Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) is on a bullish streak that began three weeks ago. Last week, the brand reported success in research on a cholesterol drug that it is developing in partnership with AstraZeneca. Success in the development of the drug would lead to growth in the portfolio of successful drugs developed using the company’s RNA antisense technology.
Ionis is a narrow moat business. Its business model involves partnerships with large pharmaceutical firms in the research and development of drugs for neurological and cardiovascular conditions.
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The company has two revenue sources. The first is royalties paid on the sale of drugs that the company co-developed with other pharmaceuticals. The second source of revenue is payment for research and development.
While the former shows stability, revenues for research and development are unstable. Consequently, the firm may experience wide fluctuations in revenues and therefore profitability.
There are various products in the pipeline of Ionis, all being in different stages. Success could be expected in 2023 and 2024. As the market learns to appreciate the company’s RNA antisense technology, there is concern that the company may lose its competitive edge.
Ionis rallies above MA 50 to find the $60 valuation
Technical analysis of the share price indicates a bullish pattern that intensified this week with the 10-day moving average testing the 50-day average level. The price has been below MA 50 since March 2021. Price movement to cross above MA 50 would likely generate demand in the market resulting in a rally.
Summary
Holding Ionis Pharmaceuticals is recommended. The price is likely to rally towards a valuation of $50. Investors, however, should be cautious about the uncertainties affecting the company’s revenue streams due to the research and development component.
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