12:00 AM
Jan 14, 2008
 |  BioCentury  |  Finance

Ebb & Flow

Although Isis (NASDAQ:ISIS) rose last week on the company's deal with Genzyme (NASDAQ:GENZ) to develop and commercialize mipomersen and follow-on compounds, the gain in market cap didn't match the upfront cash value of the partnership.

Between the sale of 5 million shares of stock for $150 million and a $175 million upfront payment, Isis stands to get a cash infusion of $325 million once the deal closes. That would bring the company's total cash to about $500 million, Chairman and CEO Stanley Crooke told Ebb & Flow.

Yet, Isis tacked on only $181 million in market cap to reach $1.5 billion last week. The stock has been on a run, adding a total of $377 million in market cap since Sept. 13, when it reacquired mipomersen for hypercholesterolemia along with two Type II diabetes compounds from Symphony GenIsis. At the same time, it turned around and partnered the diabetes candidates with Johnson & Johnson (NYSE:JNJ).

Maxim Jacobs of Ridgemark Capital thinks a lot of the gains since September were in anticipation of the mipomersen deal. But he thinks the "stock would probably be higher if this deal would have come from a Pfizer or a Merck, which are already heavily involved in this area."

The fact that Genzyme was the partner "gave the shorts more ammunition and made the longs less certain. Cardiovascular is not necessarily Genzyme's strong suit. There was an expectation that this would be used in a wider indication," he concluded.

At Dec. 31, short interest in Isis already had climbed to 19.8 million shares (23% of outstanding shares) with 14.2 days to cover, compared with mid-October, when it stood at 10.4 million shares (12% of outstanding shares) with 4.1 days to cover.

Jacobs also suggested that some investors might have sold on the news.

Crooke told Ebb & Flow that Isis soon will spin out its Ibis Biosciences subsidiary, which focuses on research tools for infectious diseases. He said his aim is to structure the parentcompany so it avoids Phase III and marketing altogether and instead operates as the hub of a technology consortium(see "Pyramidal Markets," A10).

Deal terms

The three compounds reacquired by Isis in September had all been spun off into Symphony GenIsis, funded by Symphony Capital with $75 million in April 2006.

When it acquired Symphony GenIsis, Isis paid Symphony Capital $80 million in cash and $40 million in stock. The biotech then immediately partnered the diabetes candidates, ISIS 325568, which was in Phase I, and ISIS 377131, which was in preclinical development, with Johnson & Johnson for $45 million up front and up to $230 million in milestones, plus royalties (see BioCentury, Sept. 17, 2007).

Under the Genzyme deal, Isis is eligible for $1.6 billion in milestones. Isis is initially eligible to receive 30% of profits, which will increase on a sliding scale to 50% if revenues were to reach $2 billion.

Mipomersen, an antisense inhibitor of apolipoprotein B-100 (Apo B-100), is in Phase III testing to treat the homozygous form of familial hypercholesterolemia (FH). Isis and Genzyme aren't yet disclosing when they expect data to be available, saying only they expect to submit an NDA in 2009.

Last week, Isis closed up $2.08 (14%) to $17.10.

Gains on guidance

Genzyme tacked on $3.51 to $78.56 on both the Isis deal and on early disclosure of its fourth quarter and 2007 revenue, which came in slightly above consensus estimates. The company isn't slated to release earnings until Feb. 13.

Two other companies also tipped their hands, offering upbeat guidance going into earnings season: Amgen (NASDAQ:AMGN) and Biogen Idec (NASDAQ:BIIB).

For the quarter, Genzyme's revenue rose 21% to $1.04 billion from $854 million in 4Q06. The consensus estimate was $1.02 billion.

Sales of Cerezyme imiglucerase for Type I Gaucher's disease were up 15% to $301 million from $262 million in 4Q06. Sales of...

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