BioMarin Pharmaceutical Inc. Earnings: Pushing Toward Profitability

BioMarin Pharmaceuticals (BMRN 2.87%) released third-quarter earnings on Thursday after the bell. Solid sales of its current drugs was a welcome sight, but profitability can only come with reduced R&D spending -- not a good idea for future growth -- or the approval of its recently acquired Duchenne muscular dystrophy drug.

BioMarin results: The raw numbers

Source: company press release.

What happened with BioMarin this quarter?

• Going from a profit in the year-ago quarter to a loss in the third quarter isn't what it seems. Last year, the company only showed a profit because it sold its priority review voucher, creating a one-time gain of $67.5 million.
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  Source: BioMarin Pharmaceuticals

  While its new Morquio A syndrome treatment Vimizim is still early in its launch, the drug is having a positive effect on revenue growth with sales more than double the year-ago quarter.
• Sales of Kuvan also beat the average growth with a 20% year-over-year increase.
• Sales of Naglazyme fell 20% year over year, but sales of the drug are always lumpy; we saw a large purchase in the second quarter, so smaller sales this quarter were to be expected. Importantly, the number of patients on commercial Naglazyme was 9% higher at the end of the third quarter compared with the same time in 2014.
• BioMarin's Duchenne muscular dystrophy drug drisapersen now has a brand name Kyndrisa. The company recently learned that an FDA advisory committee will review the drug on Nov. 24. An FDA decision should come on or before Dec. 27.
• Investors were expecting the committee meeting to include a review of Sarepta Therapeutics' (SRPT 0.14%) competing drug, eteplirsen, on back-to-back days. Pushing back Sarepta Therapeutics by a few months could be good news for BioMarin, because if the FDA approved Kyndrisa there won't be an unmet need for eteplirsen. Of course, conversely, if BioMarin slips up, it could be an easier meeting for Sarepta Therapeutics, especially since it'll have the advantage of having seen what happened in BioMarin's meeting.

What management had to say
In addition to Kyndrisa, BioMarin's chairman and CEO, Jean-Jacques Bienaime, highlighted a couple of other pipeline drugs that could be up for approval: "Over the next four quarters, we could potentially have three new molecular entities in registrations for approval: Kyndrisa for DMD, cerliponase alfa for CLN2 disorder, and pegvaliase for PKU. I cannot think of any other biotechnology company that has achieved this level of productivity."

Them's fighting words. Of course, being "in registration" -- the technical name for being reviewed for approval by regulators -- is only the first step. BioMarin needs to actually get the drugs approved.

Bienaime also had some interesting comments about all the presidential candidates complaining about high drug prices: "Irrespective of the political rhetoric of our direct pricing we've heard about over the last few weeks, it is important to appreciate the distinction between taking unreasonable price increases on all drugs versus investing heavily in research and development to discover breakthrough treatments for people, mostly children in BioMarin's cases, who have no alternative."

Orphan drugs have been able to charge such high prices because they treat so few people that they're not a drain on the healthcare system. None of BioMarin's current drugs are blockbusters; combined they won't even hit the $1 billion threshold this year. Let's hope politicians can see the difference.

Looking forward
After the strong third quarter, BioMarin's management increased 2015 revenue guidance to between $880 million and $900 million, up from previous guidance of $850 million to $880 million. The biotech also expects to lose less money this year than it had previously guided for.

The key there is that BioMarin is still losing money. The path to profitability in 2017 requires approval of Kyndrisa, so that's really what investors should be focused on.