After highly regarded investment firm Goldman Sachs cut its rating on the company, Ionis Pharmaceuticals (NASDAQ: IONS ) shares dropped by more than 10% at 1:45 p.m. EST today.
Until today, it's been a good time to be an Ionis Pharmaceuticals investor. In December, the company's collaboration partner Biogen won Food and Drug Administration approval for Spinraza, a potential billion-dollar blockbuster therapy for spinal muscular atrophy, and late last month, the company reported better-than-expected financial results that included a goal of achieving pro forma profitability this year.
Despite that headway, Goldman Sachs isn't impressed. According to Bloomberg, analyst Salveen Richter is telling institutional clients that Ionis Pharmaceuticals' shares could topple 45%.
Richter's price target of $25 comes after Ionis Pharmaceuticals reported phase 3 results for volanesorsen earlier this month. Volanesorsen is being developed for use in familial chylomicronemia syndrome, and trial results were good enough for management to say they plan to pursue FDA approval. Richter's skeptical, however, that volanesorsen will be a winner.
Richter also tossed cold water on the potential commercial opportunity for IONS-TTrx, a drug being developed by GlaxoSmithKline that should read out phase 3 results in Q2.
Undeniably, this is an important year for Ionis Pharmaceuticals. If Biogen can successfully market Spinraza, then royalties in the teens, plus licensing and royalty revenue on other drugs in its pipeline, could allow Ionis Pharmaceuticals to turn the corner to profitability.
The volanesorsen data could result in an FDA application for approval this year, and if GlaxoSmithKline reports positive results for TTrx, then a filing for approval could be on deck this year for that drug, too. The company also hopes to add up to five new drug candidates to its research and development pipeline this year.
Of course, there's no guarantee that all of these things are going to go Ionis Pharmaceuticals' way. Spinraza is a pricey medicine, and its launch trajectory could be slowed by insurers who want to delay its use. Furthermore, volanesorsen could get rejected by regulators -- and the trial for TTrx could be a bust. Those are real risks that investors shouldn't ignore.
Nevertheless, few biotech stocks have the pipeline depth and breadth of Ionis Pharmaceuticals or anywhere near the same number of deep-pocketed collaboration partners. Given royalty revenue is high margin and the maturing pipeline offers opportunities for additional income in 2018 and beyond, investors might be best served remaining focused on the long term, rather than reacting to individual analyst reports.
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