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

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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. 


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.