Will BioMarin Manage Its Money?

Acquisitive-minded drugmakers always worry me. BioMarin (Nasdaq: BMRN  ) has a limited acquisition history, but when it has chosen to go shopping, it hasn't done well with shareholders' cash.

Last week, the Rule Breakers pick released its third-quarter financial results and updated its guidance for the rest of the year. And if it steers clear of any acquisitions that could change the risk profile of its pipeline and adversely affect its cash-burn rate, BioMarin looks to be set up for a healthy 2008.

Thanks to higher-than-expected sales this quarter of self-marketed enzyme-replacement therapy Naglazyme, BioMarin raised its full-year sales estimate for the drug to a range of $82 million to $84 million. Sales of enzyme-replacement therapy Aldurazyme, marketed by partner Genzyme (Nasdaq: GENZ  ) , are expected to fall within the previous 2007 guidance range of $115 million to $125 million.

The increased guidance for Naglazyme, however, is still not enough to get BioMarin to profitability this year. Expectations are for a loss of $13 million to $18 million in 2007, even counting a one-time $15 million milestone payment from BioMarin's European marketing partner for Kuvan.

Speaking of Kuvan, the FDA pushed back the target date for its decision on approval of that enzyme-replacement therapy to Dec. 14. BioMarin said the delay was "solely due to an unanticipated staffing constraint at the FDA," and not to any deficiency with the marketing application. The company still plans to start marketing Kuvan in the U.S. in December.

As for what it might do with the $587 million in cash and investments sitting on the balance sheet, BioMarin didn't offer any updates. On the third-quarter conference call, BioMarin reiterated only that it's looking for complementary drugs.

Now, some specialty pharmas, including Cephalon (Nasdaq: CEPH  ) , have been very successful with product acquisitions. But others, including OSI Pharmaceuticals (Nasdaq: OSIP  ) , have failed spectacularly and thrown away hundreds of millions of dollars in shareholder cash.

BioMarin falls into the latter category, and that's why the significance of what it does with its money shouldn't be underestimated.

But with sales growth across all three of its approved and soon-to-be approved drugs, BioMarin should be on its way to sustained profitability -- as long as it stays smart with the cash stockpile.

More Foolishness on drugmaker acquisitions:


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