Ionis Earnings: Results Show Late-Stage Pipeline on Track; Shares Remain Undervalued

We’re maintaining our $62 fair value estimate for Ionis IONS 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.

Diving into the pipeline, we expect Ionis’ next approval could be for eplontersen in amyloidosis patients with polyneuropathy later this year, where Alnylam is already entrenched; total sales of Alnylam’s Onpattro and next-generation drug Amvuttra grew 46% in the second quarter and reached $223 million. We still expect Alnylam to retain leadership in this market, but with AstraZeneca as a global collaboration partner and a more convenient, self-administered product, we expect Ionis to gain 25% of a more than $5 billion potential market for the drugs in polyneuropathy and cardiomyopathy (where we expect approval of Onpattro in 2023, Amvuttra in 2025, and eplontersen in 2026).