BioMarin Pharmaceutical Inc.‘s (BMRN) third quarter 2011 loss of $0.14 per share (excluding debt conversion expense) was wider than the Zacks Consensus loss estimate of $0.11 per share. The wider-than-expected loss was attributable to increased operating expenses which more than mitigated the rise in revenues. The company suffered an adjusted loss of approximately $0.04 per share in the year-ago quarter.
Total revenues climbed approximately 16% to $113.4 million in the reported quarter. Revenues fell just short of the Zacks Consensus Estimate of $113 million.
Net product revenues in the reported quarter climbed approximately 16.9% to $112.9 million. Naglazyme, approved for treating MPS-VI, a rare genetic enzyme deficiency disorder, contributed the bulk of the net product revenues recorded in the quarter. Revenues from the drug climbed 8.1% to $55.9 million. The increase in patient demand outweighed the negative foreign exchange impact on Naglazyme sales during the reported quarter.
Net product revenues from Kuvan tablets, indicated for treating mild-to-moderate forms of PKU, grew 16.4% to $30.5 million. The increase was attributable to the higher demand for commercial tablets in the US.
Revenues for BioMarin from another enzyme replacement therapy, Aldurazyme, co-marketed with Sanofi-Aventis (SNY), increased 39% to $23.0 million. In addition to the above-mentioned products, BioMarin possesses the rights to Firdapse through its acquisition of Huxley Pharmaceuticals in October 2009.
Net revenues from Firdapse, currently marketed in Europe, were $3.5 million in the quarter, up 9% sequentially. Firdapse was launched in April 2010, in the European Union, for treating patients suffering from LEMS — a rare autoimmune disorder.
Both research & development (R&D) expenses (up 49%) and selling, general &administrative expenses (SG&A) expenses (up 17%) were on the upswing during the reported quarter leading to a 29% rise in total operating expenses.
2011 Guidance
The company raised the lower end of its guidance range for total revenues in 2011. Total revenues are expected in the range of $439 million-$465 million (old guidance $436 million-$465 million). Net product revenues are expected in the range of $432 million-$458 million (old guidance $429 million-$458 million).
Revenue guidance for the marketed products at BioMarin is as follows: Naglazyme – $225 million-$240 million (unaltered); Kuvan – $115 million-$120 million (old guidance: $112 million – $120 million); Aldurazyme – $79 million-$83 million (unchanged); and Firdapse – $13 million-$15 million (unchanged).
The outlook for SG&A expenses remained unchanged at $164 million – $174 million. BioMarin raised the forecasted range for R&D expenses as the company is investing heavily on developing its pipeline. 2011 R&D expenses are expected in the range of $205 million-$210 million as opposed to the earlier expected range of $200 million-$205 million.
Our Recommendation
We have downgraded our long-term recommendation on BioMarin to Underperform from Neutral as we believe the stock to be overvalued at current levels. Moreover, we are disappointed by the initial sales ramp of Firdapse.
Furthermore, we expect cash burn to increase since the company is investing heavily in its pipeline. Any negative news regarding the pipeline would have an adverse impact on the stock. The stock carries a Zacks #3 Rank (Hold) in the short-run.
