Company Reports

Narrow-moat Ionis reported second-quarter results that put the firm on track to meet our expectations for the year, and we're raising our fair value estimate to $69 from $62 after incorporating the recent positive phase 2 data in neurodevelopmental disorder Angelman syndrome. We expect Ionis to see a more than $500 million net loss in 2024, as investments in clinical development and supporting new drug launches outweigh royalties from partner Biogen on SMA drug Spinraza as well as collaboration and milestone revenues. We think this positions Ionis well to meet current guidance of more than $1.7 billion in cash remaining at the end of the year. We expect Ionis to turn to a profit in 2027 as several drugs should be well into their launches by this time, including polyneuropathy drug Wainua (now launching in the US with partner AstraZeneca), hereditary angioedema drug donidalorsen (to launch in 2025), and rare lipid disorder drug olezarsen (to launch in December and potentially add a broader hypertriglyceridemia indication in 2026).

Ionis is a leader in RNA-based therapies, and its spinal muscular atrophy drug Spinraza, marketed by partner Biogen, is the first RNA-based therapy to achieve blockbuster status. The firm's antisense oligonucleotide, or ASO, technology faces strong competition from RNA interference technology emerging from Alnylam, Arrowhead, and Novo Nordisk (Dicerna), as well as gene editing and gene therapy pipelines at multiple firms. However, Ionis has built a massive pipeline of promising new drugs that are rapidly moving toward the market, securing a narrow moat.

Ionis reported a larger net loss in the first quarter of 2024 than in the first quarter of last year, due to lower royalties on rare disease drug Spinraza from partner Biogen as well as higher operating expenses as the pipeline advances. This was relatively in line with our expectations, and we’re maintaining our $62 fair value estimate, as we think the firm’s $2.2 billion in cash will help support the firm as it begins a series of key drug launches. We still expect Spinraza is capable of mid-single-digit growth annually, based on solid global demand, although we do expect a slight dip in 2024 due to the timing of orders and competition. Amyloidosis drug Wainua, partnered with AstraZeneca, generated $5 million in sales among polyneuropathy patients in its first quarter on the market, with launches outside the US coming later this year and data for the larger potential indication, cardiomyopathy, still likely in 2025. Alnylam’s similar drug Amvuttra also reduces production of the disease-causing protein; it already competes with Wainua in polyneuropathy and will generate phase 3 data in cardiomyopathy this summer. We expect the firms to share this multi-billion-dollar potential market relatively equally if both are approved, given Wainua’s convenient monthly self-injections. Overall, we think Ionis is making solid progress with its pipeline and commercialization strategy, which should help it build a larger portfolio of medicines that help support the firm’s narrow moat.

Ionis reported fourth-quarter results that were ahead of our expectations due to the timing of milestone and collaboration revenue payments, with 2024 guidance slightly below our estimates, and we’re maintaining our $62 fair value estimate as the firm’s commercial portfolio expands. Revenue increased 34% in 2023, which helped reduce operating losses despite more investment in leading programs approaching the market. Royalties from partner Biogen for spinal muscular atrophy drug Spinraza were roughly flat at $240 million in 2023, as Spinraza is retaining share despite strong competition from Roche’s Evrysdi. Ionis and AstraZeneca’s ATTR polyneuropathy drug Wainua is launching in the US, and we expect Wainua’s once-monthly, self-administered injection to help it gain some market share from Alnylam’s Amvuttra, although we continue to see first-to-market Alnylam maintaining a lead. Ionis also expects Wainua data in the larger cardiomyopathy indication in 2025, if the firm takes an early look at data, or 2026 if the trial runs to completion. Amvuttra’s similar trial should produce data in mid-2024 that could influence Ionis’ decision. With two additional Ionis pipeline drugs poised to reach the market by 2025, we think the portfolio is growing nicely and continuing to support the firm’s narrow moat.

Ionis revenue fell 10% to $144 million in the third quarter relative to the same period in 2022, due to fluctuations in the timing of payments from collaboration partners. We’re maintaining our $62 fair value estimate as the pipeline is moving forward as expected, and management reaffirmed 2023 guidance. We have raised our long-term sales estimates for amyloidosis drug eplontersen due to a delay in competition from Alnylam in the key cardiomyopathy indication and added the phase 3 Alexander disease drug candidate to our model, while also raising long-term SG&A expenses to support these launches, with no meaningful valuation impact overall. Spinraza royalties held relatively steady at $67 million, and we expect royalties from Biogen could see longer-term stability if the partners have success with a high-dose version of Spinraza or a next-generation product that could be dosed less frequently. Operating expenses are climbing as three in-house launches are potentially approaching, led by eplontersen (expected approval next month in polyneuropathy), high triglyceride drug olezarsen (filing in early 2024 in hereditary forms, additional data in late 2024 or early 2025 in broader high triglyceride market), and angioedema drug donidalorsen (data expected in the first half of 2024). Overall, despite significant competition with Alnylam for collaborations and upcoming likely direct commercial competition, we think Ionis’ platform provides a strong set of mid- to late-stage programs that look competitive on efficacy, safety, and convenience. We think shares look undervalued, as the market underappreciates the ability of Ionis to translate its antisense technology platform into multiple drug launches across rare diseases, neurology, and cardiology. We think approved spinal muscular atrophy drug Spinraza and ALS drug Qalsody provide solid proof-of-concept for Ionis’ technology, supporting a narrow moat.

