Summary
- BioMarin has a core cadre of molecules with modestly growing revenues.
- Its VOXZOGO has clear blockbuster potential.
- ROCTAVIAN, which is already approved in the EU, is coming on strong with FDA review pending.
- BioMarin's outsized market cap and rich P/E ratio are rightly concerning for new investors.
BioMarin ( BMRN ) is a name that I have encountered from time to time, but have yet to research until this article. I am finding an interesting company with vast potential, and a rich $21 billion market cap.
There are plentiful considerations for investors. In this article, I outline the ones that I found most significant.
BioMarin has a nice portfolio of established products
I have found that checking into disaggregated revenues from its latest 10-Q is an efficient method of checking out larger biotechs. In BioMarin's case, this approach from its Q3 2022 10-Q is helpful as expected, per the excerpt below (pg. 16):
Impressive, BioMarin generates significant quarterly revenues from 7 products. Net product revenues from these products have grown from an aggregate ~$0.4 billion in Q3, 2021 to ~$0.5 billion in Q3, 2022, representing Y/Y quarterly growth of ~25%. All of its products are on a growth track except for KUVAN (sapropterin dihydrochloride) which showed a ~15% decline.
More current than this 10-Q, BioMarin gave an 01/09/2023 presentation (the " Presentation ") at the 41st Annual JP Morgan Healthcare Conference. Its 34 slides provide a more granular view of its past and anticipated future product development.
Slide 8 characterizes five of its products (excluding KUVAN and VOXZOGO (vosoritide ) ) as "core products". Its core products generated ~$1.5 billion in net product revenues in 2021; they grew at a CAGR of ~14% over the period from 2018-2021.
KUVAN, with declining revenues due to generic competition, is excluded from the core as is VOXZOGO for an entirely different reason. Rather than revenue decline, VOXZOGO is one of BioMarin's bright spots.
Newly approved VOXZOGO, is a major component of its value proposition
Approved in late 2021 to increase linear growth in children with achondroplasia aged 5 and up with open growth plates, VOXZOGO is just getting started. VOXZOGO uptake has been strong across the world.
The current VOXZOGO label is likely a big part of its appeal:
Not only does it not include any black box warnings, its single ancillary warning is for a risk of low blood pressure, which can be addressed with hydration. Its adverse reactions are generally benign. It has no contraindications.
On the other hand, VOXZOGO dosage and daily administration are quite fiddly. It is not just a "take two aspirin and call me in the morning" regimen. It takes time commitment and training of a dedicated caregiver.
Despite such hassles VOXZOGO is doing well. During its Q3, 2022 earnings call (the " Call "), BioMarin raised 2022 VOXZOGO revenue guidance to between $140 million and $170 million. It had already raised its VOXZOGO 2022 revenue guidance to between $130 million and $160 million during its previous (Q2, 2022) earnings call .
The VOXZOGO story is a long way from over with the Call's latest guidance raise. BioMarin has VOXZOGO potentially pegged as long term growth story. It is in line for label expansion in the US and Europe to permit administration to yet younger patients as allowed in Japan.
Per Presentation slide 9 below BioMarin anticipates a jaw dropping global market opportunity for it of >$3 billion annually:
Notably the FDA's 11/2021 approval letter imposes postmarketing study requirements on VOXZOGO. The purpose of the study will be to measure its effect of on final adult height with secondary endpoints evaluating disproportionality and bone age.
According to an 08/2021 BioMarin release the average annual cost for patients in France and Germany is $300,000. The European approval is for patients aged 2 and up.
Beyond its previously discussed approved therapies, ROCTAVIAN is in the batters with blockbuster potential
BioMarin's previously discussed therapies are already generating revenues with nice growth potential. In 08/2022 the EU granted conditional marketing authorization ((CMA)) to ROCTAVIAN™ (valoctocogene roxaparvovec) gene therapy for the treatment of severe hemophilia A in certain adult patients.
The therapy is a one and done infusion; it:
...is the first approved gene therapy for hemophilia A and works by delivering a functional gene that is designed to enable the body to produce Factor VIII on its own without the need for continued hemophilia prophylaxis, thus relieving patients of their treatment burden relative to currently available therapies. People with hemophilia A have a mutation in the gene responsible for producing Factor VIII, a protein necessary for blood clotting.
The approval impacts an estimated 3,200 patients who will be indicated for ROCTAVIAN. Additionally certain patients outside of the EU in countries in the Middle East, Africa and Latin America will gain access to ROCTAVIAN because of the EU decision. Additional market registrations will be facilitated by the EMA license.
What this means in terms of near term revenues is unclear but will likely be highly significant. Presentation slide 12 below indicates that BioMarin will be issuing revenue guidance in February, which I can say as I write on 01/31 is right around the corner; and it is the shortest month.
BioMarin investors should expect this guidance release to give the stock a jolt one way or the other, depending on whether the inscrutable market views it as positive or negative.
BioMarin will be testing its financial limits as it pursues it new blockbusters
At the outset of this article I took a look at BioMarin's Q3, 2022 disaggregated revenues. Below is an excerpt of its overall operations:
excerpt from p. 4 of BioMarin's Q3, 2022 10-Q (seekingalpha.com)
The non-financial asset sale gain references its 02/2022 sale of its rare pediatric disease priority review voucher that it got because of its VOXZOGO approval.
During the Call CFO Mueller advised, despite its slight Q3 operating loss, it was still holding to its 2022 GAAP net income guidance of $105 million to $145 million. Given that the excerpt above shows nine month income of ~$174 million this guidance is less than assuring.
In terms of liquidity BioMarin is well situated. CFO Mueller advised:
We ended the third quarter of 2022 with approximately $1.65 billion which is an increase of over $100 million compared to both year-end 2021 and the second quarter of 2022. While the company continues to experience quarterly timing difference in several cash flow categories, mainly working capital, BioMarin generated $169 million of operating cash during the first 9 months 2022, which is a positive indicator of the progression and maturity of the business in this transformative year.
Conclusion
At its core. BioMarin is in solid shape operationally. It is likely cash flow positive with liquidity of $1.65 billion. That is encouraging but it supports only a tiny slice of its ~$21 billion market cap. Its pipeline outside of VOXZOGO and ROCTAVIAN is all early stage per Presentation slide 22. It has a mere two products in clinical trials, both phase 1.
Accordingly there is something approaching $20 billion of VOXZOGO and ROCTAVIAN hopium in BioMarin's market cap. Take a look at Presentation slide 31 below:
By Mid-Decade, BioMarin may grow to earn its current market cap. That is an awful lot of blue sky for new investors in 2023 to swallow. I am holding back.
For further details see:
BioMarin: Priced For Perfection