BioMarin: Q2 2023 Confirmed My Bullish View

Background

In July, I published the article describing why my positive view of BioMarin’s (NASDAQ:BMRN) stock remains. Since the publication of the previous article, the company shares have risen by 2.5%. This week the company released quarterly results. The market did not react much to the reporting. Let’s take a closer look at the quarterly results. Looking ahead, I maintain my bullish view on the company shares after reviewing its quarterly results.

2Q results

Actual results for 2Q23 are positive. The company's 2Q23 revenue rose 12% YoY to $595 million (flat QoQ), inline with the consensus expectations. Adjusted EBITDA was at $135 million (+20% YoY, -2% QoQ), implying a margin of 23% (+2pp YoY). EPS was at $0.29 (16% better than the consensus expectations). A year earlier, it was at $0.15. Free cash flow totaled $49 million (8% margin, +3 pp YoY).

Core portfolio results overview

Revenue of the mucopolysaccharidosis drug portfolio decreased 6% YoY to $308 million. The decrease was largely due to the seasonality in Naglazyme sales. Its revenue decline 22% YoY to $90 million due to the timing of public procurement in Latin America. The portfolio of drugs for the treatment of phenylketonuria grew by 5% YoY and brought $126 million in revenue. The main growth contributor was Palynziq, whose sales grew by 22% to $75 million due to the strong new patients start. Its growth was partly offset by Kuvan’s 12% year-on-year drop in revenue. But it’s worth noting that the drop in Kuvan revenue so far is less than I previously expected.

Voxzogo

Voxzogo’s quarterly sales were $113 million, up 29% QoQ, 18% better than the consensus estimated. At the end of June, 2,000 children were already treated with the drug (+500 patients Q/Q), which represents 12% of addressable patients. Given the low market penetration, management also noted that it plans to beat consensus expectations for the drug 2024 sales ($597 million). Also, management raised its 2023 Voxzogo sales forecast to $400-440 million (previously $330-380 million). However, management noted that there may be supply-side headwind until the end of this year. So the chance of beating the new forecast for this year is not so great. Let me also remind you that the company has the opportunity to expand into younger age groups of achondroplasia patients in the US and Europe, which will add a 1,000 addressable patients. The regulatory decisions will be announced this autumn. Another opportunity for the drug is its possible use for the treatment of other similar diseases. Before the end of the year, the company will launch a pivotal study on the effectiveness of Voxzogo for the treatment of hypohondroplasia (addressable number of patients is about 15,000)

ValRox

After the drug received approval in the US at the end of June, getting reimbursement is a key to its commercial success. In Germany, a decision from the regulatory authority on the final price of the drug is expected on 15 September. The company also plans to receive reimbursement coverage in Italy and France before the end of the year. In the US, the drug will be available for commercial use as early as August. However, patients will need 1-2 months to undergo all the necessary tests to determine suitability for the treatment with the drug. The company estimates that approximately 2,500 patients in the United States are living with severe hemophilia and are eligible for treatment with the drug. The company is also actively working to expand the use of the drug to treat patients with antibodies to the viral vector (AAV5). Regarding the 2023 ValRox revenue guidance, management reaffirmed its expectations for ValRox sales of $50-150 million. To reach the midpoint of this range, the company needs at least 50 patients to be treated in the US until the end of the year.

Final Thoughts

Following the publication of the quarterly reports, I continue to believe that the market significantly underestimates the commercial prospects of the company two new drugs (Voxzogo and ValRox), as the company shares trade near the value of BMRN’s core business. At the same time, the prospects of Voxzogo is already being confirmed by successful actual sales. I expect a similar situation with ValRox. As a result, I maintain my bullish view on the company shares. At the same time, having updated the sales forecast for Voxzogo, the fair value of the company shares increased from $118 to $123, according to my DCF model. I described the main inputs in my DCF model in my previous article. I also noted the main risks for the company there. I recommend checking them out tehre or in the company last 10-K report. As the next catalysts for BMRN’s shares growth, I highlight the announcement of ValRox ‘s final price in Germany (September 15), as well as R&D Day (September 12), at which the company will shed some light on its pipeline.