Wade Walke - IR Stan Crooke - CEO Beth Hougen - CFO Sarah Boyce - President of Akcea Therapeutics Brett Monia - COO Damien McDevitt - Chief Business Officer

Chad Messer - Needham & Company Tyler Van Buren - Piper Jaffray Jim Birchenough - Wells Fargo Securities Ritu Baral - Cowen & Company Yale Jen - Laidlaw & Company

Good morning and welcome to the Ionis Pharmaceuticals Second Quarter 2018 Financial Results Conference Call. As a reminder, this call is being recorded. At this time, I would like to turn the conference over to Wade Walke, Vice President of Investor Relations to lead off the call. Sir, you may begin.

Thank you, Cole. Before we begin, I encourage everyone to go to the investor section of the Ionis Web site to find the press release and related financial tables, including a reconciliation of the GAAP to pro forma financial measures that we will discuss today. We believe pro forma financial results better represent the economics of our business and how we manage our business. We have also posted slides on our Web site that accompany our discussion today. With me on today's call are Stan Crooke, Chairman of the Board and Chief Executive Officer; Beth Hougen, Chief Financial Officer; Sarah Boyce, President of Akcea Therapeutics; Brett Monia, Chief Operating Officer; and Damien McDevitt, Chief Business Officer. I would like to draw your attention to slide three, which contains our forward-looking language statements. We will be making forward-looking statements, which are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to consult the risk factors discussed in the SEC filings for additional details. And with that, I'll turn the call over to Stan.

Thanks, Wade, and good morning and welcome everyone. Thanks for joining us. We ended the first-half in a strong financial position with the $9 million pro forma operating income, and we expect an even stronger second-half of the year. We are on track to deliver our third year of pro forma operating profitability, and we do that even while investing in the launch of TEGSEDI and WAYLIVRA. We are pleased that WAYLIVRA received a positive head comp most in favor of the approval and the interactions with regulatory agencies continue to progress well. Ionis HTTrx received prime designation in the EU and paved the way for an accelerated European approval in Huntington's disease. We believe IONIS-HTTRx could be another transformational drug, like SPINRAZA. And our partner, Roche, remains on track to initiate a pivotal study of this drug shortly. With the approval of TEGSEDI, the first RNA-targeted therapeutic approved for patients with hATTR amyloidosis, IONIS is now a multi-product sustainably profitable company. Looking forward, we expect to continue to meet the challenge of delivering transformational medicines to patients while increasing earnings and shareholder value. In the short-term, revenue or earnings growth will be driven by increased royalties from SPINRAZA, sales as Biogen broadens and expands SPINRAZA's use in the U.S. and around the world, by adding product revenues from TEGSEDI and WAYLIVRA, and the expanding and accelerating access of these two drugs into Latin America with PTC Therapeutics. As we previously shared, we have a portfolio of more than 13 drugs that we believe may enter pivotal trials in the near-term. Today, we'll focus on three of the drugs that may enter pivotal trials shortly. These drugs represent our next wave of commercial opportunities, with the potential to benefit additional patients and fuel substantial revenue and earnings growth in the mid-term. Our long-term plan remains to bring life-changing drugs to patients, while at the same time capturing ever more of their commercial value. We've made substantial progress toward accomplishing this goal. And as a result, we believe we'll increase the value to shareholders and patients as we continue to deliver these important medicines to address serious illnesses. Before I turn the call over to Beth, I would like to introduce the newest member of the Ionis executive team, Damien McDevitt, who joined us as Chief Business Officer, in June. Damien will lead with Ionis' corporate development activities and provide strategic guidance broadly throughout the company as we continue to advance our pipeline and maximize the commercial value of our drugs. Damien has over 20 years of leadership experience in the pharmaceutical industry, and we had the opportunity to work closely with him in years past, seeing his skills first-hand. So please join me in welcoming Damien to our team. And Damien, would you like to say a few words?

Thanks, Stan. It's great to be here with a near-term agenda that includes the launch of two drugs with our commercial affiliate, Akcea, multiple clinical milestones, and continued expansion of our broad pipeline. It's a great time to join the team. I look forward to applying my experience across the business to help as we execute on our goals to deliver shareholder value while delivering transformational medicines to patients in need. Now, I'll turn the call over to Beth.

