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  • BioMarin's Strong Pipeline And Recent Success Expected To Turn It Profitable

    BioMarin Pharmaceutical Inc. (BMRN)

    Recent Fundamental Highlights

    Founded in 1996, BioMarin Pharmaceutical (NASDAQ:BMRN) develops and commercializes drugs primarily for orphan indications. The company's product portfolio consists of five approved products and multiple investigational product candidates. Approved products include Naglazyme, Kuvan, Aldurazyme, Firdapse and Vimizim.

    Genzyme (now Sanofi) and BioMarin formed a 50/50 joint venture to market BioMarin's first drug, Aldurazyme, for the treatment of mucopolysaccharidosis I, or MPS I. BioMarin's MPS VI drug, Naglazyme, is seeing strong growth due to use in emerging markets like Brazil and higher (more expensive) dosing as young patients mature; we think peak sales expected to surpass $500M.

    Moat Trend

    • BioMarin's life-saving therapies may serve only a few thousand patients globally, but with six-figure price tags on most products and high barriers to entry, we see this as a very attractive marketplace
    • BioMarin's drugs target rare chronic conditions that often require treatment from a very young age, and while locating eligible patients on a global level is challenging, the firm has high patient retention rates
    • BioMarin's acquisition of Prosensa brings BioMarin a potential blockbuster drug for DMD with near-term approval potential in both the U.S. and E.U.
    • With a deep in-house pipeline, new manufacturing capacity, and the ability to supplement growth with strategic acquisitions like Prosensa, BioMarin is in a strong position for growth in the coming years

    Major Risks

    • Patents- BMRN does not have composition of matter patents on BH4, the active ingredient in Kuvan. Its intellectual property strategy entails use patents and manufacturing patents in PKU and hypertension/vascular disease. These patents are generally recognized as weaker than composition of matter patents, and therefore, BMRN could be subject to patent challenges
    • Clinical, regulatory and commercial risks are major risks for biotechnology companies
    • Biotechnology companies require significant amounts of capital in order to develop their clinical programs, and raising capital is always challenging as there is a risk that the necessary capital to complete development may not be readily available


    • Vimizim's launch continues to progress, along with sales of more mature products, Naglazyme and Kuvan
    • AdCom is expected to be a key growth driver given the robust catalyst path and analyst see many paths to additional value creation, with an FDA AdCom for drisapersen in late 2015 among the most visible and highest impact events in biotech this year
    • FY 2015 guidance for total revenue of $840M-$870M represents a 10-13% increase over 2014 revenue and with 2Q sales of $249M it is expected to reach upper end of its guidance
    • Translarna's E.U. approval a positive for drisapersen - CHMP's about face last year on PTC Therapeutics' (NASDAQ:PTCT) Translarna and its subsequent E.U. approval demonstrate a willingness to use post hoc analyses and natural history data to approve DMD (Duchenne muscular dystrophy) drugs. Translarna's approval in Europe set a positive precedent and lowered the bar for drisapersen

    Investment Rationale

    BioMarin has five marketed products with three enzyme replacement therapies (NASDAQ:ERT), and two small molecules for ultra-rare diseases. The ERTs are Aldurazyme, Naglazyme, and VIMIZM for three different types of mucopolysaccharidoses (accumulation of waste products within cells): MPS I, MPS VI, and MPS IV, respectively. BioMarin has established itself as a leader in the orphan space with growing revenues and a sizeable pipeline and is focused on the development of novel therapeutics for orphan diseases.

    Strong rare disease pipeline - BMRN is developing drisapersen for DMD, with potential US approval by YE15, PEG-PAL, and an enzyme replacement therapy for PKU, which has entered Phase III testing for Kuvan non-responders. In addition, BMN-701 is advancing into late-stage clinical testing in Pompe Disease, and BMN-673 (PARP inhibitor) is in a Phase III trial in BRCA-mutated breast cancer

    BioMarin is also well-positioned to treat the entire spectrum of patients with phenylketonuria, or PKU, one of the world's most common metabolic disorders. Kuvan is approved to treat mild to moderate PKU, and Peg-Pal is expected to see pivotal data in severe PKU in 2016. PKU is well-diagnosed with state-mandated newborn screening programs, and no alternative drug therapies exist.

