Chardan Analyst Suggests An AveXis-Ionis Pair Trade

Biogen Inc BIIB and Ionis Pharmaceuticals Inc IONS had announced on December 23, 2016, the U.S. FDA approval for Spinraza (nusinersen) for the treatment of spinal muscular atrophy (SMA) types 1 to 3.

Safety Concerns

However, with regard to the safety profile of the drug, Chardan Capital’s Gbola Amusa pointed out that 23 percent of the SMA type 1 patients treated with Spinraza died, as compared to 43 percent of the untreated patients.

On the other hand, the Phase 1 trials by AveXis Inc AVXS for its own gene therapy for SMA, AVXS-101, no SMA type 1 patients had died so far.

The analyst maintains a Buy rating on AveXis, while raising the price target from $85 to $100.

Pair Trade

“We also open a pair trade of AVXS (long) and IONS (short), on the increasing potential for 1) AVXS-101 use in SMA types 2 and 3, likely at Spinraza's expense, and 2) Spinraza to increase the size of the SMA market ahead of an AVXS-101 launch,” Amusa stated.

The analyst now believes that there is an increasing likelihood that AVXS-101 would eventually be approved for SMA types 2 and 3 as well.

Future Opportunity

AveXis’ end-of-Phase 1 meeting is expected to be held in Q2:17 or Q3:17, after the company announces the 13.6 months of data on all patients from its Phase 1 study in Q1:17.

“We believe that if the results are positive, and safety concerns persist for Spinraza, that AveXis could more easily make a case for earlier AVXS-101 approval across SMA types 1 to 3,” Amusa mentioned.

The analyst estimated a smaller opportunity for AVXS-101 in SMA types 2 and 3 for now, with greater opportunity likely following a nearer term initial approval for AVXS-1-1 or a longer-term label expansion.