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Ionis, Novartis Ink Deal to Focus on Cardiovascular Treatments


Ionis Pharmaceuticals, Inc. IONS, along with its subsidiary Akcea Therapeutics, announced that the company has entered into an exclusive, worldwide collaboration agreement with Novartis AG NVS for the development and commercialization of two novel treatments, AKCEA-APO(a)-L and AKCEA-APOCIII-L, with the potential to treat cardiovascular disease.

Ionis’ share price movement in the past one year shows that the company has outperformed the Zacks classified Medical Drugs industry. Specifically, the stock lost 4.7% during this period, compared to the industry’s plunge of 8.5%.

Share of Novartis, on the other hand, have underperformed the Zacks classified Large Cap Pharma industry during this period, with the stock losing 10% while the industry’s gained 1.7%.

Terms of the Agreement

Ionis and Akcea will receive an upfront payment of $75 million and an equity investment of $100 million, which equates to 1,631,435 shares at $61.30 per share.

Also, the companies will receive up to $315 million and $265 million in development and regulatory milestone payments, for AKCEA-APO(a)-L and AKCEA-APOCIII-L, respectively, as well as up to $285 million and $265 million in commercialization milestone payments. Moreover, the companies are eligible to receive tiered royalties in the mid teens to low twenties on net sales of each product.

As per the agreement terms, Novartis will exercise its option to license and commercialize each product following the successful completion of each phase II dose-ranging study. Ionis and Akcea believe that if both the drugs are licensed and successfully commercialized, the deal would be valued at significantly over $1 billion.

2016 Financial Guidance Updated

In a separate press release, Ionis provided an update on its 2016 financial guidance. Backed by the recent approval of Spinraza for the treatment of spinal muscular atrophy in both pediatric and adult patients, Ionis expects to end 2016 with net operating income in the low- to mid-$20 million range and with over $650 million in cash.

The company said that it has generated more than $340 million in revenues, including more than $150 million in the fourth quarter of 2016. The company also received $280 million from its partners up to the end of 2016.

The company expects its financial position to support the execution of its corporate goals throughout 2017.

Ionis currently carries a Zacks Rank #3 (Hold).

Key Picks in the Sector

A couple of better-ranked stocks in the health care sector are Arbutus Biopharma Corporation ABUS and Anika Therapeutics, Inc. ANIK. While Arbutus carries a Zacks Rank #1 (Strong Buy), Anika is a Zacks Rank #2 (Buy) stock. You can see the complete list of today’s Zacks #1 Rank stocks here.

Arbutus’ loss estimates narrowed from $1.76 to $1.71 for 2016 and from $1.53 to $1.52 for 2017 in the last 60 days. The company posted a positive surprise thrice in the four trailing quarters with an average beat of 59.31%.

Anika’s earnings estimates for 2016 and 2017 were up 3.9% and 0.5%, respectively, over the last 60 days. The company recorded a positive earnings surprise in each of the last four quarters, the average being 33.14%. Its share price was up 35.8% in the past one year.

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