Ionis is a leader in RNA-based therapies, and its spinal muscular atrophy drug Spinraza, marketed by partner Biogen, is the first RNA-based therapy to achieve blockbuster status. The firm's antisense oligonucleotide, or ASO, technology faces strong competition from RNA interference technology emerging from Alnylam, Arrowhead, and Novo Nordisk (Dicerna), as well as gene editing and gene therapy pipelines at multiple firms. However, Ionis has built a massive pipeline of promising new drugs that are rapidly moving toward the market, securing a narrow moat.

We’re maintaining our $62 fair value estimate for Ionis following in line second-quarter results, and more importantly, indications that the firm’s late-stage pipeline remains on track. Steady royalties from partner Biogen on spinal muscular atrophy drug Spinraza as well as revenue growth from collaboration agreements drove Ionis’ second-quarter revenue to $188 million, up 40% year over year. Ionis is still preparing to bring three drug candidates to the market in the near term: eplontersen (partnered with AstraZeneca) and wholly-owned olezarsen (high triglycerides) and donidalorsen (hereditary angioedema). As a result, operating expenses are continuing to climb, although with an expected net operating loss of less than $425 million for the full year, $2.4 billion in cash and short-term investments at the end of the quarter, and refinanced convertible debt due in 2028, we think Ionis remains in a solid financial position. We think shares look undervalued, as the market underappreciates the ability of Ionis to translate its antisense technology platform into multiple drug launches across rare diseases, neurology, and cardiology. We think approved spinal muscular atrophy drug Spinraza and ALS drug Qalsody provide solid proof-of-concept for Ionis’ technology, supporting a narrow moat.

We're maintaining our $62 fair value estimate for Ionis following first-quarter results that were in line with our expectations, as the firm's collaboration revenue and royalties on spinal muscular atrophy drug Spinraza from partner Biogen were relatively steady, but clinical trial and commercial readiness costs continue to keep the firm in the red. We expect the next two years to be critical, as key phase 3 trials will read out and new launches could push the firm to profitability by 2026. We think shares look undervalued, as the market doubts Ionis' ability to translate its antisense technology platform into multiple drug launches across rare diseases, neurology, and cardiology. We think Spinraza and newly approved ALS drug Qalsody provide solid proof of concept for Ionis' technology, supporting a narrow moat.

We’re maintaining our $62 fair value estimate for Ionis following full-year 2022 financial results that were roughly in line with our estimates, excluding the $80 million upfront payment to new gene editing partner Metagenomi booked in research and development expenses in the fourth quarter. Management’s revenue guidance for 2023 is slightly below our prior estimates (likely due to lower assumed collaboration revenue), and R&D expenses are trending higher than we anticipated, due to the large number of fully enrolled phase 3 studies and growing late-stage pipeline. After adjusting our model, this does not have a significant impact on our valuation. One of the bigger drivers of our Ionis valuation is AstraZeneca-partnered eplontersen, in both ATTR polyneuropathy (approval likely late this year) and cardiomyopathy (phase 3 data in 2025). While we continue to see the larger cardiomyopathy market as very competitive, with likely competition from both Pfizer’s Vyndaqel and Alnylam’s two RNAi-based therapies, Onpattro (potential October approval) and Amvuttra (data 2024), we think Ionis and Astra have a well-designed study that could give eplontersen a differentiated profile. Wholly owned programs including cardiovascular drug olezarsen (pivotal data in 2023 and 2024) and rare disease drug donidalorsen (pivotal data in 2024) are also significant contributors to our valuation, and we think olezarsen’s first-mover advantage and donidalorsen’s potential best-in-class efficacy both bode well for strong uptake. Bigger picture, we think Ionis is also making technology investments to support the durability of its narrow moat, including improvements in its oligonucleotide and ligand design, and in-licensing gene editing technology (from Metagenomi). Overall, we think shares look undervalued as Ionis heads into higher spending years in 2023-24, and we believe revenue growth is likely to begin to ramp at a more significant double-digit pace in 2025.

