Recently, BioMarin Pharmaceutical Inc. (BMRN) bought privately-held ZyStor Therapeutics Inc. to boost its portfolio of enzyme replacement therapies. ZyStor specialized in the development of enzyme replacement therapies for treating lysosomal storage disorders. The deal is worth up to $115 million.
Specifically, the Milwaukee, Wisconsin-based ZyStor was purchased for an upfront payment of $22 million. BioMarin stands to pay up to an additional $93 million on the achievement of certain milestones with no royalties pending. With this acquisition, BioMarin gains access to ZyStor’s lead candidate ZC-701, which is being developed to combat Pompe disease.
Pompe disease is an enzyme disorder characterized by the progressive degeneration of heart and skeletal muscles. The current standard of care is Genzyme’s (GENZ) Myozyme/Lumizyme.
The investigational new drug (IND) application for the candidate, which has been effective in pre-clinical studies, has been accepted by the US Food and Drug Administration (FDA) with clinical trials expected to commence in the first quarter of 2011.
We believe that the successful development and commercialization of the candidate will boost BioMarin’s top line. We also believe that the addition of ZC-701 to BioMarin’s pipeline should fill the void created by the recent discontinuation of the development of BMN-195 for treating a type of muscle disease. The decision followed the poor performance of the candidate in an early-stage study.
Our Take
Even though we are pleased with the acquisition of Huxley Pharmaceuticals, which has added Firdapse to BioMarin’s product portfolio, we remain concerned about the delayed launch of the drug. Furthermore, the disappointing performance of the company’s first approved product Aldurazyme also concerns us. However, we believe that the company’s other two marketed products, Naglazyme and Kuvan, will continue to perform well in the coming quarters.
We have a short-term Zacks #4 Rank (‘Sell’) rating on the shares highlighting the near-tem pressures on the stock, arising mainly because of the delayed launch of Firdapse. This caused the company to trim its revenue projection for 2010. However, the stable long-term outlook leads us to reiterate our long-term Neutral rating.
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