Isis Loss below Expectations – Analyst Blog

Isis Pharmaceuticals Inc. (ISIS) reported a net loss of 10 cents per share in the first quarter, well below the Zacks Consensus Estimate of a net loss of 17 cents. However, the reported quarter’s loss was higher than the year-ago period’s net loss of a cent mainly due to lower revenues and higher operating expenses.

 

Following the adoption of a new required accounting standard, Isis is no longer including Regulus Therapeutics’ financial results. Regulus has been established in collaboration with Alnylam Pharmaceuticals (ALNY).

 

First quarter revenues, which include license fees, milestone-related payments and other payments, declined 5.2% to $29.9 million. Despite recognizing a $6 million milestone payment received from Bristol-Myers Squibb (BMY), revenues declined during the reported quarter as the company finished amortizing the revenue associated with the $50 million upfront payment received from Johnson & Johnson’s (JNJ) Ortho-McNeil-Janssen in 2007. Moreover, Isis is no longer including Regulus’ revenue.

 

Going forward, revenues will include the impact of the amortization of the $35 million upfront payment received by the company under its agreement with GlaxoSmithKline (GSK). This amount will be amortized over a 5-year period.

 

Isis reported higher expenses during the quarter mainly due to the expansion of its clinical development programs, including additional expenses associated with the phase III clinical program for mipomersen and expenses associated with the inclusion of new drugs into its pipeline. This was partially offset by the non-inclusion of expenses for Regulus.

 

We expect operating expenses to continue increasing as the company expands its research and development activities. The fourth quarter should see a spike in expenses as the company is planning to move 3 to 5 candidates into clinical development.

 

Isis also continued to make progress with its lead pipeline candidate, mipomersen. Collaboration partner Genzyme (GENZ) intends to file the first new drug application (NDA) for mipomersen in the US and European Union (EU) in the first half of 2011. 

 

Meanwhile, Isis expects to present data on mipomersen from its phase III study in severe hypercholesterolemia (high cholesterol) patients in mid-2010. Results from another phase III study, conducted in high-cholesterol patients with coronary heart disease, should be out at the same time. Full results from the heterozygous FH phase III study (positive top-line data presented in February 2010) should be available shortly.

 

Besides mipomersen, Isis is progressing with its other pipeline candidates as well. The company is looking to move ISIS-CRPRx into phase II studies once phase I results are out. Isis will also be present at the upcoming meeting of the American Diabetes Association with phase I data on ISIS-GCGRRx, full phase II data on ISIS113715 and data on several preclinical programs.

 

Isis exited the quarter with a strong cash position of $519.1 million, excluding the $35 million milestone payment received from Glaxo in April. So far in 2010, the company has received about $55 million from its collaborations. The company averred that it remains on track to exit the year with more than $425 million of cash. Although Isis said that it expects a net operating loss in the mid $50 million range in 2010, the company intends to issue guidance again in mid-2010 as the earlier guidance does not include the impact of agreements signed so far in 2010.

 

We currently have a Neutral recommendation on Isis. Although we believe that Isis’ antisense technology represents an exciting and potentially revolutionary platform for developing therapeutic candidates to treat a wide margin of diseases, we remain concerned about the company’s dependence on mipomersen for future growth. Any delay in the development and commercialization of the drug would weigh heavily on the stock. We expect investor focus to remain on the mipomersen data that will be released in mid-2010.