Thank you, Damien. We ended the first-half of 2018 with operating income of $9 million, and net income attributable to Ionis' shareholders of $21 million, both on a pro forma basis. Our strong results were driven by a 15% increase in revenue compared to the first-half of 2017, including a more than three-fold increase in commercial revenues from SPINRAZA. We expect commercial revenues to grow and become an even greater portion of our total revenue as we add TEGSEDI and WAYLIVRA product sales to growing SPINRAZA revenue. We anticipate increases in both commercial revenue and R&D revenue will lead to increased operating income in the second-half of this year. Looking forward to the second-half of this year, we are projecting SPINRAZA royalties to increase as global sales continue to increase, and as we move into the higher royalty tiers. We also expect to add product revenues from TEGSEDI and potentially WAYLIVRA this year. With the addition of two full quarters of amortization from our expanded Biogen collaboration and numerous opportunities to our milestone payments, we project our substantial base of R&D revenue to also increase in the second-half of this year. We expect to meet our operating expense guidance. We're projecting R&D expenses in the range of $360 million to $390 million, and SG&A expenses in the range of $180 million to $210 million, both on a pro forma basis. Importantly, we are on track to achieve our third consecutive year of pro forma operating income, while continuing to invest in commercializing two new drugs. We ended the first-half of 2018 with approximately $2 billion in cash, and we project to end the year with more than $1.8 billion in cash, making us cash accretive for six out of the last seven years. Our substantial cash balance increases our ability to advance and expand our pipeline, build a growing pipeline of drugs for our own account and maximum the commercial value we retain for each of our drugs. We earn our revenue in two ways; through sales of commercial products which we call commercial revenue, and from collaborations with our partners which we call R&D revenue. Our commercial revenue for the first-half of 2018 was $99 million and our R&D revenue was $163 million. The primary source of our commercial revenue today is from SPINRAZA sales which increased more than 250% compared to the first-half of 2017. Worldwide SPINRAZA performance continued to be very strong with global product sales growing to $423 million for the second quarter. The number of commercial patients increased by approximately 28% from the first quarter of this year. And now over 5,000 patients are on SPINRAZA, including in the EAP and clinical studies. In the U.S. Biogen saw a 20% increase in a number of adult patients on SPINRAZA from the first quarter this year. Adult patients represent a large underserved patient population accounting for approximately 60% of the prevalent SMA patient population but only 10% of these patients today are receiving SPINRAZA, but this group of patients represents a significant opportunity for growth. Biogen saw meaningful revenue growth outside the U.S. as the passive reimbursement increased particularly in Europe, Asia Pacific and Latin America. Biogen expects to continue increase in access to SPINRAZA globally and as a result we expect our royalty revenues from SPINRAZA, which are nearly all profit to continue to increase. We also anticipate potential growth in commercial revenue from TEGSEDI and WAYLIVRA. Importantly product sales from TEGSEDI and WAYLIVRA has a potential to generate significant operating margins consistent with other rare disease drugs as sales ramp up. Our R&D revenue is comprised of four key components. The first component is the amortization of upfront payments. We typically amortize the upfront payments we've received from partners over several years. We expect this component of our R&D revenue to grow in the second-half of 2018 as a result of our expanded Biogen collaboration. We will recognize $550 million of the upfront payment from Biogen over the next 10 years. Specifically, we estimate we will recognize $38 million from this new collaboration this year with a vast majority in the second-half of this year. Beginning in 2019 and forward, we estimate we will recognize $55 million per year. In total, our amortization of upfront payments will be approximately $130 million this year with the potential to grow in future years. The second component of our R&D revenue is the milestone payments we are in -- when we or our partners the two key events in our collaborations. Typically we achieve a milestone payment while performing services for our partner. We will amortize the payment into revenue over the period of time we are performing those services. For example, in the third quarter of 2017, we received a $10 million milestone payment from Biogen when we started the Phase I, II study for IONIS-MAPTRx. Since we are conducting the study, we are amortizing the $10 million payment over the next three years. When we received milestone payments from our partners and we are not in services, we immediately recognize the payment as revenue. For example, we received a $50 million milestone payment from Biogen last year. But SPINRAZA was approved in Europe because we were not performing services for Biogen under our collaboration SPINRAZA collaboration; we recognized the entire $50 million milestone payment when it was achieved. The third component of our R&D revenue is the license fees we received when we provide our partners with exclusive licenses to our drugs. License fees are typically large payments that reflect the value we have created as we have advanced the drug through development. As our pipeline matures, we anticipate that this component of R&D revenue will increase. In the last few years, we have earned on average more than $100 million annually from license fee. Already this year, we have around $60 million from AstraZeneca. In the second-half of 2018, we expect to recognize revenues from the PTC licensing transaction. And looking forward to 2019, we will earn $150 million license fees for each of AKCEA-APO(a)-LRx and AKCEA-APOCIII-LRx as Novartis exercises its option to license to either of these drugs under its collaboration with Akcea. It's important to note that license fees fall directly to our bottom line because we generally do not have to conduct work after earning a license fee. Last, we had an R&D revenue from various services we provide to our partners including manufacturing commercial and clinical supplies for our partners. Since 2011, our R&D revenue has increased more than fourfold averaging $90 million per quarter over the last 10 quarters. R&D revenue has become a growing and sustainable source of revenue for us, which is why we include this as a consistent and recurring source of revenue in our valuation model. In summary, our growing commercial revenues from SPINRAZA and expected product sales from TEGSEDI and WAYLIVRA together with our sustainable R&D revenue should drive revenue and earnings growth in the second half of 2018 and beyond. With that, I'll turn the call over to Sarah to provide a commercial update.

