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Morningstar | BMRN Updated Forecasts and Estimates from 29 Mar 2019

We’re maintaining our $119 fair value estimate for BioMarin following fourth-quarter 2018 earnings that were in line with our expectations and guidance for 2019 that revealed stronger top-line potential for several marketed rare-disease drugs but also higher expected research/development and marketing costs. BioMarin’s revenue fell 1% year over year in the fourth quarter, which was affected by large Brazil orders for Naglazyme and Vimizim in the third quarter. Newly approved PKU therapy Palynziq saw $8.1 million in revenue in the quarter; revenue per patient is lower as patients initially titrate up to their maintenance doses, but we think strong uptake among both Kuvan patients as well as patients naive to BioMarin PKU treatments is a good sign for long-term demand, and BioMarin's Palynziq guidance of $70 million-$100 million for 2019 is in line with our own estimate. We still think the firm’s orphan drug focus and productive pipeline warrant a narrow moat rating.

This year, all eyes are on three-year data for hemophilia gene therapy val-rox (likely July 2019), val-rox accelerated filing with the U.S. Food and Drug Administration (potentially in the second half of 2019), and achondroplasia drug vosoritide's phase 3 data (available late 2019). In the long run, the firm is still guiding to $2 billion in revenue in 2020, in line with our estimates, and expenses shrinking as a percentage of sales, with products like vosoritide and val-rox driving stronger growth beyond 2020. Our model projects slower growth in 2019, with an increase in growth above 20% likely in 2020 as vosoritide and val-rox could launch. Beyond the currently launching CLN2 disorder drug Brineura (we assume $300 million in peak sales), we see $2 billion peak sales potential for val-rox and $1 billion peak sales for vosoritide, making these programs more important to BioMarin’s long-term growth trajectory.

For a deeper dive into BioMarin's portfolio and pipeline, please see our Healthcare Observer, "Annual Drug Pipeline Report: Moats Remain Secure as Innovation Counters Pricing and Generic Headwinds, but M&A Accelerating." For more information on BioMarin's gene therapy program and the potential impact on BioMarin's profitability, see our Healthcare Observer, "Drug Industry Gross Profits in a Tough Pricing Environment: Manufacturing Improvements Support Undervalued Drug Stocks."