Ionis Pharmaceuticals (IONS) has been pushing all-time-highs, which was sparked by a very positive full year 2018 earning report and business update at the end of February. Last week, shares sold off nearly 14%, on what I believe to be a combination of the several factors: Novartis’s (NVS) update on their gene therapy for Spinal Muscle Atrophy (SMA) type 1, uncertainty regarding the regulatory path of the Huntington’s Disease candidate licensed to Roche, and an over extended chart. This recent down turn has provided an opportunity to add to existing positions ahead of some upcoming catalysts.
Highlights:
- Biogen earnings premarket – 4/24
- European Commission Marketing decision on Waylivra – around 5/6
- Recent price target increased at BMO from $82 to $96
Biogen Earnings Premarket 4/24
For those who are not aware, Ionis has licensed Spinraza to Biogen (BIIB), which is the first and only medication FDA approved to treat SMA. SMA is a rare neurodegenerative disease that affects roughly 1 in 10,000 live births. Patients with SMA lack a functioning SMN1 gene, and are classified based on the number of SMN2 genes they have in their DNA. These genes promote the survival of motor neurons and prevent the degradation of muscle. Without therapy, patients can progress to paralysis, preventing them from doing tasks such as swallowing and/or holding up their heads.
Spinraza is an antisense oligonucleotide the promotes the expression of the SMN2 gene, to overcome the lack of SMN1 gene. Biogen pays Ionis tiered royalties on net sales of Spinraza in the range of 11 to 15%. Last year, Biogen’s Spinraza revenue totaled $1.7 billion, resulting in $238 million in royalty revenue for Ionis. Additionally, in 2018 Ionis received $137 million for its research and development efforts from Biogen. In total, revenue from Biogen represented 63% of Ionis’s total revenue. It is easy to see that Biogen provides a significant contribution to Ionis’s earnings.
Figure 1 shows Biogen’s Spinraza earnings for 2018 by quarter. Given the loading dose scheme followed by dosing every four months, the revenue can in fact shrink despite little to no-discontinuations. Despite the minimal growth in revenue in the second half of last year, the number of patients has significantly grown each quarter, which is encouraging. Furthermore, only around 15% of adult SMA patients are on therapy in the US, while close to 50% of pediatric patients are on therapy. Biogen has prioritized expanding to adult patients, which represents an untapped market and growth opportunity. I will be looking at their progress on this front and comparing how this has translated into continued revenue growth for Biogen, and subsequentially Ionis.
Again, Biogen will be reporting earnings for the first quarter of 2019 prior to the markets opening on April 24th. Other notable updates from Biogen on the Spinraza front were approval in China during the first quarter of 2019, and the recent announcement that the province of Saskatchewan Canada will allow access to Spinraza for physicians and patients. This is the second province in Canada to allow access.
EMA Decision for Marketing Approval of Waylivra
On February 28th, the European Medicines Agency’s (EMA) Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion for the initial marketing application of Waylivra for the treatment of familial chylomicronaemia syndrome (FCS). This product was developed by Ionis, and licensed to its subsidiary Akcea Therapeutics (AKCA). While the exact terms of the licensing agreement have not been released, the information available suggests Ionis stands to receive royalties in the range of 20 to 25% on Akcea’s net sales of Waylivra.
The opinion of the CHMP is a non-binding recommendation that is considered by the European Commission, who ultimately has the final say regarding marketing approval. This decision is handed down with 67 days after the CHMP opinion. As the opinion was dated February 28th, 67 days later would be May 6th, meaning a decision should be heard in the near future. Akcea was provided a Complete Response Letter (CRL) by the FDA last year regarding the marketing of Waylivra in the USA citing safety concerns. Akcea and Ionis are working with the FDA to determine a regulatory path forward.
Recent Analyst Upgrade
In other news, Ionis’s price target was recently raised at BMO capital from $82 to $96. Analyst Do Kim believes the stock price has and will begin to show the potential market opportunities in Huntington’s disease for their candidate licensed out to Roche. Kim kept his outperform rating on Ionis.
This is in no form a recommendation to purchase/sell equities and investors should perform additional due diligence prior to investing.
I/we long IONS.
