ISIS Will Become a Major, Major Drug Maker

I have been following ISIS Pharmaceuticals for a dozen years now and have heard Stan Crook, its CEO, promise his shareholders in as many years that profitability was just around the corner.  Over the last 4 years, he’s also been promising that KYNAMRO will be highly profitable, and indeed just at the R&D day yesterday, he said that KYNAMRO would make ISIS profitable or at least will be profitable for ISIS under the Genzyme agreement.

The reality has been that none of that has materialized and sales of KYNAMRO, which essentially is a placebo with serious safety issues, must be so enormous that ISIS has not had to break out its sales one year following its launch (my sense is that it’s been growing exponentially from 1 patient to 2, 4, and now perhaps 8 subjects with familial hypercholesterolemia). 

In fact, his delusion (he would probably call it his optimism) was on full display at the 2012 OTS meeting when he gave a keynote speech during which he celebrated himself for the first approval of a systemically administered oligonucleotide (KYNAMRO) which he said ‘had no side effects’.   

And, of course, the other perennial Stan classic: ‘partnership interest has never been greater’ -rain or shine.

People older and wiser than me will probably have the same story to tell, but going back not one, but close to 3 dozen years.  So the Street has stopped listening…

Why it’s different now

Today, however, I will make the case that the situation has changed and that ISIS Pharmaceuticals is set to become a major, major pharmaceutical company within a decade. Think $100B market cap and more.  In 20 years, it could be bigger than Apple is today with the only dilution being excessive stock option gifts to Stan and his management team.

The perfect storm is the result of improvements in 5 critical areas: platform technology, pipeline, target space, commercial and IP strategy. 

1.  Platform Technology

Phosphorothioate antisense oligonucleotides (ASOs) rely on saturating target- and non-target tissues with large amounts of potentially immunostimulatory sticky chemistry to achieve activity.  For KYNAMRO, the toxic tipping point was reached at 200mg per week with hardly any gene knockdown activity (first reported to be 40% and then seemingly coming down to 20% as drug development progressed).

For other candidates using the same 2^nd generation gapmer chemistry, the doses used in clinical development are not that different, but with improved 60-80% potency at 200mg, and much more robust knockdowns at 300mg and 400mg.    The safety profile also seems to have improved- although here I really want to first look at the briefing documents at the end of the development cycle based on the KYNAMRO history.

So at minimum, you have significantly improved potency with equivalent safety which would push open the technology to a number of additional applications beyond the extremely severe and rare populations such as those with homozygous familial hypercholesterolemia.

The potency improvements can be ascribed to just having the technology and capital to screen many more oligonucleotides for drug activity.  On the safety side, there may have been improvements by better understanding which sequences to avoid to minimize immune reactions.

Behind 2^nd gen chemistry, I’ve been quite impressed by the GalNAc-conjugation data revealed at AsiaTIDES which showed ~10x improvements in activity, and a re-direction of oligonucleotides from the kidney to the liver, both with major implications for the safety of phosphorothioate chemistry (see also supporting data by Regulus Therapeutics with its anti-miR122 candidate).  If now most of the oligonucleotides are in the target cell, many of the extracellular safety issues with the sticky chemistry will disappear.

And it does not have to stop here.  Since at least for RNaseH-mediated gene knockdown and the regulation of nuclear RNA, nuclear localization is required for ASO activity, how about attaching a little postcode to the ASO to get the oligonucleotide into the nucleus?  ASO is wasting a lot of its potential in the cytoplasm since most oligonucleotides, at least in non-cycling cells, remain in the cytoplasm.

In combination with higher-affinity chemistry, ligand-targeting and nuclear localization could make oral delivery a stroll in the park.

2.       Pipeline

Until early 2013, the claim by ISIS of having more than 2 dozen drugs in the pipeline was meaningless.  Most of these candidates were either commercially dead (KYNAMRO, Alicoforsen, Vitravene), had ceased active clinical development, belonged to other companies (!), or were in phase I. 

Today, this picture has changed dramatically.  Two major studies in the diabetes (ISIS-GCGRx) and blood clotting fields (ISIS-FXIRx) have read out positively over the last week. If the safety of these candidates is half as good as claimed in the press releases, they have be major blockbusters.  As the phase III planning is ramping up for these candidates, ISIS-SMNRx for spinal muscular atrophy and ISIS-ApoCIIIRx are promising compounds with significant commercial opportunities that will soon be in phase III.

    

Behind the growing late-stage pipeline, there is a whole bunch of earlier-stage candidates addressing exciting targets from the common (e.g. Apo little a) to the rare/severe disease spectrum (e.g. Huntington’s, myotonic dystrophy type I).  This pipeline is starting to look stronger and more diverse than any in the industry (hence the above projection of ISIS becoming a, if not the major pharmaceutical company).

3.       Commercial strategy

The most advanced candidate of commercial potential in the ISIS pipeline is ISIS-TTRRx for the treatment of TTR amyloidosis.  Leaving aside the inferior potency compared to Alnylam’s RNAi competition, this candidate with ~70% knockdown of the toxic, disease-causing gene in its own right has solid therapeutic prospects.  However, the financial windfall as that from the next most advanced candidate, ISIS-SMNRx, will fall to a pharmaceutical partner. 

You only need to consider the relative market capitalizations of ISIS ($3B) and TTR competitor Alnylam ($4.5B) when you understand that in order to become a major pharmaceutical company, you need to retain significant commercialization rights for commercially attractive drugs and not cap your upside in phase I or even at the preclinical stage as happened with SMNRx and TTRRx.

This picture, however, is changing, and with ISIS-ApoCIII, ISIS-GCGRx, and ISIS-FXIRx, the company now has exciting 3 phase III-ready candidates which it still owns 100%.  

4.       Expanding target space

In addition to improvements in gene knockdown, ISIS Pharmaceuticals is also firing on all cylinders as it comes to exploiting additional mechanisms and targets that only antisense oligonucleotides can address such as modulating splicing in a sequence-specific manner (àe.g. ISIS-SMNRx) or reducing toxic RNAs (à type I myotonic dystrophy).  So in addition to applying ASOs to the 75% of the undruggable protein-coding genome, ISIS can take advantage of the exploding insights into the involvement of RNAs in disease and exploit modulating RNA processing to a therapeutic end.

In sum, ISIS Pharmaceuticals has the largest druggable target space at its disposal in the industry.  When you are the only game in town, often addressing the root cause of a disease, there is not much to convince regulators and payors to approve and pay for your drug.

5.       IP ever-greened

When you have invented a method to invent, you can make life (freedom-to-operate) difficult for your competition.  But beyond asserting questionable claims against the competition, the fact that ISIS is continually improving on their technology and is filing for new patents can have profound impacts on their partnering and commercial strategy. 

This is because one concern with the broad partnerships that ISIS has entered with the likes of BiogenIdec, GSK, and AstraZeneca is that they are giving away too many attractive targets.  Although this is pure speculation at this point, it would be interesting to think that these licenses have not given the partners perpetual rights to the targets involved and that at some point, for example once ISIS has developed oral versions for these targets, ISIS could compete with these older drugs and retain full commercial value.

In general, the IP ever-greening strategy means that even if the target space stayed the same, ISIS could continue to draw value from it and overtake the Big Pharma that have been feeding it.