Isis Pharmaceuticals Inc. (ISIS) reported a net loss of 13 cents per share in the third quarter 2010, wider than the year-ago loss of 12 cents. The higher loss was mainly due to higher operating expenses.
However, third quarter loss was narrower than the Zacks Consensus Estimate of a net loss of 20 cents. Following the adoption of a new required accounting standard, Isis is no longer including Regulus Therapeutics’ financial results.
Quarter in Detail
Third quarter revenues, which include license fees, milestone-related payments and other payments, increased 6.9% to $28.6 million. Reported revenues exceeded the Zacks Consensus Estimate of $26 million. Revenues consist of the amortization of milestone and upfront payments received from partners like GlaxoSmithKline (GSK) and Bristol-Myers Squibb (BMY), among others.
We note that the company finished amortizing the revenue associated with the $50 million upfront payment received from Johnson & Johnson’s (JNJ) Ortho-McNeil-Janssen in 2007.
Third quarter revenues included a $5 million milestone payment received by Isis under its collaboration with GlaxoSmithKline. The milestone payment relates to the selection of a suitable candidate (ISIS-GSK1Rx) which can be moved into further stages of development under the collaboration agreement.
Isis reported higher expenses during the quarter mainly due to increased costs associated with the company’s preparations for applying for regulatory approval of lead candidate, mipomersen. The higher expenses were partially offset by the non-inclusion of expenses for Regulus.
We expect operating expenses to continue increasing as the company works on the regulatory filing of mipomersen and expands its research and development activities. Isis intends to initiate two phase II programs and two phase I programs during the fourth quarter.
Isis and partner Genzyme (GENZ) intend to file for US approval in the first half of 2011. The companies intend to initially file for the treatment of patients with homozygous familial hypercholesterolemia (FH). The filing may also include patients with severe heterozygous FH.
With the initial approval, mipomersen could be addressing a patient population of about 35k people across the US, Europe and Japan.
Guidance Maintained
Isis maintained its guidance for 2010 which reflects the impact of its agreement with GlaxoSmithKline. The company continues to expect net operating loss in the mid to high $40 million range. Isis expects to exit the year with more than $450 million of cash.
Fourth quarter revenues should be lower than previous quarter revenues as the company does not expect to receive any milestone payments during this quarter.
Our Take
We believe that antisense technology, which is the main area of focus at Isis, represents an exciting and potentially revolutionary platform for developing therapeutic candidates to treat a wide margin of diseases. The lead pipeline candidate at Isis is mipomersen, a potential blockbuster drug for the treatment of high cholesterol.
We are also positive on Isis’ agreement with Glaxo which not only validates its antisense technology; it also provides Isis with funds in the form of upfront, milestone and other payments. However, we remain concerned about the company’s dependence on mipomersen for growth.
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