Ionis Earnings: Third-Quarter Results Show Growing Late-Stage Pipeline; Shares Remain Undervalued

Ionis IONS revenue fell 10% to $144 million in the third quarter relative to the same period in 2022, due to fluctuations in the timing of payments from collaboration partners. We’re maintaining our $62 fair value estimate as the pipeline is moving forward as expected, and management reaffirmed 2023 guidance. We have raised our long-term sales estimates for amyloidosis drug eplontersen due to a delay in competition from Alnylam in the key cardiomyopathy indication and added the phase 3 Alexander disease drug candidate to our model, while also raising long-term SG&A expenses to support these launches, with no meaningful valuation impact overall. Spinraza royalties held relatively steady at $67 million, and we expect royalties from Biogen could see longer-term stability if the partners have success with a high-dose version of Spinraza or a next-generation product that could be dosed less frequently. Operating expenses are climbing as three in-house launches are potentially approaching, led by eplontersen (expected approval next month in polyneuropathy), high triglyceride drug olezarsen (filing in early 2024 in hereditary forms, additional data in late 2024 or early 2025 in broader high triglyceride market), and angioedema drug donidalorsen (data expected in the first half of 2024). Overall, despite significant competition with Alnylam for collaborations and upcoming likely direct commercial competition, we think Ionis’ platform provides a strong set of mid- to late-stage programs that look competitive on efficacy, safety, and convenience. We think shares look undervalued, as the market underappreciates the ability of Ionis to translate its antisense technology platform into multiple drug launches across rare diseases, neurology, and cardiology. We think approved spinal muscular atrophy drug Spinraza and ALS drug Qalsody provide solid proof-of-concept for Ionis’ technology, supporting a narrow moat.