ISIS Pharmaceuticals, Inc. (NASDAQ:ISIS)

CAPS Rating: 4 out of 5

The Company is a biopharmaceutical company exploiting proprietary RNA-based drug discovery technologies to create a new class of drugs to treat important diseases.


Player Avatar zzlangerhans (99.85) Submitted: 8/6/2010 8:49:56 PM : Outperform Start Price: $9.00 ISIS Score: +35.07

Isis, like many small biotechs and pharmas, can be looked at as a microcosm of the stock market as a whole. There's always a bull case and a bear case, but baby biotechs rarely follow a straight trajectory upward or downward for any significant period of time. As in the sideways S&P that we are currently saddled with, we must constantly readjust our perspective based on the valuation that the market assigns. Perma-bulls and perma-bears will get whipsawed and never make any progress in their portfolios.

The bear perspective on Isis currently has the upper hand. Four phase III trials of mipomersen for hypercholesterolemia have been completed and the story remains consistent - the drug is effective at lowering cholesterol but confers a high risk of developing elevated liver enzymes, a potential precursor of irreversible liver injury. Pipeline candidates have been discontinued for less. And Big Daddy Genzyme has been the subject of takeover rumors, raising concerns that mipomersen may end up being returned to Isis on a Tupperware platter. So far in the month of August, momentum has been downward.

In the rush to sell, investors have likely discounted the fact that Isis' 900M market cap will be supported by about 550M in cash once earnings are released August 9. Isis appears to be the corporate leader in anti-sense technology, despite mipomersen's failings, and has other anti-sense drug candidates to treat diabetes advancing in their pipeline. Besides the potential of these new drugs, the technology platform and strong financial position will keep Isis on the short list of companies that may be acquired once the pendulum swings back in the direction of growth.

At a share price over 12, which would correspond to an enterprise value of 900M, I'd certainly have a jaundiced view of Isis' short-term prospects (so to speak). But at the current price of 9 and enterprise value of 600M, I'll play Isis in CAPS for a short-term rebound as they remind the investing community of their proprietary anti-sense platform and other pipeline candidates, and prepare their mipomersen NDA for H1 2011.

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