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Dendreon Corporation (DNDN), ISIS Pharmaceuticals, Inc. (ISIS): Big Milestones Could Lead This Stock to Big Gains

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I cannot emphasize enough how important having a deep and diverse pipeline, as well as numerous potential collaborative partners, can be in the biotechnology space.

I know it’s like comparing apples and oranges, but humor me for a moment. On one hand, we have Dendreon Corporation (NASDAQ:DNDN), a cancer immunotherapy developer that, at one time, was the talk of Wall Street. What Dendreon didn’t have, though, was a diversified pipeline of products and exactly zero development partners, and it lacked any experience in bringing a drug to market. Since its advanced prostate cancer immunotherapy, Provenge, was approved, sales growth has stalled and losses have piled up.

Dendreon Corporation (NASDAQ:DNDN)In other column, we have Isis Pharmaceuticals, Inc. (NASDAQ:ISIS), an antisense drug developer that currently has 31 clinical and pre-clinical drugs being studied, as well as 12 collaborative drug development partners. It only has one therapy approved by the Food and Drug Administration — like Dendreon Corporation (NASDAQ:DNDN) — with Kynamro, a homozygous familial hypercholesterolemia treatment, but it wisely partnered with Sanofi SA (ADR) (NYSE:SNYto help market the drug.

The difference between the two companies, despite both continuing to lose money, is that Dendreon Corporation (NASDAQ:DNDN)’s opportunities are waning with such a small pipeline to fall back on while ISIS Pharmaceuticals, Inc. (NASDAQ:ISIS)’ are soaring.

Source: Garfield Anderssen, Flickr.

A mountain of milestones
If you note ISIS Pharmaceuticals, Inc. (NASDAQ:ISIS)’ performance over the past year, it has climbed from as low as $7.56 to close yesterday near $32 per share. The reason for its big up day yesterday was the announcement of another expanded collaboration with Biogen Idec Inc. (NASDAQ:BIIB) with regard to the development of neurological therapies. This announcement — and the potential for $4 billion in milestones (assuming every drug the two are collaborating on gets approved, which is an unlikely scenario) that Isis’ management touched on yesterday afternoon — got me wondering: Just how much milestone money could Isis be looking at based on its collaborations?

Below are a few snippets from the press releases of some of its most important collaborations:

With regard to ISIS Pharmaceuticals, Inc. (NASDAQ:ISIS)’ now fourth collaboration with Biogen Idec Inc. (NASDAQ:BIIB):
“When combined with the first three collaborations, using what we think a reasonable assumptions about the success of the various programs, with the caveat that of course most of these programs are very early stage, Isis revenue potential exceeds $4 billion plus royalties.”

ISIS Pharmaceuticals, Inc. (NASDAQ:ISIS) and AstraZeneca plc (ADR) (NYSE:AZN) formed an RNA-therapeutics-based strategic alliance last year to discover novel cancer treatments. Here’s how Isis’ milestone payments break down in this partnership:

Under the terms of the agreement, ISIS Pharmaceuticals, Inc. (NASDAQ:ISIS) will receive from AstraZeneca plc (ADR) (NYSE:AZN) $31 million in upfront and near term payments, comprising a $25 million payment on signing followed by a $6 million payment in the second quarter of 2013 assuming the research program is continuing. Isis is eligible to receive further milestone payments subject to achieving certain predefined clinical success criteria for the ISIS-STAT3Rx program and pre-clinical milestones for the other programs.

Similarly, in 2010 ISIS Pharmaceuticals, Inc. (NASDAQ:ISIS) partnered with GlaxoSmithKline plc (ADR) (NYSE:GSK) to collaborate on RNA-therapeutics for rare and infectious diseases. According to their collaboration:

Under the terms of the agreement, which covers up to six programs, ISIS Pharmaceuticals, Inc. (NASDAQ:ISIS) will receive an upfront $35 million payment from GSK and is eligible to receive on average up to $20 million in milestones per program up to Phase 2 proof-of-concept (PoC). Isis will be eligible to receive license fees and milestone payments, totaling nearly $1.5 billion, in the event all six programs are successfully developed for one or more indications and commercialized through to pre-agreed sales targets. In addition, Isis will receive up to double-digit royalties on sales from any product that is successfully commercialized.

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