Monday, May 13, 2013

Poor Stock Offering by ISIS A Homemade Problem


Last week, shares of ISIS Pharmaceuticals came off multi-year highs of $23/share to close to $18/share when the $2B market cap company raised $170M in a public secondary offering.  The poor reaction to the stock offering is in stark contrast to other fund raisings in the industry lately and includes the impressive $170M offering by Alnylam in January, a $125M offering by Sarepta in December, and most recently the $36M offering by Arrowhead Research.  In all these cases, the offerings hardly registered on the stock chart and if, it was to the upside.

What happened?  Given that ISIS Pharmaceuticals is regarded as a bellwether of the industry, has the frenzy surrounding RNA Therapeutics and orphan drug development died down?

I don’t believe so (and expect the stock to bounce back in the coming days and weeks for the same reasons that it had tripled in the few months before).  The more likely explanation is that the management of ISIS Pharmaceuticals has never understood the money-making aspect of drug development and the sensitivities of the financial markets. 

The business strategy of seeking to out-license all its drugs before commercialization (supposedly, the new money is to hold onto drug candidates longer), may betray nothing more than its lack of confidence in the safety and efficacy of its own compounds.  We will likely see evidence of the cleverness behind this and the deal with Genzyme/Sanofi, when sales of recently approved mipomersen, once heralded by the CEO as a replacement of statins, but now relegated to the ultra-orphan homozygous FH population in the US only, will be made public.  

And at one point, the low-hanging targets will have been licensed and new technologies such as RNAi Therapeutics firmly replaced RNase H.  At that point, the company could have repeated the strategic mistake of PDL Biopharma in the monoclonal antibody space which has now degenerated into an IP management and royalty company.

The fallacy of that business model is also supported by the fact that cash flow break-even from licensing revenues alone was supposed to be just around the corner forever it seems.  Instead, we recently had a debt offering and this secondary.

I was recently asked on Twitter why I am always so negative on ISIS Pharmaceuticals.   In addition to my fundamental bias towards RNAi as the far more compelling mechanism for gene knockdown compared to brute-force RNaseH antisense with the phosphorothioate backbone, it comes down to credibility.
 
I have no doubt that the scientists at ISIS Pharmaceuticals are leading in many aspects of oligonucleotide chemistry, but it makes me wonder whether vasculitis is really only a peculiarity of non-human primates, gross morphological changes of proximal tubule cells really of no functional significance, injection site reactions and flu-like symptoms just ‘nuisance’ side effects as Dr. Crook recently called them (even better is the 'vanity' comment in explaining why the homoFH teenagers discontinued on the trial), and low-level inflammation in multiple tissues due to the persistent high concentrations of innate immunostimulatory oligonucleotides really not predisposing to diseases such as liver, lung, and kidney fibrosis.

But fortunately for the ISIS executives, the fact that their personal financial management skills are better than their investor relations savvy will help them sleep despite of these concerns.  According to Yahoo! Finance, Dr. Crooke and his team cashed in several million dollars through option exercises and stock sales in the month before the offering, and a few more since the beginning of the year:

