Why Is BioMarin (BMRN) Up 6.1% Since Last Earnings Report?

A month has gone by since the last earnings report for BioMarin Pharmaceutical (BMRN). Shares have added about 6.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is BioMarin due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

BioMarin Beats on Q3 Earnings, Lowers Sales View

BioMarin’s adjusted earnings of 54 cents per share beat the Zacks Consensus Estimate of 25 cents. Earnings were up almost 23% year over year due to lower R&D expense.

Total revenues were $476.8 million in the reported quarter, up 3% from the year-ago period. Sales beat the Zacks Consensus Estimate of $460 million.

In the quarter, the company continued to experience a significant impact of COVID-19. The pandemic caused demand interruptions such as missed patient infusions and disruption in new patient starts for some of its products.

Quarterly Details

Product revenues (including Aldurazyme) were $460.7 million in the quarter, down 2.2% year over year. Product revenues from BioMarin's marketed brands (excluding Aldurazyme) declined 2% year over year to $419.8 million. Royalty and other revenues were $16.0 million in the quarter, higher than $10.2 million a year ago.

Kuvan revenues rose 3% to $124.1 million. Revenues are expected to decline in the fourth quarter due to generic competition.

New product, Palynziq injection sales grossed $46.1 million in the quarter compared with $40.7 million in the previous quarter, driven by new patients initiating therapy as well as the growing number of U.S. patients who have now achieved maintenance dosing.

The majority of Palynziq sales came from the United States. New patient starts picked up recently in the United States as additional clinics resumed operation. The pandemic slowed down patient growth in Germany and launch in European markets

Naglazyme sales declined 19% to $76.3 million. Vimizim contributed $147.9 million to total revenues, down 10% year over year. Sales of both Naglazyme and Vimizim were hurt by unfavorable timing of orders in Latin America.  Naglazyme and Vimzim revenues vary on a quarterly basis, primarily due to the timing of central government orders from some countries, mainly Brazil. Meanwhile, like the previous quarter, missed patient infusions due to COVID-19 also hurt sales of the drugs in the third quarter.

Brineura generated sales of $25.4 million in the quarter, compared with $25.8 million in the previous quarter.

Product revenues from Aldurazyme totaled $40.9 million, up 79% year over year due to higher sales volume to Sanofi’s subsidiary Genzyme. Genzyme is BioMarin's sole customer for Aldurazyme and is responsible for marketing and selling Aldurazyme to third parties.

R&D expenses declined 17.5% year over year to $125.6 million due to lower clinical manufacturing costs for BMN 307 and lower clinical activity spend for Roctavian. Launch preparations for Roctavian and continued global launch of Palynziq resulted in a 6.2% increase in SG&A expenses to $150.1 million.

As of Sep 30, 2020, BioMarin had $1.8 billion in cash, cash equivalents and investments, compared with $1.7 billion at the end of Jun 30, 2020

2020 Guidance

BioMarin lowered its sales guidance for the year to reflect the impact of COVID-19, loss of exclusivity for Kuvan in October and no contribution from Roctavian to 2020 revenues. The company said that the impact of COVID-19 is expected to be felt in 2021 as well due to the effect of delays in new patients initiating therapy.

Total revenue guidance was lowered from a range of $1.85-$1.95 billion to $1.81-$1.87 billion.

Vimizim sales are expected in the range of $515-$545 million compared with $530-$570 million guided previously. Kuvan sales guidance was maintained in the range of $430-$480 million. Naglazyme sales range was tightened from $360-$400 million to $370-$400 million. Brineura sales are expected within $90-$110 million versus $85-$115 million previously. Palynziq sales guidance was maintained in the range of $160-$190 million.

The guidance for costs was lowered due in part to cost containment measures during the pandemic. R&D costs are expected to be within $630-$670 million compared with $675-$725 million. SG&A expenses are anticipated in the range of $725-$765 million versus $780-$830 million.

The company raised its adjusted net income guidance to a range of $280-$330 million from $260-$310 million expected previously.

Pipeline Update

In August 2020, the FDA issued a complete response letter (CRL) to the biologics license application for Roctavian. The BLA application was based on interim data from an ongoing phase III study and the updated three-year results from a long-term phase I/II study

However, the FDA was not satisfied with the data and asked for two-year follow-up data on annualized bleed rates from the ongoing phase III study (n=134) to provide additional evidence of a durable effect. This data is not expected to be available before November 2021.

One year of follow-up of all patients in the study is expected to be completed in November and the company will announce the one-year top-line data in the first quarter of 2021. BioMarin withdrew the Marketing Authorization Application (MAA) in the EU and will re-submit the MAA with complete one-year phase III data to the EMA in the second quarter of 2021.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -328.75% due to these changes.

VGM Scores

At this time, BioMarin has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, BioMarin has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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