Ionis reported solid third-quarter results that put it on track to meet our full-year estimates, and we’re maintaining our $62 fair value estimate for the firm. Revenue grew 20% despite declines in royalties for spinal muscular atrophy drug Spinraza, as collaboration revenue from partners Roche, AstraZeneca, and Biogen drove growth. Management maintained its full-year guidance, although we think operating expenses are tracking well below management’s targeted range, despite supporting additional phase 3 programs. Ionis is also sitting on roughly $2 billion in cash, which should support further in-house phase 3 programs and any bolt-on acquisitions necessary to support further advancement of its pipeline of antisense drugs and support its narrow moat.

Ionis is a leader in RNA-based therapies, and its spinal muscular atrophy drug Spinraza, marketed by partner Biogen, is the first RNA-based therapy to achieve blockbuster status. The firm's antisense oligonucleotide, or ASO, technology faces strong competition from RNA interference technology emerging from Alnylam, Arrowhead, and Dicerna, as well as gene editing and gene therapy pipelines at multiple firms. However, Ionis has built a massive pipeline of promising new drugs that are rapidly moving toward the market, securing a narrow moat.

We’re maintaining our $62 fair value estimate for Ionis following second-quarter results (reported earlier in the month) that were as expected and strong progress with the firm’s advancing clinical-stage pipeline. Recent positive phase 3 data for eplontersen in TTR amyloidosis with polyneuropathy as well as several positive phase 2 studies among Ionis’ partnered and wholly owned programs are encouraging, but we continue to see key pivotal data catalysts in 2023-25, led by hypertriglyceridemia drug olezarsen in 2023-24 and hereditary angioedema drug donidalorsen in 2024, followed by eplontersen (cardiomyopathy) and pelacarsen (heart disease) in 2025. In the meantime, we expect additional midstage data to reveal the depth of the Ionis pipeline and allow the firm to continue to move more programs to phase 3. We think Ionis’ antisense oligonucleotide technology supports a narrow moat, and we continue to see the shares as undervalued despite recent stock price appreciation tied to Alnylam’s encouraging results for its own TTR amyloidosis drug patisiran in the broader cardiomyopathy patient group.

We're not making any changes to our $62 Ionis fair value estimate following positive top-line interim results from a phase 3 study of Astra-partnered eplontersen in polyneuropathy, as the drug remains on track to be filed later this year and approved in 2023. After 35 weeks of treatment, the drug led to significant differences from historical controls on co-primary endpoints (transthyretin concentration and neuropathic disease progression) as well as a key secondary endpoint, quality of life. However, we had already assumed trial success in this indication. In addition, collaboration terms (roughly 20% royalty from Astra) and competition (Alnylam received approval of Amvuttra last week), limit cash flow impact. In this indication, we think Alnylam has the edge, with Amvuttra's every-three-month dosing (versus monthly dosing for eplontersen), although more details on the extent of eplontersen's benefit to disease progression will determine uptake. We continue to assign Ionis a narrow moat, based on the breadth and potential of its late-stage pipeline in neurology, cardiology, and rare diseases.

Ionis reported first-quarter results in line with our expectations and confirmed its outlook for 2022, so we're not making any changes to our $62 fair value estimate. Ionis expects data from the phase 3 study of Astra-partnered eplontersen in polyneuropathy by mid-2022, and if data is positive, we expect the drug to be approved in 2023. Ionis announced in April that it has increased the size and duration of its phase 3 trial for the drug in cardiomyopathy; while this pushes the timing of data from late 2024 to the first half of 2025, we think improving the odds of achieving clear signals for different subsets of patients—those with hereditary or wild-type disease, for example, or those naive to treatment or taking Pfizer's Vyndaqel in combination with eplontersen—could make it worth the wait, despite the fact that this increases the potential lead for Alnlylam's vutrisiran (still expecting data in early 2024). Despite other RNA-targeting technology that could compete with Ionis' technology down the road, we continue to assign Ionis a narrow moat rating based on the breadth and potential of its late-stage pipeline in neurology, cardiology, and rare diseases.

Healthcare innovation represents a key area of exponential growth, and we think the scientific community’s understanding of medical interventions has increased significantly over time and will likely continue to grow in a non-linear upward trajectory during the decades ahead. Within healthcare innovation, we view two key areas of explosive growth potential: 1) innovative therapies and 2) innovative devices and diagnostics. High spending on research and development, massive growth in scientific advancements (and medical articles), steep increases in clinical studies, and major growth in medical patents all support exponential growth opportunities in key healthcare areas. This innovation not only supports strong growth potential but also the intangible assets that are the basis of many economic moats and leadership positions in healthcare.

