Ionis Pharmaceuticals Inc: Growing Royalties, an Advancing Pipeline, and Getting Back Rights to Some Drugs

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Ionis Pharmaceuticals (NASDAQ: IONS) reported second-quarter earnings earlier this week and then followed up on Friday with a disclosure that it's getting full rights back to two of its drugs, inotersen and IONIS-FB-LRx, after GlaxoSmithKline (NYSE: GSK) decided not to license them.

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Ionis Pharmaceuticals results: The raw numbers

Metric

Q2 2017

Q2 2016

Year-Over-Year Change

Revenue

$104 million

$38.5 million

171%

Income from operations

($1.6 million)

($48.9 million)

N/A

Earnings per share

($0.09)

($0.47)

N/A

What happened with Ionis Pharmaceuticals this quarter?

  • Biogen (NASDAQ: BIIB) reported $203 million in sales of their spinal muscular atrophy drug, Spinraza, during its second full year on the market, netting Ionis $22.4 million in royalties on sales of the drug. The royalties are tiered and should increase as a percentage of sales as Spinraza sales increase.
  • The rest of the revenue came from the usual mix of milestone payments and licensing fees from Ionis' various partners.
  • In May, the company reported positive results for its NEURO-TTR phase 3 trial testing inotersen in patients with hereditary TTR amyloidosis. GlaxoSmithKline handed back rights to the drug, but this may be a it's-not-you-it's-me kind of breakup, since GlaxoSmithKline is undergoing a strategic review of its assets. Ionis is shooting to file marketing applications for inotersen in the U.S. and EU by the end of the year.
  • Ionis spun out Akcea Therapeutics (NASDAQ: AKCA) in July, but it still owns 70% of the shares after the IPO, so Ionis will have to incorporate Ackcea's financials into its own for the foreseeable future.
  • The duo filed a marketing authorization for volanesorsen in the EU for familial chylomicronemia syndrome and plans to file marketing applications in the U.S. and Canada in September.

What management had to say 

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On the call, before GlaxoSmithKline (GSK) made its decision about inotersen, Stanley Crooke, Ionis' chairman, CEO, and president didn't sound too worried about the potential for the big pharma to pass:

"Obviously, GSK is going through quite meaningful transition. So we are prepared for whichever decision GSK makes, and in fact, we'd be delighted, absolutely delighted to have inotersen back if that were their decision."

Crooke doesn't sound worried about inotersen's potential competition from Alnylam Pharmaceuticals' (NASDAQ: ALNY) patisiran either:

"In the end, there's certainly room for more than one drug in the treatment of TTR amyloidosis, and we're confident that the profile of inotersen is significantly more attractive than our competitor. We think that the ease of use and the easy monitoring for the well-identified potential adverse events and the extraordinary efficacy we saw and the fact that we achieved both improvement in the NIS+7 and multiple components and substantial improvement in quality of life, again, in multiple components will make this drug an extremely attractive drug to practitioners."

Finally, Crooke points to the 80% or so run-up in Akcea's share price since its IPO as a sign that Ionis' strategy of creating commercial subsidiaries focused on a therapeutic area can create value:

"This really is an opportunity for one plus one to equal substantially more than two."

Looking forward

After the stellar quarter for Spinraza, management increased guidance significantly and now expects pro forma operating income around $55 million and to end the year with cash of more than $950 million. Previous guidance was just to be "breakeven or profitable" with a year-end balance of over $825 million.

In addition to the potential approvals of volanesorsen and inotersen next year, investors will get to see plenty of earlier-stage pipeline data in the coming months with phase 1 or phase 2 results from nine drugs expected soon.

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Brian Orelli has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alnylam Pharmaceuticals, Biogen, and Ionis Pharmaceuticals. The Motley Fool has a disclosure policy.