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Get On Board Or Get Run Over-Cash In This Week

Sep. 07, 2020 11:00 AM ETBioMarin Pharmaceutical Inc. (BMRN), QQQ, SPY
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  • Non-stop winning.
  • Overall market attention will be focused on this crazy idea that markets can move downward.
  • We are watching 265 on the (QQQ) and 325 on the (SPY) as key levels. Closes below there could trigger more selling.
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It was a brutal end to a week that usually sees big money leave early for vacation. The volume suggested there was cause for concern, but not panic. The big intraday rebound Friday was encouraging, but not a guarantee that pain is done.

The US reported a higher employment figure, 1.37 million jobs, than the forecast 1.32 million for August.

The level of unemployment is well down, at 8.4%. That's the good news. The bad is that our trade deficit in July hit a 12-year high as imports replace what would have been made in the USA.

Overall market attention will be focused on this crazy idea that markets can move downward. We had become spoiled, it is true. Markets simply cannot go up forever. We are watching 265 on the (QQQ) and 325 on the (SPY) as key levels. Closes below there could trigger more selling. We do not see a crash coming but are trimming big winners as we have been. We are comfortable owning/buying into rotational names like the cruises, entertainments, industrials, and financials. Energy continues on its own path, perhaps because of weather, possible hurricane season, etc. Financials and industrials have leveled off, but still look ok. Materials and semiconductors are weakening. Utilities and consumer staples are showing strength too. The wild card is precious metals. We remain bullish, but the near-term is fuzzy.

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BioMarin Slammed: We Are Buying

Aug. 19, 2020 2:02 PM ET (BMRN)


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Prepared by Tara/Stephanie

Shares of BioMarin (BMRN) are getting crushed following a snub from the FDA on its hemophilia drug, asking for more follow up data. This has pushed the timeline out to late 2021 on this drug. A big painful hit for sure.

Shares are now down to $75 a share, and we are looking to get in

The play

Target entry 1: $75-76

Target entry 2: $73-$74

Target entry 3: $70-$71

Double down $65

Stop loss: $58

Short term price target: $84-$85 (days to a few weeks)

Longer-term target: $100-$105

Note these are suggested ranges for entry


Interesting little company here. Founded in the late 1990s the company has seen shares trade at $40 in 2007, those shares hitting a high around $150 in 2015, and ever since have mostly traded just below the $100 mark until last few months where it was well over $100. We think shares come back.

The run to its highs in 2015 was driven by revenues increasing from about $100 million over a decade ago towards the billion mark.

This impressive result was not all achieved on an organic basis, as deals and losses made that the share count essentially doubled over the same period of time. The advancement of the company started with Aldurazyme for which FDA approval was obtained in 2003 and Naglazyme which followed in 2005. FDA approval for Kuvan was granted in 2007, yet despite a reasonable run-up in product sales the company was still losing money, in part because R&D expenditures stood at around $300 million per annum. Following FDA approval of Vimizim in 2014 the company had 5 marketable products (including Firdapse) which generated nearly $900 million on a combined basis in 2015.

Shares have been in the triple digits. With shares hitting a peak of $150 in 2015, the company was valued at around $24 billion, for arguably very steep valuation multiples, as the company was continuing to lose money. Now it makes money. Not a lot of it, but it is EPS positive.

Since the peak in 2015, shares have lost nearly half their value, as the market has seen decent returns of course over the past years, marking even larger relative underperformance. This underperformance has mostly been driven from the high valuation/expectations at the start, a failed $700 million acquisition of Prosensa, as continued growth has steadily made that valuations have come down.

2017 had been somewhat of an important year as the company obtained approval for Brineura and in early 2018 it turned out that the company grew full year sales by 18% to $1.31 billion.

Growth was driven by double-digit percentage increases in Kuvan, Naglazyme and Vimizim, with revenues of all three products coming in between $330 and $410 million.

Sales of Aldurazyme fell 4% to $90 million as Brineura generated $8.6 million in their debut year. The company reported a net loss of $117 million and adjusted profit of $74 million, making that the company is largely breaking-even.

The company guided for 2018 revenues of $1.50 billion and adjusted profits of $120 million and GAAP losses of around $140 million. Nailed it. Revenues came in at $1.49 billion, in line with expectations. Sales growth of the top three products was relatively modest, revenues of Aldurazyme jumped 50% to $135 million, and Brineura generated nearly $40 million in sales in its second year.

Further encouraging, the company obtained approval for Palynziq in 2018, contributing $12.2 million in sales. The company furthermore guided for 2019 sales at a midpoint of $1.715 billion and modest GAAP losses, in combination with increasing adjusted profits.

Take home

Today's news was frusturating. But it is not a denial. The real potential is the pipeline as BioMarin continues to see healthy growth in the meantime, and more importantly quite diversified growth. Hence, we see value at these levels, down 36% today, provided you have a medium-term outlook and confidence in the pipeline conversion. Short-term, we think there is a relief rally into the $80s.

Disclosure: I am/we are long BMRN.

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