"We are reiterating or rating on Isis Pharmaceuticals (ISIS) of a Buy and increasing our price target to $20. We believe that antisense technology represents an exciting and potentially revolutionary platform for developing therapeutic candidates to treat a wide margin of diseases. In our view, antisense as a platform is today where biologics were ten years ago. The company’s leading candidates are mipomersen (w/Genzyme Corporation (GENZ)) for high cholesterol and ISIS-113715 for diabetes, along with several other proprietary and partnered programs for oncology, inflammatory disease, asthma, and viral infections. Our financial model forecasts profitability in 2010.
Thanks to various collaborations, Isis has put itself in constant position to receive developmental milestone. The company sees no need to re-tap the financial markets in the next five years. In that regard, in five year we see Isis as cash flow positive, so there may never be a need to re-tap the financial market. Isis exited 2007 with $193.7 million in cash and securities. Adding the $150 million from the Genzyme equity investment, the $175 million up-front payment from Genzyme, and the $20 million equity investment form Abbott Labs (ABT) and Isis is sitting on over $500 million in cash.
We note this level does not include another potential $20 million from Abbott before July 31, 2008, and potentially another $175 190 million by July 31, 2009. Management expects to exit 2008 with over $450 million still on the books. Couple all that cash with the potential that mipomersen is a blockbuster and several other compounds are moving nicely forward, and Isis looks like the premier small-to-mid cap biotechnology company in our universe. We see Isis as uniquely well-positioned for a very successful future. We are keeping our Buy rating and $20 price target on Isis Pharmaceuticals. We find it comforting that Genzyme recently agreed to acquire 5 million shares of Isis at $30 per share - $10 above our near-term target."