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Est. 1842 May 20, 2019

Ionis Pharmaceuticals (IONS - $67.78) Healthcare/Biotechnology

Recent Management Meeting Updates: Investors Want More Ticker: IONS

AAN Meeting Tidbits Rating: Buy
We recently hosted several meetings with IONS management and investors. All Price Target: $98.00
investors were very interested in data readouts and the competitive landscape of
different drugs presented at the recent AAN meeting. Major takeaways were:
• RG6042 in HD clinical development a main interest. Investors are interested
in the RG6042 in HD Phase I/IIa OLE 9-month study results of >60% and >40%
mutant HTT protein reduction in CSF by the Q4W and Q8W doses. The study Trading Data:
hypothesis is that >30% mutant HTT protein reduction in cortex could potentially Last Price (5/17/2019) $67.78
reverse the symptoms. The 15-month study could be completed in late 2Q19 and 52–Week High (4/8/2019) $86.58
Roche would like to present the data at a medical conference in 4Q19 or early 2020; 52–Week Low (6/28/2018) $40.91
and start discussions with the FDA, possibly in early 2020, to explore the potential Market Cap. (MM) $9,458
for an accelerated approval. Patient enrollment of the Phase III study could complete Shares Out. (MM) 134.06
in 1H20. Factors for deciding not to explore allelic-specific HTT are that such an
approach would: 1) require multiple drugs; 2) difficulty in diagnosing of some
patients; 3) antisense drug of some alleles are difficult to make; and 4) no AEs
observed of wild-type HTT elimination from several animal models.
• Tofersen (BIIB067) in SOD1-ALS is another focus. The reduction of ALS-FRS-
R and improvement of lung function demonstrated from the Phase I/II trial interim
data are encouraging. More impressive is the improvements seen in the fast
progressors, and they accounted for ~50% of the total SOD1 ALS patients. The
targeted tissues for SOD1 ALS are spinal cord and motor cortex. Additional data
updates could slate to 2020. In addition, BIIB is scheduled to host an ALS webcast
on June 5, 2019 at 8:00 a.m. (ET).
• Spinraza commercial outlook with competitors to come. Given the robust clinical
readouts from several clinical studies and the real-world patient experiences so far,
IONS believes that Spinraza remains the best treatment option in SMA. This could
figure prominently in parents minds when choosing therapy. Further, despite
promising Zolgensma clinical data at the AAN, the fact that several Zolgensma-
treated patients later need to take Spinraza, and the presence of anti-AAV antibodies
(from mother in type 1 patients) in ~10% of patients, could increase the challenges
for future Zolgensma adoption by patients. Anti-AAV antibodies could still be
present in older Type II and III patients as they might develop them on their own.
• Action. We are reiterating our Buy rating and $98 target price to reflect our bullish
view on progress in IONS’s marketed and pipeline products. Our valuation is based
on our DCF and probability-adjusted-NPV-driven, sum-of-the-parts analyses.

Earnings Estimates: (per share) Yale Jen, Ph.D.

Managing Director /
(Dec) 1Q 2Q 3Q 4Q FY P/E Senior Biotechnology Analyst
FY-19E 0.63A -0.19 -0.14 -0.22 0.03 NM (212) 953-4978
yjen@laidlawltd.com
FY-18A -0.01 -0.29 -0.03 2.32 2.09 NM
FY-17A 0.03 -0.09 0.00 0.02 0.08 NM
FY-16A -0.52 -0.47 0.06 0.21 -0.72 NM
Source: Laidlaw & Company estimates

FOR ANALYST CERTIFICATION AND DISCLOSURES, PLEASE SEE DISCLOSURES SECTION AT THE END OF
THIS REPORT. This report has been prepared by Laidlaw & Co (UK), Ltd. Investors should be aware that the firm may
have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a
single factor in making their investment decision. All prices are those current at the end of the previous trading session
unless otherwise indicated. Prices and consensus estimates are sourced from a reliable market source
 Laidlaw & Company
May 20, 2019 Est. 1842

