Small and Volatile, but Not for Long

When a company treats rare diseases, with very few patients, revenue can be pretty wonky from quarter to quarter as inventory levels can have a major effect on revenue. Still, BioMarin Pharmaceutical (NASDAQ:BMRN) is looking pretty healthy when you dig a little deeper.

For instance, one of its drugs, Aldurazyme, is sold by Genzyme (NASDAQ:GENZ), which recorded a year-over-year sales increase of 5.5%. BioMarin, which manufactures the drug, actually recorded lower year-over-year revenue from Aldurazyme because it transferred less inventory to Genzyme. The key number, though, is the volume of the drug that was dispensed, which increased 11.6% year over year.

It's the opposite story with Kuvan, albeit with one less middleman. Sales increased 28.4% between the second and third quarters of this year, but dispensing of the drug increased 8.5% quarter over quarter as specialty pharmacies built back up inventory.

Growth in revenue from individual drugs will probably always be choppy, but the volatility of total revenue might decrease a little as the company continues to launch new drugs. Earlier this week, BioMarin bought a company with an almost-approved drug, and it also has two drugs in midstage development. Normally that would mean they're still years away from approval, but because of the orphan-drug status, it's likely that BioMarin should be able to get phase 3 trials done relatively quickly if the phase 2 trials are a success next year.

BioMarin is also working on a monitor for patients who have phenylketonuria (PKU), the disease that Kuvan treats. The monitor uses some of the same technology that glucose monitors from Abbott Labs (NYSE:ABT) and Johnson & Johnson (NYSE:JNJ) use, but monitors phenylalanine levels which are too high in PKU patients. In addition to supplying revenue, the monitor should increase sales of Kuvan, as it'll make it easier for patients to stay on the drug.

Revenue could also increase through acquisitions, as management mentioned that other deals are in the works. But it's not likely that BioMarin is going to overpay. CEO J.J. Bienaime said: "If the price gets out of control, we generally stop bidding, and we have done that in the past," letting competitors overpay for those assets.

I'm sure BioMarin's investors are pretty happy it did.