Growth Side Effects Diminish Investor Value (ISIS)

Growth may be good for a developing basketball player, but US regulators do not like to see it occur in developing drug treatments. The Food and Drug Administration (FDA) rang alarm bells over a drug, Kynamro, produced by Isis Pharmaceuticals (NASDAQ: ISIS) and Sanofi (NYSE: SNY) when neoplasms developed in conjunction with the drug’s use for treating a genetic disease of the liver. The disease, familial hypercholesterolemia, causes the liver to improperly clear low-density lipoprotein (LDL) particles from the blood, which can lead to a heart attack or premature death.

The FDA may support a plan for the drug to be used in cases where the patient has a life threatening illness or where other therapeutic options are limited. The FDA expects to make a final decision on the drug by the end of January. A tip-off on how the FDA may rule comes in December when the federal agency decides the fate of a similar drug manufactured by Aegerion Pharmaceuticals (NASDAQ: AEGR).

The news sent sellers running for the exits. When the morning bell rang, traders swapped shares for two dollars less than they did at the close of trading yesterday to begin the session at a price of $11.13. A brief rally after the opening sent the stock to an intraday high of $12.00. By the time traders had unpacked their lunches, the stock had tumbled below its opening price. The selling continued into the final hour of trading when the stock traded at the low of the day for $9.90. The stock bounced a bit near the closing bell where it finished the day at $10.27 for a loss of almost 22%. Over 17 million shares traded during the session, making today the heaviest volume seen all year in Isis Pharmaceuticals stock.

Ironically, shares of Isis Pharmaceuticals popped 4% yesterday in sympathy with Aegerion after the FDA released briefing documents that indicated a possible approval for Aegerion’s drug Lomitapide in targeted patients. Aegerion stock tacked on another gain today while shares of Isis Pharmaceuticals took it on the chin. Traders and investors have to be wondering if the action today in Isis shares is an overreaction or a stern warning.

From mid-April when shares sold for around $7.00, the stock steadily climbed until it hit a new annual high of $15.16 in September. Several announcements concerning drug trials including the company’s New Drug Application (NDA) for Kynamro in May helped propel the stock’s five-month-long march. The 52-week low for Isis Pharmaceutical shares was set 11 months ago when the stock traded for $6.43.

The company is expected to report third-quarter financial results in early November. The consensus view of analysts covering the company projects a loss of $0.28 per share. Ten analysts give the stock an average recommendation of “overweight” with a $14.63 price target.

Isis Pharmaceuticals focuses on the development and commercialization of RNA-based drug therapies. The company has 17 drugs in various stages of development, including three in stage III clinical trials.

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Published by Alan Masterson

Alan has over 25 years of trading experience in the U.S. equity markets. He began his career in finance working on a program trading desk specializing in over-the-counter stocks. His career progressed from that point to his current position as senior trader on an institutional trading desk. In the evenings, Alan teaches economics at a local community college. He has contributed articles to various publications over the last six years, including feature articles for an economics magazine and various financial blogs. You may contact Alan via his email ( or his Google+ page (