Maintaining Our $62 FVE and 2021 Forecast for Ionis; Data Catalysts Ramping Up in 2022

Ionis Pharmaceuticals reported $133 million in revenue and a $48 million non-GAAP net loss in the third quarter, lower than we had expected, as Spinraza royalties from partner Biogen and smaller milestone payments from collaborators failed to counter rising operating expenses. That said, Ionis is still on track to meet its guidance for more than $600 million in revenue this year, with higher revenue expected in the fourth quarter, and we're maintaining our $62 fair value estimate. Research and development expenses grew substantially in the quarter as Ionis moves more wholly owned programs into late-stage trials and continues to supplement its antisense technology with licensing agreements. While a reorganization following the Akcea acquisition has brought selling, general, and administrative expenses under control, we expect R&D to move higher in the fourth quarter, particularly as the firm begins phase 3 trials for hereditary angioedema drug donidalorsen (2024 data). As we discussed in our Oct. 18 note, the key phase 3 trial of amyotrophic lateral sclerosis drug tofersen failed to meet its primary endpoint, although signs of reduced disease progression (and the recently initiated presymptomatic Atlas trial) could mean that the program still has a chance at moving forward, and we're maintaining our 40% probability-weighted forecast for the drug (roughly $50 million in annual royalty revenue in our model by 2030). Ionis now has multiple programs in phase 3 and a validated platform (with the success of spinal muscular atrophy drug Spinraza) to support its narrow moat.