Isis Pharmaceuticals Inc. (ISIS) reported a net loss of 20 cents per share in the fourth quarter of 2011, 6 cents above the year-ago loss of 14 cents and a penny wider than the Zacks Consensus loss Estimate. Revenues increased 22.6% to $32.4 million, missing the Zacks Consensus Estimate of $36 million. Higher operating expenses led to the wider fourth quarter 2011 loss.
Full year loss came in at 85 cents, in line with the Zacks Consensus Loss Estimate, but well above the year-ago loss of 62 cents. Revenues declined 8.7% to $99 million, missing the Zacks Consensus Estimate of $103 million.
Quarter in Detail
Revenues, which include license fees, milestone-related payments and other payments, increased in the fourth quarter of 2011 mainly due to the sale of $5.8 million worth of drug substance to Genzyme in support of the commercial launch of Kynamro. Moreover, Isis Pharma received a $5 million milestone payment from GlaxoSmithKline (GSK) for identifying a second development candidate under their collaboration.
Operating expenses increased 20.7% during the quarter to $51 million mainly due to the advancement of Isis Pharma’s pipeline. While research and development expenses increased 20% to $47.2 million, general and administrative expenses increased 29.1% to $3.8 million.
With Isis Pharma completing its $125 million funding obligation for Kynamro, Kynamro development expenses will be shared equally with Genzyme from 2012 until the product becomes profitable. As a result, Isis Pharma’s share of Kynamro related expenses should decline.
Update on Kynamro
Isis Pharma and partner Genzyme – a Sanofi (SNY) subsidiary – filed for European approval of lead pipeline candidate, Kynamro (mipomersen), in July 2011. The companies are seeking approval for patients with homozygous familial hypercholesterolemia (FH) and severe heterozygous FH.
The US application, which will be submitted in the first quarter of 2012, will be for the homozygous FH indication. Isis Pharma said that Genzyme is preparing for the EU and US launch of Kynamro this fall.
Meanwhile, Isis Pharma and Genzyme are conducting a 12-month study (FOCUS FH – saFety and atherOgeniC lipoprotein redUction of mipomerSen in FH) with Kynamro. The study is being conducted to support the expansion of the initial label and an alternative dosing regimen (three times a week). The study is being conducted under the FDA’s Special Protocol Assessment (SPA) program.
2012 Outlook
Isis Pharma expects revenues to increase in 2012. The acceptance of the new drug application (NDA) filing and approval in the US will trigger milestone payments of $25 million each from Genzyme. Expenses are expected to go up slightly mainly due to the expansion and maturation of the pipeline. The company is guiding towards pro forma net operating loss in the low $40 million range.
Neutral on Isis Pharma
We currently have a neutral recommendation on Isis Pharma, which carries a Zacks #3 Rank (short-term “Hold” rating). We expect investor focus to remain on the regulatory progress of Kynamro.
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