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Why Is Ionis Pharmaceuticals (IONS) Down 7% Since Last Earnings Report?

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It has been about a month since the last earnings report for Ionis Pharmaceuticals (IONS - Free Report) . Shares have lost about 7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Ionis Pharmaceuticals due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Q1 Loss Widens Year Over Year, Sales Miss

Ionis reported first-quarter 2021 adjusted loss per share of 32 cents compared with loss of 7 cents per share in the year-ago period.

Adjusted earnings exclude expenses related to the Akcea acquisition and restructured European operations and other items. Including these non-recurring expenses, loss per share was 64 cents per share. The Zacks Consensus Estimate stood at a loss of 48 cents per share.

Ionis reported total revenues of $112 million, down 15.8% year over year due to lower R&D revenues and royalties on Spinraza in the quarter. Sales missed the Zacks Consensus Estimate of $133 million.

Quarter in Detail

Ionis earns commercial revenues, primarily royalty payments on net sales of Spinraza and R&D revenues, from partnered medicines.

First-quarter revenues comprised commercial revenues of $85 million, up 1.2% year over year. R&D revenues of $27 million declined 45% from the year-ago quarter due to higher milestone payments in the year-ago quarter. Ionis expects R&D revenues to be higher in the second half as its partnered programs are advancing.

Commercial revenues from Spinraza royalties were $60 million, down 9.1% year over year as Biogen reported softer sales of the drug. Product sales from Tegsedi and Waylivra were $20 million, compared with $15 million in the year-ago quarter.

Under Ionis’ new distribution model, its commercial revenues from Tegsedi and Waylivra shift from product sales to distribution fees based on Sobi’s net sales. Ionis’ first-quarter revenues reflected this shift in Europe. Beginning in the second quarter, revenues from Tegsedi sales in North America will also reflect this shift.

License and royalty revenues were $5 million in the quarter compared with $3 million in the year-ago quarter.

Adjusted operating costs rose 3.9% year over year to $159 million in the first quarter of 2021 mainly driven by higher R&D costs. SG&A expenses decreased in the first quarter.

2021 Guidance

Ionis maintained its 2021 total revenue guidance of more than $600 million. Adjusted net loss is expected to be less than $75 million.

While total revenues in the second quarter are expected to be similar to the first quarter, Ionis expects an increase in revenues in the second half of 2021 driven by increasing R&D revenues.

Adjusted operating expense are expected to be in the range of $675 million to $725 million as Ionis invests in expanding its wholly-owned pipeline and utility of its technology, and building its commercial capabilities. Ionis expects R&D expenses to increase approximately 25% to 35% in 2021 compared with the last year while SG&A expenses are expected to decrease.

Pipeline Update

\Ionis announced that it has decided to discontinue development of Ionis ENAC-2.5Rx in cystic fibrosis due to toxicity findings in preclinical studies.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month. The consensus estimate has shifted -13.82% due to these changes.

VGM Scores

At this time, Ionis Pharmaceuticals has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Ionis Pharmaceuticals has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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