Chardan Analyst Suggests An AveXis-Ionis Pair Trade

Biogen Inc (NASDAQ: BIIB) and Ionis Pharmaceuticals Inc (NASDAQ: 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 (NASDAQ: 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.