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Isis Pharmaceuticals, Inc. (ISIS - Analyst Report) recently amended its deal with GlaxoSmithKline (GSK - Analyst Report) for the development of their candidate, ISIS-TTRRx. ISIS-TTRRx is being developed for the treatment of transthyretin (TTR) amyloidosis. The companies plan to initiate a registration-directed phase II/III study evaluating the efficacy of ISIS-TTRRx on neurological dysfunction and quality-of-life in patients with familial amyloid polyneuropathy (FAP), a type of TTR amyloidosis, by the year end.

Under the terms of the amended agreement, Isis Pharma will receive an upfront payment of $2.5 million and stands to receive a milestone payment of $7.5 million on the initiation of the ISIS-TTRRx phase II/III study and pre-licensing milestone payments of $50 million to support the study. Isis Pharma is also eligible to receive higher regulatory and sales milestones and double-digit royalties on ISIS-TTRRx sales.

As per the original agreement in 2010, Isis Pharma was eligible to receive up to $20 million (already received $10 million) in milestone payments for ISIS-TTRRx up to the phase II proof-of-concept (PoC) stage. Additionally, Isis Pharma could receive licensing fees, milestone payments and double-digit royalties on ISIS-TTRRx sales.

In January 2012, positive phase I data was presented on ISIS-TTRRx. ISIS-TTRRx demonstrated promising tolerability and efficacy profile.

Our Recommendation

We currently have an Outperform recommendation on Isis Pharma. Isis Pharma received a major boost in October 2012 when the Food and Drug Administration’s (FDA) Endocrinologic and Metabolic Drugs Advisory Committee voted (9 - 6) in favor of approving the company’s lead pipeline candidate, Kynamro (mipomersen).

A final response from the FDA should be out in January 2013. Meanwhile, Kynamro could be approved and launched in the EU by year end.

We believe that antisense technology (the main area of focus at Isis) represents an exciting and potentially revolutionary platform for developing therapeutic candidates to treat a wide margin of diseases.

The stock carries a Zacks #3 Rank (Hold rating) in the short run.

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