Isis Pharmaceuticals, Inc. ISIS reported second-quarter 2015 earnings of 29 cents per share, substantially lower than the Zacks Consensus Estimate of 34 cents. However, Isis Pharma had incurred a loss of 10 cents in the year-ago quarter.
Total revenues in the quarter soared almost 111% year over year to $120.4 million. Revenues were mainly driven by the recognition of the more than $90 million upfront payment from Bayer AG BAYRY for ISIS-FXIRx. Isis Pharma has a collaboration agreement with Bayer for ISIS-FXIRx. Revenues were, however, below the Zacks Consensus Estimate of $125.9 million.
The Quarter in Detail
Research & development expenses increased 14.8% year over year to $68 million. General & administrative expenses shot up 74.2% year over year to $7.8 million.
Isis Pharma expanded its existing partnership with AstraZeneca AZN and announced a multi-year collaboration for the discovery and development of novel antisense drugs primarily focused on treating cardiovascular, metabolic and kidney diseases. The deal could see Isis Pharma receive up to more than $4 billion in license fees and milestone payments plus tiered double-digit royalties on annual net sales for each of the programs.
Isis Pharma has made significant progress with its pipeline. The company reported positive data from a phase III study (FOCUS FH) on Kynamro, being evaluated for the treatment of patients with severe heterozygous familial hypercholesterolemia. Results showed that patients on Kynamro witnessed a statistically significant reduction in LDL-cholesterol, thereby meeting the primary endpoint of the study.
Volanesorsen (ISIS-APOCIIIRx) has been moved into phase III development in patients with familial chylomicronemia syndrome. The company intends to initiate a phase III study on volanesorsen for an additional indication, partial lipodystrophy, shortly.
Isis Pharma is developing ISIS-TTRRx and ISIS-SMNRx in collaboration with its partners. Currently, ISIS-SMNRx is in two phase III studies for the treatment of spinal muscular atrophy in infants and children. Data from the phase III program on ISIS-SMNRx is expected in late 2016 or early 2017.
On the other hand, ISIS-TTRRx is being evaluated for the treatment of patients with polyneuropathy form of transthyretin/TTR in a phase III study. Data should be out in the first half of 2017. A phase III study on ISIS-TTRRx for the treatment of patients suffering from TTR-related cardiomyopathy is currently underway with data expected in late 2016 or early 2017.
2015 Guidance Improved
Encouraged by the strong financial performance in the first half of 2015, Isis Pharma has considerably revised its guidance.
For 2015, Isis Pharma now expects net operating loss in the low $30 million range, which is an improvement of more than 40% from the earlier guidance.
The company now expects to end the year with a cash balance of more than $750 million (previous guidance: 630 million), reflecting payments from the latest agreement with AstraZeneca and $33 million of milestone payments generated so far in the third quarter.
Isis Pharma expects its expenses to increase in the second half of 2015 due to expenses related to the commercial launch of volanesorsen.
Our Take
Isis Pharma’s second-quarter results were disappointing with the company’s earnings falling significantly short of expectations. However, revenues increased year over year. Nonetheless, we are positive on the latest deal with AstraZeneca.
Isis Pharma’s agreements with leading health care companies continue to validate its antisense technology and provide the company with funds in the form of upfront, milestone and other payments. The company expects multiple pipeline related news in 2015 and 2016. We expect investor focus to remain on pipeline updates from the company.
Isis Pharma currently holds a Zacks Rank #2 (Buy). Another favorably ranked stock in the health care sector is Actelion Ltd. ALIOF carrying a Zacks Rank #1 (Strong Buy).
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