• Other pipeline updates. For AKCEA-TTR-LRx, the Phase I study (in healthy
volunteers) should be completed soon and the two separate Phase III studies
in polyneuropathy and cardiomyopathy, respectively, could start in 2H19.
Given the very low dose needed of a LICA drug and a likely superior
mechanism of action of tackling the root cause, instead of stabilizing the
protein; IONS believes AKCEA-TTR-LRx should likely to have greater
therapeutic benefits over other marketed or in-development cardiomyopathy
therapies. IONIS-FXIRx in atrial fibrillation of ESRD dose optimizing Phase
IIb study and IONIS-FXI-LRx Phase I study results are expected in mid-2019
and shortly thereafter, respectively. Bayer would have to make a go/no go
decision advancing one or both programs forward to potential pivotal studies.
Given Bayer has paid $100MM and $75MM, respectively for each program,
it is possible that they might advance both forward for different indications.
For IONIS-HBVRx, GSK should report the in HBV Phase II study top-line
results in 2H19. IONIS-HBVRx targets four viral RNAs.

Yale Jen, Ph.D.

Ionis Pharmaceuticals Page 2 of 8
yjen@laidlawltd.com
 Laidlaw & Company
May 20, 2019 Est. 1842

Anticipated milestones in 2019 and beyond

Product Indication Event Timing Importance
Familiar chylomicronemia syndrome Meeting with the FDA for future regulatory path 1Q19 ****

Waylivra (Volanesorsen) (FCS)

Potential EU approval 2Q19 ****

Familiar partial lipodystrophy (FPL) Report of Phase III study top-line results Mid-19 ****

Potential additional ROW approvals 2019 ***

Spinal muscular atrophy (infant
Spinraza (Nusinersen) Quarterely sales updates (recurring) 2019 ***
/children)
Potential FDA decision on AVXS-101 approval 2Q19 ***

Polyneuropathy due to hereditary TTR

Tegsedi (Inotersen ) Quarterely sales updates (recurring) 2019 ***
amyloidosis (hATTR-PN)

Polyneuropathy due to TTR Possibly start pivotal study 2H19 ***

amyloidosis Potentially complete pivotal study
IONIS-TTR-LRx 2021 ***
Cardiomyopathy due to TTR
Possibly start pivotal study 2H19 ***
amyloidosis
Potential to report Phase IIb ESRD dose optimizing
Mid-19 ***
Atrial fibrillation of end-stage renal study
IONIS-FXI Rx
disease Potential to start Phase III study or decision waiting for
2H19/2020 ***
Lica product by Bayer

IONIS-FXI-LRx Novel anti-thrombotic agent Potential to report Phase I study results 2019 ***

High risk CV patients with elevated Report Phase II dose optimization study results 1H20 ****
ACKEA-APOCIII-LRx
triglyceride as major risk factor NVS start Phase III CV outcome study 2020 ****

IONIS-DMPK-2.5Rx Myotonic dystrophy 1 Develop the next gen. product 2019 ***

IONIS-PKKRx Hereditary angioedema Possibly to start a LICA version drug Phase I trial 2019 ***

Potentially report Phase II/III study results by Roche 4Q21/2022 ****

IONIS-HTTRx (RG6042) Huntington disease
Readout of PRECISION-HD study by WVE 1H19 ***

Rare hyperlipidermias Potentially report Phase II study results Mid-19 ***

ACKEA-ANGPTL3-LRx Non-alcoholic fatty liver disease

(NAFLD) with metabolic Potentially report Phase II study results 1H20 ***
complications

Potentially start Phase II POC study 2019 ***

IONIS-TMPRSS6-LRx β-Thalassemia Potentially report Phase II POC study results 2H19/1H20 ****

Potentially pivotal Phase III study 2020 ***

High risk CV patients with elevated
ACKEA-APO(a)-LRx NVS potentially start Phase III CV outcome study 2H19/2020 ****
Lp(a) as major risk factor

IONIS-STAT3-2.5Rx Determine next step in clinical development 2019 ***

Head and neck cancer
(Danvatirsen) Potentially start a Phase III study by AZN 2020 ***

Start Phase II study 2019 ***

IONIS-DGAT2-LRx NASH
Potentially start a Phase II/III study 2020 ***

Report topline Phase I/II study results at the AAN May 4-10, 2019 ****
IONIS-SOD1Rx (BIIB067) Amyotrophic lateral sclerosis (SOD1)
Report topline Phase III study results 2H20 ****