Thank you, Beth. The team of Akcea is ready to launch both TEGSEDI and WAYLIVRA. TEGSEDI is now approved in the EU. It is the first product to be approved for patients with both stage I and stage II disease. And it is the first approved drug for hATTR to show benefits in quality of life and measures of neuropathy. The broad label include hATTR patient who have symptoms of neuropathy. Together with patients and their families and the entire hATTR community, we are excited by this important event. The European team is now finalizing the last details for launch. The TEGSEDI launch will begin in Germany. Our team in Germany is fully set and ready for the post-summer launch. The EU launch will follow a typical sequence across Europe. And we have teams in place in these geographies to ensure that the launch continues as quickly as possible. We plan to announce EU pricing for TEGSEDI when we launch in Germany. For both TEGSEDI and WAYLIVRA, we expect the price to reflect the rarity of hATTR and Akcea, the burden of these diseases and the value that both drugs to bring to patients. We expect to price these drugs similarly to other life changing rare disease drugs. According to a 2017 article published in the rare disease report, rare disease drugs approved in the U.S. are typically priced within a range of $300 to $700,000 per year. We plan to price responsibly, and it our expectation not to be in the upper end of that range. We will rollout our patient support services on a country by country basis in each market the program will be according to local standards while staying consistent with our philosophy for support which is to make the monitoring as simple and straightforward as possible for physicians, patients, and caregivers. We are investing in the highest level of patient and physician support that is allowed in each country. And our market access team is working diligently to provide access to patients as soon as possible. The review of TEGSEDI in the U.S. and Canada remains on track. And we are ready to launch in these markets as quickly as possible after approval. In the U.S., we are continuing to have positive interactions with the FDA leading up to our October 6 PDUFA date. Our U.S. TEGSEDI team is fully built including field sales, medical, case managers and market access. We continue to see strong progress from our sale team's effort in disease stage education and patient identification as well as the growing interest in both our patient focused hATTR Change the Course website and our physician focused hATTR Guide website. In addition, we recently launched hATTR Compass in the U.S. and Canada. HATTR Compass is a confidential genetic testing and genetic counseling program for people with suspected hATTR. This program offers rapid genetic testing results by doing a panel of over 85 potential genetic diseases resulting in neuropathy combined with supportive and confidential genetic counselling. Turning to WAYLIVRA, as a reminder WAYLIVRA has a PDUFA date of August 30. Our review process continues with Emab and Health Canada on WAYLIVRA. In Europe, we anticipate our PHA key opinion with an approval late second-half of 2018. The study on WAYLIVRA, we continue to enrol patients in our early access program for each drug and we're seeing increasing level of interest in these programs from patients and physicians. We have also accelerated our plans for global expansion into new markets with TEGSEDI and WAYLIVRA through our partnership with PTC Therapeutics. We now plan to expand and accelerate access to these drugs in Latin America which represents a significant market opportunity for both drugs and particular for TEGSEDI, Brazil is a significant market with a large population of people living with hATTR. One of the top enrollers in the neuro TTR study is in Brazil and we have great support from the KOLs, PTC has established a rare disease team with a proven track record of success and patient identification, physician and patient education program and in obtaining market access making them the right partner for TEGSEDI and WAYLIVRA. PTC plans to expedite our filings in Latin America including Brazil late this year. We are well positioned to launch TEGSEDI and WAYLIVRA upon approval. We are excited about the progress we have made and for the benefit. These drugs may bring to people with HATGR and low doses. And I turn now over to Brett to review key highlights from Ionis pipeline.

