Goldman Sachs partner Dinakar Singh has spent almost $100m to help his daughter find a solution to an incurable and fatal condition called spinal muscular atrophy (SMA). ISIS Pharmaceuticals is already on the case.
Yet this is only part of the story. In total, ISIS has 24 drugs in the pipeline, with many being jointly funded alongside blue- chip partners such as Bristol-Myers Squibb, Eli Lilly, GlaxoSmithKline and Novartis. Underpinning all these formulations is its innovative science, called ‘Antisense’, which could revolutionise healthcare.
Many of today’s cardiovascular illnesses plus cancer and diabetes are caused by ‘bad’ proteins being produced in the body. The drugs that are currently on offer attempt to deal with the consequences, but the side effects can be extreme and the drugs’ efficacy poor. By contrast, Antisense drugs get to work by blocking the production of these disease-causing proteins in the first place. The drugs target the malfunctioning gene and block it. As the cells producing ‘good’ proteins are not harmed, the side effects are much reduced, and the treatment can be tailored to each individual patient. This science is protected by 1,400-odd patents.
ISIS Pharmaceuticals (Nasdaq: ISIS)
The first prescription drug to reach the pharmacies in a couple of years’ time could be Kynamro. Co-funded by Genzyme, it is a unique medicine that can prolong the life of patients who have fatal cardiovascular disease. The drug has recently been filed with the EU for approval, with an American application on track for submission by the fourth quarter of 2011. A positive verdict would not only give the green light to the drug, but would also provide a huge endorsement to the whole class of drugs based upon ‘Antisense’ science. Reassuringly, there is no danger of patent expiries until 2023 at the earliest, and the company has $194m of net cash to finance itself for the foreseeable future.
Fine, but what are the potential pitfalls? Well, as with most early-stage biotechs, ISIS is still loss-making. It is also exposed to regulatory uncertainties and is reliant on one main therapeutic area. All the same, the shares look to be a good play on the long-term trends of personalised medicine and ageing populations. The firm may even be a takeover target for Big Pharma. My risk-adjusted fair value on the stock is $10 per share.
Rating: SPECULATIVE BUY at $6.80 (market capitalisation $680m)