Drug Lowers Cholesterol; Stock Follows

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Mipomersen does a really good job at lowering cholesterol, but unfortunately it also did a pretty good job at lowering Isis Pharmaceuticals' (Nasdaq: ISIS) stock price, too. Shares fell by 17% yesterday despite the successful clinical trial.

Investors already knew the trial was a success, from way back in May.

The details presented at the American Heart Association meeting by Isis and its marketing partner Genzyme (Nasdaq: GENZ) seem to be what killed the stock.

Previously, we knew that one patient had dropped out of the study because of elevated liver enzymes, a sign of potential liver toxicity. It turns out that four patients -- it was a small study, so that's 12% of those receiving the drug -- had elevated liver enzymes.

These patients have a genetic disease that causes them to have abnormally high cholesterol even after taking cocktails of cholesterol drugs, including Pfizer's (NYSE: PFE) Lipitor, AstraZeneca's (NYSE: AZN) Crestor, Merck's (NYSE: MRK) Zetia, and Abbott Labs' (NYSE: ABT) Niaspan. High liver enzymes, especially if it doesn't actually cause liver disease, won't keep the drug off the market.

The problem is that Isis and Genzyme would like to expand the drug into more patients, where the same level of side effects could be problematic. (Consider that causing hair to fall out is an acceptable side effect for a cancer treatment, but not for a heartburn drug.)

Data from a trial testing patients with a less severe form of the disease will be available in the first quarter of next year, so investors won't have to wait long to see how problematic the side effect really is. Since most cholesterol drugs cause elevated liver enzymes in some patients, it's possible that the less severe patients taking fewer medications in addition to mipomersen won't have liver-enzyme issues.

The other mipomersen news yesterday was that the company now plans to file its marketing application in the U.S. and E.U. "by mid-2011" instead of "the second half of 2010." While somewhat disappointing, a six-month delay doesn't deserve a 17% drop in share price.

It looks to me as if investors are overreacting here. Fools looking for a cheaper entry point into Isis are getting their wish.