BioMarin Pharmaceutical Inc: The Future Looks Bright

Orphan drugmakers have been soaring over the past two years, and BioMarin is no exception. After such large gains, however, investors should consider if BioMarin can continue to head higher over the long-term.

Feb 23, 2014 at 5:10PM

Orphan drug specialist BioMarin Pharmaceutical (NASDAQ:BMRN)enjoyed a notable week. It started with the U.S. Food and Drug Administration, or FDA, officially approving the company's enzyme replacement therapy for Morquio A syndrome called Vimizm. And the European Medicines Agency's, or EMA, Committee for Medicinal Products for Human Use, or CHMP, closed out the week by recommending Vimizim for approval as well.

According to statements made during BioMarin's recent conference call, Vimizim could see final approval in Europe by late April following this positive opinion from CHMP. All this good news helped BioMarin shares climb 7.36% for the week, reaching new all-time highs in the process.

BMRN Chart

BMRN data by YCharts

Viewed in this light, I think investors should consider whether BioMarin still has any remaining upside, or if it's time to take profits.

A breakdown of BioMarin's conference call
Last Tuesday, BioMarin held a conference call outlining preliminary 2013 financial results and 2014 financial guidance. CEO Jean-Jacques Bienaime set the tone for the call by stating that Vimizim should drive BioMarin revenue to over $1 billion in the near future, and that the company's next orphan drug, BMN-701 for Pompe disease, could be approved within two years.

Continuing this optimistic outlook, BioMarin's other officers noted that Vimizim received the broadest label possible and the commercialization efforts have already begun.

Digging into the details, Vimizim is expected to cost $380,000 per patient per year on average, and first-year sales are projected to come in around $60 million to $70 million. Over the next two years, Vimizim is expected to propel BioMarin to profitability, as the drug becomes the company's largest revenue generator to date.

BioMarin expects full-year revenue to grow to $650 million to $680 million, an 18% to 22% increase over 2013. Even so, clinical expenses are still projected to total around $530 million this year, and management gave guidance of a non-GAAP net loss of roughly $100 million in 2014.

The good news is that 2014 should be BioMarin's peak year in terms of clinical expenses as a percentage of revenue. In fact, the company believes that profitability could be achieved within the 2015 to 2016 time frame, if all goes according to plan with Vimizim's commercial launch.

To sum up, Vimizim's approval is perhaps the most important event to date at BioMarin, and the drug should grow revenue by double-digits every year for the next few years.

Foolish outlook
BioMarin shares have now risen a healthy 53% in the past year based on the strength of its commercial and clinical pipelines. That said, you should keep in mind this orphan drugmaker is now trading at 17 times 2014 estimated revenue, and the company isn't expected to become profitable any time soon.

To put these numbers into context, we need to take a look at how shares of other leading orphan drugmakers are trading. At the low end, Jazz Pharmaceuticals is trading at around 10 times revenue; shares of Alexion Pharmaceuticals are trading closer to 23 times revenue; and finally, Isis Pharmaceuticals leads the pack by trading at a stately 54 times revenue.

BioMarin therefore isn't the most expensive orphan drugmaker out there, but investors have to wonder how much longer the market will continue to pay substantial premiums for earnings from biopharmas in general, and orphan drugmakers in particular.

With that said, I have been suspicious of the market's pricing of orphan drugmakers for some time now -- yet all they've done is continue to head higher. Based on BioMarin's improving fundamentals and promising clinical pipeline, I would expect it to be a top performer within this group, assuming the sector-wide trend of paying top dollar for earnings holds. 

BioMarin's has growth potential, but can it beat The Motley Fool's top stock pick for 2014?
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

George Budwell owns shares of BioMarin Pharmaceutical. The Motley Fool recommends BioMarin Pharmaceutical and Isis Pharmaceuticals. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers