Ionis Pharmaceuticals Surges 102% in 2024 Following FDA Approval of Eplontersen

If you are watching Ionis Pharmaceuticals and trying to decide your next move, you are definitely not alone. There has been a flurry of interest lately, with the share price closing at $69.96 and posting a notable 6.3% gain over the last week. That momentum only looks stronger when you widen the lens: Ionis is up 14.7% for the month and an impressive 101.7% year-to-date, with a 1-year performance of 83.8%. Over the longer haul, the 5-year return clocks in at 46.6%, suggesting that this is no flash in the pan but a story of persistent growth and shifting perceptions of the company’s risk and reward profile.

Some of these gains have come as investors have grown more optimistic about the pipeline of drugs in development and the company’s progress in securing key partnerships. While not every bit of positive news directly moves the stock, there is a sense in the market that Ionis is increasingly seen as a leader in RNA-targeted therapies, a field attracting significant attention in biotech right now.

Of course, the big question is whether the rally has left Ionis overvalued or if there is still fuel in the tank. By the numbers, Ionis scores a 2 out of 6 on our valuation checklist, meaning it is undervalued by two key measures but not across the board. Let’s break down what drives that score, compare the valuation methods, and explore if there might be an even better way to judge fair value for this fast-evolving company.

Ionis Pharmaceuticals scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Ionis Pharmaceuticals Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's intrinsic value by projecting its future cash flows and discounting them back to today's dollars. This approach provides a forward-looking valuation, which is particularly useful for companies in growth phases and industries undergoing rapid change, such as biotechnology.

For Ionis Pharmaceuticals, the current Free Cash Flow stands at negative $277 million, reflecting heavy continued investment in R&D and growth initiatives. Analyst estimates project cash flows to remain negative for several years, with a significant turnaround forecast for 2029, when Free Cash Flow is expected to reach $383 million. Over the next ten years, extrapolated estimates anticipate Free Cash Flow growing past $2.1 billion by 2035, suggesting dramatic improvements if the pipeline succeeds.

Based on these cash flow projections, the DCF model calculates an intrinsic fair value of $208.05 per share, which is substantially higher than the recent share price of $69.96. This represents an implied discount of 66.4 percent, suggesting the market is deeply undervaluing Ionis relative to projected future cash generation.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Ionis Pharmaceuticals.

Our Discounted Cash Flow (DCF) analysis suggests Ionis Pharmaceuticals is undervalued by 66.4%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Ionis Pharmaceuticals Price vs Sales

For companies that are not yet profitable, the Price-to-Sales (P/S) ratio is often the go-to valuation metric. Unlike earnings-based ratios, which can be distorted or negative for biotech firms in heavy development phases, the P/S ratio focuses on top-line revenue, making it more reliable for evaluating potential in growth-driven sectors like biotechnology.

It is important to remember that growth expectations and risk play a large role in what constitutes a “normal” or fair P/S ratio. Rapidly growing companies with promising drug pipelines and lower perceived risks often warrant higher multiples, while mature or riskier companies typically trade at a discount to the industry average.

Currently, Ionis Pharmaceuticals trades at a P/S ratio of 11.81x. This is modestly higher than the biotech industry average of 10.51x and the peer average of 7.32x. That said, a straightforward comparison can miss important context about Ionis’s unique outlook and position in the market.

This is where Simply Wall St’s proprietary Fair Ratio comes in. Unlike raw peer or industry multiples, the Fair Ratio reflects a more tailored assessment by factoring in key elements like Ionis’s growth potential, profit margins, specific industry, market cap and its risk profile. For Ionis, the Fair Ratio is 3.80x, well below its current P/S.

Comparing the actual P/S to the Fair Ratio suggests that Ionis Pharmaceuticals is currently trading above what is justified by its fundamentals, making the stock overvalued by this measure.

Result: OVERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Ionis Pharmaceuticals Narrative

Earlier, we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is simply the story you have about a company. It’s your perspective and big-picture logic for how the business evolves, why its future may be brighter (or riskier) than the numbers alone suggest, and what you think Ionis Pharmaceuticals is really worth based on your assumptions for future revenue, earnings, and margins.

Think of a Narrative as a bridge connecting a company’s unique story to a specific financial forecast and, ultimately, a fair value of the stock. Narratives are designed to be intuitive, flexible, and accessible on Simply Wall St’s Community page, where millions of investors share and update their own views in real time.

This tool empowers you to decide when to buy or sell by visualizing how your (or the community’s) estimated fair value compares to the current market price. Because Narratives are dynamic, they automatically adjust when new data, news, or earnings come out, keeping your perspective sharp and up to date.

Using Ionis as an example, one investor’s Narrative could be optimistic, envisioning blockbuster launches and assigning a future fair value near $96. A more cautious Narrative might highlight pricing and regulatory risks, leading to a much lower $43 target. With Narratives, you can easily see and stress-test both perspectives for smarter decisions.

Do you think there's more to the story for Ionis Pharmaceuticals? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com