Isis Pharmaceuticals (NASDAQ:IONS) reported a $31 million profit in the fourth quarter.
That's right, profit.
No, Kynamro, the only drug Isis has on the market, didn't become an instant blockbuster. Isis' partner, Sanofi (NASDAQ:SNY), still isn't even breaking out sales of the cholesterol-lowering drug, and Isis hasn't factored in profits from the partnership into its 2015 guidance.
Instead, the profit comes from a variety of other sources.
There was a $19 million gain on sales of shares in Regulus Therapeutics, which Isis helped set up with Alnylam Pharmaceuticals. Regulus is up more than 350% since its IPO in 2012, so taking a little off the table makes sense; Isis still has an 11% stake in Regulus worth $105 million.
The company also collected nearly $70 million in milestone payments from partners in the fourth quarter. Add in the amortized part of up-front fees already announced, revenue for manufacturing services, and revenue from its relationship with Alnylam, and fourth-quarter revenue was double from the year-ago quarter and made up about 40% of Isis' revenue for the year.
In other words, the quarter was a fluke. Don't expect another profitable quarter unless there's another period in which a bunch of lumpy milestone payments come in at the same time.
Not that investors should complain about the increased cash position. Isis ended 2014 with nearly $730 million in cash, which is $72 million more than it had at the end of 2013. That sure beats dilution through a secondary offering.
For 2015, Isis expects to increase operating expenses by $45 million over last year, resulting in a cash burn of about $100 million this year. With a stocked pipeline of 38 drugs, that's a pretty impressive use of capital; it certainly helps that Isis' partners are picking up much of the development costs.
While the partners line the coffers with milestone payments, Isis' wholly owned drugs will provide the most bang for their buck once they're on the market. Keep an eye on the most advanced drug, ISIS-APOCIIIRx, which the company has moved into its newly formed subsidiary, Akcea Therapeutics, which will focus on Isis' lipid franchise.
Isis is developing ISIS-APOCIIIRx for two orphan indications -- familial chylomicronemia syndrome, or FCS, and partial lipodystrophy -- that cause high triglyceride levels. The FCS phase 3 trial is under way, and a phase 3 trial in partial lipodystrophy is expected to begin this year; the company plans to complete both trials toward the end of 2016 or in early 2017.
ISIS-APOCIIIRx could also be used for a more general population of patients who have high triglycerides, but the frequency of dosing and availability of oral medications would make it hard to sell, so Isis is developing a follow-on medication called ISIS-APOCIII-LRx. The additional "L" in the name, which is the only change, stands for Isis' new LICA conjugation technology that can target drugs to particular targets -- in this case the liver -- increasing potency by a factor of 10.
The follow-on version, as it is further back in development and will require larger clinical trials, will take time to develop, but hopefully by then the company will have revenue of its own in addition to all those milestone payments from its partners.