Report
Karen Andersen
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Morningstar | Ionis Reports Solid 1Q Results and Pipeline Progress; Slightly Increasing Our FVE

Ionis' first-quarter results were on track with our expectations. We're increasing our global probability of approval for rare disease drug Tegsedi from 70% to 80%, following the recent European approval, and plan to increase our assumed probability of approval for ALS drug tofersen following recent early data. We expect to slightly raise our current $52 per share fair value estimate as a result. Overall, Ionis' antisense technology is gaining traction and could lead to the creation of a moat, but we're waiting for evidence that the firm's newly approved drugs and phase 3 drug candidates can meet with commercial success before assigning Ionis a narrow moat.

Ionis' total revenue grew to $297 million in the quarter, driven by a $150 million license fee from Novartis, and royalties on spinal muscular atrophy drug Spinraza increased 46% year over year to $60 million, as Biogen's sales of the drug hit $518 million globally. We think total Spinraza sales are on track to reach nearly $2.2 billion for the full year, which incorporates significant slowing in sales growth as Novartis' gene therapy Zolgensma is likely to launch in the second half of the year. We also forecast Spinraza sales declines in 2020 and beyond due to Zolgensma as well as Roche's oral therapy risdiplam, which should be filed by the end of the year. However, Ionis and Biogen are also working on a less frequently dosed treatment, which should move into trials soon and could combat some of the pressure (Spinraza is currently administered once every four months intrathecally, into the spinal canal). In addition, broader prevalence of SMA globally than originally estimated could mean greater room for Spinraza to continue growing outside the U.S., and Zolgensma will need to continue to generate strong data on the durability of its efficacy--and efficacy beyond type 1 disease--to reassure physicians that efficacy is in par with Spinraza.

Ionis' pipeline is progressing nicely, with two recently approved drugs and two key drugs that have advanced to phase 3 development. Two of Ionis' drugs are launching through its Akcea affiliate; Tegsedi saw $7 million in sales in its first full quarter on the market in the U.S., and Waylivra was just approved in Europe (on track to launch in Germany in the second half of the year). The late-stage pipeline is growing substantially, as Ionis has two new phase 3 neurology programs in Huntington's (with Roche) and ALS (with Biogen), and two Akcea programs using next-generation LICA technology are poised to enter phase 3: AKCEA-TTR-Lrx in ATTR (led by Akcea, advancing later this year) and cardiovascular disease drug AKCEA-APO(a)-Lrx (led by Novartis, advancing early 2020).
Underlying
Ionis Pharmaceuticals Inc.

Ionis Pharmaceuticals is engaged in discovering and developing RNA-targeted therapeutics. The company has two commercial medicines, SPINRAZA and TEGSEDI. SPINRAZA (nusinersen) injection for intrathecal use is a survival motor neuron-2, directed antisense oligonucleotide indicated for the treatment of spinal muscular atrophy in pediatric and adult patients. TEGSEDI (inotersen) injection is a Generation 2+ antisense medicine and an approved subcutaneous RNA-targeting medicine designed to treat people with polyneuropathy caused by hereditary transthyretin amyloidosis.

Provider
Morningstar
Morningstar

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.

Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.

We have operations in 27 countries.

Analysts
Karen Andersen

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