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Ionis, changing its strategy, reels its spinoff back in

Ionis Therapeutics plans on paying half a billion dollars to acquire Akcea Therapeutics, a company it spun out in 2017 to help develop and commercialize some of its medicines. The move, according to a Monday announcement, offers “strategic value” and “significant financial benefits,” including the target company’s roughly $390 million in cash on hand.Per deal terms, Ionis has agreed to buy the approximately 24% of common stock in Akcea that it doesn’t already own. At a price point of $18.15 per share, the deal reflects a 60% premium to where Akcea shares traded on Friday.The move represents a strategic shift for Ionis, which for years had preferred to license its drugs out rather than sell them on its own and hatched Akcea as part of that plan. The companies expect their transaction to complete in the fourth quarter, at which point Ionis will take full control of the two rare disease drugs sold by Akcea.

Ionis built its business around antisense technology, a type of drugmaking tool that, in theory, can treat a wide variety of diseases by silencing certain genes. Historically, Ionis has largely preferred to have partners take charge of commercializing those medicines, as Biogen has with the spinal muscular atrophy drug Spinraza. With a growing list of experimental drugs in the works, Ionis created Akcea as a subsidiary in late 2014 to help with the effort. It was formed specifically to advance the piece of its pipeline that specifically focused on rare lipid disorders, and sell them once they got to market.

By 2017, Ionis had decided Akcea would be more valuable as a standalone company. It conducted an initial public offering that summer, ultimately recording $144 million gross proceeds. But since then, a mixed track record of successes and setbacks makes it difficult to conclude how fruitful Akcea has been as a spin out.

On one hand, the company was able to notch its first U.S. approval in 2018 with Tegsedi, a drug for peripheral nerve damage caused by an uncommon inherited disease. Then, in 2019, European regulators allowed Akcea to start marketing another drug, Waylivra, as an adjunctive treatment for patients with a metabolic illness known as FCS.

The company’s drug programs have also continued to attract attention from powerful players like Biogen and Pfizer.

On the other hand, however, Akcea has struggled to get Waylivra approved in the U.S. And commercially, Akcea has seen only modest revenue from both Waylivra and Tegsedi. The two drugs brought in a combined $42 million over the entirety of 2019, accounting for less than 10% of total revenue — which was rooted mostly in research, development or licensing payments from collaborations.

Recent executive departures, increased market competition, and a disappointing decision from its big pharma partner Novartis have added more fuel to investor concerns. Over the last year, Akcea’s share price fell 45%.

After three years on its own, the spinout is now heading back home. For Ionis, the deal allows it to “retain more value” from Akcea’s products and experimental drugs. Ionis names Akcea as a partner on six of its pipeline programs.

“This acquisition is another step forward in Ionis’ evolution and creates a stronger, more efficient organization,” Ionis CEO Brett Monia said in an Aug. 31 statement.

“We believe becoming one company — with one vision and one set of strategic priorities, led by one team — will deliver significant strategic value, enhancing the future success of our company, accelerating our next phase of growth and positioning us to most effectively deliver our medicines to patients,” Monia added.

Indeed, the move appears to be part of a strategic shift for Ionis. Stifel analyst Paul Matteis noted that the company’s “tone around self-commercializing its pipeline has shifted dramatically over the last couple of years, aided in no small part by the commercial success of Spinraza and the financial flexibility (cash resources) that revenue stream has afforded the company.”

Ionis recorded $279 million in revenue for the first six months of 2020. Half of that total came from sales royalties related to Spinraza.