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Isis Pharmaceuticals, Inc. Message Board

  • robert.vince robert.vince Sep 18, 2012 3:59 PM Flag

    A Biotechnology Firm Making Its First Step Towards Profitability?

    From the Motley Fools Part 1:
    As bullish markets expand, monies are channelled not just into established names, but to companies which offer the potential to become the next big names. In recent weeks, the number of stocks which have seen money flows above their typical average have markedly increased. Of these movers-and-shakers, one to make the grade was ISIS Pharmaceuticals (NASDAQ: ISIS).

    ISIS Pharmaceuticals researches and develops antisense drugs, used for the treatment of cardiovascular, metabolic, severe and rare diseases, including cancer. The company focuses on Antisense RNA research. Antisense RNA operates like a blocker, preventing RNA (protein cooking instructions) from building proteins that may ultimately contribute or lead to disease. The company's business is to develop Antisense RNA-based drugs to a point where they can be licensed to a partner, who then commercialize it. The company has collaboration agreements with a number of companies, including Biogen Idec (NASDAQ: BIIB), Bristol-Myers Squibb, Eli Lilly, and GlaxoSmithKline.

    Buyers regain momentum

    ISIS Pharmaceuticals stock price has enjoyed a solid summer of 2012 after a few years of lackluster trading. The stock's nadir was 2009 when it ran into a $19 ceiling, and headed south to spend most of last year below $10 a share. But a couple of heavy trade days in early August following earnings, and more recently in September saw a shift from net selling to net buying. Largest was 3.3 million shares traded in a single day which was also so happened to come with a push above $14.

    But income heavily tied to a single client

    Like many biotechnology stocks, it has a variable but typically losing streak of earnings. Analyst expectations aren't a useful guide, although biotechnology stocks are probably less sensitive to earnings releases than perhaps other pharmaceutical companies which are less research focused. The company's revenues are heavily dependent on milestone payments from its research partners, Genzyme in particular. The Genzyme payments accounted for 90% and 84% of the $42.8 million and $59.1 million in reported revenue for the three and six months ended in June 30th 2012. ISIS almost squeaked a Q2 profit at a penny loss per share, although expectations for next quarter are for a $-0.28 loss.

    Genzyme is working with ISIS Pharmaceuticals to develop its lead product, KYNAMRO, for the treatment of familial hypercholesterolemia. Commercialization can begin once it obtains the required regularly approval in Europe and the United States; the former application was made in June 2011, and latter to the FDA in May 2012. Submitting these applications generated a $25 payment from Genzyme. FDA approvals can take 6 to 10 months to complete, so it will be the latter part of the year until news of this is known. Should the FDA approve the commercial release of KYNAMRO then ISIS Pharmaceuticals will receive another $25 million payment from Genzyme. However, the larger picture is that ISIS Pharmaceuticals will have a new, more substantial, source of revenue in the form of license payments, not to mention a milestone payment of up to $825 million for commercialization of the drug.

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    • However, it has more than one string to its bow

      While Genzyme is the primary contributor to ISIS Pharmaceutical coffers, the company has engaged in a number of new projects with Biogen Idec. The first was announced in January with the goal to commercialize ISIS-SMN RX for the treatment of spinal muscular atrophy (SMA). This project came with a $29 million starter kitty. A second collaboration was announced in June to create a drug for the treatment of myotonic dystrophy type 1 (DM1). This project was funded with an initial payment of $12 million. Together, these payments are just part of a larger $875 million sum paid by Biogen Idec to ISIS Pharmaceuticals over the last five years. So while Genzyme may be the flavor of the month, ISIS Pharmaceuticals has strong, and long standing relationships with other research partners to help fund its research.

      What's in it for the Research Partners?

      ISIS Pharmaceuticals is heavily dependent on its Partners to fund its research. The Genzyme relationship has almost come to fruition, but the Biogen relationship appears more tenuous given the sums involved. However, Biogen has negotiated itself a bargain. Rival Roche has a licensing deal with PTC Therapeutics for a SMA program which could cost the company close to $0.5 billion, this is compared to the $225 million Biogen has committed to give ISIS Pharmaceuticals for a commercial ISIS-SMN. Biogen also gains the benefit of fast track status for ISIS-SMN, so not only is it paying less it's also likely to get to market first with its drug. The DM1 project is in an earlier phase, but there is no specific treatment for individuals with this genetic disorder. Initial clinical trials haven't offered a management solution and there is little in the way of public research available on the subject.

      Fresh opportunities are developing

      ISIS Pharmaceuticals is also engaged in new areas of RNA research. It has a joint venture with Alnylam Pharmaceuticals to treat diseases using formerly 'junk status' microRNA. The joint-venture company, Regulus Therapeutics, is looking to IPO soon and this will offer new opportunities for ISIS Pharmaceuticals to explore.

      Exciting times at year end?

      The kicker for this year is whether the FDA will complete its review and approve KYNAMRO for the commercial market in the next few weeks. Not only is this important from a revenue perspective, but also a demonstration of the company's capability to deliver a commercially viable drug. It is hoped KYNAMRO will become the company's first 'fully fledged' drug to cross the line. What goes for KYNAMRO will not only have a bearing on immediate revenue, but also reflect on its ability to deliver to its clients and perhaps attract new clients in the process. KYNAMRO approval will go a long way towards pushing ISIS Pharmaceuticals into profitability and crack the long standing $19 ceiling along the way.

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