    Stock performance

    BioMarin currently trades at $136.02 (closing price as of Aug 11th) and looks attractive with strong upside potential over medium to long term with high visibility of growth and optimism arising from its key products, including Drisapersen, BMN-111 and BMN-190. With key clinical read-outs and additional POC (proof of concept) data on BMN-701 for Pompe within the next 12 months, BMRN remains a core biotech holding with strong positive outlook for the stock in 2015 and 2016.

    Tags: BMRN, long-ideas
    Aug 13 8:20 AM | Link | Comment!
  • Adobe's (ADBE) Strategic Shift Will Lead To Growth In The Long-Term

    Adobe Systems Inc. (NASDAQ:ADBE)

    Headquartered in San Jose, CA, Adobe Systems, Inc. delivers powerful graphic design, publishing and imaging software for print, web and video production to help professionals express, share, and manage their ideas. Founded in 1982, Adobe created printing technology that inspired the desktop publishing revolution. Since then, Adobe has assembled the premier portfolio of graphic design, imaging and publishing software on the market. In 2005, the company acquired one of its closest competitors, Macromedia, bringing together Adobe's content creation and collaboration products with Macromedia's web design and animation tools. Market-leading, Adobe, creative products in include Creative Suite, Photoshop, Acrobat, Illustrator, Flash and Dreamweaver. Adobe entered the digital marketing market with its acquisition of Omniture in 2009, and has since made several investments in this business, which is the fastest growing revenue segment today. The company's five-year price to volume performance can be seen below.

    (click to enlarge)

    (Yahoo Finance)

    Fundamentals (Financial year end Nov)

    The company's recent fundamental highlights are shown:

    • Adobe reiterated FY2015 EPS guidance of $2.00, which is below consensus of $2.07. The company also reiterated FY2016 EPS guidance of $3.00, which is below consensus of $3.26.
    • Adobe's guidance looks conservative, especially since the company set these goals several years ago. The company also increased its estimate of Media total addressable market (NYSE:TAM) to $14 bn from $10 bn, increasing overall TAM to $35 bn from $31 bn in March.
    • Adobe continues to see the Media business growing through continued migration to Creative Cloud, increased ARPU, and ongoing market expansion, as evident through the expanding TAM.
    • Adobe Creative Cloud (NYSE:CC) adoption has grown rapidly over the past two years, with total subscriber count hitting 2.8mn at the end of 3Q2014, up 171% y/y, while the pace of new subscriber adds has accelerated every quarter since CC was released.

    For investors, the investment rationale for the company should be derived from the analysis of four key factors: Financial strength, management, economic moat, and dividends.

    Financial Strength

    The company's consolidated balance sheet can be seen below, it has not been updated to reflect 2014 as of yet, but some key trends do emerge. Firstly, the company has been able to increase its cash on hand 67% since 2009 and this should remain positive in 2014. Secondly, the company's current ratio has always remained above 2.5. This means the company is always able to cover its liabilities without any risk of default to its creditors. Lastly, the company's "total liabilities to total assets" has remained steady between 0.14 and 0.36 for the past 10 years. This means the company has been using a proportionate amount of debt to fund its growth.

    (click to enlarge)


    The key focus of management should always be on the creation of free cash flow for the company. As you can see below the company has remained strong in this aspect.

    (click to enlarge)

    Economic Moat

    The key focuses of a company's economic moat have to do with competitive advantage and pricing power. A company's competitive advantage allows the company to earn higher profit per unit sold than competitors and creates barriers to entry into the market. Gross margins have stayed strong over the past 10 years, while net margins have come down in recent years. Expect this to be a key focus for management as they head into the future.