IONIS-C9Rx (BIIB078) Amyotrophic lateral sclerosis (C9) Report Phase II POC study results 2H19 ***

IONIS-BIIB4 - 6Rx Neurodegenerative disease Report Phase I study results 2019 ***

Potentially report Phase II study results 4Q19/1Q20 ***

IONIS-GHR-LRx Acromegaly
Potentially start Phase III pivotal study 2020 ***

IONIS-AGT-LRx Treatment-resistant hypertension Phase Ib study results 2H19 ***

AD/Frontotemporal dementia Potentially report Phase I/II study results 2020 ****
IONIS-MAPTRx (BIIB080)
Frontotemporal dementia Potentially start Phase III study 2020 ***

IONIS-FB-LRx Geographic atrophy Start Phase II study 1Q19 ***

Potentially report Phase II study top-line results by

IONIS-HBVRx HBV 3Q19 ****
GSK
**** / ***** Major catalyst event that could impact share price very significantly while *** event is more informative

Source: Laidlaw & Company estimates and company presentation.

Yale Jen, Ph.D.

Ionis Pharmaceuticals Page 3 of 8
yjen@laidlawltd.com
 Laidlaw & Company
May 20, 2019 Est. 1842

Major risks
Clinical risks of study failure could have significant impacts on IONS share
value. Although many ongoing studies have provided encouraging clinical
outcomes following prior studies; risks remain that some current trials might not
meet study endpoints in order to advance forward. As such, the value of any such
clinical asset could be significantly impaired and therefore IONS shareholder
value could diminish. Such a negative impact could be more pronounced if the
clinical program is in very advanced development stages or with high investor
expectations. Regulatory risks are part of the clinical risks as even if a drug met
its endpoints for pivotal studies. The regulatory agency might not grant approval
and therefore, the drug cannot be commercialized.

Commercial risk even if a therapeutic is approved, sales could be

substantially below expectations. Even it is approved; the commercial sales of
any drug could fall below expectations, resulting in diminishing IONS
shareholder value. Factors that could impact on the commercial outlook of a drug
could include execution of marketing and sales; competition from other drugs;
potential change of the treatment paradigm; and unrealistic expectations or
projections.

Continued consummations of partnerships could be important. Given that

partnerships are a critical part of IONS product development and
commercialization strategy; failure to consummate future product development
or product commercialization partnerships could put share value at risk. The
alternative approach could require that the company raise capital from financial
markets to support its operation if the company cannot generate profits from
product revenues.

Future capital raises could potentially dilute value of current shareholders.

If it is not profitable, the company may need to raise capital from financial
markets to support its operations; even if the company already has partners to
provide milestone and other types of payments and/or product revenue. As such,
the company might not always be able to raise capital from financial markets at
favorable terms. Share dilution under this scenario could reduce the value of the
investment to current shareholders of the company

Although antisense drugs have been approved, this modality might not be
broadly accepted and therefore limit its commercial potential. Although two
antisense drugs are already approved and commercialized in the U.S. and other
part of the world; this treatment modality remains with limited exposure to the
medical world. As such, it is possible that going forward, antisense or other RNA-
based medication could have limited use due to market acceptance. Such a
scenario could reduce the market potential of antisense drugs and have negative
impact on IONS shareholder value.

Yale Jen, Ph.D.

Ionis Pharmaceuticals Page 4 of 8
yjen@laidlawltd.com
 Ionis Pharmaceuticals Figure 1: Income Statement

