Ionis Earnings: String of Late-Stage Pipeline Data Begins in the Second Half of 2023

We’re maintaining our $62 fair value estimate for Ionis IONS following first-quarter results that were in line with our expectations, as the firm’s collaboration revenue and royalties on spinal muscular atrophy drug Spinraza from partner Biogen were relatively steady, but clinical trial and commercial readiness costs continue to keep the firm in the red. We expect the next two years to be critical, as key phase 3 trials will read out and new launches could push the firm to profitability by 2026. We think shares look undervalued, as the market doubts Ionis’ ability to translate its antisense technology platform into multiple drug launches across rare diseases, neurology, and cardiology. We think Spinraza and newly approved ALS drug Qalsody provide solid proof of concept for Ionis’ technology, supporting a narrow moat.

While Spinraza sales growth has flattened and Qalsody only serves a very small percentage of ALS patients, Ionis has three late-stage pipeline drug candidates that remain among the biggest drivers in our free cash flow model. We expect eplontersen (partnered with AstraZeneca) to launch in 2024 in ATTR polyneuropathy, with data in early 2025 in patients with cardiomyopathy that could expand the number of patients eligible for treatment. We expect that study design and the drug’s self-administered profile could help distinguish it from Alnylam’s Amvuttra. However, the firm’s two unpartnered late-stage drugs have the biggest impact on our fair value estimate. Olezarsen should have data in a rare hereditary form of high triglycerides later this year, with data in the broader severe hypertriglyceridemia population in 2024. We expect this could be Ionis’ first independently launched product, although management hopes to have an international partner by next year. Third, we think hereditary angioedema drug donidalorsen should have data in early 2024, positioning the firm to launch in 2025 in a competitive market, but with potential for a best-in-class product.