CARLSBAD, Calif., Nov. 10 /PRNewswire-FirstCall/ -- Isis Pharmaceuticals, Inc. today announced its financial results for the third quarter ended September 30, 2008. Isis’ positive net income for the third quarters of 2008 and 2007 was $3.2 million and $20.0 million, respectively, driven primarily by significant revenue in each period from Isis’ corporate partnerships. Additionally in the last 15 months, Isis has achieved three quarters of pro forma net income, excluding non-cash stock compensation expense.
“We maintained our financial strength, ending the third quarter profitable, while remaining on track to meet our financial guidance with a net operating loss of less than $15 million for the year on a pro forma basis and year-end cash of at least $450 million. In addition to the three quarters of pro forma net income, over the last 15 months, on a pro forma basis, we have had two quarters of net operating income, with our current quarter having a very small loss at the net operating level. Although we reported another quarter of positive net income, we are not yet at the point of sustainable profitability and our quarter-to-quarter performance will continue to fluctuate based on one-time events. However, these positive financial results reflect how we are able to create significant ongoing revenue and how close the successful execution of our business model has brought us to sustainable profitability, an important goal for Isis,” commented B. Lynne Parshall, COO and CFO of Isis.
“Our business model is only achievable because of the speed and productivity of our antisense drug discovery platform, which enables us to build a robust and diverse pipeline of drugs that are attractive to our partners. Our financial strength is driven by the successful execution of our business model, creating valuable partnerships allowing us to move many drugs forward with significant financial and other support from our partners, while keeping our operating expenses low,” continued Ms. Parshall.
Financial Results
For the first nine months of 2008, Isis had a pro forma net operating loss (NOL) of only $4.5 million, excluding compensation expense related to stock options, compared to a pro forma NOL of $23.3 million for the same period in 2007. On a GAAP basis, Isis’ loss from operations was $16.3 million and $30.5 million for the first nine months of 2008 and 2007, respectively. The considerable improvement in the Company’s financial performance was driven primarily by the significant increase in revenue in 2008 from Isis’ corporate partnerships. The strategic alliances that Isis entered into over the past year have strengthened its financial position and have created a continuing revenue base from license fees, augmented by sublicensing fees and milestone payments for these and earlier partnerships.
Revenue
Total revenue for the first nine months of 2008 and 2007 was $86.5 million and $44.9 million, respectively. Isis’ revenue almost doubled in 2008 compared to 2007 as a result of Isis’ new collaborations including its strategic alliances with Genzyme, Ortho-McNeil and Bristol-Myers Squibb. Also contributing to the increase was the revenue Regulus earned from its strategic alliance with GlaxoSmithKline (GSK). In addition to revenue from its pharmaceutical alliances, Isis’ satellite company strategy has made significant contributions to Isis’ revenue. For example, in the third quarter of 2007, Isis earned $26.5 million of sublicensing revenue from Alnylam. In 2008, Isis continued to earn substantial revenue from its satellite companies, including $6.1 million in sublicensing revenue from Alnylam and Antisense Therapeutics Limited (ATL).
Operating Expenses
On a pro forma basis, operating expenses for the first nine months of 2008 and 2007 were $91.0 million and $68.2 million, respectively. Isis’ pro forma operating expenses were $32.5 million for the three months ended September 30, 2008 and were essentially flat compared to $32.1 million for the three months ended June 30, 2008. The higher year to date expenses in 2008 compared to 2007 were primarily due to increased activity levels related to Isis’ planned investment to fill its pipeline and the expansion of its clinical development programs, including increased expenses for manufacturing of drug supplies for Isis’ corporate partners and its internal drug development programs, an increase in Ibis’ operating expenses to support the growth of its commercial business and the activities to achieve the Abbott milestones, and expenses for Regulus, which began operations in September 2007. On a GAAP basis, Isis’ operating expenses for the first nine months of 2008 and 2007 were $102.8 million and $75.4 million, respectively, including non-cash compensation expense related to stock options of $11.8 million and $7.2 million, respectively.