May 20, 2019

Ionis Pharmaceuticals – Income Statement
($'MM)
2016 2017 2018 2019E 2020E 2021E
1Q19 2Q19E 3Q19E 4Q19E
Revenue
Kynamro profit share 0.0 8.4 9.9 11.0 12.1 12.4
Tegsedi (Inotersen or IONIS-TTRRx ) revenue 0.0 0.0 2.2 7.0 8.5 9.4 11.0 36.0 47.6 87.4
Waylivra (Volanesorsen or IONIS-APOCIII Rx & LRx ) revenue 0.0 0.0 0.0 - - 0.2 0.6 0.8 9.6 52.1
Spinraza (Nusinersen) revenue 0.0 112.5 237.9 60.0 72.4 75.6 77.3 285.4 318.4 330.6
Pipeline products - Prob. Adj 0.0 - - - - 0.0 0.0 18.1
R&D revenue under collaborative agreements 325.9 385.6 344.8 229.0 62.8 66.0 75.0 432.8 415.5 423.8
Licensing and royalty revenue 20.7 9.5 14.8 1.0 2.0 9.0 1.0 13.0 13.0 13.0
Total revenue 346.6 507.7 599.7 297.0 145.8 160.2 165.0 768.0 804.0 925.0
Costs of goods 1.8 1.0 1.1 1.3 3.5 6.9 6.9 16.7
Research and development 344.3 374.6 414.6 107.0 112.0 119.9 129.5 468.4 487.1 506.6
General and administrative 48.6 108.5 244.6 68.0 69.6 70.3 73.1 280.9 303.4 324.6
Total Operating Expenses 392.9 483.1 661.0 176.0 182.7 191.4 206.0 756.1 797.3 847.9
Operating Incomes (losses) (46.3) 24.5 (61.3) 121.0 (36.9) (31.1) (41.1) 11.9 6.7 77.1

Equity in net loss of Regulus Therapeutics Inc.

Investment income 5.5 8.2 30.2 12.0 12.7 13.0 11.4 49.1 54.0 59.4
Interest expense (38.8) (44.8) (44.8) (12.0) (11.5) (11.4) (11.5) (46.3) (46.3) (46.3)
Gain on investments, net (0.0) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Gain on investment in Regulus Therapeutics Inc. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Loss on extinguishment of financing liability for leased facility (7.7)
Loss on early retirement of debt (4.0) 0.0
Other expenses (3.5) (0.2) 0.0 (0.3) (0.1) (0.2) (0.6) (0.6) (0.7)
Total Other Income, net (37.3) (47.8) (14.8) 0.0 1.0 1.5 (0.3) 2.2 7.7 13.1
Income before tax (83.6) (23.2) (76.2) 121.0 (36.0) (29.7) (41.3) 14.0 14.3 90.2
Tax (2.9) 6.0 291.1 (31.0) (0.3) (0.4) (0.4) (32.1) (5.3) (33.4)
Page 5 of 8

Net Income (Loss) GAAP (86.6) (17.3) 215.0 90.0 (36.3) (30.1) (41.8) (18.1) 9.0 56.8
Net loss attributable to noncontrolling interest in Akcea 11.3 58.8 (6.0) 9.7 9.7 9.6 23.0 24.2 25.4
Net Income (Loss) Applicable to Common Shareholders (86.6) (5.9) 273.7 84.0 (26.6) (20.4) (32.2) 4.9 33.2 82.2
Non-GAAP net income (losses) (14.4) 84.7 393.5 126.0 7.5 15.2 5.6 154.4 181.7 238.7
Net Earnings (Losses) Per Share—Basic ($0.72) $0.08 $2.09 $0.63 ($0.19) ($0.14) ($0.22) $0.03 $0.22 $0.53
Net Earnings (Losses) Per Share—Non-GAAP ($0.12) $0.67 $2.94 $0.89 $0.05 $0.10 $0.04 $1.07 $1.21 $1.54
Shares outstanding—basic 120.9 124.0 132.3 138.6 141.6 145.1 148.1 143.3 149.3 154.3
Shares outstanding--diluted 120.9 126.1 134.1 141.5 141.6 145.1 148.1 144.1 150.1 155.1

Margin Analysis (% of Sales/Revenue)

Costs of goods 0% 0% 0% 0% 0% 0%
R&D 99% 74% 69% 36% 77% 75% 78% 61% 61% 55%
MG&A 14% 21% 41% 23% 48% 44% 44% 37% 38% 35%
Operating Income (loss) -13% 5% -10% 41% -25% -19% -25% 2% 1% 8%
Net Income -25% -1% 46% 28% -18% -13% -20% 1% 4% 9%

Financial Indicator Growth Analysis (YoY%)

R&D revenue under collaborative agreements 16% 18% -11% 124% 4% 5% -37% 26% -4% 2%
Licensing and royalty revenue 784% -54% 55% 6% 267% -29% 91% -12% 0% 0%
Total Revenue 22% 46% 18% 106% 24% 10% -14% 28% 5% 15%
R&D 7% 9% 11% 3% 10% 26% 14% 13% 4% 4%
SG&A 31% 123% 125% 56% 5% 2% 9% 15% 8% 7%
Operating Loss -39% -153% -350% -3766% -27% 68% -481% -119% -44% 1055%
yjen@laidlawltd.com

Total Other Income, net 207% 28% -69% -100% -116% -210% 2264% -115% 255% 70%

Laidlaw & Company

Pretax Income -5% -72% 228% -1221% -36% 49% -484% -118% 2% 529%
Net Income -2% -93% -4709% -6015% -34% 347% -110% -98% 579% 148%
Yale Jen, Ph.D.

