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Make that four collaborations between Biogen Idec (NASDAQ: BIIB ) and Isis Pharmaceuticals (NASDAQ: ISIS ) in the last two years. The pair announced a six-year deal Monday to develop antisense technology for novel therapies treating neurological diseases. This is an excellent development for investors in both companies because each gets to leverage an area of strength -- the technology platform for Isis and an understanding of neurological diseases for Biogen -- to advance future revenue potential. It also helps bring awareness to similar technology platforms in the industry.
A match made in biotech heaven
Isis will capture a $100 million upfront payment in the third quarter and additional milestone payments worth up to $220 million, not including cost reimbursements related to clinical trials. Meanwhile, Biogen expands its push into validated antisense gene therapy technology. What the heck is antisense technology? Essentially, Isis can develop small molecule and biologic drugs to silence or activate genes that play key roles in genetic diseases. It is fixing the body's ailments at the most basic genetic level.
The takeaway for investors is that it has big potential for treating the underlying causes of neurological diseases -- not just the symptoms -- which is precisely why Biogen tapped the technology. It wasn't the company's first rodeo, however. The same platform was the center of the three previous collaborations targeting various hereditary muscular and neurological diseases. It may finally be time for RNA-based therapies and gene therapies to hit the prime time, which could have profound implications for the biotech industry.
Silence is golden
Rather than look at Isis in an isolated bubble, it may be more productive to consider what the development means for similar or even competing technologies. For instance, earlier this year Isis and Sanofi (Genzyme) gained approval for the antisense drug Kynamro developed to treat homozygous familial hypercholesterolaemia, or HoFH. It is a rare genetic disease that reduces the body's ability to remove LDL cholesterol.
Fellow biotech Aegerion (NASDAQ: AEGR ) has developed its own drug for HoFH called Juxtapid. While the next-generation drug is not in the same class as Isis', it does have the major advantage of being administered orally, versus once-weekly injections for Kynamro. JPMorgan analyst Cory Kasimov estimates peak sales in the United States and Europe to hit $500 billion -- a respectable watermark for a rare disease. The ability to compete directly with Isis could make Aegerion a respectable takeover target given its sub-$3 billion market cap.
Blocking or silencing genes doesn't have to be limited to rare diseases, either. AstraZeneca (NYSE: AZN ) coughed up $31 million up front for up to five antisense cancer drugs to be developed with Isis. It was one of many deals -- acquisitions and R&D -- that AstraZeneca inked in the past three years. If the program progresses out of the early stages, it could pay dividends for the big pharma. That can't come soon enough for investors, who are looking optimistically toward the long-term given the lack of preparation in dealing with the patent cliff. Could antisense save the day?
Foolish bottom line
It goes without saying that Biogen is sold on the potential of Isis' antisense technology platform. Why else would it commit to (potentially) shell out several billion dollars in milestones and royalties in a best-case development scenario? I believe this is good news for investors, and, given the large financial commitment for Biogen, it may make more sense to swallow Isis down the road. Either way, investors should look at these developments with a big-picture view. The risk-to-reward balance for RNA-based and antisense gene technologies continues to become more favorable for your portfolio with each new development.
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