What: After failing to win over regulators in January, BioMarin Pharmaceuticals Inc. (NASDAQ:BMRN) discontinued development of four drugs in its pipeline targeting Duchenne muscular dystrophy, or DMD. The shuttering of research into exon-skipping therapies for DMD more than offset rumors that Sanofi SA (NASDAQ:SNY) could be considering a bid to buy the company, and as a result, BioMarin's shares slipped by 11% last month, according to S&P Global Market Intelligence.
So What: BioMarin acquired exon-skipping therapies in 2014 and filed for approval of the first of its exon-skipping drugs, Kyndrisa (drisapersen), shortly thereafter. Management had hoped that a big need for new therapies to treat this muscle-wasting disease could result in an FDA approval in spite of shaky efficacy in trials. However, the FDA ultimately opted against approval in January. On May 31, BioMarin threw in the towel on Kyndrisa and three other exon-skipping therapies in development, opting to focus its attention on other, more promising drugs in its rare-disease drug pipeline.
The news was disappointing to investors because many industry watchers thought that an approval of Kyndrisa could lead to annualized sales in the hundreds of millions of dollars and catapult BioMarin to profitability in 2017. Additionally, if Kyndrisa had been approved, it would have qualified BioMarin to receive a fast-track voucher that could be used to accelerate review times on other drugs in development. Alternatively, the company could have sold the voucher on the open market. In the past, similar vouchers have fetched more than $300 million.
As shares pulled back in June, rumors surfaced that Sanofi was mulling a bid to buy BioMarin. Sanofi is on the hunt to bulk up its product lineup, and drugs sold by BioMarin to treat rare diseases would conceivably complement Sanofi's rare-disease drug portfolio. In the first quarter, BioMarin's rare-disease drugs produced $237 million in revenue, while Sanofi's rare-disease drugs generated sales of $715 million, at current exchange rates.
Now What: DMD was far from the only rare-disease indication being targeted by BioMarin, so while the discontinuation of development of exon-skipping drugs in its pipeline is a blow, it's not a deal-breaker. Exiting Q1, BioMarin's full-year sales guidance remains $1 billion, and even without tailwinds from Kyndrisa, management still hopes to turn a profit next year for the first time.
Among catalysts that could reignite BioMarin's shares are the potential filing for approval of pegvaliase for use in patients with phenylketonuria, or PKU. PKU is caused by a buildup of phenylalanine, an amino acid found in many foods, especially those high in protein. When phenylalanine builds up, it can cause mental, behavioral, neurological, and physical problems. About 50,000 people worldwide are diagnosed with PKU, and BioMarin expects to file for pegvaliase's approval before the end of this year.
As for the rumored mergers and acquisitions, it's unclear if there's any truth to the talk regarding Sanofi's interest. The likelihood that Sanofi could bid for BioMarin may have declined this week since it entered into a confidentiality agreement to kick the tires of Medivation, a cancer drug company. Earlier this week, new rumors emerged that Roche Holdings may be interested in buying BioMarin, but it's not clear if there's any truth to that rumor either.
Overall, BioMarin is an intriguing company with a slate of valuable drugs that target uncommon diseases. With its chance for profitability next year and new drugs making their way to market, investors ought to consider adding this company to their portfolios.