We are downgrading BioMarin Pharmaceutical Inc. (BMRN) to Underperform from Neutral following its below-par showing in the final quarter of 2010.
Earnings were hurt by lower-than-expected revenues.
BioMarin develops and commercializes biopharmaceuticals for serious diseases and medical conditions. The company’s product portfolio comprises four approved products and several investigational candidates. The marketed products include Aldurazyme, Naglazyme, Kuvan and Firdapse.
Aldurazyme was approved in the US in 2003. The drug is co-marketed with Genzyme Corporation (now a part of Sanofi-Aventis (SNY)) for the treatment of MPS-I (mucopolysaccharidosis).
Naglazyme was approved by the US Food and Drug Administration (FDA) in 2005 for MPS-VI, a rare genetic enzyme deficiency disorder. Kuvan was approved in the US in 2007 for phenylketonuria. Firdapse was launched in the European Union in 2010 for treating patients suffering from Lambert Eaton Myasthenic Syndrome – a rare autoimmune disorder.
There are a number of reasons for the negative sentiment regarding BioMarin. The continued weak performance of Aldurazyme and the slow Firdapse ramp disappoint us. The growth of Aldurazyme sales slowed drastically in 2010 to 1.4% from 2.5% in 2009 and 22.4% in 2008. The dramatic slowdown in sales growth indicates that Aldurazyme is approaching maturity.
Moreover, we expect cash burn to increase since the company is investing heavily in its pipeline. Any negative news regarding the pipeline would have an adverse impact on the stock. For example, in 2010, BioMarin halted the development of BMN-195 for treating a type of muscle disease following the disappointing showing of the candidate in an early-stage study.
Furthermore, a majority of the candidates at Biomarin are in early/mid-stage development. This implies that they are quite a few years away from hitting the market. This is a cause for concern.
These headwinds cause us to believe that there is little reason for investors to own the stock.
BIOMARIN PHARMA (BMRN): Free Stock Analysis Report
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