Thanks, Sarah. We continue to make excellent progress in the first half of 2018 with our pipeline focused on delivering high value therapies in areas of high unmet needs. Some of our highlights include publication of the Phase 3 NEURO-TTR study of TEGSEDI in the New England Journal of Medicine, this publication highlighted early sustained and highly significant benefit seen with TEGSEDI treatment in patients with regulatory TTR doses in polyneuropathy when compared to placebo in both co-primary endpoints. Both endpoints being the youngest of seven and measure of neuropathic disease progression and in the medical quality of life question, publication in such a prestigious journal highlights of course the importance of TEGSEDI to the medical community. Ionis HTTRx also known as RG6042 partner with Roche was granted prime designation by the European Union. Prime designation is important, because it accelerates the review timelines and streamlines interactions with the EMA which can help bring this potentially disease modifying drug to market faster with people with Huntington's disease. Another highlight is our Ionis TRx program, this drug was granted orphan drug designation in the EU for the treatment of people with frontal and temporal Dementia or FTD, Map TRx is partnered with Biogen and was currently in the clinical study in patients with Alzheimer's Disease and we completed Phase 1 studies with four new like programs. In each of these programs, we demonstrated substantial target reduction in very low diseases with excellent safety profiles which is consistent across all of our like programs. So now let's look at some upcoming events in the pipeline. We have 13 drugs and have the potential of two advanced and two late stage studies in the near-term and we remain excited about all of them, today we want to focus on three drugs that we expect will advance into pivotal studies shortly starting with Huntington's disease. We have always plan to start pivotal study of Ionis HTTRx in patients with Huntington's disease soon, this drug is the first and only drug to demonstrate a substantially lowering of the Huntingon protein, along with this achievement we also reported trends in clinical benefit in these patients. These results support this drug's potential to slow or perhaps halt progression of this devastating disease and these results were in large part to today's programs prime designation. Assuming Novartis's licenses exceeds like drug to treat patients with high Lp(a) levels they plan to advance the drug in the Phase 3 in patients with high Lp(a) in cardiovascular disease. Elevated Lp(a) is genetically determined Cardiovascular risk factor as it's present in approximately 20% of the world-wide population and it's becoming increasingly recognized a major contributor to cardiovascular disease. There is currently no treatment options available specifically and sufficiently target Lp(a) levels. Another anticipated Phase 3 start is Akcea's LICA version of TEGSEDI Akcea TTR-Lrx which is advancing rapidly. We planned to start clinical studies this year with the potential to enter pivotal studies before the end of 2019. Based on pre-clinical data and results from our other LICA program we believe Akcea TTR-LICA will be in a attractive option for people with TTR-amyloidosis due to its importunacy which we expect will translate into very well doses mentioned monthly or even less frequently. We're targeting Lafora with TTR-amyloidosis including both hereditary and wild type cardiomyopathy. As mentioned we've made excellent progress in building and advancing our LICA program. In the near-term we're pursuing disease areas as diverse this cardiovascular disease, infectious disease, oph-thalmic disease, NASH in a range of rare diseases. Our LICA technology enables monthly or less frequent dosing with those doses is much lower and our non-LICA generation two drugs. In clinical Studies our LICA drugs consistently demonstrate substantial increases importunacy with great safety and tolerability profiles, suitable for large patient population such as those with cardiovascular disease like in patients with elevated Lp(a) or in cardiac amyloidosis due to outside TTR. In a few months Akcea plans to report data in the Phase 2 study of Akcea TTR-Lrx in approximately 270 patients receiving weekly and monthly doses over six to 12 months as the longest and largest that LICA drug today the study represents a key milestone for our LICA pipeline. Now, let's turn our attention to our Neuro pipeline. Neurological drug discovery at Ionis continues at a rapid pace for diseases large unmet medical needs, reinforcing our leadership position in this disease area. We're advancing a number of new potentially disease modifying medicines for broad range in neurological diseases each of which if you bring substantial benefit to patients. In partnership with Biogen, we've advanced a total of eight Inois discovered an excess drugs for neurological diseases into development including Ionis HTTRx currently in Phase 12 study, in Alzheimer's disease and IONIS6lRx which is in a Phase 12 study in patients with SAG 1 related ALS. Data from the SAG 1 program as expected early next year. Beyond these drugs we have three more drugs in clinical trials and more than 20 programs in late stage research and drug discovery. We also continue to build in advance our own neurological disease pipeline in parallel. We currently have five Ionis owned programs for rare neurological diseases including these include two Akcea drugs TEGSEDI and it's like a follow-on, a program for Alzheimer's disease, which recently under development into additional programs expected to enter development next year. In addition, we expect to add several more Ionis owned a program that is placed over the next 12 to 18 months. So we're preparing for a catalyst with second half in 2018 and early 2019. As Sarah mentioned our most important near term panelist are the approvals and launches of TEGSEDI and WAYLIVRA. From additional key advance we're expecting including include Phase 2 data from AKCEA-APOCIII-LRx in patients with high Lp(a) levels in cardiovascular disease clinical data from MD Anderson in patients with head and neck cancer. Clinical data from our Phase 1(2) study in patients with SAG 1 related ALS and many important clinical trial starts including the expected initiation of Phase 3 pivotal studies. We look forward to sharing these results with you as the year progresses and in particular at our upcoming Investor Day which we will be hosting on Friday November 9 in New York. At this event we will provide a more in-depth presentation on our business and pipeline and discuss the exciting advances we're making with our technology. We hope you can join in. And with that, I'll turn it back over Stan.

