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What: Shares of BioMarin Pharmaceutical Inc. (BMRN +2.59%), a biopharmaceutical company focused on diseases with unmet need, gained 22.2% in July, according to data from S&P Global Market Intelligence. BioMarin finished July by announcing the FDA accepted its application for a rare-disease drug and presenting positive data for its hemophilia therapy. These developments have kept the stock rising into August, but rumors of a Roche buyout provided most of the lift earlier in the month.
So what: This isn't the first time rumors of an offer from the big pharma have boosted shares of BioMarin. About three years ago, Roche's CEO, Severin Schwan, was quick to dispel the notion, but this time around he hasn't had much to say.
Rumors aside, BioMarin's outlook perked up last month when the FDA accepted Brineura's (formerly known as cerliponase alfa) application for treatment of children with a rare form of Batten disease. If approved, it will be the first disease-modifying treatment for this debilitating, and ultimately fatal, condition that affects approximately one of every 200,000 newborn babies.
On the same day it announced Brineura's application, BioMarin also touted positive results from an early study with hemophilia A gene-therapy candidate, BMN 270. The company intends to enroll up to 12 patients, but at the interim six of seven patients given the high dose showed a critical blood clotting factor at a level above 50% (the seventh patient's level was above 10%) at between 12 and 28 weeks after receiving a single dose.
Now what: Purchasing, then scuttling, a handful of candidates for treatment of Duchenne muscular dystrophy took a toll on BioMarin's finances, reputation, and stock price. With the stock down about 31% over the past year, a deflated market cap of about $16.2 billion puts an acquisition of BioMarin within Roche's, or another big pharma's, means.
BioMarin's rapidly growing top line and management's prediction of positive cash flows beginning next year are stoking the rumors. Total revenue has nearly doubled since the first round of Roche buyout rumors began circulating in 2013, but so has BioMarin's research and development budget.
BMRN Revenue (TTM) data by YCharts.
This year, BioMarin expects total revenue of at least $1.05 billion to lead to a net loss between $355 million and $385 million. Ending its muscular dystrophy program will cut down on costs, and potential approval of Brineura would certainly help the company reach profitability.
In addition, phase 3 results released in March show pegvaliase significantly lowers circulating phenylalanine in phenylketonuria patients, and the company plans to file applications for the drug's approval by the end of the year. Approximately 50,000 diagnosed patients across the developed world suffer this disease marked by an inability to metabolize the amino acid phenylalanine. It's currently managed with strict low-protein diets. Unfortunately, compliance is problematic, and phenylalanine buildup in the brain frequently leads to severe intellectual disability.
Whether the buyout rumors are true or not, investors would do well to remain focused on BioMarin's pipeline progress and competitive threats. Over the next several years, generic competition for Kuvan, a drug responsible for about a third of the company's product revenue, will begin pressuring its sales.
With a bit of luck, pegvaliase and Brineura could more than offset the losses. Further out, BioMarin intends to begin a trial designed to support an application for BMN 270 about halfway through next year. The therapy's potential success in hemophilia A could provide another important revenue stream.
