Isis-Genzyme: Deal of the Year?

On January 7th, 2008, Genzyme (Nasdaq: GENZ) and Isis Pharmaceuticals (Nasdaq: ISIS) announced a partnership for the Isis cholesterol drug Mipomersen.

According to the deal, Genzyme will pay Isis $325 million upfront, with the potential for $825 million more in milestone payments as the drug progresses through stage 3 trials. In addition, Isis will receive another $750 million in milestone payments if the drug does well. This brings the grand total to a potential $1.9 billion for Isis. With a market capitalization of only $1.3 billion, Isis has some serious potential to earn intelligent investors lots of money.

The day the deal was announced, Isis stock surged more than 50% in after-hours trading, topping out at nearly $22 per share, up from $14.58 at market close. Since then, the stock has given up nearly all of its gains and is currently trading at $15.19; a mere 4.2% higher than before the deal was announced. Needless to say, I am shocked that the stock is not above $20 as we speak, and believe that it will be in the not-too-distant future.

I am not alone in thinking the stock is currently undervalued. Stanley Crooke, the CEO of Isis, said recently that he is “extremely disappointed” but doesn’t expect the current price will stay down for long.

While I agree with Mr. Crooke wholeheartedly, I also believe that he could do more to boost the stock. In fact, in looking at the past months’ insider buys at Isis, it appears as though no-one is buying the stock. Why is that? If this deal was so good, Mr. Crooke, prove you believe so by buying shares at market prices.

I know that for me, as an investor who is very enthusiastic about this deal, I cannot justify buying too much Isis stock until I see Mr. Crooke put some money where his mouth is. I hope to see this happen soon, so I can buy more without losing sleep.

In the interest of full disclosure, the author of this article owns shares of Isis Pharmaceuticals, and is soon to own more.

Comments

[GEORGE1:]

I AGREE WITH YOU 100% MR. CROOKE SHOULD EITHER BUY BIG
OR TAKE THE E OFF HIS LAST NAME

2008 Jan 28 11:33 AM

[GEORGE1:]

I JUST PHONED MR. CROOKE WHO INFORMED ME HE IS NOT ALLOWED TO BUY STOCK OUTSIDE OF HIS PLAN???

2008 Jan 28 11:48 AM

[GEORGE1:]

ALSO SAYS HE ALREADY HAS 2000000 SHARES NOW..WAS NOT HAPPY WITH MY COMMENT

2008 Jan 28 11:54 AM

[Ryan Freund:]

Is that true for the rest of the Isis team? I would like to see all of them buying stock.

2008 Jan 28 01:49 PM

[Jay Ell:]

When I first bought Isis stock about 20yrs ago, it was on the basis of the company having the potential of being another Microsoft. OK, so even if it were only half the hype, that wouldn't be so bad. Nothing ever happened so I sold the stock last year.
Do I buy back in or is this another pipe dream?

2008 Jan 28 08:33 PM

[Ryan:]

Isis wasn't getting these kinds of deals back then... I believe it's a good idea to at least hold a small position.

2008 Jan 28 09:45 PM

[mardez678:]

Company insiders are allowed to buy stock only within a very narrowly defined time frame per SEC rules because they are privy to insider information.

When you invest in Biotech you must have a ten year, or more, time frame. This is about the time it takes for a drug to get to market - if at all.

ISIS is the first biotech drug I have ever invested in and I did so because of the science. It is innovative and looks at an aspect of our DNA/RNA makeup that reveals a potential to stop disease by stopping or turning off certain protein production functions specific to a certain disease and thereby preventing or stopping the disease.

Who else beleives that they can do this?

These companies: EI Lilly, Alnylam, Ortho-Mcneil, Bristol Myers Squibb, J & J, Pfizer, Achaogen, Merck & Co., Antisense Therapeutics, Atlantic, Healthcare(UK), iCO, ImQuest Pharmaceuticals, OncoGenex, Sarissa, Archemix, Ercole Biotec, Rosetta Genomics, Santaris Pharma, Idera Pharma, Integrated DNA Tech., Drug Royalty USA, Inc., Eyetech Pharma and finally there is IBIS, which manufactures the T5000, which can identify bacteria and virus in human clinical samples and give an antidote or a cure in a few hours. This last was essentially purchased by Abbott last month.

Should you own ISIS - only if you have patience and the willingness to stick with a formidable bio-tech company that has cutting edge technology to cure and prevent disease from opthalmic to cancer.

Disclosure: writer has common and call options on ISIS.

2008 Feb 07 02:46 PM

[Ryan:]

Agreed, Mardez. I'm sticking with it.

Regards,
Ryan Freund
freundinvesting.com

2008 Feb 07 07:59 PM