Thanks, Brett. The approval of TEGSEDI in the EU is of course an important event with EC's decision, TEGSEDI is now the world's first on a targeted therapeutic proof for patients with ATTR amyloidosis. Now, patients suffering with the systemic progressive in vital disease have hope for better future. And with the approval of TEGSEDI, Ionis is now a multi-product sustainably profitable company delivering transformational medicines to patients. Looking ahead, we believe we're positioned for substantial growth in the second-half of this year and in the years to come. With a growing pipeline of products to treat patients in need, Akcea is ready to launch TEGSEDI in the EU and as quickly as possible after approval in the U.S. Akcea is also ready to launch WAYLIVRA upon approval in the U.S., and quickly after approval in the EU. We expect that the transaction with PTC is going to deliver real value, and that this is an important step in accelerating in the near-term. And we're profitable, with the flexibility to design commercialization strategies to maximize commercial potential for each of our drugs, and maximize our participation in the commercial value. And with that, I'll turn the call over for Q&A. Can you set us up for Q&A, Cole?

Certainly. We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Chad Messer from Needham & Company. Please go ahead.

Great, thanks. Good morning, and thanks for taking my question. A couple, if I may, on your deal with PTC, a general one and then a more specific one. So starting with the general one, can you walk us through sort of the thought process you used as you decided to go with the partner for Latin America versus building on your own? Seems on your own certainly would have been a possibility with the talent you have at Akcea. And I guess my -- if you can answer that question kind of with [indiscernible] which is my thoughts to how you might be thinking of other geographies that aren't yet covered. And then more specifically, wondering if you could comment on the size of the PTC sort of ground force in Latin America, and whether they need to expand or do more post launch of your two drugs? Thanks.

Thanks, Chad. I'll take the first one, and then Sarah can amplify on that, and then Sarah, if you'll answer the second question. I think our logic for the PTC collaboration includes the fact that, of course, we are moving as rapidly as possible to prepare for a launch in the U.S. and the EU for both drugs. And we certainly have our hands full with that. We've made great progress, but it's a very [indiscernible] time for the Akcea team. With Latin America, if we were to do it ourselves, we would be doing it a little later. So PTC provides a great opportunity to accelerate sales in Latin America for both products. We think that's a big win for us and PTC. And remember that we have not included in the transaction the [indiscernible] form of TEGSEDI or WAYLIVRA. And so we believe that we have plenty of opportunity to build our Latin America force after we've successfully launched these drugs in the U.S. and Europe. And Chad, I wouldn't read any more than just exactly what I said into the fact that we did the PTC transaction. The other territories will be made on a territory basis. And as a function of how fully ready we are to take full advantage of the opportunity in these other markets.

And Chad, just to add, to your question around PTC and the size in Latin America, they have a fully built up organization in there. They have actually been extremely successful in commercialization in Latin America, in particular in Brazil. One of the key drivers, as Stan said, around partnering with PTC was time and allowing that rapid acceleration to provide TEGSEDI and WAYLIVRA to patients as quickly as possible because they already have that infrastructure in place. Certainly it is, both for TEGSEDI and WAYLIVRA, they are significant opportunities. So, first to expect to have some expansion of PTC's Latin America organization, but the infrastructure, the leadership, and the people that are really needed to drive that success are already in place. And we're really thrilled with the people that we met; we had great chemistry, and very similar attitude around sense of urgency and patient focus.

