A Long‑Term Biotech Story — With a Smarter Entry Point

Stocks continue to trade in overbought territory, regardless of what historical valuation metric an investor wants to use. That said, there is nothing this market is, if not resilient. 

A major dustup between the U.S. and Europe around Greenland and a potential tariff escalation knocked the S&P 500 and Nasdaq down by more than 2% on Tuesday with the VIX moving sharply higher. However, by the end of the holiday shortened week, those indexes were barely in the red and the VIX quickly normalized.

I am being more conservative with many of my covered call positions these days — selecting strike prices further away from the current trading level of the targeted stock. This provides additional downside protection at the expense of higher potential returns. Investors who are more bullish on the markets should utilize option strike prices much closer to the trading level of the covered call candidate.

I'm employing this conservative bent with my latest covered call candidate, a midcap biopharma stock I like over the longer term. I would just like to have an entry point 20% lower than where the stock is currently trading, and I'm fine with a return of just over 10% over the next six months if I do not get a substantial decline in the shares.

Ionis Pharmaceuticals (IONS)  is a commercial-stage biotechnology company focused on the development and marketing of RNA-based and gene-editing therapies primarily for the treatment of cardiometabolic and neurological diseases. Ionis currently has seven approved and marketed products (five of which are out-licensed) and is advancing 11 late-stage clinical programs.

The company's pipeline is diverse. Many of its products and clinical programs are antisense therapies. These entail the creation of short, non-coded synthetic strands of DNA (antisense oligonucleotides) that are capable of binding to messenger RNA to influence gene expression. 

The key product Ionis is marketing on its own is known by the brand name Tryngolza. This is a once-monthly, self-administered, subcutaneously injected ligand-conjugated antisense (LICA) therapy. It is approved as an adjunct to diet to reduce triglycerides in adults with familial chylomicronemia syndrome (FCS). 

Based on late-stage study results, Tryngolza should be approved for and become the standard of care for severe hypertriglyceridemia (sHTG). This will be a major milestone for Ionis and Tryngolza should get the green light from the FDA later this year. Another wholly owned product, known by the brand name Dawnzera, was approved for hereditary angioedema (HAE) late this summer.

Ionis is a few years away from profitability, but the analyst community sees a sales CAGR of over 40% from 2027-2029 and more than $3 billion in overall revenues in 2030. Management sees peak sales from its wholly owned portfolio of over $4 billion, driven in large part by Tryngolza’s approval for sHTG. It sees peak royalty revenue from its licensed products at north of $2 billion with potential milestones of roughly $6 billion on top of that. 

The stock’s market cap is roughly $13 billion, and the company has approximately $1 billion in net cash on its balance sheet. 

Ionis is a sum-of-the-parts story I want to be a part of over the long term — just at a lower entry point in this overbought market. Especially as the stock has had a big run since September.

Option Strategy

This is how one can initiate a holding in IONS via a covered call order. As a reminder, covered-call orders involve buying an equity and simultaneously selling just out of the money call strikes against the new position.

Using the July $70.00 call strikes, fashion a covered call order with a net debit in the $63.00 to $64.00 a share range (net stock price - option premium). 

This strategy provides downside protection of around 20% with upside potential of about 10% over the option duration even if the stock trades down 13%.

At the time of publication, Jensen was long IONS.