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Biomarin - >>> Is BioMarin's Promising Pipeline Enough to Drive Its Valuation?


What Are BioMarin’s Valuation Drivers?



By Jillian Dabney

Sep 27, 2016


http://marketrealist.com/2016/09/how-promising-is-biomarins-late-stage-pipeline/?utm_source=yahoo&utm_medium=feed


BioMarin’s valuation drivers

BioMarin Pharmaceutical (BMRN) is a high growth company that primarily focuses on rare diseases. In this series, we’ll discuss the pillars for its success.

BioMarin’s valuation drivers include its five existing commercialized products, its late stage pipeline, its early stage pipeline, and the fact that it’s going to break even in 2017.


What Are BioMarin’s Valuation Drivers?


Five marketed products

BioMarin holds Vimizim, Naglazyme, Kuvan, Aldurazyme, and Firdapse in its commercialized drug portfolio. These five drugs are expected to add a total of $1.1 billion–$1.2 billion to BioMarin’s top line during 2016.


BioMarin expects that its existing portfolio could grow to $1.5 billion without additional products.

Potential opportunities with Brineura and pegvaliase

For details on the opportunities for Brineura, or cerliponase alfa, and pegvaliase, read Inside BioMarin’s Big Plans for 3Q16 and Kuvan and Pegvaliase as BioMarin’s Potential Valuation Drivers.

Gene therapy and vosoritide

For details on gene therapy, read The Evolution of Hemophilia Treatment—And What It Means for BioMarin.

Near break-even

On non-GAAP (generally accepted accounting principles) basis, BioMarin is expected to break even or better in 2017. It expects a loss of $75 million–$100 million in 2016. For a better understanding how BMRN plans to become profitable, read Is BioMarin Set to Become Profitable in 2017?

BioMarin’s less than $1 billion in sales and its $16 billion market capitalization could point toward its overvaluation. However, as the company is valued based on the prospects for its pipeline, its premium valuation seems to be justified. As BioMarin is a high growth company with promising pipelines, achieving this milestone and performing better than break-even could result in a jump in its share price.

If you invest in the iShares Nasdaq Biotechnology ETF (IBB), you can enjoy exposure to the otherwise risky BioMarin. IBB has 2.9% of its total holdings in BioMarin. IBB also holds other biotechnology companies such as Gilead Sciences (GILD), Celgene (CELG), and Biogen (BIIB).


Revenue expectations

BioMarin Pharmaceutical (BMRN) expects its existing commercialized drugs to add $1.1 billion and $1.2 billion to its top line in 2016. Wall Street analysts’ expectations are in line with the company’s guidance, which expects revenue rises of 26.7% and 18.8%, respectively, in 2016 and 2017.

Analysts expect BMRN’s other key drug, Naglazyme, to fetch $307.9 million and $333.2 million in 2016 and 2017, respectively. Kuvan should add $351.2 million in 2016 and $389.4 million in 2017. For a better understanding of BioMarin’s guidance in 2016, read BioMarin’s Guidance for 2016: The Inside Story.


BioMarin to Cross $1 Billion Revenue in 2016


Vimizim is expected to be a major revenue driver for BioMarin in 2016. During 2015, the drug earned $228.1 million. BioMarin now expects Vimizim to add $315 million–$340 million to its top line in 2016.


For details on the order-driven Vimizim, read BioMarin’s Key Order-Driven Drugs: Vimizim and Naglazyme.

Revenue growth for peers in 2016

Let’s try to understand the revenue growth for BioMarin’s peers in the rare disease space. During 2016, Alexion Pharmaceuticals’ (ALXN) revenue is expected to rise 18% to $3.1 billion. Vertex Pharmaceuticals’ (VRTX) revenue should rise 69.3% to $1.7 billion, while Regeneron (REGN) is expected to witness a rise of 23.3% and $5.1 billion in revenue.

Geography-wise contributions

BioMarin earns a major portion of its revenue from the United States. In 2015, it generated ~50% of its total revenue from the United States. Europe, its second major contributor, had a share of 20%, while Latin America’s contribution stood at 16%.

To reduce the risk of direct equity investment, you can opt for options such as ETFs, which offer diversified equity coverage. The First Trust NYSE Arca Biotechnology Index ETF (FBT) holds 3.2% of its total assets in BioMarin.

Continue to the next article for details on BMRN’s late-stage pipeline.


Brineura: Late stage pipeline product

BioMarin Pharmaceutical’s (BMRN) late-stage pipeline includes cerliponase alfa. The company’s application for cerliponase alfa, an enzyme replacement therapy, is under review by the FDA for the treatment of CLN2 disease.

CLN2 is a fatal neurodegenerative disease. The children affected by it lose the ability to walk and talk by six years old. The Prescription Drug User Fee Act date for the drug is April 27, 2017. Cerliponase alfa holds priority review status and breakthrough therapy designation from the FDA.


How Promising is BioMarin’s Late-Stage Pipeline?



The European Medicines Agency (or EMA) has started the formal review process for cerliponase alfa, and its decision is expected by 3Q17. Cerliponase alfa holds an orphan drug designation from the EMA.
Other companies that operate in the rare disease space include Alexion Pharmaceuticals (ALXN), Vertex Pharmaceuticals (VRTX), and Sanofi (SNY) through its subsidiary, Genzyme.


Pegvaliase

Pegvaliase is indicated for the lowering of blood phenylalanine levels in PKU (phenylketonuria) patients. You can read details about the drug in What Are BioMarin’s Products for Treating Phenylketonuria? BioMarin’s existing drugs coupled with Brineura and pegvaliase are expected to drive BMRN’s total revenue across $2 billion by 2020.

If BioMarin’s two late-stage products are approved, its share price could rise. Although the company hasn’t yet crossed $1 billion in revenue, its market capitalization stood at $16.6 billion on September 26, 2016, indicating investors’ belief in the company’s products.

To gain exposure to the rapidly growing BioMarin, you can invest in the PowerShares QQQ Trust, Series 1 ETF (QQQ). The fund holds 0.28% of its total assets in BioMarin.

In the next article, we’ll discuss BMRN’s early stage pipeline

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