Loss at ISIS Narrower than Expected

Zacks

Isis Pharmaceuticals Inc. (ISIS) reported a net loss of 21 cents per share in the fourth quarter of 2012, a penny wider than the year-ago loss of 20 cents but 2 cents narrower than the Zacks Consensus Estimate of loss of a 23 cents per share.

Revenues decreased 38.7% to $19.9 million, beating the Zacks Consensus Estimate of $16 million. Revenues include license fees, milestone-related payments and other payments.

Full year loss came in at 79 cents, narrower than the Zacks Consensus Estimate and the year-ago loss of 85 cents each. Revenues increased 3% to $99.1 million, edging past the Zacks Consensus Estimate of $98 million.

Operating expenses decreased 9.9% during the final quarter of 2012 to $46 million. Research and development expenses decreased 9.4% to $42.8 million and general and administrative expenses were down 14.9% to $3.2 million.

We note that Isis Pharma’s lead product, Kynamro (mipomersen sodium), received US Food and Drug Administration (:FDA) approval in Jan 2013 for the treatment of familial hypercholesterolemia (:FH). Isis Pharma’s partner Sanofi (SNY) is marketing the product in the US. Isis Pharma will share profits from Kynamro.

The company will initially get 30% of the share which will linearly increase to 50% as revenue touches the $2 billion mark on a yearly basis. Sanofi is also looking to get the drug approved in the rest of the world including Europe.

We note that in the first quarter of 2013, Isis Pharma is expected to record significant milestone revenues. The company received a milestone payment of $25 million from Sanofi in Jan 2013 on US approval of Kynamro. In Feb 2013, Isis Pharma received a $7.5 million milestone payment from GlaxoSmithKline (GSK).

The payment primarily relates to the initiation of a phase II/III clinical study of ISIS-TTRRx. The study will span 15 months enrolling 200 patients. Isis is developing ISIS-TTRRx in collaboration with Glaxo for the potential treatment of transthyretin (:TTR) amyloidosis.

Isis Pharma currently carries a Zacks Rank #3 (Hold). Though impressed by Isis Pharma’s pipeline, we expect investor focus to remain on Kynamro’s ramp up. Lannett Company, Inc. (LCI) looks more attractive in the pharma sector with a Zacks Rank #1 (Strong Buy).

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