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We recently reiterated a Neutral recommendation (Zacks #3 Rank – short-term “Hold” rating) on Isis Pharmaceuticals (NASDAQ:ISIS). Isis Pharma is a drug discovery and development company that focuses on the development of products using ribonucleic acid (RNA)-based technologies, such as antisense.

The company discovers new drugs and out-licenses them to partners for license fees, milestone payments and royalties. Isis Pharma has partnership agreements with leading pharmaceuticals companies like Genzyme (GENZ) and GlaxoSmithKline (NYSE:GSK), among others.

Isis Pharma also has a collaboration agreement with biotech company, Alnylam Pharmaceuticals (NASDAQ:ALNY). Both companies have joined hands to form Regulus Therapeutics, Inc., a company that is focused on microRNA (mRNA) therapeutics.

Isis Pharma focuses its research and development efforts primarily on cardiovascular, metabolic and neurodegenerative diseases and cancer while its partners are involved in the development of antisense drugs in these and other areas, including inflammatory diseases.

We are positive on antisense technology and believe that the number of potential therapeutic applications is enormous. The lead pipeline candidate at Isis Pharma is mipomersen, a potential blockbuster drug for the treatment of high cholesterol.

Mipomersen has been developed in collaboration with Genzyme. Genzyme expects to file for EU approval of mipomersen in the first half of 2011 and US approval in the second half of 2011.

Thanks to its collaborations with several companies, Isis Pharma is positioned to consistently receive developmental milestones. The company sees no need to re-tap the financial markets in the next few years.

However, we are concerned about Isis Pharma’s dependence on mipomersen for future growth. With eyes focused on the successful development and commercialization of this candidate, any development or regulatory hurdle would be a major setback for the company. A delay in gaining approval would weigh heavily on the stock.

In fact, although Isis Pharma has consistently presented encouraging results on mipomersen, concerns regarding the candidate’s safety profile remain with the company reporting elevations in liver transaminases, which is a sign of possible liver damage.

We remain worried that concerns regarding the safety profile of the drug could limit its commercial potential once it is launched. Mipomersen’s regulatory filing in the US has also been delayed from the first half of 2011 to the second half of 2011.

Source: Isis Pharmaceuticals: A Lot Riding on Safety of New Drug