BioMarin Pharmaceutical Inc. (BMRN) announced recently that it will purchase the privately-held drug discovery and early stage development company LEAD Therapeutics. LEAD is developing LT-673, an orally available poly (ADP-ribose) polymerase (PARP) inhibitor for treating patients suffering from rare, genetically defined cancers. The stock purchase agreement requires BioMarin to make an upfront payment of $18 million to the shareholders of the private company.
The acquisition would add LT-673 to BioMarin’s pipeline. BioMarin intends to submit an Investigational New Drug (IND) application with the Food and Drug Administration (FDA) by the end of 2010. BioMarin will pay LEAD another $11 million on acceptance of the application which would enable LT-673 to be tested on humans. Furthermore, BioMarin will pay up to $68 million more in the event of the drug clearing the hurdles of clinical trials and getting approved.
BioMarin expects to incur approximately $11 million to $13 million in operating expenses and acquisition related costs in 2010. The transaction is expected to be completed by mid-Feb 2010.
2010 Outlook
BioMarin expects net income (excluding special items) between $39 million to $49 million in 2010. Total net product revenues for the year are expected between $368 million and $398 million. The Zacks Consensus Estimate for 2010 is 23 cents per share on revenues of $396 million.
BioMarin will release fourth quarter as well as fiscal 2009 (ended Dec 31, 2009) results on Feb 23, 2010. The company should report break-even earnings per share in the fourth quarter and a loss of 5 cents per share in fiscal 2009 as per the Zacks Consensus Estimate.
Estimate Revisions Trend
Earnings for the next quarter (the first quarter of 2010) have witnessed a downward movement recently. Over the past week, 6 of 11 analysts covering the stock lowered earnings estimates and 1 has moved upwards. This downward movement justifies our recommendation that investors should avoid the stock (Zacks Rank # 4 (Sell)) in the short-term as BioMarin is expected to Underperform the broader U.S. equity market over the next 1-3 months.
Our long-term recommendation on the stock is Neutral which indicates that BioMarin is expected to perform in line with the broader U.S. equity market over the next 6-12 months. The neutral recommendation is justified by the fundamentals of the company.
Even though we are pleased with the acquisition of Huxley Pharmaceuticals, which has added 3,4- diaminopyridine amifampridine phosphate (3,4-DAP) for the treatment of Lambert Eaton Myasthenic Syndrome (LEMS) to its pipeline, we remain concerned about the stalled growth rate of the company’s first approved product Aldurazyme.
However, we believe that the company’s other two marketed products Naglazyme and Kuvan, will continue performing well in the coming quarters and sustain growth. Consequently we are Neutral on the stock.
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