The Bay Area Pharma Stock Investors Could Buy and Hold for the Next 20 Years

The Bay Area Pharma Stock Investors Could Buy and Hold for the Next 20 Years April 7, 2017
By Mark Terry, BioSpace.com Breaking News Staff

You can argue that short-term stock buys are called gambling while long-term buys are called investing. Even if true, solid stocks may fluctuate—or tank—over the long haul. George Budwell, writing for The Motley Fool, discusses why he thinks BioMarin Pharmaceuticals is a good long-term biotech stock.

BioMarin, perhaps best known for its failed drug for Duchenne muscular dystrophy (DMD), is headquartered in Novato, Calif. For a while it had been involved in a race to the market against Sarepta Therapeutics , but after the U.S. Food and Drug Administration (FDA) turned down its application for Kyndrisa (drisapersen) in January 2016, BioMarin abandoned the program in June 2016.

Nonetheless, the company has five drugs on the market for rare diseases: Vimizim for Morquio A Syndrome; Kuvan for phenylketonuria (PKU); Naglazyme for mucopolysaccharidosis (MPS) VI, Aldurazyme for MPS I; and Firdapse for Lambert-Eaton Myasthenic Syndrome (LEMS).

And the FDA is expected to make a decision on the company’s Brineura for CLN2 disease by April 27. CLN2 is a type of Batten disease, which usually is diagnosed in children between the ages of two and four. It includes language delay and seizures, which then are followed by movement disorders, motor deterioration, dementia, and blindness. Patients typically die between the ages of 10 and 16. There are no approved treatments.

Because BioMarin focuses on rare and ultra-rare diseases, the prices—and hence the margins—on their drugs are sky high. Budwell points out that EvaluatePharma’s most recent industry report indicates that orphan drugs will have 20 percent of the total prescription market by 2022. And BioMarin is one of the top orphan drugmakers.

Budwell writes, “Although the drug’s (Brineura) commercial opportunity is tough to nail down because of the rarity of the condition and the fact that orphan drug prices have been all over the map lately, it should add at least several hundred million to BioMarin’s top line within a few short years if approved. As a prime example, some analysts are already forecasting BioMarin’s top line to grow by as much as 16 percent next year if Brineura does get a green light from the FDA this month.”

Although these rumors have faded, last summer there was even talk that Sanofi might consider buying BioMarin. Sanofi currently appears to be in talks to buy Flexion instead, but that wouldn’t necessarily rule out a bid for BioMarin in the future by Sanofi or any other company interested in a strong position in the rare disease market.

BioMarin is currently trading for $87.11.

Budwell writes, “So while BioMarin isn’t exactly cheap with a price-to-sales ratio of 13.34, this company is operating within one of the fastest-growing segments of the pharma industry, and it has a proven track record of bringing innovative new medicines to market.”

Last week, Cowen and Company reiterated an “outperform” rating for BioMarin with a price target of $150. Nomura began coverage on March 1 and issued a “neutral” rating. Instinet also launched coverage on March 1 with a “neutral” rating and a $93 price target. Vetr downgraded it from “strong-buy” to “buy” with a price target of $102.51. And on February 27, Wedbush repeated a “neutral” rating with a price target of $102. JPMorgan Chase & Co, on February 25, gave it a “buy” rating with a price target of $123.

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