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Isis Pharmaceuticals, Inc.: The Best-Performing Biotechs of 2013

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With the Nasdaq Biotechnology Index up 65% since the start of the year, it's clear that the biotech sector performed extraordinarily well in 2013-but which stocks were the biggest winners? Several small-cap and mid-cap biotech companies posted returns of 200% or more through the middle of December this year, and, in this series, I review the 15 biggest movers of 2013. Let's continue this review with number 10 on the list, Isis Pharmaceuticals  (NASDAQ: IONS  ) .

A bevy of top tier partnerships and the launch of its first FDA approved drug helped propel Isis Pharmaceuticals 256% higher through the middle of December this year.

A stable of promising drugs in the wings suggests a runway of market moving catalysts could support the company next year too.

Deals, deals, and more deals

Isis' only drug, Kynamro, isn't kicking off much in the way of sales..yet. In fact, sales were so small Isis didn't even bother breaking them out when the company reported its third quarter earnings.

So, while Isis waits for Kynamro sales to build, the company is relying on a heap of milestone payments from the likes of AstraZeneca (NYSE: AZN  ) , Biogen (NASDAQ: BIIB  ) and GlaxoSmithKline (NYSE: GSK  ) .

AstraZeneca is working with Isis on ISIS-STAT3, a mid stage antisense drug that could eventually treat brain, lung, breast, bone, and liver cancer, as well as multiple myeloma. If STAT3 succeeds, AstraZeneca will hand over up to $75 million in milestone payments over the next two years. And, if the drug reaches the market, Isis stands to get a handsome double digit royalty on sales too.  

Isis is also working with AstraZeneca on ISIS-ARR, a preclinical antisense drug for prostate cancer. This past June, AstraZeneca paid Isis $10 million to add the drug to its co-development deal.

Biogen (NASDAQ: BIIB  ) paid Isis a $10 million milestone payment for ISIS-DMPK, an antisense drug for Myotonic Dystrophy Type 1, a genetic neuromuscular disease, in October. Biogen also paid Isis a $1.5 million milestone for ISIS-SMN, a drug entering phase 2 for infants with spinal muscular dystrophy, in November.

Biogen also expanded its neurological therapy collaboration with Isis in September, handing over $100 million and agreeing to as much as $200 million in milestones related to the program.

GlaxoSmithKline (NYSE: GSK  ) has made two $2 million milestone payments since September for progress associated with ISIS-TTR, which is in phase 2/3 for the treatment of TTR amyloidosis. Isis may find another $46 million may come its way if the trial goes as hoped. Glaxo also paid $3 million to Isis in late November for the advancement of anti-viral drug ISIS-GSK3 into phase 1. And in early November, Glaxo paid $5 million milestone to Isis when eye drug ISIS-GSK4 was designated for development.

Fool-worthy final thoughts

It's tough for investors to get a clear picture when milestone payments make up the majority of revenue. As a result, investors need to read through quarterly filings to see what programs are advancing and what relationships are paying-off. It also means taking a long view in terms of analyzing Isis sales. In that regard, Isis appears to be doing well because its revenue for the first nine months has grown from $82 million last year to $105 million this year. Despite that jump, investors need to remember Isis is pouring money out to develop its promising pipeline.

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