IONS – The bear case.
This will be the first of a long running series of bear case posts on a variety of different stocks. As a general rule I will only be writing up those companies that, if the bear case is addressed, have something left. I.e. I will explicitly exclude companies like PPHM or NWBO. Note that at the bottom of each bear case I will also write up a simple bull case as context – but the emphasis is on the bear. My goal is to make the bull vs bear debate more substantive.
I picked IONS primarily because, although there are many IONS bears, the bears’ case is almost reflexively focused on side effects. I’d find it much more useful if their bear arguments were less reflexive. As with most of biotech there is plenty to be bearish about without falling back on reflexivity.
1) Valuation - $5B is a lot for a company with $300M revenues last year (and probably about $200M this year)
a. Most of the drugs in their pipeline are partnered (royalties at about 15%) and most are orphans – i.e. smaller patient populations. Even if, optimistically, 30% are eventually approved it won’t equate to more than $1.5B/Yr and that is 7 or 8 years from now (with a heavy risk discount back to current stock price). (The bull case is that the pipeline is 10’s of drugs – and they have a history of getting large milestone payments)
b. The wholly owned drugs are much riskier than the partnered drugs – e.g. volanesorsen (for high trig) is likely to follow the same trajectory as other lipid modifiers (i.e. low sales $). (The bull case here is that FCS is not the same as generic high trig)
2) Drug specific TTR-Rx (partner GSK):
a. Watch issue: Once both IONS and ALNY TTR polyneuropathy results come out the IONS results are meaningfully worse from an efficacy standpoint
b. IONS thrombo data in TTR Poly is bad enough that it more than offsets the much more cumbersome and toxic ALNY infusion system.
3) Drug specific Volanesorsen:
a. It is only a lipid modifier – and sales of lipid modifiers are anemic without any clinical efficacy of benefit to the patient.
b. The thrombo data is much worse than has been presented by the company (see below for details of what the company has said and not said – but the odd thing about the current bear position is that much of it is in actual contradiction to what the company has explicitly said, and that seems odd).
4) Drug specific FXI-Rx (partner Bayer – with royalties greater than typical for IONS):
a. No specific results released after the dialysis trial and real release (first real release expected early Jan cc) will show no benefit of bleeding vs coag. Or worse, show adverse events (e.g. even a small move of platelet count could be bad given the indication being pursued).
5) Akcea drugs (lipid and metabolic targets via liver) are all largely pipe dreams:
a. NASH etc are, at best, poorly understood and with poor surrogates so the chances of success are small.
b. The side effects of the HbA1c drugs are likely to take a LOT of money to resolve – and several of their drugs in this area actually had big enough issues that they were visible even in very small trials (e.g. liver enzyme issues).
6) Thrombo :
a. Thrombo is an on-going risk in TTR and FCS and even though all the data to-date says it only occurs early on (within first 4 months of dosing) it may re-appear much later (in Drisapersen, a related technology, the thrombo was more severe, but only showed up after several years).
b. In the pursuit of non-liver indications (e.g. DMPK) they up the dose above 300 mg and risk much more extensive thrombo that dampens all the rest of their pipeline.
Brief bull case (largely for context):
a) FCS may not be ‘just another lipid levels’ disease. The literature on FCS is sparse, but there are hints that, for instance, even for a given trig level the FCS patient has a much greater chance of pancreatitis (chronic or acute). BTW – in my previous write up of IONS (almost 1 year ago) I speculated that the FCS primary endpoint was likely to have success, but less likely than the SMA trial. I now change that to the chance of success at the primary endpoint is just as high as the chance of success in SMA was 1 year ago. The basis of my change is a re-evaluation of the ph2 results (2 of 3 FCS patients went well under 500 – and that is very uncommon in FCS), plus the FCS subgroup in the just announced high trig ph3 RCT.
b) TTR-Rx results may show very substantive benefit in the cardiomyopathy subgroup – and if so it is likely to also have benefit in wt TTR cardiomyopathy (a huge market – although one that will require longer trials and rollout of new tech and SOC to differentiate TTR cardio from other amyloidosis cardio)
c) DPMK results (planned to be discussed in the Jan cc) show clinical efficacy even in the short and small trial.
d) FXI-Rx results in dialysis reprise the earlier ph2 results of large clot reduction with only mild bleed increase. Complete clarity by IONS on different types of bleeds and clots and severity will be required here – so this is definitely a long-shot given IONS history about being fuzzy when it comes to safety.
Thrombo on the record - Finally, a brief summary of what IONS has *explicitly* said about thrombo in their TTR and Volanesorsen trials:
a) All such thrombo events have been transient. And all occurred on or before around 4 months of dosing. And subsequently, including as recently as last week, they have said no such thrombo events have occurred since the June disclosure (i.e. after that 4 month mark).
b) The thrombo is only occurring in diseases which already have platelet anomalies – e.g. they explicitly note that there have been no thrombo events in volan non-FCS patients despite many more such patients.
c) None of the thrombo events have resulted in significant bleeds. And all the thrombo events have been transient.
d) Note that I do not believe they have been explicit about the exact characteristics of the thrombo – exactly how severe nor how long nor exactly how many patients (other than to say ‘less than a handful’ across TTR and FCS)
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