We are downgrading BioMarin Pharmaceutical Inc. (BMRN) to Underperform from Neutral because of the continuous disappointing performance of the company’s first marketed product, Aldurazyme, and the later-than-expected European launch of Firdapse for the treatment of a rare autoimmune disorder. The later-than-expected European launch of the drug was primarily responsible for the company trimming its 2010 revenue outlook.
BioMarin develops and commercializes biopharmaceuticals for serious diseases and medical conditions. The company’s product portfolio comprises four approved products and several investigational product candidates.
The marketed products include: Aldurazyme, approved in 2003 and co-marketed with Genzyme Corporation (GENZ) for the treatment of MPS-I (mucopolysaccharidosis); Naglazyme, which received approval from the US Food and Drug Administration (FDA) in 2005 for MPS-VI- which is a rare genetic enzyme deficiency disorder; Kuvan, which was approved in 2007 for phenylketonuria (PKU); and Firdapse, which was launched in the European Union (EU) earlier in the year.
There are a number of reasons for the negative sentiment regarding BioMarin. We remain deeply concerned about the stalled sales growth of Aldurazyme. The year-over-year growth of Aldurazyme sales slowed drastically in 2009 to 2.5% from 22.4% experienced in 2008. The dramatic slowdown in sales growth indicates that Aldurazyme is approaching maturity.
Moreover, most of the pipeline candidates at BioMarin are in early or middle stage of development. The pipeline will take some time to develop. With multiple pipeline events lined up, we believe that the stock will be adversely affected in the event of any news pertaining to a pipeline setback. For example, earlier in the year, BioMarin halted further development of BMN-195 for treating a type of muscle disease following the disappointing showing of the candidate in an early-stage study.
The later-than-expected European launch of Firdapse in April 2010 was primarily responsible for the company trimming its revenue estimate for 2010. While the overall revenue projection for 2010 has been slashed to $370 million-$393 million from the prior forecast of $374 million-$405 million, the 2010 projection for Firdapse sales has been lowered to $7 million-$10 million from $10 million-$15 million.
We believe that any such delays or letdowns pertaining to the company’s marketed products will affect its top line and the bottom line will also stand affected since R&D expenses are bound to increase with increasing clinical activity at BioMarin.
These headwinds cause us to believe that the risk/reward profile at BioMarin is tilted towards risk. Consequently, we see little reason for investors to hold the stock at current levels.
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