We are downgrading BioMarin Pharmaceutical Inc. (BMRN) to Underperform from Neutral purely on valuation grounds as we believe that the stock is overvalued at current levels. Our target price is $30.00. BioMarin, founded in 1996 and headquartered in Novato, California develops and commercializes biopharmaceuticals for serious diseases and medical conditions.
We are disappointed by the initial sales ramp of the company’s newest marketed product – Firdapse. Firdapse was launched in the EU in April 2010 for treating patients suffering from Lambert Eaton Myasthenic Syndrome (LEMS) – a rare autoimmune disorder.
Firdapse is the first drug to hit the European market for treating this rare autoimmune disease. The sales of the drug were a mere $3 million in the final quarter of 2010, $3.1 million in the first quarter of 2011 and $3.2 million in the second quarter of 2011. The other marketed products at BioMarin are Aldurazyme co-marketed with Sanofi-Aventis (SNY), Naglazyme and Kuvan.
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.
Since we believe the stock is overvalued at current levels, we advise investors to avoid it for the time being.
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