Net Loss and Net Loss Applicable to Common Stock
Isis’ net loss for the first nine months of 2008 and 2007 was $3.3 million and $4.0 million, respectively. Isis’ net loss in 2008 was significantly lower than 2007 primarily due to a decrease in the Company’s loss from operations. Isis’ loss applicable to common stock for the first nine months of 2008 and 2007 was $3.3 million or $0.04 per share and $129.3 million or $1.57 per share, respectively. In the third quarter of 2007, Isis purchased the equity of Symphony GenIsis. The $125.3 million on Isis’ Statement of Operations in a line item called Excess Purchase Price over Carrying Value of Noncontrolling Interest in Symphony GenIsis, Inc. represented a deemed dividend to the previous owners of Symphony GenIsis. This deemed dividend only impacted Isis’ net loss applicable to common stock and its net loss per share calculations for 2007 and does not affect Isis’ net income (loss).
Balance Sheet
As of September 30, 2008, Isis had cash, cash equivalents and short-term investments of $512.0 million compared to $193.7 million at December 31, 2007. In 2008, Isis received a significant amount of cash from its partners including:
As of September 30, 2008, Isis had consolidated working capital of $411.9 million compared to $145.1 million at December 31, 2007. The cash Isis received in the first half of 2008 primarily led to the increase in Isis’ consolidated working capital, offset by $68.9 million of deferred revenue from Genzyme and GSK that is included in current liabilities.
Based on Isis’ existing and committed cash, not including the cash Isis could receive from Abbott if Abbott completes its purchase of Ibis, Isis remains on track to meet its cash guidance with a 2008 year end cash balance greater than $450 million, which is sufficient to fund the activities of the Company for at least five years.
Ibis Biosciences, Inc.
Ibis’ revenue for the first nine months of 2008 and 2007 was $9.0 million and $8.1 million, respectively. The increase in Ibis’ year to date 2008 revenue compared to the same period in 2007 was primarily a result of the government contracts awarded in late 2007 and 2008 and the increased number of Ibis’ T5000(TM) Biosensor System placements. So far in 2008, Ibis has been awarded up to $11.6 million of new contracts that support Ibis’ continued revenue growth by expanding the applications for the Ibis T5000 Biosensor System. Ibis’ revenue in 2008 also included revenue from the distribution agreement Ibis and Abbott entered into in March 2008.
Excluding non-cash compensation expense related to stock options, operating expenses for Ibis were $22.4 million and $14.1 million for the first nine months of 2008 and 2007, respectively. The increase in operating expenses primarily reflects an increase in costs to support the growth of Ibis’ commercial business and the costs to achieve milestones as part of the Abbott transaction. Ibis generated a loss from operations, excluding non-cash compensation expense related to stock options, of $13.4 million and $6.0 million for the first nine months of 2008 and 2007, respectively.
Regulus Therapeutics LLC
Regulus’ revenue for the first nine months of 2008 and 2007 was $1.4 million and $41,000, respectively. The increase was primarily related to revenue from its collaboration with GSK.
Excluding non-cash compensation expense related to stock options, operating expenses for Regulus were $4.5 million and $49,000 for the first nine months of 2008 and 2007, respectively. With the strategic alliance with GSK, it is anticipated that Regulus’ expenses will increase over its run rate to date in 2008 as Regulus advances its research and development activities. Regulus generated a loss from operations, excluding non-cash compensation expense related to stock options, of $3.1 million and $8,000 for the first nine months of 2008 and 2007, respectively.
Quarterly Highlights
“We have had a very successful year financially and in the advancement of the drugs in our pipeline with many milestones to look forward to, including the initiation of three additional trials studying mipomersen,” continued Ms. Parshall. “Together with Genzyme, we completed enrollment in a pivotal Phase 3 mipomersen study and initiated a second Phase 3 mipomersen study. Tonight data will be presented by two of the investigators conducting clinical studies on mipomersen, including top line data from an ongoing Phase 2 study showing that mipomersen did not cause steatosis or fatty liver. Additionally, we will provide an update on our open-label extension study where we have patients who have been exposed to mipomersen from three to 23 months with a median continuous exposure of 16 months.”
