BioMarin Pharmaceutical Inc. (BMRN) posted adjusted earnings per share of 1 cent in the fourth quarter 2010 (excluding special items but including stock-based compensation expenses), below the year-ago earnings of 5 cents per share. Earnings were affected by lower-than-expected revenues in the quarter. The Zacks Consensus Estimate had pointed toward a loss of 2 cents per share.
Total revenues climbed approximately 16.7% to $101.6 million in the reported quarter. Revenues in the reported quarter were, however, below the Zacks Consensus Revenue Estimate of $105 million due to poor Naglazyme revenues.
For full year 2010, adjusted loss per share was 2 cents (excluding special items but including stock-based compensation expenses), much lower than a gain of 13 cents per share reported in the previous year. The Zacks Consensus Estimate was a positive $1.78 per share.
It should be noted that BioMarin reported earnings per share (including extraordinary items) of $1.73 in 2010 versus break even results in the previous year. Full-year 2010 revenues of $376.3 million were above the year-ago figure of $324.7 million and slightly below the Zacks Consensus Estimate of $380 million.
The Quarter in Detail
Net product revenues in the reported quarter climbed approximately 17.3% to $98.5 million. Royalty and license revenues increased to $2.96 million from $2.78 million in the fourth quarter of 2009. Revenues from collaborative agreements accounted for the remaining revenues in the reported quarter.
Revenues from Naglazyme in the reported quarter were up only 1.6% over the prior-year quarter to $45.1 million. Naglazyme revenues were impacted by inconsistent ordering patterns from certain large purchasers, particularly from the Brazilian government.
Patient growth was, however, steady in the quarter. Naglazyme is an enzyme replacement therapy for treating mucopolysaccharidosis VI, a rare genetic enzyme deficiency disorder. BioMarin expects sales to be robust in the first quarter of 2011.
Revenues from Aldurazyme, an enzyme replacement therapy for treating mucopolysaccharidosis I, as recorded by Genzyme Corporation (GENZ), increased 9.8% over the prior-year quarter to $42.5 million due to an increase in the number of vials shipped to customers by Genzyme. In this context, we note that Genzyme is responsible for selling the drug.
Net product revenues for BioMarin from Aldurazyme increased 37.5% to $23.1 million in the reported quarter due to higher positive impact from inventory transfer revenue.
Net product revenues from Kuvan tablets, indicated for treating mild-to-moderate forms of the genetic disease phenylketonuria (PKU), grew 20.3% to $27.3 million.
In addition to the above-mentioned products, BioMarin possesses the rights to Firdapse through its acquisition of Huxley Pharmaceuticals in October 2009. Firdapse (amifampridine phosphate) is indicated for treating Lambert Eaton myasthenic syndrome (LEMS), a rare autoimmune disease.
Net revenues from Firdapse, currently marketed in Europe, were a negligible $3.0 million in the quarter. However, the product is gaining momentum in the EU. In the US, BioMarin plans to start phase III trials in the second quarter of 2011 with a New Drug Application (NDA) expected to be filed in the first half of 2012.
2011 Guidance
BioMarin introduced its 2011 financial projections. Total revenue and net product revenue are expected to be in the range of $417–$452 million and $411–$446 million, respectively.
Revenue guidance for BioMarin products is as follows: Naglazyme – $206–$225 million; Kuvan – $112–$120 million; Aldurazyme – $79–$83 million; and Firdapse – $14–$18 million. Selling and general expenses are expected in the range of $164–$174 million in 2011 and R&D expense in a band of $195–$205 million. BioMarin expects to generate adjusted EBITDA of $43–$55 million in 2011.
Pipeline Update
The company has a number of products in the late-stage pipeline. These are discussed below.
Hand-Held Blood Phe Monitor: BioMarin is developing a hand-held device to monitor blood levels of PKU patients. It is expected to be approved and commercially available by the end of 2011, which can help boost Kuvan revenue.
PEG-PAL (PEGylated recombinant phenylalanine ammonia lyase): BioMarin is currently conducting phase II trials of PEG-PAL for the treatment of PKU and expects to report top-line data from the trial in mid-2011. A phase III trial is expected to be initiated in the first quarter of 2012.
GALNS (N-acetylgalactosamine 6-sulfatase): GALNS is being currently developed for the treatment of MPS IVA. The company initiated a phase III study with the candidate in early February 2011. Top-line results are expected in the second half of 2012.
In addition to the above mentioned candidates, the company also has BMN-673 (PARP inhibitor – phase Ib trial initiated in January 2011) and BMN-701 (Pompe’s disease; phase I/II trial initiated in mid-January 2011) in its pipeline.
Our Recommendation
Currently, we have a Neutral recommendation on BioMarin. We expect Naglazyme and Kuvan to continue to perform impressively in the coming quarters. Moreover, an impressive ramp up of the recently launched Firdapse would boost the top line further.
Moreover, the company has a robust pipeline with multiple events lined up. The successful development and commercialization of the pipeline would help drive long-term growth at BioMarin. However, we expect cash burn to increase since the company is investing heavily on developing its pipeline. Consequently, we reiterate our Neutral rating on the stock.
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