Wednesday, December 3, 2008


Earlier in the year, I sold 100 shares of Isis for close to a $200 profit and I decided to buy 50 of those back this morning at 10.45, a much lower price than the last sale.   This is a speculative stock for me, and I always limit my exposure to these speculative plays.  The shares have been just about cut in half since August 2008, but the news for this small biotech company has been good.  Isis has a dominant patent position in RNA based drug discovery.  It has about 18 drugs in development with the furthest along being Mipomersen for the treatment of familial hypercholesterolemia, a disease of very high cholesterol levels.  ISIS: Profile for Isis Pharmaceuticals, Inc. - Yahoo! Finance  It has a partnership with Genzyme for that drug.  For its involvement, GENZ paid ISIS an upfront payment of $325 million and much more for milestone payments thereafter.  TheStreet.comFDA Moves Isis' Finish Line   Genzyme bought 5 million shares of ISIS at $30 per share, and I believe that 150 million was included as part of the 325 upfront.  Profits will be split at 50/50 after 2 billion in sales.  The milestone payments could reach 1.575 billion for various development, regulatory, and commercial milestones.  Filing for FDA approval may occur sometime in 2010.   In a recent note dated 11/11/2008 , Barclays, which has an overweight rating and a  $23 target, stated that positive safety data was presented for this drug at a recent American Heart Association conference. 

 Due to its patent position in RNAi technology which Isis has licensed to other firms, it will receive royalties and milestone payments received by its licensees.  An example is the announcement earlier in the year of a deal between Takeda and Anlylam whereby Takeda paid an upfront fee of 100 million to Anlylam,  and Isis would receive $4.6 million of that fee for  licensing its patents to Anlylam  Another example is today's announcement by OncoGenex of positive survival data from its drug in stage 2 clinical trials for metastatic castrate resistant prostrate cancer.  Yahoo! Finance  This drug was developed using Isis' antisense technology.  Royalties are payable to ISIS in the range of 5.5% to 7% of net sales plus a percentage of any milestone payments.  Another antisense drug developed by ISIS recently completed a Phase IIa study for multiple sclerosis where it demonstrated a 54% reduction in the cumulative number of new active lesions.  The drug was licensed to ACL which subsequently licensed it to TEVA.  A report by Barclays from September discusses other drug candidates.  

The transcript of the last earnings call is worth a read.  ISIS Pharmaceuticals Inc. Q3 2008 Earnings Call Transcript - Seeking Alpha  ISIS ended the 3rd quarter with over 500 million in cash.  It believes that it has enough cash to fund its activities for the next five years.  Some of its other operations, like IBIS Biosciences, where Abbott is a partner, is discussed in the recent earnings release.  Isis Reports Financial Results and Highlights for Third Quarter of 2008: Financial News - Yahoo! Finance
For these small biotechs, I have to pay attention to cash burn rates and cash on hand to try an ascertain whether the company has the balance sheet to realize its potential. 

This small investment in ISIS is what I call an intelligent speculation.  I have almost built my profits up so I am close to playing with the house's money on this one, having bought and sold it several times, with sales in 2006, 2007 and 2008.  Managing risk with these small speculative positions is important to me.  I feel that I am now in a position with this company that I have bought again at a sufficiently favorable price that I am inclined now to let it ride and just see what happens.  It  has a lot of promise. But a lot can happen before the FDA actually approves any of its drug candidates as shown by the delay recently experienced in its lead cholesterol lowering drug mentioned above. I put this 50 shares in an IRA just in case I hit pay dirt with it, which is still very much up in the air. 
See also, Seeking Alpha

I am back buying common stocks with cash flow since there was not a close below 815 in the S & P.  I am currently monitoring about 200 small and micro caps for potential investments and this category is by far my favorite. 

 I am not a financial advisor but an individual investor trying to navigate my way through a difficult market. In these posts, I am acting as an unpaid financial journalist and an occasional political commentator.   I am also aggregating financial news stories that I view as important and providing any reader of these posts, assuming there are more than a couple, with links to those articles, sort of a filtered, somewhat intelligent, free search engine.  Any discussion made by me of particular securities  is not a recommendation to buy or to sell.  Trade at your own risk.  Consult with your financial advisor prior to making any purchase or sale. I will try to identify my sales too but it may take a few minutes after I implement them to create a post explaining my reasons.  The sale may before or after the post.  Before buying or selling any stock, even one recommended by a trusted financial advisor,  please research it and make up your own mind which is what I always try to do.  Research would include reading reports, reviewing financial records, earnings estimates, sec filings and prior earnings releases and news.  In this post, and all others by me, I am merely describing my reasons for purchasing  or selling securities, and the potential pitfalls that I identified prior to purchase or the reasons for a sale.  The securities mentioned in this and all posts written by me may not be suitable for others based on their unique financial position and risk profile.  Always read the prospectus before buying a Trust Certificate, bond, preferred stock or other bond or bond like investments.    

No comments:

Post a Comment