“Building on the success of mipomersen, we have bolstered our cardiovascular franchise with the addition of a new drug targeting PCSK9 and the initiation of clinical trials on our CRP inhibitor. This year we and our partners have presented encouraging Phase 2 data on our antisense drugs in cardiovascular disease, cancer and multiple sclerosis, advanced two new drugs into the pipeline and initiated clinical studies on two exciting antisense drugs. We continue to make progress in every element of our business and look forward to another strong year in 2009,” concluded Ms. Parshall.
Conference Call
At 8:30 a.m. Eastern Time today, November 10, Isis will conduct a live webcast conference call to discuss this earnings release and related activities. Interested parties may access the webcast at http://www.isispharm.com or listen to the call by dialing 877-795-3604. A webcast replay will be available for a limited time at the same address.
About Isis Pharmaceuticals, Inc.
Isis is exploiting its expertise in RNA to discover and develop novel drugs for its product pipeline and for its partners. The Company has successfully commercialized the world’s first antisense drug and has 19 drugs in development. Isis’ drug development programs are focused on treating cardiovascular and metabolic diseases. Isis’ partners are developing antisense drugs invented by Isis to treat a wide variety of diseases. Ibis Biosciences, Inc., Isis’ majority-owned subsidiary, is developing and commercializing the Ibis T5000(TM) Biosensor System, a revolutionary system to identify infectious organisms. Isis is a joint owner of Regulus Therapeutics LLC, a joint venture focused on the discovery, development and commercialization of microRNA therapeutics. As an innovator in RNA-based drug discovery and development, Isis is the owner or exclusive licensee of over 1,500 issued patents worldwide. Additional information about Isis is available at http://www.isispharm.com.
This press release includes forward-looking statements regarding Isis Pharmaceuticals’ business, the financial position and outlook for Isis as well as its Ibis Biosciences subsidiary and its Regulus joint venture, and the therapeutic and commercial potential of the Company’s technologies and products in development. Any statement describing Isis’ goals, expectations, financial or other projections, intentions or beliefs is a forward-looking statement and should be considered an at-risk statement, including those statements that are described as Isis’ goals or projections. 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, in developing and commercializing systems to identify infectious organisms that are effective and commercially attractive, and in the endeavor of building a business around such products. Isis’ forward-looking statements also involve assumptions that, if they never materialize or prove correct, could cause its results to differ materially from those expressed or implied by such forward-looking statements. Although Isis’ forward-looking statements reflect the good faith judgment of its management, these statements are based only on facts and factors currently known by Isis. As a result, you are cautioned not to rely on these forward-looking statements. These and other risks concerning Isis’ programs are described in additional detail in Isis’ annual report on Form 10-K for the year ended December 31, 2007, and its most recent quarterly report on Form 10-Q, which are on file with the SEC. Copies of these and other documents are available from the Company.
In this press release, unless the context requires otherwise, “Isis,” “Company,” “we,” “our,” and “us” refers to Isis Pharmaceuticals and its subsidiaries and joint venture.
Isis Pharmaceuticals is a registered trademark of Isis Pharmaceuticals, Inc. Ibis Biosciences and Ibis T5000 are trademarks of Ibis Biosciences, Inc. Regulus Therapeutics is a trademark of Regulus Therapeutics LLC.
Reconciliation of GAAP to Pro Forma Basis
As illustrated in the Selected Financial Information in this press release, pro forma operating expenses and pro forma income (loss) from operations were adjusted from GAAP to exclude compensation expense related to stock options, which are non-cash. Isis has regularly reported non-GAAP measures for operating expenses and income (loss) from operations as pro forma results. These measures are provided as supplementary information and are not a substitute for financial measures calculated in accordance with GAAP. Isis reports these pro forma results to better enable financial statement users to assess and compare its historical performance and project its future operating results and cash flows. Further, the presentation of Isis’ pro forma results is consistent with how Isis’ management internally evaluates the performance of its operations.
CONTACT: Kristina Lemonidis, Associate Director, Corporate Development,
+1-760-603-2490, or Amy Blackley, Ph.D., Manager, Corporate Communications,
+1-760-603-2772, both of Isis Pharmaceuticals, Inc.
Web site: http://www.isispharm.com/
