April 15, 2006 (Vol. 26, No. 8)

Querida Anderson

Company’s Stocks Rise as Cardiovascular Drug Candidate Shows Positive Results

Isis Pharmaceuticals (www.isispharm.com) has developed an antisense drug candidate that continues to show potential in treating patients with cardiovascular diseases by reducing cholesterol, LDL-C, as well as triglyceride levels. Although excitement is over only this one drug, because it is antisense there&#180s a lot of upside opportunity, says Kate Winkler, Ph.D., senior executive director, healthcare and life sciences research at Global Crown Capital. &#8220The stock has doubled in the last couple of months; antisense technology now actually works for drugs,&#8220 she adds.

Isis successfully commercialized the world&#180s first antisense drug, Vitravene, which treats cytomegalovirus retinitis in AIDS patients. Along with its partners, it has 13 second-generation antisense drugs in clinical development. It owns or is the exclusive licensee of approximately 1,500 issued patents worldwide.


Adding to this existing patent estate, Isis recently received U.S. patent 7,015,315. This patent covers antisense drugs with modified sugars, including Isis&#180 second-generation chemistry and numerous other sugar-modified antisense compounds. The patent does not expire until March 2023, thus extending the duration of Isis&#180 control over antisense drug chemistry and design, as well as the patent life of Isis&#180 second-generation antisense drugs.

Clinical Trials

In September 2005, Isis initiated the Phase II development program of ISIS 301012, a second-generation antisense drug. ISIS 301012 selectively reduces apoB-100, a target critical to the synthesis and transport of low-density lipoprotein cholesterol. Isis is also conducting a Phase II trial of ISIS 301012 in combination with statin therapy in patients with high cholesterol and a Phase II in patients with familial hypercholesterolemia.

Dr. Winkler believes that these studies will provide visibility to investors on the drug&#180s potential. Thus sustaining an overweight rating, Dr. Winkler says, &#8220we sense that investors are finally starting to buy into the successes achieved with second-generation antisense, and we believe Isis&#180 pipeline and technologies warrant sustained enthusiasm.&#8220

FY2006 Financial Results

As of April 3, 2006, Isis&#180 market cap was $654.86 million. Dr. Winkler says that &#8220this is an R&D stage company with no real revenues to speak of, so of course it is still burning cash to fund their development expenses.&#8220 Nevertheless, as a result of the company&#180s reorganization in January 2005, it had a lower-than-historical burn rate as R&D revenues and expenses and operation losses declined.

Isis&#180 reports that its proforma loss from operations was $50.8M for 2005, compared to $85.4M for 2004&#8212a 41&#37 decrease. The company&#180s loss from operations for 2005 was $57.2M, compared to $117.9M for the previous year, according to GAAP. The $25.5-M decrease, primarily in non-cash restructuring activities from 2004 to 2005, contributed to the reduction in loss from operations, according to Isis.

Resulting from the loss of operations, Isis&#180 net loss applicable to common stock for 2005 decreased to $72.4M, or $1.15 per share, compared with $142.9M, or $2.52 per share, for 2004.

The cost savings that was achieved through the streamlining of its operations also led to a decrease in R&D and G&A expenses of $37.2M.

Isis as a Core Part of Investors’ Portfolio

&#8220The evidence that Isis has succeeded in its efforts to generate effective antisense drugs is mounting. We think the results for several product candidates are notable enough that even the most skeptical in the investment community may soon find themselves compelled to acknowledge Isis&#180 successes. And with that acknowledgement should come the recognition that Isis holds the key to translating genomic information into drugs,&#8220 asserts Dr. Winkler. &#8220We recommend Isis as a core biotech portfolio component for investors with the patience to await Isis&#180 return to the limelight over the next 12-24 months.&#8220

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