Biopharmaceutical companies hold two main risks for shareholders: financial risks, and the risk involved with successfully bringing drugs to market. Other risks exist, too, but ignoring either of those first two is what oftentimes gets investors in trouble in this sector.
No one has questioned drug developer BioMarin Pharmaceuticals'
Revenues rose a whopping 227% year over year to $25 million, thanks to strong sales from the company's two enzyme replacement therapies, Naglazyme and Aldurazyme. Naglazyme in particular is still early in its sales life cycle; the FDA just approved it for marketing in May 2005.
It can be a pain to break out the health of BioMarin's top-line results, because it splits profits from Aldurazyme with Genzyme
Net Product Sales |
Year-Over-Year Growth |
|
---|---|---|
Q3 2006 |
$39.7 |
75.7% |
Q2 2006 |
$33.2 |
61.2% |
Q1 2006 |
$30.3 |
43% |
Q4 2005 |
$25.4 |
(14.0%)* |
Despite a 30% increase in research and development spending to $18 million, BioMarin's net loss for the quarter was cut by more than half to $7 million because of the surging drug sales, and the company should become profitable in a quarter or two at most.
BioMarin has proved its ability to bring drugs through the clinical trial process to market in a timely manner. That's praiseworthy, considering that clinical trial delays make many biotech investments unpalatable. That said, BioMarin's pipeline isn't exactly overflowing with drug candidates. The company is expected to submit an application for approval of Phenoptin, a drug to treat a rare metabolic disease, during the second quarter of next year and is progressing a drug called BH4 through phase 2 trials in treating various cardiovascular conditions, with the first trial results expected early next year. BioMarin has partnered both of these programs with Serono
Other than those two drugs, BioMarin doesn't have anything else in the clinic, so a failure on the part of Phenoptin to gain approval would be particularly painful to BioMarin's shareholders.
Even with its small pipeline, BioMarin appears to be running smoothly. Sales of its drugs are growing rapidly, it remains poised to bring Phenoptin to the market late next year, and profitability is right around the corner. That's more than could be said for many biopharmaceutical companies.
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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has adisclosure policy.