Report
Karen Andersen
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Morningstar | Maintaining Our BioMarin Fair Value Estimate Following Strong 3Q

We’re maintaining our $118 fair value estimate for BioMarin following third-quarter 2018 earnings that were in line with our expectations. BioMarin’s revenue grew 17% in the third quarter, which is slightly ahead of the 15% revenue growth we model for the full year as the quarter benefited from large Brazil orders for both Naglazyme (43% growth) and Vimizim (37% growth). Newly approved PKU therapy Palynziq saw $4.4 million in revenue in the quarter; revenue per patient is lower as patients initially titrate up to their maintenance doses, so 2018 revenue for Palynziq will remain insignificant for BioMarin, but we think strong uptake among both Kuvan patients as well as patients naïve to BioMarin PKU treatments is a good sign for long-term demand. We still view the firm’s orphan drug focus and productive pipeline as warranting a narrow moat rating. The firm's R&D day on Nov. 7 will give us more information on the durability of vosoritide efficacy and the preclinical data for the firm's PKU gene therapy.

In the long run, the firm is still guiding to a top-line growth rate around 15% through 2020 and expenses shrinking as a percentage of sales, with products like vosoritide and val-rox driving stronger growth beyond 2020. Our model projects midteens growth in 2018 and 2019, with an increase in growth 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 $1 billion peak sales potential each for PKU drug Palynziq and for vosoritide and val-rox, making these programs more important to BioMarin’s long-term growth trajectory.

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." BioMarin plans to enter a PKU gene therapy into development in 2019, which we think could be a promising follow-up to the firm’s established presence with oral PKU drug Kuvan and ongoing U.S. launch for the more potent injectable PKU therapy Palynziq. We think the firm’s gene therapy manufacturing is already off to a good start (hemophilia gene therapy patients in val-rox Phase 3 trials are receiving product from BioMarin’s own commercial facility), and we expect the firm has several preclinical gene therapy candidates under consideration.
Underlying
BioMarin Pharmaceutical Inc.

BioMarin Pharmaceutical is a biotechnology company that develops and commercializes therapies for people with serious and life-threatening rare diseases and medical conditions. The company's commercial products are Aldurazyme (laronidase) for Mucopolysaccharidosis I; Brineura (cerliponase alfa) for the treatment of late infantile neuronal ceroid lipofuscinosis type 2; Kuvan (sapropterin dihydrochloride) for the treatment of phenylketonuria; Naglazyme (galsulfase) the treatment of Mucopolysaccharidosis VI ; Palynziq (pegvaliase-pqpz) for adult patients with phenylketonuria; and Vimizim (elosulfase alpha) for the treatment of Mucopolysaccharidosis IV Type A.

Provider
Morningstar
Morningstar

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.

Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.

We have operations in 27 countries.

Analysts
Karen Andersen

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