Only July 1, we recommended BioMarin (NASDAQ:BMRN) due to the recent pipeline disappointments driving the stock to a level offering an excellent risk-reward opportunity and that pipeline prospects were solid to drive 25%+ top-line growth over the next several years. Recent announcements regarding the FDA's acceptance of the BLA for cerliponase alfa for CLN2, a form of Batten disease (now dubbed Brineura by the company), with a PDUFA date of January 17, 2017, and potentially, even more importantly in the long term, positive data on BMN 270, a potential gene therapy cure for some with hemophilia A, seem to be bearing out the thesis. As such, we are increasing our price target from $125 to $138.
The initial upward jolt to the stock after our July 1 recommendation involved a takeover speculation (see our comment here) from Roche (OTCQX:RHHBY). This has been speculated about for more than a decade that we have followed the stock, and we have no special insight other than what we offered in our comment. The stock gapped from the high $70s to the high $80s.
Although yesterday's news on the BLA acceptance for Brineura was not unexpected, it provides further confidence that it will be approved and our 2018 numbers, on which our target numbers are based.
The positive data on BMN 270 changes the upside potential. As mentioned in our July 1 recommendation, because of the confusion over when the remaining patients in the current Phase 1/2 trial would be dosed and the reasons for an apparent holdup, we remained skeptical about the program.
The data released yesterday by the World Federation of Hemophilia changes the complexion of the company in our view:
- It confirms that BMN 270 is a potential cure for many patients in a disease state where patients often now receive three Factor VIII injections per week.
- Relative to other orphan diseases that BioMarin offers treatments, the patient population is enormous - as many as one in 5,000 male births.
The company has indicated that a Phase 2b has been planned for mid-2017 that could possibly be used for registration. There are many factors that will determine that, and we are not betting on it, although it is not out of the question. However, we believe the data are solid and having a viable candidate with such large revenue potential does slightly increase our numbers in the out years and increases our 2018 EV/EBITDA multiple to 19x, boosting our target from $125 to $138.
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