Maintaining Our $62 Ionis FVE as R&D Expenses Ramp Ahead of Bigger Phase 3 Readouts

We’re maintaining our $62 fair value estimate for Ionis following full-year 2022 financial results that were roughly in line with our estimates, excluding the $80 million upfront payment to new gene editing partner Metagenomi booked in research and development expenses in the fourth quarter. Management’s revenue guidance for 2023 is slightly below our prior estimates (likely due to lower assumed collaboration revenue), and R&D expenses are trending higher than we anticipated, due to the large number of fully enrolled phase 3 studies and growing late-stage pipeline. After adjusting our model, this does not have a significant impact on our valuation. One of the bigger drivers of our Ionis valuation is AstraZeneca-partnered eplontersen, in both ATTR polyneuropathy (approval likely late this year) and cardiomyopathy (phase 3 data in 2025). While we continue to see the larger cardiomyopathy market as very competitive, with likely competition from both Pfizer’s Vyndaqel and Alnylam’s two RNAi-based therapies, Onpattro (potential October approval) and Amvuttra (data 2024), we think Ionis and Astra have a well-designed study that could give eplontersen a differentiated profile. Wholly owned programs including cardiovascular drug olezarsen (pivotal data in 2023 and 2024) and rare disease drug donidalorsen (pivotal data in 2024) are also significant contributors to our valuation, and we think olezarsen’s first-mover advantage and donidalorsen’s potential best-in-class efficacy both bode well for strong uptake. Bigger picture, we think Ionis is also making technology investments to support the durability of its narrow moat, including improvements in its oligonucleotide and ligand design, and in-licensing gene editing technology (from Metagenomi). Overall, we think shares look undervalued as Ionis heads into higher spending years in 2023-24, and we believe revenue growth is likely to begin to ramp at a more significant double-digit pace in 2025.