milestone that you mentioned a little bit earlier of the AstraZeneca, could you repeat that and also will that be additional milestone you anticipate for factory level once you finish the Phase 2 study I guess in the second half of this year?

There's a 55 million milestone for Factor XI RX when we finished the renal study and I don't remember--

There are additional milestones for Factor XI as upper taxes in development and through the regulatory process and then the AstraZeneca cardio metabolic milestone was a $25 million milestone that we're projecting in our guidance for this year.

It's a $25 million milestone late in the year so it was probablized at a very low level right now, so it doesn't show up. That's one of the swings that happens in our guidance is it goes from either probability that we put on it to a 100% once you get it and then it changes things.

The pipeline question is that for the Hepatitis B HPV program you have both the conventional and LICA version are both in clinical studies. Just curious whether you guys are going to eventually advance all to the LICA or you may keep two programs and maybe decision much later on?

Of course that's a GSK collaboration and so I don't want to speak for GSK but they are pursuing the development of both drugs right now and they believe there is significant logic for considering developing both.

The next question is from Michael Schmidt of Leerink Partners. Please go ahead.

This is Varun Kumar on behalf of Michael Schmidt. My first question would be on be Ionis Factor XI. What kind of efficacy data should we expect this year from Ionis Factor XI and in terms of commercial opportunity can you please talk about how you foresee it positioning your products in the equivalent product space?

Well the study that we're doing in patients with renal dysfunction is purely to answer the question does the drug behave the same in those patients as it does in patients with normal kidney function and we're just looking at Factor XI levels. So we would see it really -- we have to think of it as a pharmacokinetic study principally and a safety study to get us ready to do the rest of the work. And our positioning of Factor XI RX is pretty much as we have said the additional forays with Factor XI RX will go into areas where current anti- thrombotics are really not used because of leading risk such as patients in renal dysfunction but eventually we think it has the properties that would allow us to displace a good many of the other indication in other anti-thrombotics that are out there.

And my second last question is on Ionis DMPK. Can you please remind us the timeline for Phase 1, 2 data read out, is it still end of this year? And what kind of exploratory endpoints are you planning to report specifically will it include muscle biopsy data as well? Thank you.

The endpoints that we're looking at do include muscle biopsies and muscle biopsies prior to dosing at the conclusion of dosing and it's we’re looking at several different dose groups and so we will have the opportunity to look at the set of transcriptional analyses that should give us a pretty good sense of whether the drug appears to be altering, spicing in the way that in RNA processing in a way that it should. So it is a muscle biopsy driven, there are also other questions we might ask such as what happens to the diabetes these patients have as -- if they do that but the primary is the muscle biopsy.

Just to add, you will remember that obviously this disease hasn't been studied before with a therapeutic intervention and so the purpose of this study is to broadly explore a variety of exploratory endpoints so that we can choose among them the ones that are most sensitive to go into next Phase 2b and Phase 3 studies. So we're looking at measures of [indiscernible], measures of muscle strength, a whole variety of different things as well as transcriptional analyses and muscle biopsies and so the purpose of this is to inform our next stages of development.

Yes, it's on schedule.

When we do expect to have data this year from that program.

We're in the final cohort now.

I want to thank everyone for their interest and questions and with that, I want to bring the call to a close. We do have an important and exciting year lying ahead of us and look forward to beginning the process and telling you a little more detail about some of our progress in neurological diseases at AAN in the next few months. Thank you.

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