We're maintaining our $62 fair value estimate for Ionis Pharmaceuticals following solid-fourth quarter results and as the firm heads into a multiyear period of significant investment in its pipeline. Despite other RNA-targeting technology that could compete with its technology down the road, we continue to assign Ionis a narrow moat rating based on the breadth and potential of its late-stage pipeline in neurology, cardiology, and rare diseases. We also think Ionis' technology continues to improve in potency and deliverability, supporting the firm's ability to continue to compete beyond its first wave of promising drugs poised to launch in 2024-25.

AstraZeneca has licensed Ionis's next-generation TTR amyloidosis drug eplontersen (Ionis-TTR-LRx), paying $200 million upfront, up to $485 million in approval-related milestones, as well as hefty payments tied to future sales of the drug. Ionis is already relying on Sobi to market its first-generation TTR amyloidosis drug, Tegsedi, and given the tough competitive landscape, we think it was wise to partner with a larger firm capable of supporting a broad rollout (Ionis will retain co-commercialization rights in the U.S.). Alnylam already has Onpattro approved and will likely launch next-generation version vutrisiran in April 2022, potentially putting Ionis and Astra about a year behind, and we assume Alnylam sales will peak in 2030 at roughly double the potential peak sales for Ionis programs in TTR amyloidosis (roughly $900 million for Ionis/Astra and $1.7 billion for Alnylam). We're maintaining our $62 per share fair value estimate for Ionis, and we continue to see shares as undervalued, despite a broad late-stage pipeline and a marketed blockbuster with spinal muscular atrophy drug Spinraza that help support a narrow moat.

Ionis Pharmaceuticals reported $133 million in revenue and a $48 million non-GAAP net loss in the third quarter, lower than we had expected, as Spinraza royalties from partner Biogen and smaller milestone payments from collaborators failed to counter rising operating expenses. That said, Ionis is still on track to meet its guidance for more than $600 million in revenue this year, with higher revenue expected in the fourth quarter, and we're maintaining our $62 fair value estimate. Research and development expenses grew substantially in the quarter as Ionis moves more wholly owned programs into late-stage trials and continues to supplement its antisense technology with licensing agreements. While a reorganization following the Akcea acquisition has brought selling, general, and administrative expenses under control, we expect R&D to move higher in the fourth quarter, particularly as the firm begins phase 3 trials for hereditary angioedema drug donidalorsen (2024 data). As we discussed in our Oct. 18 note, the key phase 3 trial of amyotrophic lateral sclerosis drug tofersen failed to meet its primary endpoint, although signs of reduced disease progression (and the recently initiated presymptomatic Atlas trial) could mean that the program still has a chance at moving forward, and we're maintaining our 40% probability-weighted forecast for the drug (roughly $50 million in annual royalty revenue in our model by 2030). Ionis now has multiple programs in phase 3 and a validated platform (with the success of spinal muscular atrophy drug Spinraza) to support its narrow moat.

Biogen and Ionis announced mixed phase 3 data from the Valor study for ALS drug candidate tofersen on Oct. 17, as part of the annual meeting of the American Neurological Association, and we're not expecting to make any significant changes to our fair value estimates for either firm. As it stands, we include a 40% probability of approval for tofersen in 2022 in our valuation models, with probability-adjusted sales of $425 million (to Biogen) and royalties of $52 million (to Ionis) by 2030. While tofersen missed the key primary endpoint in this placebo-controlled study, which used the revised amyotrophic lateral sclerosis functional rating scale, there were trends toward reduced disease progression, particularly among patients who started treatment earlier. In addition, biomarkers appeared to point to the drug's ability to reach its target and plausibly slow neurodegeneration, as measured by reduced SOD1 levels and neurofilament. Biogen plans to expand its access program, which allows ALS patients to access the drug prior to approval, and will continue with the ongoing Atlas trial, which seeks to prevent clinical manifestation of ALS in presymptomatic patients diagnosed using SOD1 and filament levels. While we could see a path to approval for the drug, either with continued follow-up from the Valor study or with data from Atlas, we continue to see failure as slightly more likely. We see Biogen's broad neurology portfolio and pipeline as warranting a wide moat, and Ionis' antisense technology supporting a narrow moat. However, the failure of Ionis's Huntington's disease program and delays with its inhaled drug candidates could signal erosion of the firm's positive moat trend, and we're carefully watching for progress in the key areas of rare diseases and cardiology to find continued support for our trend rating.

Ionis is a leader in RNA-based therapies, and its spinal muscular atrophy drug Spinraza, marketed by partner Biogen, is the first RNA-based therapy to achieve blockbuster status. The firm's antisense oligonucleotide, or ASO, technology faces strong competition from RNA interference technology emerging from Alnylam, Arrowhead, and Dicerna, as well as gene editing and gene therapy pipelines at multiple firms. However, Ionis has built a massive pipeline of promising new drugs that are rapidly moving toward the market, securing a narrow moat.