By Declan Fallon - September 18, 2012 | Tickers: BIIB, ISIS | 0 Comments

Declan is a member of The Motley Fool Blog Network -- entries represent the personal opinions of our bloggers and are not formally edited.

As bullish markets expand, monies are channelled not just into established names, but to companies which offer the potential to become the next big names. In recent weeks, the number of stocks which have seen money flows above their typical average have markedly increased. Of these movers-and-shakers, one to make the grade was ISIS Pharmaceuticals (NASDAQ: ISIS).

ISIS Pharmaceuticals researches and develops antisense drugs, used for the treatment of cardiovascular, metabolic, severe and rare diseases, including cancer. The company focuses on Antisense RNA research. Antisense RNA operates like a blocker, preventing RNA (protein cooking instructions) from building proteins that may ultimately contribute or lead to disease. The company's business is to develop Antisense RNA-based drugs to a point where they can be licensed to a partner, who then commercialize it. The company has collaboration agreements with a number of companies, including Biogen Idec (NASDAQ: BIIB), Bristol-Myers Squibb, Eli Lilly,and GlaxoSmithKline.

Buyers regain momentum

ISIS Pharmaceuticals stock price has enjoyed a solid summer of 2012 after a few years of lackluster trading. The stock's nadir was 2009 when it ran into a $19 ceiling, and headed south to spend most of last year below $10 a share. But a couple of heavy trade days in early August following earnings, and more recently in September saw a shift from net selling to net buying. Largest was 3.3 million shares traded in a single day which was also so happened to come with a push above $14.

But income heavily tied to a single client

Like many biotechnology stocks, it has a variable but typically losing streak of earnings. Analyst expectations aren't a useful guide, although biotechnology stocks are probably less sensitive to earnings releases than perhaps other pharmaceutical companies which are less research focused. The company's revenues are heavily dependent on milestone payments from its research partners, Genzyme in particular. The Genzyme payments accounted for 90% and 84% of the $42.8 million and $59.1 million in reported revenue for the three and six months ended in June 30th 2012. ISIS almost squeaked a Q2 profit at a penny loss per share, although expectations for next quarter are for a $-0.28 loss.

Genzyme is working with ISIS Pharmaceuticals to develop its lead product, KYNAMRO, for the treatment of familial hypercholesterolemia. Commercialization can begin once it obtains the required regularly approval in Europe and the United States; the former application was made in June 2011, and latter to the FDA in May 2012. Submitting these applications generated a $25 payment from Genzyme. FDA approvals can take 6 to 10 months to complete, so it will be the latter part of the year until news of this is known. Should the FDA approve the commercial release of KYNAMRO then ISIS Pharmaceuticals will receive another $25 million payment from Genzyme. However, the larger picture is that ISIS Pharmaceuticals will have a new, more substantial, source of revenue in the form of license payments, not to mention a milestone payment of up to $825 million for commercialization of the drug.

However, it has more than one string to its bow

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A Biotechnology Firm Making Its First Step Towards Profitability?