What: Shares of Isis Pharmaceuticals (ISIS 1.64%), a biopharmaceutical company that utilizes its proprietary antisense technology platform to develop drug candidates across a myriad of disease indications, exploded higher by 11% in January per S&P Capital IQ after it announced two licensing agreements, updated its full-year guidance, and received a milestone payment.
So what: All in all it was a pretty typical month for Isis which delivered fantastic news all the way around.
By far the biggest price mover was its early month announcement that it and Johnson & Johnson (JNJ 1.18%) subsidiary Janssen Biotech had forged a licensing agreement for three gastrointestinal tract drug hopefuls. Under the terms of the deal Isis will receive $35 million upfront and is eligible to receive another $800 million in development and regulatory milestones. Additionally, Isis could receive tiered royalties based on sales of these GI drugs.
The second agreement extended the ability to cross-license intellectual property for advances in RNA therapeutics with Alnylam Pharmaceuticals (ALNY +0.26%) through April 2019.
In terms of guidance, Isis announced that it expects a net operating loss in the mid-to-high $10 million range, which is 70% improvement over its initial forecast for a net operating loss in the low $50 million range. Also, because of Isis' robust milestone and licensing payments it'll end the year with approximately $725 million in cash, more than $150 million higher than it initially forecast.
Lastly, Isis announced in mid-January that it had earned $7 million for advancing ISIS-SMNrx as a treatment of spinal muscular atrophy in children.
Source: Flickr user Myfuture.com.
Now what: With around three dozen open clinical studies and about a dozen clinical partners it's no wonder that Isis' share price has been unstoppable. While not every study is expected to result in a blockbuster, it would only take a few winners to make Isis' valuation cheap, even here.
Isis' greatest asset is its antisense technology platform which allows the company to monetize its intellectual property without having to constantly turn to common stock offerings to fuel its research.
Of course, investors should also consider that profitability is still a ways out on Isis. Because the company has partnered up a good chunk of its pipeline it'll never quite realize the full potential of most approved drugs. Also, some three dozen drugs can eat up quite a bit of cash in clinical studies. As some of these trials move into larger late-stage studies we could see Isis struggle a bit as its expenses rise.
In spite of these concerns I still view Isis' long-term prospects favorably. I would like to see it substantially expand its approved product portfolio over the next two or three years to validate the success of its antisense technology platform, but I consider its multiple collaborations to be enough validation for the time being that its drug hopefuls have potential.
