Isis Pharmaceuticals (NASDAQ: ISIS), a developer and marketer of RNA-based novel drugs to treat a variety of diseases, has been one of the best performing stocks in the biotechnology sector this year. Year-to-date, the stock has gained almost 250%. Despite the strong gains, there are reasons to believe that Isis Pharmaceuticals still has growth potential. There are four reasons that make Isis Pharmaceuticals an attractive proposition.
Isis is a position in antisense technology. The technology has been designed to alter a gene's function, silence a mutation, or activate a gene to compensate for an underlying genetic defect. Antisense technology makes it possible to synthesize a strand of nucleic acid (DNA, RNA or a chemical analog) that binds to the messenger RNA (mRNA) produced by the gene and effectively turn that gene on or off. With antisense technology, Isis has been able to generate a broad pipeline of first-in-class drugs. One of the biggest advantages of the antisense platform is that it reduces costs and time to discover and develop drugs when compared to traditional small molecule drugs.
Collaboration with Genzyme for Kynamro
Isis' lead product candidate is Kynamro for the treatment of patients with homozygous familial hypercholesterolemia, or HoHF. The company has partnered with Genzyme, a subsidiary of French drugmaker Sanofi (NYSE: SNY), to commercialize Kynamro in the U.S. Genzyme is also pursuing marketing approval for the drug in other markets. An extremely rare disease, HoHF occurs in one out of every 1 million people. However, the actual prevalence of the disease might be underestimated. Currently, some 6,000 people worldwide suffer from HoHF.
Currently, there is just one other approved drug for the treatment of HoHF: Juxtapid from Aegerion Pharmaceuticals (NASDAQ: AEGR). Juxtapid was launched in January this year after the Food and Drug Administration approved the drug in December 2012. The once-daily pill costs about $295,000 a year. This is where Isis' Kynamro has an edge. Kynamro, which is an injectable treatment, will cost $176,000 a year.
In addition to costs, Isis' patents offer strong and extensive protection for the drug and the technology. The FDA has already approved the new drug application for Kynamro in January.
Strategic collaboration in neurology
This month, Biogen Idec (NASDAQ: BIIB) and Isis entered into a strategic collaboration to advance treatment of neurological disorders. Under the terms of the six-year research collaboration agreement, Biogen will have the exclusive rights to use Isis' antisense technology to develop therapies for neurological disorders.
The agreement includes an upfront payment of $100 million to Isis. In addition, Isis is also entitled to receive milestone payments, license fees, and royalty payments for all treatments developed through the collaboration agreement. The agreement highlights one of the ways in which Isis is capitalizing on its breakthrough technology.
Partnership with Roche
Isis has also formed an alliance with Swiss drug major Roche to discover and develop antisense drugs to treat Huntington's disease. The alliance brings together Isis' antisense expertise and Roche's scientific expertise in developing neurodegenerative therapeutics.
Under the terms of the agreement, Isis will receive an upfront payment of $30 million. In addition, Isis is eligible to receive up to $362 million in license fee, and pre-and post-licensing milestone payments. The company is also entitled to receive tiered royalties on sales of the drugs.
Reasons to watch Isis
As I mentioned earlier, Isis shares have surged almost 250% this year. Despite the substantial gains, there is still room for growth. This is because Isis has an innovative technology, which it is using to develop a broad pipeline of drugs. In addition, the company has entered into several strategic collaborations. Isis also has a very strong balance sheet, with more than $590 million in cash on hand. The strong cash position means that the company has the ability to advance its drug development programs. Based on these factors, I think Isis Pharmaceuticals is a compelling investment to watch in the biotech space.
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