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Ionis Pharmaceuticals: Valuation Compared to Its Peers

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Ionis Pharmaceuticals’ valuation

Ionis Pharmaceuticals (IONS), known as ISIS Pharmaceuticals (ISIS) until December 2015, has been a leader in the RNA-targeted therapeutic space for more than 26 years. The company is focused on bringing its late-stage drugs to the markets and developing new high-value drugs that might be the best-in-class treatment for life-threatening diseases.

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Forward EV-to-EBITDA

On a capital structure neutral and excess cash-adjusted basis, Ionis (IONS) was trading at a forward EV-to-EBITDA (enterprise value to earnings before interest, taxes, depreciation, and amortization) multiple of 32.4x. This compares to the industry average of ~19.8x as of April 13, 2016. The company’s forward EV-to-EBITDA multiple has traded in the range of 25.9x to 50.7x.

The company is trading at an average EV-to-EBITDA multiple compared to its peers: Below are the multiples for some of its peers:

  • Vertex Pharmaceuticals (VRTX): 33.8x
  • Ligand Pharmaceuticals (LGND): 30.3x
  • Amag Pharmaceuticals (AMAG): 4.7x
  • Medivation (MDVN): 23.0x

Here are the fundamental factors that drive Ionis’s stock prices and valuations:

  • the performance of existing products
  • new and existing collaborations
  • results of clinical trials
  • product approvals

In this series, we’ll be looking at Ionis’s existing products and other factors that are driving its revenues. This will give us a better understanding of each of the above drivers.

Stock price performance

As of April 13, 2016, Ionis’s stock value has fallen 36% over the last 12 months. The iShares Nasdaq Biotech ETF (IBB) has fallen ~22.9% during the same period. IBB holds 1.0% of its total assets in Ionis.

Analyst recommendations

Analysts estimate that Ionis stock has the potential to return 29% over the next 12 months. Analyst recommendations show a 12-month targeted price of $55 per share compared to $42.59 per share as of April 12, 2016. Of the analysts tracking Ionis stock, 54% are recommending a “buy,” 38% are recommending a “hold,” and 8% are recommending a “sell,” according to a Bloomberg consensus. Changes in analyst estimates and recommendations are based on changing trends in the stock price.

To divest some of the risk, you could consider ETFs such as the SPDR S&P Biotech ETF (XBI), which holds ~1.2% of its total assets in Ionis. You could also consider the First Trust NYSE Arca Biotech ETF (FBT), which holds ~3.3% of its total assets in Ionis.

Next, let’s look at analyst estimates for Ionis Pharmaceuticals’ 2016 revenue.

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