BioMarin (NASDAQ:BMRN), a massively successful rare-disease drugmaker that's already won six FDA approvals, is expected to find out this week if the FDA will gives it a seventh victory. The regulatory decision on pegvaliase, a new treatment for phenylketonuria, or PKU, has big implications for the company and its investors, so let's take a closer look.

A bit of background

PKU is a rare genetic disease caused by an inability to break down phenylalanine, an amino acid. Diagnosed in childhood, PKU patients can accumulate toxic levels of phenylalanine in the brain, especially if their diet includes protein-rich foods or foods containing aspartame, an artificial sweetener.

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A buildup of phenyalanine can cause damage to nerve cells in the brain, resulting in irreversible brain damage, developmental delays, and neurological problems, including seizure.

Typically, patients with PKU are identified at birth (all 50 states in the U.S. require PKU screening), and when cases are diagnosed, treatment involves dietary restriction and, sometimes, BioMarin's prescription drug, Kuvan -- a pharmaceutical version of a natural substance, BH4, that reduces phenyalanine levels in the blood by breaking it down.

A new option

Approved in 2007, Kuvan generated $408 million in sales last year, up 19% from 2016, and that was good enough to make it BioMarin's second-highest-selling drug behind Vimizim, an enzyme replacement therapy for Morquio A syndrome (MPS IVA) with $413 million in sales in 2017.

Despite Kuvan's commercial success, it only works in between 30% to 50% of PKU patients, and only 1,900 of the roughly 50,000 people on the planet with PKU are taking it, most of whom are children. Pegvaliase is under consideration for use in adults, and according to BioMarin, that's an addressable patient population of 33,000, including about 12,000 patients in the United States.

The company hasn't settled on pricing for pegvaliase yet, but they've said they expect it to cost moderately more than Kuvan, which costs $150,000 per year. The size of the addressable market, and a potential six-figure price tag, suggests pegvaliase peak sales could be above $1 billion someday.

It may take time for it to become a blockbuster, though. A potent medicine, it will take between four to six months for patients to get titrated up to a full dose of pegvaliase.

What's next

Pegvaliase may cannibalize some of Kuvan's sales, but Kuvan's use in children should still make it a top-seller for the company until generic competition arrives.

So far, two companies have filed abbreviated new drug applications (ANDA) with the FDA indicating plans to launch generics. Initially, BioMarin responded with patent infringement lawsuits, but eventually, it agreed to licensing deals that allow generic Kuvan to become available as soon as October 2020.

Ahead of that potential threat, BioMarin plans to initiate human trials next year for a gene therapy that may restore production of the enzyme that's missing in PKU patients. Currently, that gene therapy is in the pre-clinical stages, but management has said that its analysis has shown durability for the therapy that's stretched out to 53 weeks. The potential for a one-and-done gene therapy in this indication would undeniably be the Holy Grail for patients and the company.

One more thing

Although there's a need for additional treatment options in PKU, there's no guarantee that the FDA will approve pegvaliase. The FDA could decide it wants to see longer-term safety data first, or it could determine that the efficacy associated with reducing phenyalanine levels alone isn't sufficient. Given that a no-go vote from the FDA could weigh heavily on shares in the short term, risk-averse investors ought to play it conservative and wait and see what the FDA decides to do. 

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