BioMarin Pharmaceutical (BMRN 1.47%) has not escaped the market sell-off caused by the COVID-19 pandemic. The stock dropped 21% from its high of $97.10, set March 4, before quickly rebounding; year to date, the biopharma's shares are down 5%. BioMarin is trading at 59.2 times future earnings, and the company's forward price-to-earnings-growth (PEG) ratio is 0.76. Given these valuation metrics, should investors consider buying shares?
Broad portfolio of drugs
BioMarin has a broad portfolio of commercialized drugs targeting rare genetic disorders. Marketed globally in more than 75 countries, these drugs offer steady revenue growth.
The year 2019 produced record results for the company. It demonstrated continued operational excellence and productive research and development (R&D) that will lead to new products and top-line growth in the coming years. BioMarin ended the year strong, with all brands contributing to total revenue of $1.7 billion, a 14% increase year over year.
Net product revenue from six products marketed by BioMarin -- Vimizim, Kuvan, Naglazyme, Palynziq, Brineura, and Firdapse -- generated $1.6 billion, up 17% from 2018's total revenue. Remaining net product revenue came from products marketed by Sanofi Genzyme, generating $97.8 million, a decline of 28% year over year.
Of the commercialized products, Vimizim became the first BioMarin brand to reach and surpass $500 million in annual sales. Moreover, the performance of two newer brands, Palynziq and Brineura, was impressive, contributing to 10% of net product revenue. Management expects Palynziq to drive better growth in the coming years.
Looking ahead to 2020 and beyond, investors will want to keep tabs on BioMarin's continued operational excellence and its research and development pipeline. In January, it sold its Firdapse assets to a third party, so it will no longer record revenue from Firdapse going forward. Instead, this year and the coming years will be focused on the potential approval of valoctocogene roxaparvovec (Valrox) for treatment of hemophilia; the submission of an application for treatment of achondroplasia (a genetic disorder that results in dwarfism); and enrollment in a phase 2 study for another treatment for phenylketonuria (PKU). The success of these endeavors will contribute to top-line growth and continue to strengthen BioMarin's sales in a path toward profitability.
The market may be volatile right now because of the coronavirus pandemic, but BioMarin's business seems stable. It has plenty of cash for operations ($1.2 billion, with a quarterly burn rate of just 3.5% ) and is in a healthy financial situation in which its assets exceed its liabilities.
It manages its debt effectively, currently boasting a debt-to-equity ratio (D/E) of 27.2%. A D/E ratio of less than 30% implies that a company is not using too much debt to finance its operations -- ideal for operating in economic downturns. Over the past five years, the company has managed to reduce its debt levels from a high of 41.8%.
In its fourth-quarter earnings call in February, CEO Jean-Jacques Bienaime noted that executives expect the company to turn profitable under generally accepted accounting principles (GAAP) in 2020. "For the first time in the history of the company, our revenue growth and improvement in profitability is also increasing our operating cash flows as our total cash and investment grew for the second straight quarter in Q4 of last year," he said. Analysts currently forecast that BioMarin will become profitable over the next three years.
Positioned to dominate
BioMarin's broad portfolio of drugs and strong financials offer investors a stable long-term investment for the next three to five years. With plenty of cash and effective financial management, the company looks positioned to dominate in the current market conditions. Moreover, success with its upcoming pipeline -- particularly the approval of Valrox -- should put the company in position to reach profitability soon. Analysts project an average price target of $118.48, with a range of $77 to $164. Investors should note the current bargain price in the market and consider adding shares to their portfolio.