Isis (ISIS): Controversy and opportunity

by John McCamant, editor The Medical Technology Stock Letter

Isis Pharmaceuticals (NASDAQ: ISIS) stock is down over the last month on the continued controversy and misinformation surrounding the safety and potential market size for mipomersen.

Wall Street has focused on some perceived safety issues from the release of Phase 3 data for mipomersen in heterozygous familial hypercholesterolemia (heFH) patients.

The trial met its primary endpoint with a highly statistically significant 28% reduction in LDL-cholesterol after 26 weeks of treatment, compared with an increase of 5% for placebo.

Mipomersen also reduced apo-B, total cholesterol, and non-HDL cholesterol. Full data will be presented at an upcoming medical conference.

Specifically on the primary endpoint, mipomersen reduced the average LDL from 150 mg at baseline to 104 mg and allowed 45% of patients to reach an LDL of <100mg, a goal and significant medical accomplishment for patients with pre-existing coronary artery disease considering that they were already on maximally tolerated anti-cholesterol therapy.

Perceived safety problems are the main reason that ISIS’ stock is down on the news. This is despite the fact that the most common adverse events (AEs) were injection site reactions and flu like symptoms.

Wall Street remains very concerned about continued signals regarding liver toxicity. The key is to remember that cholesterol is processed in the liver and any drug that is lowering cholesterol will have some potential negative effects on the liver.

ISIS and partner Genzyme have not altered their filing plan for mipomersen approval. ISIS said that mipomersen’s initial regulatory package will include approximately 700 treated patients.

Importantly, a large percentage of patients will have been treated for >1 year and some for 2+ years.  The filing package will include data from four Phase 3 trials.

Next Steps:  Full data are to be presented at an upcoming medical meeting with the next venue being the European Atherosclerosis Society meeting starting June 20th in Hamburg, Germany.

We should also see data in late August/early September at the European Society of Cardiology meeting which may also have some more data from two ongoing mipomersen trials.

By mid-2010 Genzyme expects Phase 3 trial results: one trial is in 58 severe hypercholesterolemia patients and the other in 158 high risk hyperholesterolemia patients. These data will be filed in the first half of 2011.

Most of the data in that will comprise the data filing package is expected to be featured at this year's ACC meeting in November.

We believe that medical conferences where complete data sets for mipomersen will be presented by key opinion leaders are important for ISIS’ share price. These presentations will make it much harder for naysayers to make a negative case against mipomersen.

We continue to believe that ISIS has developed and executed very well from their platform technology base of antisense. In order to fully leverage this technology, the company has built the industry's leading intellectual property position in the field of antisense/RNA drug discovery, composed of more than 1,500 issued patents either owned or exclusively licensed by ISIS.  

Whether it's RNAi, microRNA or RNA splicing, they are all mechanisms of antisense and companies can't operate in the field without getting a license from ISIS.

Over $1 billion has been invested through partnerships or direct equity, yet despite significant proof of concept and huge dollars committed by third parties to access antisense technology, ISIS has an enterprise value of just over $300 million.

Major partners include Genzyme, Abbott, BMS, J&J, Eli Lilly, Pfizer, Merck, GSK, Novartis and Teva.

Bottom line:  ISIS now has a market cap of less than $900 million and $550 million in the bank, giving the company as enterprise value of just $350 million.

This is ridiculous regardless of whether or not mipomersen is a blockbuster or just manages to be a niche drug that generates hundred’s of millions in annual revenue.

ISIS has great partners, late stage drugs, and a tremendous IP portfolio that has and will continue to generate partnerships and revenue. Given our long-term confidence in the company the target price remains $30. ISIS is now a strong buy under $12.

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