Thanks, Sarah. Next question, please.

And our next question comes from Tyler Van Buren with Piper Jaffray. Please go ahead.

Hi, good afternoon. Thanks for taking the questions. I guess the first question would be to have, without giving any specifics of course, have the label discussions with WAYLIVRA begun?

Well, we're well along in the regulatory process with the FDA. And I think that's the maximum that would be appropriate to say today.

Great, that's helpful. And then I guess with respect to the TEGSEDI and WAYLIVRA launches, what early metrics should we look at to determine commercial success? And I guess just following up on that, with respect to the cardiologists who are looking at the cardiomyopathy patients who have symptoms of polyneuropathy, how do you expect to reach those patients specifically for the TEGSEDI launch?

So, starting with the back part first, with cardiologists. Our field team is already engaged and calling on cardiologists as well as neurologists, and some hematologists from a disease education perspective and patient identification. One of the things that we very clearly found in our discussions with physicians, and in particular cardiologists, is they absolutely have these patients. They have many of the patients who had cardiomyopathy also had symptoms of polyneuropathy, and would be covered by, for example in Europe, the broad label that we were able to achieve. There will also need to be a close partnership between cardiology and neurology, and that's one of the things that we're also working on quite closely. In terms of tracking on launch metrics, so one of the things that you -- our distribution system is fully in place. We're using a specialty pharmacy, so the drugs typically won't report through IMS when going down that route. For us, we'll be looking at all metrics such as things like patient identification, as well as looking at, as we have patient start forms, and then we look at conversion times from a start form over to reimbursed drug. So that'll be the types of metrics that we're looking at. And we'll flush that out as we get closer to the launch and give more guidance around that, but typical types of things that you look at in the orphan space.

Thanks, Sarah. And I do think that Sarah, and Paula, and the teams at Akcea have put together a really remarkable patient services system. And I think that patient service system will be substantially helpful in both identifying patients, getting them through the process so they can get their medicine, helping practitioners take care of these patients, certainly handling all the paperwork and everything or helping them handle it. And then we think that will also contribute to excellent retention. And so we'll be looking at the performance of all those systems very carefully here at Ionis and Akcea.

Great. And just one last question, I just want to get your updated expectations for the [indiscernible] data at the end of the month. There's some talk among KOLs that regardless of the mortality benefits if they'll use it in wild-type patients despite other options potentially being available, which is kind of confusing given the fact that it hasn't done well abroad based upon a lack of efficacy, so what do you guys think they need to show in terms of a mortality benefit to be able to carve out maybe their own segment in the near-term and perhaps over the long-term?

Sure, Tyler, let me take this. This is Brett Monia. So, to families as you said has had a bit of a struggle in reaching the polyneuropathy stage 1 population which has been approved for some jurisdictions not U.S. of course. They did increase the dose in the Phase III study and they did report significant -- as it is with significant top line data in cardiac outcome. So we are expecting, the significance when they presented ESC, what we don't know is whether or not that population, whether or not they will have significant benefit in both populations vegetarians as well as wild type. Whether or not they intact the same way on mortality versus hospitalizations and whether there will be a dose response. So there is so much we don't know and we will learn more about this later this month that's for the wild type population you asked about. There is no other treatment for wild type today. So the bar isn't very high, if they show just to go significance for wild-type cardiomyopathy is expected, patients will be treated with that and that's something we will deal with as we develop our LICA for that population. We believe our mechanism is superior and whatever we learn from the design their study will only help us design a better study in Phase III and we like our, we like our mechanism, so we look at the data and we've gone from there. Sarah, do you want to add, Stan?

Just one thing to add after of course, the two mechanisms are potentially complimentary, we think the great benefit will be brought by getting with the protein that causes the trouble but the remaining protein could also benefit from a stabilizer. So we could imagine very easily that patients might be treated with both drugs.

I think that answered.

Thanks. Thank you very much.

Thanks for the thought.

And our next question comes from Jim Birchenough from Wells Fargo Securities. Please go ahead.

Hi, guys congrats on all the progress during the first-half of the year. A couple of questions from me just first on the revenue line, when you think about the four contributors to R&D revenue and what's feeding those contributors in terms of the science and some of the products, is this a revenue line I should grow over the next year or next several years. How far does the visibility go on that line when you think about that continued growth sustainability?

