Ionis Pharmaceuticals (NASDAQ:IONS) beat management's expectations in the fourth quarter, as it closed out its third consecutive year of adjusted operating profitability helping the company fund the development of its pipeline.

Ionis Pharmaceuticals results: The raw numbers

Metric

Q4 2018

Q4 2017

Year-Over-Year Change

Revenue

$192 million

$168 million

14%

Income from operations

$10.8 million

($6.2 million)

N/A

Earnings per share

$2.32

($0.03)

N/A

Data source: Ionis Pharmaceuticals.

What happened with Ionis Pharmaceuticals this quarter?

  • Ionis booked $70 million in royalties from Biogen's (NASDAQ:BIIB) sales of their spinal muscular atrophy drug Spinraza, up from $52 million in the year-ago quarter.
  • In its first quarter on the market, Tegsedi, which treats the polyneuropathy form of hereditary transthyretin amyloidosis, added another $2 million in revenue. That's sales, not royalties, because, although the drug is sold by former subsidiary Akcea Therapeutics (NASDAQ:AKCA), Ionis is still a majority shareholder in the company, so Akcea Therapeutics' financials get folded into Ionis' profit and loss statement.
  • Most of the revenue continues to come from up-front and milestone payments from partners who have licensed Ionis' drugs. For example, the company earned $35 million from Biogen for licensing its ALS drug IONIS-SOD1Rx and $30 million in milestone payments from AstraZeneca for advancing two medications that were licensed to the British pharma.
  • The research and development revenue has continued this quarter with Ionis already announcing a $150 million payment from Novartis for licensing AKCEA-APO(a)-LRx, which was one of the assets spun off into Akcea, and a $35 million payment from Roche for starting a phase 3 clinical trial of IONIS-HTTRx in patients with Huntington's disease.
  • On the bottom line, the large earnings per share came from a one-time tax gain.
Medications scattered on top of $100 bills

Image source: Getty Images.

What management had to say

Ionis' chairman and CEO, Stan Crooke, highlighted the company's solid pipeline of drugs: "We have at least 10 late-stage medicine[s] advancing to our pivotal trials, with four expected to be in pivotal programs by the end of this year. With more than 40 medicines in development, we're in an excellent position to continue to increase revenue and earnings, not just today, not just in the near term, but also in the mid- and longer term."

Don't expect Ionis to sell off its shares of Akcea anytime soon. As Chief Financial Officer Beth Hougen explained, "We also plan to continue investing in Akcea as demonstrated by our choice to take our 50% portion of the $150 million license fee from Novartis in Akcea stock."

Looking forward

Management is looking for revenue of more than $725 million this year, a substantial increase from the $600 million Ionis booked in 2018. Some of that will come from increasing Spinraza royalties as well as sales of Tegsedi, but investors should expect a large portion of the revenue will continue to come from up-front and milestone payments from partners for out-licensed drugs.

On the bottom line, Ionis should book its fourth consecutive year of adjusted operating profit, which is expected to exceed $100 million this year.