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Markets May Have Got the Latest Ionis Pharmaceuticals, GlaxoSmithKline News Wrong

Here's why the recent decision by GSK to turn down Ionis' TTR drug may not be as bad as it seems.

Image via Ian Wilson/Wikimedia

Biotechnology company Ionis Pharmaceuticals, Inc. (IONS) just announced that its partner, GlaxoSmithKline plc (GSK), has denied to cash in an option that would have seen it team up with Ionis on the submission of a new drug application (NDA) to the FDA in the US for drug called inotersen. The $5 billion biotechnology company is trading down on the news and currently goes for a 25% discount to its end of July market capitalization. As can be inferred from the market reaction, the news is widely being seen as negative for Ionis and not unreasonably so – at surface level. That a healthcare giant like GSK doesn’t want to partner on the development of a drug in a condition like this, which has no commercial alternative on shelves right now, and especially given the late stage of development, doesn’t bode well for the drug’s chances when it goes in front of the FDA.

There may be, however, an opportunity to pick up shares in anticipation of a recovery ahead of the drug advancing along its development pathway. That GSK has declined its option seems like bad news at a glance, but may not be as strongly suggestive of failure as wider markets seem to believe.

As noted, the drug in question is called inotersen and it is targeting a condition called hereditary TTR amyloidosis. Specifically, a subgroup of this condition called familial amyloid polyneuropathy (FAP). FAP, which is now referred to more commonly referred to as hereditary transthyretin amyloidosis with polyneuropathy (hATTR-PN), is a progressive, debilitating and fatal genetic disease in which patients experience TTR (a type of protein) build up in major organs, including peripheral nerves, heart, intestinal tract, kidney and bladder. It causes the progressive loss of motor functions eventually leads to death.

It is a rare disease, there are only 10,000 patients suffering from hATTR-PN worldwide, but this far from negates the revenue potential for any drug that hit shelves and has been shown to treat the condition successfully and – just as importantly – safely.

With inotersen, Ionis is trying to do just that.

The drug is what is called an antisense drug, designed to inhibit the formation of the protein that builds up and causes the issues associated with this condition. Specifically, and in this instance, the protein that inotersen targets is TTR. Most treatment options available to patients right now, and all of the treatment options available to patients in the US, target the degradation in motor function that is associated with condition. In contrast, this drug aims to address the underlying cause of the disease. That’s it’s USP and it’s what could allow it to gobble up a large portion of the addressable market if it’s approved.

So why would GSK refuse an option to commercialize it alongside Ionis?

The most obvious reason is rooted in some safety concerns that came about on the back of the phase 3 trial that will underpin the NDA for the asset. The primary endpoints of the study were rooted in a couple of gold standard severity scales, and the drug hit against both in terms of clinical benefit. However, as was reported subsequent to topline release, a number of patients on the trial developed severe thrombocytopenia. Of these (there were four in total) two recovered, one discontinued the trial as a direct result of the side effect and another died.

There were a total of 177 patients in the study, so while this proportion of adverse events isn’t great, it’s not terrible either. In addition, the company recognized the development of thrombocytopenia and altered the recruitment criteria in order to avoid dosing any patients that might be more at risk from this side effect than others. In other words, patients with an already low platelet count wouldn’t be allowed to take part. In this sense, the company has overcome the safety concerns for the main part, but there remain questions as to whether the necessity to only dose patients with an already average or high platelet count will limit overall market potential if and when this drug reaches commercialization.

That’s the first reason that GSK might have turned the drug down and it is the one that markets seem to be basing their decisions on right now.

There is a second reason, however, that could have nothing to do with Ionis or GSK’s opinion on the approvability of inotersen. Specifically, it’s the recent culling of a large number of development stage programs by GSK’s new CEO Emma Walmsley. The company’s attempt to dramatically reduce its research and development costs has led to the dropping of many early stage and late stage assets, and there is a chance that the latest decline against the Ionis option is rooted in cost-benefit/opportunity cost analysis as opposed to the company’s perception of whether it can get inotersen approved.

If that is the case, the recent selloff might be an opportunity to pick up shares at a discount ahead of Ionis submitting successfully for approval in the US.

Disclosure: The author has no positions in any of the stocks mentioned

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