Hi, Jim its Beth. So we think that it will continue to grow. The pipeline continues to grow, it continues to mature and so we believe that R&D revenue as it has done in the last six, seven years will continue to grow and it will grow substantially, those -- each one of those elements that I spoke about has the potential to increase as the pipeline grows and as the drugs get later in the development process and reach the market. So we see that being very sustainable and out of significant growth trajectory.

And Jim just to add to that and to remind everyone we have built a very sizable pipeline of drugs that we intend to commercialize ourselves through commercial affiliates. But we also judiciously partner after proof of concept those drugs that we think really require a very large infrastructure both for development and commercialization like APO(a)-LRx and APOCIII-LRx and even with those we are retaining a much greater fraction of commercial revenues today. So that combination of continued strong interest from potential large company partners for those drugs that really we believe require those kinds of resources, the -- adding the increased number of drugs in our pipeline that are both available for partnering and are unavailable for partnering. As a fact, that the value of the technology and drugs grows, that assures that those all of those types of revenue will continue to grow for the foreseeable future certainly that's our plan.

And then, maybe Stan on TEGSEDI and WAYLIVRA, you highlighted the high margin nature of these Orphan Drugs, do you expect both of those drugs to be profitable next year off your own net revenue expectation, is this a profit driver next year as well?

So Jim, this is Beth, I think it's too early for us to be saying before the drugs are actually launched but we will certainly be watching and expect subsequent watches. And then, in appropriate time, the drugs we believe could be substantial contributors our earnings.

I think what we are really proud of is that we are advancing a pipeline of 40, novel first-in-class or best-in-class drugs and launching two drugs through Akcea remember we consolidated all those expenses and even so we remain sustainably profitable and the profits are going to grow. So I think that's the thing that I would focus investor's attention on which I do think is really quite a bit important acquisition and attractive position for us to be in and the product of the technology and the business model.

And just one last one for Brett perhaps on the TTR LICA obviously an opportunity to expand into the wild-type and cardiomyopathy opportunity but is there a faster market strategy that might focus on the NEURO-TTR population as a follow-on on TEGSEDI and do you think in that population TTR reduction alone could be sufficient to get LICA in the market quickly for patients?

Yes, sure Jim, happy to take that. So as you know, we are going to start our clinical study, first clinical study with TTR LICA this year. And then, we are working towards a rapid development strategy for both the wild-type cardiomyopathy patient population as well as the hereditary patient population that we expect to starts these studies for next year for both. We believe that the -- neuropathy indications specifically really the TEGSEDI label if you will pursuing that label with TTR LICA will be a fast track -- will be a fast path to get there. We are not necessarily -- have not necessarily concluded that real focus on TTR lowering mechanism and we are still working through that with Akcea and with the regulators but we do think there will be a rapid path whether it's a biomarker or whether it's a smaller version of the NEURO-TTR study that's to be determined but we do believe there will be a faster track to get there. The wild-type cardiomyopathy patient population, I suspect will look something like that Pfizer did only and optimize and maybe somewhat optimized version based on the learnings that we get from the results of their Phase III study, that will be a longer probably an outcome type study in those patients.

I suppose you'd say, Brett that we would expect to have similar to that, announced for their drug.

Yes.

Would that be fair to say?

We certainly have that option Stan as you know, we are going to the Akcera [Ph] and the Akcea team, we were definitely discussing that option, it's -- that's only available to us, we want to do it and so it's under consideration, so absolutely…

Another thing that I want to add that, it is that the drug truly is formerly a pro drug, it has a same sequence as TEGSEDI and the GalNAc or the LICA is used to direct delivery to the parasite and then removed, so it is in fact a pro-drug and could be treated as a pro-drug certainly we think of it that way.

Thanks, guys.

Thanks, Jim.

And our next question comes from Ritu Baral from Cowen. Please go ahead.

Hi, guys. Thanks for taking the question. Just really two questions, and one, the Phase 2 data readout for Akcea as well as the [indiscernible] program in NASH, can you remind of how those Phase II structured and what efficacy endpoints on especially for NASH that will be produced at the end of the trial?

I'll take that Ritu. So the actual populations in the two studies are slightly different, but the primary endpoint is MRI assessment of liver fat for both [indiscernible] LICA. And we expect to get update in the near future, certainly this year, and we expect the [indiscernible] data a little later. So what we are looking for of course the safety and tolerability and reductions in liver fat, we will also be evaluating a number of other plasma markers, triglycerides and a variety of other things, and we have some -- quite a number of secondary endpoints and looking at metabolic characteristics.

In the MRI that standard I guess PDFF that we seem difference looks reconsideration of safety of NASH trials?

