Market Exclusive

A Clinical Hold Just Made Ionis Pharmaceuticals Inc (NASDAQ:IONS) Attractive. Here’s Why.

At the end of last week, Ionis Pharmaceuticals Inc (NASDAQ:IONS) announced that the FDA had issued a clinical hold order, and that one of its ongoing phase III trials is to be temporarily suspended. The company is down more than 15% on the news, and looks set for further sell side pressure as we head into a fresh week. The market response is not unusual with this type of thing, but there are some elements of the situation that might mean the decline is an opportunity to get into Ionis at a discount. Here’s why.

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First, a look at the drug in question. It’s called IONIS-TTRRx, and Ionis is developing it in partnership with GlaxoSmithKline plc (ADR) (NYSE:GSK) as a therapy for sufferers of a condition called TTR Amyloidosis. Specifically, two subtypes of TTR amyloidosis called Familial Amyloid Cardiomyopathy (FAC) and Familial Amyloid Polyneuropathy (FAP).

Both are hereditary conditions, rooted in a mutation in a gene called TTR, which causes abnormal variants of the TTR protein. These variants cause the proteins to fold and – over time – build up in particular parts of the body. This build up leads to the negative symptoms in whatever part of the body they reside; in FAP, it’s the nervous system, in FAC, it’s the heart.

IONIS-TTRRx is an antisense drug – it’s designed to bind to the sense segment of the messenger RNA of TTR. In doing so, it makes the mRNA no longer single stranded, which means it cannot begin the translation phase. Translation is required in protein formation, so by stopping translation, the drug stops, or reduces, the amount of TTR variants being produced. Less TTR equals less buildup, and less buildup allays the symptomatic disease associated with wherever the build up resides. Simple.

GSK and Ionis are running two consecutive trials: a phase II in FAC and a phase III in FAP. Of important note, neither of these trials are affected by the clinical hold, and data from both is expected early 2017. What has been affected, is a trial called CARDIO-TTR, which as yet, had not even begun.

The phase III in FAP is ongoing, but patients that have completed their predefined trial period no longer receive the drug. GSK is looking to set up a phase III that offers access to IONIS-TTRx to patients that have finished their course, and monitor these patients as part of an open label extension to the primary phase III. It is this trial that the FDA has put on hold – a trial that has not yet really begun (GSK were in the protocol setting process before the FDA came in to the picture) and one that will only serve to provide support data, not primary data for the NDA submission.

We don’t know the exact reason behind the hold, but we know the FDA has some questions for GSK regarding the NEURO-TTR study, which is the FAP phase III we’ve already discussed. From this, we can glean an important element – that the questions don’t relate to anything that is going to put the FAP phase III in jeopardy. If the FDA was concerned about something in the FAP ongoing, the agency would have put that trial on hold, not a planned extension study.

This means the delay is likely just that – a delay – and we will see a lifting of the hold in due course as things resume. This, in turn, means that the decrease in market capitalization is market reaction to the hold, without really digging into what the hold means (or what’s caused it).

As such, now could be a great time to pick up an exposure to Ionis. Markets have sold off on the company based on what seems to be misinterpretation, and as things normalize, the gap should close for a quick 15% return.

Beyond that, trial data will dictate the company’s market capitalization, but as a quick turnaround position, this looks attractive.

Of course, there’s always an element of risk on these sorts of trades. There may be developments down the line that increase the severity of implications of the hold. As things stand, however, the risk looks minimal.


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