BioMarin: Growth Drivers Remain Intact

Overview

BioMarin Pharmaceutical (NASDAQ:BMRN) is a global leading biotechnology company that has been dedicated to transforming lives through genetic discovery. With a strong focus on rare diseases, BioMarin develops and commercializes therapies for people with serious and life-threatening medical conditions. As BioMarin traded sideways for the past 10 years, investors have been waiting patiently for a return on their investment.

One reason for the stock's struggle to reclaim its all-time highs has been increased competition, as BridgeBio Pharma Inc. (BBIO), reported encouraging results from its Phase 2 trial for its investigational dwarfism medication. The drug has the potential to rival BioMarin's Voxzogo, should it receive approval.

Nevertheless, BioMarin's valuation has now contracted significantly and is trading at attractive levels, considering that it continues to drive substantial growth in its product portfolio. Furthermore, if BioMarin taps its large potential market and receives approval for its drug candidates such as BMN 255 for hyperoxaluria in chronic liver disease, it could see a long runway for growth ahead, it could lead to long-term upside for the stock.

Earnings Snapshot

BioMarin announced strong second-quarter results for 2023. Total revenues for the quarter reached $595.3 million, representing a 12% year-over-year increase. The revenue growth was driven by the continued success of VOXZOGO and other key products in their portfolio. Here, its most significant product, VIMIZIM, saw a 2% increase year-over-year (YoY) from $173.3 million to $177 million. Most impressively, VOXZOGO sales surged 229% year-over-year, due to continued global market expansion and rapid patient uptake across all regions.

Overall, BioMarin's net income for the quarter totaled $56 million, while its non-GAAP income was $105.2 million. Adjusted EBITDA for the quarter stood at $135 million, highlighting the company's profitability. Additionally, the company reported free cash flow of $27.7 million, further solidifying their financial position. The he company also gave an update on its recently FDA-approved ROCTAVIAN gene therapy for the treatment of adults with severe hemophilia A.

After securing the FDA's nod, BioMarin mobilized its U.S.-based sales team and announced that ROCTAVIAN should be commercially available come August. BioMarin calculates that around 2,500 individuals with severe hemophilia A in the United States, who are eligible for this treatment, are currently being catered to at roughly 140 specialized hemophilia treatment facilities.

Current Drug Pipeline & Development

BioMarin's drug pipeline is the driving force behind its growth in recent years. BioMarin also has several promising candidates in various stages of development that have the potential to revolutionize the treatment of rare diseases. Its most notable pipeline includes:

VIMIZIM: Vimizim stands as the first drug to receive FDA approval for treating Morquio A syndrome, a condition characterized by an enzyme deficiency that hampers skeletal growth and can lead to various other health complications. BioMarin indicates that approximately 800 individuals in the U.S. are afflicted with this disease, and around 3,000 patients exist in the developed world. Priced at $380.000 annually, the drug could drive yearly revenues in the range of $400 million and $500 million.

VOXZOGO: BioMarin's VOXZOGO, which targets achondroplasia (dwarfism), has shown remarkable growth for BioMarin since its FDA approval. There are about 11,000 children across Europe, the Middle East and Africa with achondroplasia and could be eligible for Voxzogo, BioMarin estimates. According to some estimates, VOXZOGO could drive sales of up to $1 billion annually. Nevertheless, BioMarin is facing fierce competition from BridgeBio, which posted promising results from its small but highly anticipated Phase II study of infigratinib in achondroplasia.

ROCTAVIAN: In the second quarter of 2023, BioMarin received U.S. approval for ROCTAVIAN, a treatment for hemophilia A with factor VIII inhibitors. The commercial launch of ROCTAVIAN is already underway, and progress is being made for its commercial launch in Europe. BioMarin's ValRox, approved in the U.S. at the end of June, is awaiting reimbursement decisions in Germany, Italy, and France. The company estimates that approximately 2,500 patients in the U.S. living with severe hemophilia could benefit from ValRox. Priced at a staggering $2.9 million, Roctavian could generate hundreds of millions in annual sales for BioMarin.

BMN255 (In early development): BioMarin has completed the multi-ascending dose study of BMN 255 in healthy participants for hyperoxaluria in chronic liver disease. Preliminary data indicates that BMN 255 swiftly and effectively boosts plasma glycolate levels after administration. Consequently, BioMarin aims to commence enrollment for a more extensive study focusing on patients with chronic liver disease and hyperoxaluria in the latter half of 2023. The company posits that BMN 255, being a potent and orally absorbable small molecule, has the potential to substantially alleviate both the disease severity and treatment demands in a patient group where there is a pronounced unaddressed medical need. The incidence of primary hyperoxaluria is slightly less than 3 to 1,000,000 population or about 1,000 persons in the US, making it extremely rare. Nevertheless, if proven effective, BioMarin could generate similar revenues to the drugs in its portfolio, based on its immense pricing power.

Valuation and Future Outlook

BioMarin has never been particularly cheap, for a good reason. In this regard, its Price to Sales (P/S) ratio has been hovering at around 10 times. The given reflection represented its strong growth outlook, as it grew sales almost 3 fold over the past 10 years. Its main competitors in the space of genetic disorders include Biogen (BIIB), Gilead Sciences (GILD) and Amgen (AMGN). As demonstrated in the chart above, Amgen and Biogen trade at a cheaper valuation of just 4.7 times and 4 times forward Price to Sales. However, their given growth rates are also significantly lower. In this regard, BioMarin is set to grow revenues to $2.9 billion by 2024, which would represent a 22% growth rate.

It can be expected that BioMarin will continue to post above-average growth rates in the following years due to its small revenue run rate and large potential addressable market size. At the beginning of 2023, BioMarin estimated that only 6% of the total addressable patient population is being treated with Voxzogo. While Amgen and Gilead Sciences are more profitable due to their significant scale, I believe profitability will improve over time for BioMarin as the company currently focuses on growth. BioMarin's overall balance sheet remains healthy too, with $1.2 billion in cash against $1 billion in debt.

Takeaways

BioMarin’s recent unveiling, ROCTAVIAN, stands as a testament to its pricing power, with its staggering $2.9 million price tag. When considering the 2,500 potential patients in the U.S. alone, the revenue implications for ROCTAVIAN spiral into the hundreds of millions. At a current valuation, of just of 5.5 times forward Price to Sales, I believe that future growth from ROCTAVIAN is not fully priced in.

However, BioMarin is facing robust competition, notably from BridgeBio Pharma, which could potentially dent growth prospects for its leading drug, VOXZOGO. In this swiftly evolving biotech domain, competitors presenting promising trial outcomes can shift market dynamics considerably.

Looking forward, BioMarin's trajectory isn't solely anchored in its existing arsenal. The company’s expansive and efficient sales force ensures the broad reach of their treatments, but the onus is on upcoming drug developments, like BMN255, to secure their future. If BMN255, alongside other pipeline drugs, achieves its anticipated potential, it could catalyze sustained long-term growth and stock appreciation.

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