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Isis Pharma Posts Lower Q3 Loss

Zacks Equity Research

Isis Pharmaceuticals Inc. (ISIS) reported a net loss of 21 cents per share in the third quarter of 2013, narrower than the Zacks Consensus Estimate of a loss of 29 cents and the year-ago loss of 33 cents. Despite higher expenses, higher revenues led to the narrower year-over-year loss.

Revenues grew 103.3% to $23.6 million, well above the Zacks Consensus Estimate of $18 million. Revenues include license fees, milestone-related payments and other payments.

Isis Pharma did not provide any details on Kynamro’s performance – Kynamro was launched by Genzyme in late Mar 2013. Earlier this year, Isis Pharma had said that it would provide an update on its fourth quarter call on the product’s performance. Kynamro’s sales ramp up could be slow due to the reimbursement process and the process of finding eligible patients. Moreover, competition exists in the form of Aegerion Pharmaceuticals, Inc.’s (AEGR) Juxtapid.

Operating expenses increased 23.8% in the third quarter of 2013 to $49.1 million. Research and development expenses increased 24.9% to $45.7 million and general and administrative expenses were up 10.8% to $3.4 million. Expenses will continue increasing as the company moves ahead with the development of candidates like ISIS-APOCIIIRx (cholesterol management), ISIS-SMNRx (spinal muscular atrophy) and ISIS-TTRRx (transthyretin amyloidosis).

ISIS-APOCIIIRx, which is currently being developed entirely by Isis Pharma, is expected to move into phase III development early next year. The company has 10 candidates in phase II or phase III development.

Meanwhile, Isis Pharma lowered its projected pro forma net operating loss guidance by more than 30% to the mid $40 million range. The company was earlier expecting to meet or beat its net operating loss guidance of $60 million. Isis Pharma expects fourth quarter net operating loss to be similar to the third quarter - in the low to mid $20 million range.

Fourth quarter revenues are expected to be in the mid $30 million range – this includes revenues from the amortization of up-front fees of approximately $15 million. Isis Pharma will be recording new revenues in the fourth quarter under its fourth deal with Biogen Idec (BIIB).

Isis Pharma currently carries a Zacks Rank #1 (Strong Buy). We are positive on Isis Pharma’s agreements which not only validate its antisense technology but also provide Isis Pharma with funds in the form of upfront, milestone and other payments.

At present, Actelion Ltd. (ALIOF) also looks well-positioned with a Zacks Rank #1.

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