Yes. We learned first with KYNAMRO how effective MRIs are, and I think they have become standard in assisting liver fat, they're highly, they have high precision can detect relevantly small differences in liver fat and what we've learned over the course of time we've been doing work in this area is that the changes in liver fat are fairly rapid. So we have a high degree of confidence in MRI liver fat measurements are a highly effective measure for these drugs and the other NASH drugs that we have moving along.

And can you talk about the DGAT2 mechanism in relation to the certainly the different pathologies, with NASH information [indiscernible] and fibrosis, where do you think the direct benefit and what maybe downstream?

One of the luxuries we have with our platforms is the ability to examine the role of multiple targets within a pathway and we did that which looking at the triglycerides synthesis pathway and determines which would be the best target, we looked at targets like fatty acid syntheses DGAT2, DGAT2 and so on. Based on extensive pre-clinical data, we determine that DGAT2 was by far the most attractive target for not only NASH but also it's impacting plasma lipids, cluster of all triglycerides and those kinds of things, we saw reversal in pre-clinical models that we did with DGAT2 that we didn't see with other targets in that pathway reversal of both liver fat as well as markers of inflammation that of course will lead to approval on NASH. So it's a mechanism which we're blocking to triglycerides synthesis pathway and as I think you may be aware, you could evidence that as the lower liver fat not only will impact NASH, it will also improve glucose, improve glucose homeostasis, improve glucose in sensitivity and those sorts of things. So it's a real evaluation in various targets within the triglycerides and pathway led us to DGAT2.

But Brett, I think she also is trying to compare the mechanisms of DGAT2 and 3 and why we're pursuing both of we think that liver, accumulation of liver fat is very complicated process that and that there are multi-factors that lead to increases in liver fat and then at second hit as responsible for progression to hepatitis and fibrosis in the like, so targets across the gamut of both the triglyceride formation and in earlier development of factors that contribution to inflammation and fibrosis and so our DGAT2 of course inhibits an enzyme in the glucose pathway and [indiscernible] free is really quite different. We suspect that there will be patients who are driven by one inappropriate behaviour one arm of those pathways and others and so what we want to do is explore all these targets, all these structures we have in Phase 2, I think once the same worked best and then find the patient populations that are most attractive maybe the case that we find one that fixes everybody but that's typically not the way this is for typically these kinds of diseases are multi factorial and have different factors and different feeds in the given patients, so we like being able to bit on several pathways in an important disease category like Nash. And then if I say weren't strictly simply focusing on triglyceride metabolism and general metabolic processes. We're also looking for an information in fibrosis as well.

Got it, very helpful. Thanks, guys.

And the next question comes from Yale Jen from Laidlaw & Company. Please go ahead.

Good afternoon, and thanks for taking the questions. And just going back to the TTR little bit for the sort of next-gen products, and Island has announced that they're going to potentially start a pivotal study toward end of the this year and you guys just mentioned that you were start a pivotal study next year, just maybe give them sense, what's your thought in terms of these timeline differences to using there has them any major impact in terms of to reach the market or any I mean other colors on that regard?

I think that, your question was about TTR-LICA adverse like, yes so they are and we will be developing the microform of TEGSEDI with an extremely aggressive clinical pathway that is designed to reduce as the leader they have. and in the end, we think time to market certainly does matter but what will matter most is profile and we're excited about the profile. We think our LICA form of TEGSEDI will have and we think it's going to be a great performer in the marketplace.

Okay, great. That's helpful. and just another question is although why your level launches if I currently remember correctly there is a significant patient potentially located in Canada, so I'm just curious what will be the timeline for the potential approve in Canada and what type of marketing effort at this point toward that specific at that region.

Yes, you certainly are correct. there is a meaningful population of FCS patents in Canada and the dialogue with the Canadian regulatory authorities is in progress and but I can't give you a date by which that's going to finish yet I think in the near future we shouldn't be able to do that but I can't do that today. And Sarah and team are fully ready to launch in Canada and have an excellent team in place, so when we get approval we'll certainly be ready to take advantage of that opportunity.

Okay, great. Thanks a lot and congrats on the progress.

Thank you, and thanks everyone for your interest in participating in the call. As Brett mentioned, we will be holding an Investor Day on Friday November 9 in New York. At which we planned to provide comprehensive update on the business. Details on this event will be announced soon, but if you have a question before there details coming out please give way to call and I'm sure you will be able to answer for you. So thank you very much and talk to you again soon.

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