EPS -3% -111% 2511% -5624% -36% 341% -109% -98% 551% 140%

Yale Jen, Ph.D. 212-953-4978

Source: Roth Capital Partners Research and NovaBay's SEC filings

Est. 1842
Source: Bloomberg LP; Company reports; Laidlaw & Company estimates.
 Laidlaw & Company
May 20, 2019 Est. 1842

DISCLOSURES:
ANALYST CERTIFICATION
The analyst responsible for the content of this report hereby certifies that the views expressed regarding the company or companies and their securities accurately represent
his personal views and that no direct or indirect compensation is to be received by the analyst for any specific recommendation or views contained in this report. Neither
the author of this report nor any member of his immediate family or household maintains a position in the securities mentioned in this report.

EQUITY DISCLOSURES
For the purpose of ratings distributions, regulatory rules require the firm to assign ratings to one of three rating categories (i.e. Strong Buy/Buy-Overweight, Hold, or
Underweight/Sell) regardless of a firm's own rating categories. Although the firm’s ratings of Buy/Overweight, Hold, or Underweight/Sell most closely correspond to
Buy, Hold and Sell, respectively, the meanings are not the same because our ratings are determined on a relative basis against the analyst sector universe of stocks. An
analyst's coverage sector is comprised of companies that are engaged in similar business or share similar operating characteristics as the subject company. The analysis
sector universe is a sub-sector to the analyst's coverage sector, and is compiled to assist the analyst in determining relative valuations of subject companies. The
composition of an analyst's sector universe is subject to change over time as various factors, including changing market conditions occur. Accordingly, the rating assigned
to a particular stock represents solely the analyst's view of how that stock will perform over the next 12-months relative to the analyst's sector universe.

Additional information available upon request.

# Laidlaw & Co (UK) Ltd. has not provided any investment banking services for the company (ies) mentioned in this report over the last 12 months.

RATINGS INFORMATION
Rating and Price Target Change History

3 Year Rating Change History

3 Year Price Change History

Source: Laidlaw & Company Created by: Blue-Compass.net

Laidlaw & Company Rating System* % of Companies for which Laidlaw & Company
% of Companies has performed services for in the last 12 months
Under Coverage
With This Rating Investment Banking Brokerage
Strong Buy Expected to significantly outperform the sector over 12
(SB) months.
0.00% 0.00% 0.00%

Buy (B) Expected to outperform the sector average over 12 months. 62.50% 23.44% 3.13%

Expected returns to be in line with the sector average over 12

Hold (H)
months.
4.69% 3.13% 0.00%

Returns expected to significantly underperform the sector

Sell (S)
average over 12 months.
0.00% 0.00% 0.00%

ADDITIONAL COMPANIES MENTIONED

Roche (ROG – Not Rated)
Biogen (BIIB – Not Rated)
Akcea Therapeutics (AKCA – Not Rated)
Bayer (BAYRY- Not Rated)
GlaxoSmithKline (GSK – Not Rated)

ADDITIONAL DISCLOSURES
As of the date of this report, neither the author of this report nor any member of his immediate family or household maintains an ownership position in the securities of
the company (ies) mentioned in this report.

Ionis Pharmaceuticals Page 6 of 8 Yale Jen, Ph.D.

yjen@laidlawltd.com
 Laidlaw & Company
May 20, 2019 Est. 1842
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Ionis Pharmaceuticals Page 7 of 8 Yale Jen, Ph.D.

yjen@laidlawltd.com
 Laidlaw & Company
May 20, 2019 Est. 1842

NOTES:

Ionis Pharmaceuticals Page 8 of 8 Yale Jen, Ph.D.

yjen@laidlawltd.com