Please ensure Javascript is enabled for purposes of website accessibility

3 Reasons BioMarin Pharmaceutical Stock Is a Buy Right Now

By George Budwell - Oct 24, 2019 at 9:27AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

BioMarin's stock is poised for big gains in 2020. Here's why.

The rare-disease specialist BioMarin Pharmaceutical (BMRN 2.68%) posted an outstanding third-quarter earnings report yesterday after the closing bell. Specifically, the biotech crushed FactSet's consensus Q3 GAAP net income estimate by a whopping 75%, and beat the prevailing revenue forecast for the three-month period by a modest 1.16% as well. Investors, in turn, cheered this news by bidding up the company's stock by 3.83% in after-hours trading on moderate volume.

While better-than-expected earnings are always a plus from an investing standpoint, there's actually a lot more to like about this orphan drugmaker other than its encouraging Q3 results. Here are three additional reasons to consider buying this top biotech stock right now. 

An index finger pressing down on a blue buy now button on a gray keyboard.

Image source: Getty Images.

BioMarin's stock checks all the right boxes

When it comes to picking top revenue-generating biotech stocks, there are three core areas investors should focus on: 

  1. The stock's valuation within the context of its long-term outlook. Cheap biotechs, more often than not, are cheap because they have a middling to unfavorable long-term outlook. So, investors should be on the lookout for biotech stocks with a below-average valuation but a strong near-term outlook. 
  2. The deep value offered by the company's late-stage clinical pipeline. Clinical pipelines are the lifeblood of all biotechs, so it's paramount to consider the commercial viability and potential of a company's most important candidates before buying shares. 
  3. The overall health of the company's balance sheet. Biotechs are well-known for diluting shareholders to oblivion, taking on debt on less-than-stellar terms or signing away the commercial rights to a key revenue generator, all in the name of funding operations. A large cash position, therefore, is a promising sign that the company won't have to undercut its shareholders to simply remain a going concern.  

BioMarin passes each of these checkpoints with flying colors 

On the valuation front, its shares are trading somewhere along the lines of 6.2 times next year's sales right now. While that figure might jump off the screen as a sky-high valuation in absolute terms, the stock is actually cheap for a top maker of orphan drugs -- especially for one whose annual revenue could more than double within the next four years.

Keeping with this theme, shares of the Duchenne muscular dystrophy specialist Sarepta Therapeutics (SRPT 5.29%) are presently trading at nearly 10 times next year's sales, and the cystic fibrosis giant Vertex Pharmaceuticals' (VRTX 1.51%) stock isn't much cheaper at 8.2 times the company's 2020 sales forecast. 

The point is that both of these top orphan-drug stocks are markedly more expensive than BioMarin's at current levels. Best of all, BioMarin should at least match -- if not surpass -- both Sarepta and Vertex from a revenue growth standpoint over the next decade. 

BioMarin also ticks the late-stage clinical pipeline box. During its Q3 conference call, management noted that the company is on track to submit regulatory filings for the severe hemophilia A treatment valoctocogene roxaparvovec in both the U.S. and EU and release the top-line results for vosoritide's pivotal trial for children with achondroplasia (a form of dwarfism) before the end of the year. Both of these experimental rare-disease treatments are expected to achieve blockbuster level sales early in the next decade. 

Regarding the health of its balance sheet, BioMarin sports one of the strongest cash positions among all mid-cap biotechs right now. Specifically, the company exited the most recent quarter with an eye-catching $1.2 billion in cash and cash equivalents. That means that BioMarin shouldn't have to dilute current shareholders, take on boatloads of debt, or cut a bad licensing deal due to an imminent cash crunch. 

Key takeaways

BioMarin's relatively cheap valuation, strong growth prospects, and sizable cash cushion are three solid reasons to buy its stock soon. Now, it's true that this orphan-drug maker hasn't been a great investing vehicle over the past few years, but this situation should change for the better in early 2020. After all, BioMarin's late-stage pipeline has consistently produced big wins for shareholders over the years -- and valoctocogene roxaparvovec and vosoritide both appear poised to follow in this rich tradition in the not-so-distant future.


Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

BioMarin Pharmaceutical Inc. Stock Quote
BioMarin Pharmaceutical Inc.
$80.97 (2.68%) $2.11
Vertex Pharmaceuticals Incorporated Stock Quote
Vertex Pharmaceuticals Incorporated
$273.73 (1.51%) $4.08
Sarepta Therapeutics, Inc. Stock Quote
Sarepta Therapeutics, Inc.
$74.65 (5.29%) $3.75

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.