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Ionis Pharmaceuticals’ Valuation Compared to Its Peers

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Mar. 21 2017, Updated 2:26 p.m. ET

Ionis Pharmaceuticals’ valuation

Ionis Pharmaceuticals (IONS), previously known as Isis Pharmaceuticals (ISIS), has been a leader in the RNA-targeted therapeutic space for more than 26 years. The company changed its name in December 2015.

Ionis is focused on bringing its late-stage drugs to the market and developing new high-value drugs that might be the best-in-class treatment for life-threatening diseases.

The fundamental factors affecting stock prices and valuation include performance of existing products, new and existing collaborations, and other factors such as clinical trials and product approvals. In this series, we’ll look at the performances of existing products as well as other factors that are driving Ionis’s revenues.

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Forward EV and revenue multiples

Generally, preferred valuation multiples are forward PE (price-to-earnings) and forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization). But since Ionis reported a net loss in its recent earnings due to variations in timings for licensing fees and milestone payments from its collaborations, these multiples are negative. So we’ll look at Ionis’s forward EV-to-revenue multiple for its valuation.

According to data on March 20, 2017, the company is trading at a forward EV-to-revenue multiple of 12.6x. That compares to the industry average of 4.4x. Competitors such as Incyte (INCY), Innoviva (INVA), and Gilead Sciences (GILD) are trading at forward EV-to-revenue multiples of 18.8x, 8.9x, and 4.3x, respectively.

Analyst recommendations

According to March 20, 2017, data, Ionis stock has risen 4.1% over the last 12 months. Wall Street analysts estimate that the stock has the potential to return ~16.2% over the next 12 months. Their recommendations show a 12-month target price of $46.73 per share compared to the last price of $40.22 per share on March 17, 2017.

About 38.5% of analysts have recommended a “buy” for IONS stock. About 46.1% have recommended a “hold,” and 15.4% have recommended a “sell.” Changes in analysts’ estimates and recommendations are based on changing trends in the stock price.

To divest the risk, you can consider ETFs such as the First Trust NYSE Arca Biotechnology Index Fund (FBT), which holds ~3.1% of its total assets in Ionis.

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