Is Isis Pharmaceuticals, Inc. Now a Bargain?

Isis Pharmaceuticals has been one of the biggest victims of the general biotech downturn, falling 38% year-to-date. Has this dramatic decline created a compelling buying opportunity?

May 13, 2014 at 12:31PM

Isis Pharmaceuticals (NASDAQ:IONS) has one heck of a bad year in terms of the performance of its share price, falling close to 40% year-to-date. And starting in late February, the stock has essentially made a beeline lower. Given the dramatic and rapid nature of this decline, Isis shares could be starting to find a bottom, making them a potential rebound candidate. Supporting this idea, Isis shares are now trading at only four times their cash value. So, let's dig deeper into this antisense drugmaker to see if it is now a bargain at current levels. 

ISIS Chart

ISIS data by YCharts

How did we get here?
Before exploring Isis's present value proposition, we need to consider why the stock fell like a rock earlier this year. The problem started soon after the company announced positive top-line data for ISIS-SMN Rx, its treatment for children with spinal muscular atrophy, or SMA, being co-developed with Biogen (NASDAQ:BIIB). After shooting up more than 15% on the back of this news, the stock began its rapid decline that has continued into May. What's interesting is there hasn't been a particular negative event to pin the blame on for Isis's woes. As such, I suspect the stock has been a victim of the wider biotech downturn that hit companies valued more for their clinical, rather than commercial pipeline, particularly hard. 

My view is that Isis has been a victim of its own success in many ways. Because the company was able to achieve a number of clinical trial successes during the run-up across all biotechs, its valuation swayed heavily toward the potential of its robust clinical pipeline. And despite having multiple late-stage and mid-stage clinical candidates, the market probably didn't like the fact that Isis's shares were trading as high as forty-six times annual revenues at one point! Furthermore, Isis's decreasing milestone revenues combined with increasing R&D costs are likely, at least partly, to blame for this decline as well. In short, Isis's shares got a tad ahead of themselves from a fundamental perspective.

But that pipeline shouldn't be ignored
Isis's novel antisense technology has allowed it to build one of the deepest pipelines and diverse licensing agreement populations in the sector. Specifically, Isis has over twenty ongoing clinical trials and over ten pharma partners. Moreover, the company has a total of thirty-two drugs under development, with plans to add another five next year.

Looking ahead, we should see Isis launch late-stage studies for its SMA drug ISIS-SMN Rx, as well ISIS-GCCR Rx as a potential treatment for severely high triglycerides and familial chylomicronemia syndrome. In short, Isis's clinical pipeline is progressing nicely, giving investors ample reason to keep a close watch on this mid-cap biotech. 

Foolish wrap-up
Because Isis isn't expected to file for another regulatory approval until at least 2016, all eyes will remain on its sole FDA approved product Kynamro for the time being. Kynamro is approved as a treatment for a rare disorder known as homozygous familial hypercholesterolemia, or HoFH, and is marketed by Sanofi (NYSE:SNY). Per their agreement, Isis presently receives approximately 30% of Kynamro sales.

However, Kynamro's launch has gotten off to a slower than expected start, with Sanofi's Genzyme recently increasing its sales staff to try to ramp up sales. And adding some intrigue to the mix, Aegerion Pharmaceuticals' (NASDAQ:AEGR) competing drug Juxtapid reported disappointing sales numbers in the first-quarter, dragging Aegerion shares down in the process. In short, these HoFH drugs are having a tougher time than expected in gaining market share, which is somewhat surprising given that orphan drugs tend to exhibit relatively high penetration rates. 

Viewed in this light, we need to carefully consider if Isis really represents a bargain following its recent pullback? On the one hand, we have perhaps one of the strongest clinical pipelines among mid-stage biotechs, with multiple blockbuster candidates. At the same time, we aren't seeing stellar sales for Kynamro. As a result, Isis is only projecting total revenue for 2014 to come in at $160 million, meaning that its shares are presently trading at about eighteen times annual revenue for the year. So, I personally don't think Isis represents a bargain, even after falling in such dramatic fashion. You therefore might want to remain on the sidelines until Kynamro sales begin to live up to their earlier billing or the company gets closer to another regulatory filing. 

Invest in the next wave of health care innovation
The Economist compares this disruptive invention to the steam engine and the printing press. Business Insider says it's "the next trillion dollar industry." And the technology behind is poised to set off one of the most remarkable health care revolutions in decades. The Motley Fool's exclusive research presentation dives into this technology's true potential, and its ability to make life-changing medical solutions never thought possible. To learn how you can invest in this unbelievable new technology, click here now to see our free report.


George Budwell has no position in any stocks mentioned. The Motley Fool recommends Isis Pharmaceuticals. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers