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BMRN: Roche Takeout Rumor

|Includes: BioMarin Pharmaceutical Inc. (BMRN)

We have no particular insight into the rumor from the UK's Daily Telegraph regarding Roche's (OTCQX:RHHBY) acquisition interest in BioMarin, other than to say it is plausible. The rumored takeout price is between $130-$140 per BMRN share. Our upside target was $125.

Roche, of course, markets one of the largest orphan drug with about $6 billion in sales. One report from the Orphan Drug Congress Europe puts Roche at number 4 in orphan drug sales in 2020. Roche has also made acquisition and VC moves in the space in the past couple of years. So the interest is definitely there.

We published a recommendation on BMRN this past Friday, July 1. ONe of our longer term thesis has been that BioMarin would be an excellent takeout candidate for a larger pharma company interested in the orphan disease category. BioMarin has the R&D and sales and marketing infrastructure along with complex manufacturing capacity. What has alluded the company is profitability.

We stated in the recommendation that BioMarin current portfolio, along with expected approvals over the next couple of years should move the company toward breakeven in 2017 and profitability in 2018. Also, larger opportunities in achondroplasia and potentially Hemophilia A should catapult earnings over next several years.

So perhaps we are moving toward the takeout faster than anticipated. There are also other large pharma companies with extensive orphans operations that could be interested: Shire, who bought Transkaryotic Therapies and, Sanofi, who owns Genzyme, among others.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.