On the surface, BioMarin Pharmaceutical (BMRN -0.44%) looked like it had a rough fourth quarter with revenue down year over year. But dig a little deeper, and the decline appears to be explained by the nature of the company's business. With new-drug launches off to a good start and a well-stocked late-stage pipeline, there doesn't appear to be anything wrong with the orphan-drug company.
BioMarin results: The raw numbers
|
Metric |
Q4 2018 |
Q4 2017 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$353.2 million |
$358.3 million |
(1%) |
|
Income from operations |
($38.1 million) |
$58.0 million |
N/A |
|
Earnings per share |
($0.03) |
($0.30) |
N/A |
Data source: BioMarin Pharmaceutical.
What happened with BioMarin this quarter?
- While sales were down a bit year over year in the fourth quarter, the decline was simply due to uneven sales in some countries. For the year, revenue was up 14% year over year. The lumpiness makes it more difficult to predict trends, but it's hard to complain about growth in the mid-teens.
- Much of the quarterly decline came from Aldurazyme, which saw sales decline 39% year over year in the quarter, but sales of the drug were up 50% for the year.
- Brineura, which launched last year, generated $12.2 million in sales, while recently launched Palynziq added $8.1 million.
- As of the middle of February, there were 335 patients on Palynziq for whom BioMarin is getting paid. A little over a third came from the clinical trials, but there are 212 patients who hadn't previously taken the drug. There are also 131 people who are waiting for their first treatment with Palynziq, so a substantial sales growth in the quarters ahead is possible.
- Last month, the company said that it completed enrollment for the phase 3 clinical trial of the high dose of valoctocogene roxaparvovec (valrox) gene therapy for patients with hemophilia A.
Image source: Getty Images.
What management had to say
In its clinical trials, Palynziq had some issues with anaphylaxis -- a severe allergic reaction -- but Henry Fuchs, BioMarin's president of worldwide research and development, said the side effect hasn't been a major problem in the commercial setting. "I think one of the things I am very encouraged about, about this, is we do see anaphylaxis occurring, but the majority of patients who have it are successfully rechallenged," Fuchs said. "In the clinical trial studies, the majority of patients who had an anaphylactic event are able to successfully receive continued Palynziq safely, and the fact that doctors are doing that in the commercial setting as well bodes really well because I think that the key thing to keep your eye on is discontinuations due to adverse events."
As a one-time, potentially curing gene therapy, valrox is going to run into challenges with getting paid for by insurance plans and government programs, but Chief Commercial Officer Jeffrey Robert Ajer doesn't seem too concerned and thinks gene therapies being developed by other companies for other diseases will help pave the way:
We do see some players already taking shape in the United States. So there's Luxturna that's on the market -- watching that. Novartis could add an SMA gene therapy on the market in the not-too-distant future and before valrox hits the market, and that would also be instructive, to watch the experience there.
Check out the latest BioMarin earnings call transcript.
Looking forward
Management is looking for 2019 revenue in the $1.68 billion to $1.75 billion range, a 15% increase over 2018 at the midpoint and on the way to management's goal of 2020 revenue of $2 billion. Palynziq could get approved by EU regulators in the second quarter, setting up a European launch in the second half of this year, but don't expect much in EU sales this year as it can take a while to get reimbursement set up in many European countries.
On the bottom line, management is looking for a net loss on a GAAP basis, but expects adjusted income to come in between $130 million and $170 million, substantially higher than the $91 million last year.
BioMarin could certainly get to GAAP profitability if it wanted to, but chooses to spend on research and development instead. These investments ought to pay off in the long run. Investors should look for late-stage data, expected later this year, on vosoritide for children with achondroplasia, a form of short-limbed dwarfism. In the second half of this year, management also expects to announce whether it'll pursue an accelerated FDA approval for valrox or use the standard approval pathway.
