We are maintaining our Neutral recommendation on BioMarin Pharmaceutical (BMRN) with a target price of $21.
BioMarin develops and commercializes biopharmaceuticals for serious diseases and medical conditions. The company’s product portfolio comprises of 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, a rare genetic enzyme deficiency disorder; Kuvan, approved in 2007 for phenylketonuria (PKU); and Firdapse, approved in the European Union (EU) for treating Lambert Eaton Myasthenic Syndrome (LEMS), a rare autoimmune disorder.
Firdapse was added to BioMarin’s portfolio through the acquisition of Huxley Pharmaceuticals in 2009. The company has chalked out a clear development path for the drug in the US after meeting with the FDA officials. BioMarin intends to initiate a late-stage study of the drug either by year-end or early next year and seek approval from the FDA in the second half of 2011. The FDA approval for the LEMS drug is expected by the third quarter of 2012.
Furthermore, BioMarin has a robust pipeline. The pipeline includes PEG-PAL (PEGylated recombinant phenylalanine ammonia lyase), which is currently under development for the treatment of PKU; and GALNS (N-acetylgalactosamine 6-sulfatase), which is currently under development for the treatment of MPS IVA. Additionally, the company has other candidates in early-stage development. We believe that the successful development and commercialization of the robust pipeline at BioMarin will boost the company’s top line.
The company’s recent acquisition of ZyStor Therapeutics has boosted its pipeline for enzyme replacement therapies. Recently, BioMarin initiated a late-stage study to evaluate the effects of Kuvan on neuropsychiatric symptoms in patients suffering from PKU. BioMarin expects to report data from the study in the first half of 2012.
We note that Naglazyme is the biggest contributor to revenues at BioMarin. The initial ramp of Kuvan has also been impressive. We believe that these two products will continue to perform well in the coming quarters, thereby driving growth at BioMarin. The addition of Firdapse to its product portfolio should augment revenues. However, we are disappointed about the stalled growth rate of the company’s other marketed product, Aldurazyme.
Moreover, the delayed launch of Firdapse in the EU was primarily responsible for the company trimming its 2010 revenue outlook and the consequent near-term pressure on BioMarin. This is highlighted by the Zacks #4 Rank (short-term Sell recommendation) on the stock. However, the stable long-term outlook leads us to believe that the risk/reward profile is balanced at BioMarin. Consequently, we reiterate our long-term Neutral rating on the stock.
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