Near-term volatility in a drugmaker's shares can make for long-term opportunities. Shares of BioMarin Pharmaceutical (Nasdaq: BMRN ) opened down more than 10% today, in reaction to the second-quarter results it reported yesterday after market-close. However, investors would be hard-pressed to find anything wrong in BioMarin's latest numbers.
For the second quarter, revenue was up 122% versus last year, as BioMarin's enzyme replacement therapies, Naglazyme and Aldurazyme, continue to sell well. In addition, net income finally turned positive, compared to a loss last year.
Nothing was amiss in BioMarin's financial guidance for the rest of 2008, either. The company revised its 2008 revenue and earnings figures higher by several percentage points yesterday, thanks to stronger-than-expected sales of Naglazyme and revenue from partner Genzyme's (Nasdaq: GENZ ) sales of Aldurazyme.
The price drop in BioMarin's shares is related to a slower-than-expected increase in the number of new patients using its third drug, Kuvan. In December, BioMarin received FDA marketing approval for Kuvan in the U.S., and analyst expectations for its sales have been high. BioMarin's CEO previously discussed being "comfortable" with others' peak annual sales estimates of $300 million to $400 million eventually.
But on the company's earnings conference call, BioMarin mentioned how new-patient growth for Kuvan has decelerated significantly in June and July after a rapid rate in the first part of the second quarter. Second-quarter sales of Kuvan at $12 million were still more than double its first-quarter sales, but BioMarin reduced its peak 2008 sales forecast for Kuvan because of new-patient growth recently being more tepid than expected.
Compounds like Kuvan -- and other ultra-expensive, rare-disease treatments coming from drugmakers like Alexion Pharmaceuticals (Nasdaq: ALXN ) , Regeneron Pharmaceuticals (Nasdaq: REGN ) , or Amicus Therapeutics (Nasdaq: FOLD ) -- can cost patients tens of thousands of dollars per year. Thus a small miss in the number of new patients can be enough for sales to clock in below expectations.
BioMarin appeared to blame the decelerating June and July growth of new patients on the summer vacation season; most of the patients who will use it are adolescents. The company expects the new-patient growth rate to pick up again once school starts in September.
Analysts didn't sound so sure of this reasoning on the conference call, which is why BioMarin's shares have fallen today. No matter what happens, investors can expect continued volatility in shares of BioMarin as expectations for Kuvan change for the better or worse in the coming months.