Apr 30, 2013
29,945
Direct
Automatic Sale at $22.26 per share.
666,575
Apr 30, 2013
29,945
Direct
Option Exercise at $6.81 - $11.12 per share.
N/A
Apr 29, 2013
30,000
Direct
Option Exercise at $11.12 per share.
333,600
Apr 29, 2013
30,000
Direct
Automatic Sale at $22.51 per share.
675,300
Apr 24, 2013
25,854
Direct
Option Exercise at $6.81 - $11.12 per share.
N/A
Apr 24, 2013
25,854
Direct
Automatic Sale at $22.50 per share.
581,715
Apr 23, 2013
30,000
Direct
Automatic Sale at $22.12 per share.
663,600
Apr 23, 2013
10,417
Direct
Option Exercise at $15.38 per share.
160,213
Apr 23, 2013
10,000
Indirect
Automatic Sale at $22.12 per share.
221,200
Apr 23, 2013
10,417
Direct
Automatic Sale at $22.38 per share.
233,132
Apr 23, 2013
30,000
Direct
Option Exercise at $11.12 per share.
333,600
Apr 22, 2013
20,000
Indirect
Option Exercise at $6.81 per share.
136,200
Apr 22, 2013
10,000
Direct
Option Exercise at $11.12 per share.
111,200
Apr 22, 2013
27,320
Direct
Automatic Sale at $22.13 per share.
604,591
Apr 22, 2013
27,320
Direct
Option Exercise at $8 - $15.38 per share.
N/A
Apr 22, 2013
10,000
Direct
Sale at $22.10 per share.
221,000
Apr 22, 2013
20,000
Indirect
Sale at $22.10 per share.
442,000
Apr 22, 2013
30,000
Indirect
Sale at $22.10 per share.
663,000
Apr 21, 2013
20,000
Direct
Option Exercise at $7.26 per share.
145,200
Apr 21, 2013
17,656
Direct
Automatic Sale at $21.40 - $21.49 per share.
379,0002
Apr 21, 2013
10,000
Indirect
Automatic Sale at $20.99 per share.
209,900
Apr 21, 2013
20,000
Direct
Automatic Sale at $20.99 per share.
419,800
Apr 21, 2013
17,000
Direct
Option Exercise at $11.12 per share.
189,040
Apr 21, 2013
17,000
Direct
Automatic Sale at $21.26 per share.
361,420
Apr 21, 2013
30,000
Direct
Option Exercise at $11.12 per share.
333,600
Apr 21, 2013
30,000
Direct
Automatic Sale at $20.99 per share.
629,700
Apr 21, 2013
17,656
Direct
Option Exercise at $14.47 - $15.38 per share.
264,0002
Apr 18, 2013
2,042
Direct
Option Exercise at $11.12 per share.
22,707
Apr 18, 2013
2,500
Direct
Automatic Sale at $21.25 per share.
53,125
Apr 18, 2013
30,000
Direct
Option Exercise at $7.26 per share.
217,800
Apr 18, 2013
30,000
Direct
Option Exercise at $7.26 per share.
217,800
Apr 18, 2013
2,500
Direct
Option Exercise at $11.12 per share.
27,800
Apr 18, 2013
30,000
Direct
Automatic Sale at $20.01 per share.
600,300
Apr 18, 2013
2,042
Direct
Automatic Sale at $20.80 per share.
42,473
Apr 18, 2013
30,000
Direct
Automatic Sale at $20.01 per share.
600,300
Apr 18, 2013
15,000
Direct
Option Exercise at $14.18 - $15.38 per share.
222,0002
Apr 18, 2013
15,000
Direct
Automatic Sale at $19.60 - $21.01 per share.
305,0002
Apr 11, 2013
5,460
Direct
Automatic Sale at $19.60 - $19.62 per share.
107,0002
Apr 11, 2013
5,460
Direct
Option Exercise at $14.18 - $14.47 per share.
78,0002
Apr 10, 2013
7,000
Direct
Automatic Sale at $19.52 per share.
136,640
Apr 10, 2013
7,000
Direct
Option Exercise at $11.12 per share.
77,840
Mar 20, 2013
9,000
Direct
Option Exercise at $14.18 per share.
127,620
Mar 20, 2013
1,000
Direct
Automatic Sale at $19.50 per share.
19,500
Mar 20, 2013
1,000
Direct
Option Exercise at $11.12 per share.
11,120
Mar 20, 2013
9,000
Direct
Automatic Sale at $19.26 per share.
173,340
Mar 19, 2013
3,924
Indirect
Automatic Sale at $18 per share.
70,632
Mar 19, 2013
14,376
Direct
Option Exercise at $11.12 per share.
159,861
Mar 19, 2013
3,924
Indirect
Option Exercise at $5.93 - $16.32 per share.
N/A
Mar 19, 2013
14,376
Direct
Automatic Sale at $18.13 per share.
260,636
Mar 19, 2013
31,597
Indirect
Automatic Sale at $18 per share.
568,746
Mar 19, 2013
31,597
Indirect
Option Exercise at $5.93 - $16.32 per share.
N/A
Mar 18, 2013
11,179
Indirect
Automatic Sale at $18 per share.
201,222
Mar 18, 2013
11,179
Indirect
Option Exercise at $5.93 per share.
66,291
Mar 12, 2013
20,800
Indirect
Automatic Sale at $18.01 per share.
374,608
Mar 12, 2013
20,800
Indirect
Option Exercise at $5.17 - $5.93 per share.
