A Top BioMarin Drug Heads Overseas

BioMarin (Nasdaq: BMRN  ) looks set to add another new drug approval to its lengthening list of products on the market. Last week the Rule Breakers pick announced that the European Union health care authorities had recommended that its enzyme replacement therapy Kuvan be approved for marketing.

Kuvan is used to help sufferers of a rare genetic disorder and has been approved for marketing in the U.S. since December. While the European Medicines Agency (EMEA) hasn't issued final approval for Kuvan yet, in nearly all cases a drug that receives a positive recommendation for approval gets full marketing approval within two months.

In the European Union BioMarin has enlisted the help of German drugmaker Merck KGaA to market Kuvan. While not a perfect proxy for what European sales of Kuvan will be, for many disorders the U.S. and European Union have relatively similar numbers of patients and thus similar market potentials for a drug.

In the U.S. BioMarin recorded sales of $12 million for Kuvan in the second quarter and has forecasted that peak annual U.S. sales could eventually be $400 million before its U.S. Kuvan marketing exclusivity runs out in late 2014 and drugmakers like Barr Pharmaceuticals (NYSE: BRL  ) and Teva Pharmaceutical (Nasdaq: TEVA  ) start producing significantly cheaper generic copies of the drug.

BioMarin will get an undisclosed level of royalties on all sales of Kuvan by Merck KGaA. It's not atypical for royalty rates on niche drugs like Kuvan to be in the double-digit percentage range. If BioMarin is getting anywhere from 10% to 20% on all sales of Kuvan by Merck KGaA for instance, and if peak European sales can match BioMarin's $400 million forecast for the U.S., then in a few years BioMarin could be pulling in anywhere from $40 million to $80 million annually in expense-free royalties from Merck KGaA's sales of the drug.

Like other orphan drug developers such as Genzyme (Nasdaq: GENZ  ) , Alexion Pharmaceuticals (Nasdaq: ALXN  ) , and Regeneron Pharmaceuticals (Nasdaq: REGN  ) BioMarin has shown that even developing niche orphan drugs that treat conditions affecting only several thousand people worldwide can be profitable endeavors.

In just 2008 alone, BioMarin expects its revenue to grow at least 135% compared to last year as it ramps up sales of all three of its orphan drugs. While it's nice to see BioMarin's top-line growing so rapidly, investors should also continue to watch and make sure that BioMarin is able to turn some of this top-line growth into meaningful profits.

BioMarin is an active pick of our market beating Rule Breakers newsletter. Barr is an active Stock Advisor pick. Try any of our Foolish newsletters today free for 30 days.

Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has an A+ disclosure policy.


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