    (click to enlarge)

    (click to enlarge)

    Dividends and Buybacks

    The focus of many investors investment decisions is on the basis of income streams and buybacks to warrant the risk of holding a company while waiting for capital appreciation. ADBE has not paid a dividend since 2005 and looks unlikely to do so in the coming years. The focus of the company instead has been the issuance and buyback of shares. The trend is unclear and the company fluctuates between issuances and buybacks as it sees fit. The 10-year trend can be seen below.

    (click to enlarge)

    Investment Rationale

    Adobe is making several major strategic changes in the company's business model, which are intended to raise the company's long-term revenue growth potential and increase recurring revenue. The company's creative cloud offering which includes all creative desktop products, is priced at a compelling monthly subscription price and is expected to provide consistent long-term benefits.

    Adobe currently trades at $73.47 (closing price as of Dec 2nd ) with its 52 week range of $53.93-$74.69 and provides potential in the long-term as long as three things occur. One, the move to cloud revenue increases top line growth. Two, creative cloud offering is increasing the number of new users because of a lower entry price. Three, marketing cloud is well suited for growing demands of CMOs.

    All information and data was taken from For further insights into the company or any of the 5000+ companies listed, visited the page.

    Tags: ADBE, long-ideas
    Dec 02 11:36 PM | Link | Comment!
  • Bed Bath & Beyond's (BBBY) E-Commerce Shift Will Create Growth

    Bed Bath & Beyond (NASDAQ:BBBY)

    Bed Bath and Beyond is a leading retailer of domestic and home furnishings as well as food, giftware, health and beauty care items and infant/toddler merchandise. BBBY operates over 1500 stores in the US and Canada under various subsidiaries brands and also has a joint venture with a similar company in Mexico. The value proposition for Bed Bath and Beyond is a focus on everyday low prices, a differentiated merchandise assortment, excellent customer service and a unique, decentralized operating culture.

    The company has changed its supply chain strategy to help make the company more profitable in the near future. This strategy shift will require increased company investment as the company looks to make its pricing more competitive, develop more targeted and dynamic marketing and invest in a state-of-the-art multi-channel supply chain e-commerce distribution strategy.

    These investments for the company should be off in the long-term and this is reflected in the Vuru grade as well as growth and stability metrics.

    BBBY currently trades at $66.43 (price as on 07-Oct, P/E ttm of 13.78) with its 52 week range of $54.96 - $80.82 and looks fairly valued at current levels with high upside potential in the long-term. The growth price sees the stock undervalued by 16.46% as of October 7th.

    Recent earnings for the company have exceeded analyst estimates and will help the company continue to fund its growth plans


    - EPS of $1.17 exceeded consensus EPS of $1.14


    - Ecommerce/mcommerce sales grew 50% and drove the bulk of BBBY's revenues growth for 2Q2014


    - 3Q/4Q EPS plan of $1.17-$1.21/$1.78-$1.83 incorporates consensus

    The economic moat trend of the company is another catalyst for the strong grade on Vuru. Bed Bath and Beyond remains a strong retail operator, in terms of in-store merchandising, and more entrepreneurial store-level culture than the average retailer and still above average margins and ROIC. The company has had very consistent margins over the past 10 years averaging very close to 40%.

    The aggressive investments over the past 18 months to enhance multi-channel capabilities, including a new website for the company, should keep customers coming back for core home goods and drive margins positively.

    Risks for the company in the near future include a highly competitive industry saturated from other competitors and retailers as well as possible changes in the growth of the housing market.

    Investment Rationale

    BBBY is tackling online competition head-on, with substantial investments in its omni-channel infrastructure that should help it to become the market leader.

    These changes should also help improve trends in the long-term and if the housing market growth stays stable the outlook for the company is positive.

    If BBBY proves that its strategic moves and investments will grow sales and margins as consumer shopping behavior shifts and competition remains intense, look for investors to see strong returns on the company.

    Tags: BBBY, long-ideas
    Oct 08 3:31 PM | Link | Comment!
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