115,0002
Mar 4, 2013
18,240
Direct
Option Exercise at $6.81 per share.
124,214
Mar 4, 2013
18,240
Direct
Automatic Sale at $16.86 per share.
307,526
Mar 4, 2013
5,040
Direct
Automatic Sale at $16.86 per share.
84,974
Mar 4, 2013
5,040
Direct
Option Exercise at $6.81 per share.
34,322
Mar 3, 2013
11,700
Direct
Option Exercise at $11.12 - $11.27 per share.
131,0002
Mar 3, 2013
11,700
Direct
Automatic Sale at $15.82 per share.
185,094
Feb 20, 2013
10,000
Direct
Option Exercise at $5.17 per share.
51,700
Feb 18, 2013
1,600
Direct
Automatic Sale at $14.80 per share.
23,680
Feb 18, 2013
1,600
Direct
Option Exercise at $10.29 per share.
16,464
Feb 14, 2013
350
Direct
Automatic Sale at $14.80 - $14.82 per share.
5,1832
Feb 14, 2013
350
Direct
Option Exercise at $10.29 per share.
3,601
Feb 12, 2013
6,100
Direct
Option Exercise at $7.25 - $8 per share.
47,0002
Feb 12, 2013
6,239
Direct
Automatic Sale at $14.17 per share.
88,406
Jan 29, 2013
2,000
Direct
Automatic Sale at $14.82 per share.
29,640
Jan 29, 2013
2,000
Direct
Option Exercise at $10.29 per share.
20,580
Jan 28, 2013
300
Direct
Automatic Sale at $13.40 per share.
4,020
Jan 16, 2013
242
Direct
Sale at $14.16 per share.
3,426
Jan 15, 2013
309
Direct
Sale at $14 per share.
4,326
Jan 15, 2013
330
Direct
Sale at $14 per share.
4,620
Jan 15, 2013
345
Direct
Sale at $14 per share.
4,830
Jan 15, 2013
143
Indirect
Sale at $14 per share.
2,002
Jan 15, 2013
759
Direct
Sale at $14 per share.
10,626
Jan 15, 2013
242
Direct
Sale at $14 per share.
3,388
Jan 15, 2013
1,317
Direct
Sale at $14 per share.
18,438
Jan 14, 2013
695
Direct
Option Exercise at $0 per share.
N/A
Jan 14, 2013
542
Direct
Option Exercise at $0 per share.
N/A
Jan 14, 2013
1,715
Direct
Option Exercise at $0 per share.
N/A
Jan 14, 2013
317
Indirect
Option Exercise at $0 per share.
N/A
Jan 14, 2013
776
Direct
Option Exercise at $0 per share.
N/A
Jan 14, 2013
737
Direct
Option Exercise at $0 per share.
N/A
Jan 14, 2013
542
Direct
Option Exercise at $0 per share.
N/A
Jan 14, 2013
2,978
Direct
Option Exercise at $0 per share.
N/A
Jan 3, 2013
1,296
Direct
Automatic Sale at $10.76 per share.
13,944
Jan 2, 2013
265
Direct
Automatic Sale at $10.84 per share.
2,872
Jan 2, 2013
311
Direct
Automatic Sale at $10.84 per share.
3,371
Dec 31, 2012
447
Direct
Acquisition (Non Open Market) at $8.87 per share.
3,964
Dec 31, 2012
431
Direct
Acquisition (Non Open Market) at $8.87 per share.
3,822
Dec 31, 2012
2,328
Direct
Statement of Ownership
N/A
Dec 31, 2012
898
Direct
Acquisition (Non Open Market) at $8.87 per share.
7,965
Dec 31, 2012
215
Direct
Acquisition (Non Open Market) at $8.87 per share.
1,907
Dec 31, 2012
N/A
Direct
Statement of Ownership
N/A
Dec 12, 2012
6,000
Direct
Automatic Sale at $9.63 per share.
57,780
Dec 12, 2012
6,000
Direct
Option Exercise at $5.25 per share.
31,500

3 comments:

Anonymous said...

And yet, ISIS is back well above $20, now, while your pet stocks of TKMR and ARWR languish. Just curious - does self-doubt ever enter your mind, or are you that convinced you're that much smarter than everyone else?

Dirk Haussecker said...

If you had read my post carefully, I stated that I expected the stock to move back up on the back of the bullish biotech market.

Eric said...

Why do you keep saying that Stan Crooke claimed mipomersen (then called ISIS301012) would be a replacement for statins? Stan has never said that. I was an employee at Isis at the time that ISIS301012 first entered clinical development. In employee meetings Stan always said that the drug would never replace statins, but rather would be useful for patients who are unable to tolerate statins or cannot get to target levels of cholesterol. I was there at Isis before ISIS301012 and well into the mipomersen days after the Genezyme days. Stan was consistent all of that time in saying that it would never replace statins.

By Dirk Haussecker. All rights reserved.

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