EUR 850.00 For Business Accounts Only

Morningstar | Slight Increase to Our Ionis FVE Following Solid 4Q and Pipeline Advancement

We have slightly raised our fair value estimate for Ionis to $52 per share from $49, after raising our Tegsedi pricing assumptions, adding explicit lines for Huntington's and ALS programs, but also pushing revenue from Waylivra (volanesorsen) back due to regulatory delays. Ionis' fourth-quarter and 2018 results were boosted significantly by the release of a valuation allowance related to taxes, as the firm is nearing profitability, but otherwise results were in line with our expectations, with operating expense increases driven by the Tegsedi launch and Spinraza-related fees. We continue to believe that Ionis is in the process of building a moat, as despite expected pressure on Spinraza from competition, the firm's late-stage pipeline is growing significantly.

Sales of spinal muscular atrophy drug Spinraza grew to $1.7 billion in 2018, resulting in nearly $240 million in royalties to Ionis from partner Biogen, more than double what Ionis saw in 2017. While Novartis looks poised to launch SMA gene therapy Zolgensma (AVXS-101) this year (FDA approval expected by May), we think Spinraza will continue to grow in 2019, particularly in older patients, as Zolgensma will likely be labeled for type 1 infants, and our midteens Spinraza growth is in line with Biogen's forecast. However, we do assume average annual declines in the midsingle digits for Spinraza following 2019, due to both Zolgensma and Roche's phase 2 oral drug risdiplam.

The pipeline is a mixed bag, as we've pushed back potential approval of Waylivra in the U.S. and Europe to 2020 following regulatory delays, but we've raised our assumed probability of approval for AKCEA-APO(a)-Lrx from 25% to 50% following strong phase 2 data late last year and licensing by Novartis earlier this week. Given its solid safety profile, we expect the drug could be used to lower lipoprotein(a) levels in patients with cardiovascular disease, and Novartis will conduct a phase 3 outcomes study (Ionis/Akcea to receive royalties).

In addition, the first patients in Roche's pivotal trial of RG6042 (Huntington's disease) began enrolling in January, and Biogen is moving forward with a phase 3 study of BIIB067 for ALS patients with SOD1 mutations; both of these programs have had promising early-stage data in indications where there are no approved treatments, and both could be filed in 2020.

In October, Tegsedi (inotersen) received approval for polyneuropathy of hereditary transthyretin amyloidosis in the United States, Canada, and Europe, and fourth-quarter sales were roughly $2 million. Tegsedi's approval closely followed Alnylam's August approval of Onpattro (patisiran) for hATTR polyneuropathy, which was the first approval of an RNAi therapy. Alnylam's Onpattro must be administered intravenously, and while Tegsedi can be self-administered, we note that Tegsedi's U.S. label included a black-box warning for thrombocytopenia and requires patient and doctor certification and weekly monitoring. We anticipate the market to be competitive throughout our explicit forecast, and we project Tegsedi sales peaking in 2022 at $215 million before competing next-generation therapies enter the market.