ISIS Scores On J&J Collaboration & Milestones (ISIS, JNJ)

ISIS Pharmaceuticals Inc. (NASDAQ:ISIS) is trading up pre-market on new that it entered a broad collaboration with Ortho-McNeil, a Johnson & Johnson (NYSE:JNJ) unit, for discovery, development and commercialization of antisense drugs to treat metabolic diseases.

The company has two drugs here for this, but the company bought its entire franchise back and this collaboration will include Type 2 diabetes.  ISIS will grant to Ortho-McNeil worldwide development and commercialization rights to two of its diabetes development candidates, ISIS 325568 and ISIS 377131, which inhibit the production of glucagon receptor and glucocorticoid receptor.

Ortho-McNeil will provide funding to ISIS to support the joint discovery of novel drugs to treat diabetes and obesity. J&J will continue development of these drugs after the initial collaboration phase. ISIS will receive a $45 million upfront licensing fee, and research and development funding over the period of the collaboration. In addition to the licensing fee, ISIS could receive more than $230 million in milestone payments upon successful development and regulatory approvals of ISIS 325568 and ISIS 377131, plus royalties on sales. ISIS may also receive milestones and royalties on the successful development and regulatory approvals of additional drugs discovered as part of the collaboration.

Before this morning’s news, ISIS had a $1.06 Billion market cap and shares closed yesterday at $12.76.  Shares are up 8% at $13.80 after the CEO came on CNBC, and its 52-week trading range for its stock was $7.49 to $14.00.  On the June 30 balance sheet, the company had over $200 million in cash and short-term investments and its total liabilities were listed as $215.97 million.

Jon C. Ogg
September 13, 2007

Jon Ogg can be reached at [email protected]; he produces the 24/7 Wall St. Special Situation Investing Newsletter and he does not own securities in the companies he covers.