Should You Buy BioMarin Pharmaceutical Stock At $78?

May 24th, 2021 · by Trefis Team
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We believe that BioMarin Pharmaceutical stock (NASDAQ: BMRN) is a good buying opportunity at the present time. BMRN stock trades near $78 currently and it is, in fact, down 19% from its pre-Covid high of around $97 in March 2020 – before the coronavirus pandemic hit the world. BMRN stock has had a volatile ride since last year. It rallied from levels of under $71 on March 23, 2020, when broader markets made the bottom, to levels of around $130 in mid-July 2020. This move was largely driven by the positive developments around Valrox – BioMarin’s gene therapy for Hemophilia A. However, BMRN stock plunged over 40% to levels of $73 toward the end of August, 2020. This decline also related to the company’s Hemophilia A treatment. The U.S. FDA issued a response letter asking the company’s for more data, which essentially meant a delay of around two years for the drug approval. BMRN stock has remained in the range of $70 and $90 since then. Given that the stock has corrected meaningfully to accommodate the delay in approval for its Hemophilia A treatment, we believe that BMRN stock now looks attractive at the current levels of around $78.

The FDA’s response for Valrox in August was surely a setback for the company, but it is not that the treatment is ineffective. The FDA has asked for a two-year follow-up safety and efficacy data on all trial participants for Valrox. This essentially means a delay in approval, to probably 2022. On the European side, the company expects the verdict to come in sometime this year. Note that Valrox is a potential blockbuster with peak sales estimated to be over $3.5 billion in 2030.

While BMRN stock has been volatile in the current Covid-19 crisis, how did it fare in the 2008 crisis? In this note we focus on a comparative analysis of BioMarin Pharmaceutical stock performance during the current financial crisis with that during the 2008 recession in our interactive dashboard.

Timeline of Coronovirus Crisis So Far:

  • 12/12/2019: Coronavirus cases first reported in China
  • 1/31/2020: WHO declares a global health emergency.
  • 2/19/2020: Signs of effective containment in China and hopes of monetary easing by major central banks helps S&P 500 reach a record high.
  • 3/23/2020: S&P 500 drops 34% from the peak level seen on Feb 19, 2020, as COVID-19 cases accelerate outside China. Doesn’t help that oil prices crash in mid-March amid Saudi-led price war
  • Since 3/24/2020: S&P 500 recovers 86% from the lows seen on Mar 23, 2020, as the Fed’s multi-billion dollar stimulus package suppresses near-term survival anxiety and infuses liquidity into the system.
  • 5/24/2021: Around half of the U.S. population has received at least one dose of Covid-19 vaccine, while 29% of the population is fully vaccinated.

In contrast, here is how BMRN stock and the broader market fared during the 2007-08 crisis

Timeline of 2007-08 Crisis

  • 10/1/2007: Approximate pre-crisis peak in S&P 500 index
  • 9/1/2008 – 10/1/2008: Accelerated market decline corresponding to Lehman bankruptcy filing (9/15/08)
  • 3/1/2009: Approximate bottoming out of S&P 500 index
  • 12/31/2009: Initial recovery to levels before accelerated decline (around 9/1/2008)

BioMarin Pharmaceutical and S&P 500 Performance Over 2007-08 Financial Crisis

BMRN stock increased from from levels of about $25 in October 2007 (pre-crisis peak for the broader markets) to levels of around $30 in September 2008 before declining to $12 in March 2009 (as the markets bottomed out), implying BMRN stock declined 52% from its October 2007 levels. It saw a rebound to levels of around $19 by the end of 2009, reflecting a 57% growth from its bottom. In comparison, the S&P 500 Index saw a decline of 51% from its peak in September 2007 to its bottom in March 2009, followed by a sharp recovery of 48% by January 2010.

BioMarin Pharmaceutical Fundamentals Have Been Robust Over The Recent Years

BioMarin’s revenues increased from $1.3 billion in 2017 to $1.9 billion in 2020, led by increased contribution from some of its drugs, including Kuvan, Vimizim, Palynziq, and Brineura. The company’s EPS has seen a significant growth to $4.75 in 2020, compared to a loss per share of $0.67 in 2017. This can be attributed to higher revenues and expansion of margins, led by reduced R&D investments and income tax benefits.

Does BioMarin Pharmaceutical Have Sufficient Cash Cushion To Meet Its Obligations?

BioMarin Pharmaceutical has seen its total debt grew to $1.1 billion in 2020, compared to $0.8 billion in 2017, while its total cash decreased to $1.1 billion from $1.4 billion over the same period. It also generated over $86 million in cash from its operations in 2020. The company has a sufficient liquidity cushion to meet its near term obligations.

Conclusion

Phases of Covid-19 Crisis:

  • Early- to mid-March 2020: Fear of the coronavirus outbreak spreading rapidly translates into reality, with the number of cases accelerating globally
  • Late-March 2020 onward: Social distancing measures + lockdowns
  • April 2020: Fed stimulus suppresses near-term survival anxiety
  • May-June 2020: Recovery of demand, with gradual lifting of lockdowns – no panic anymore despite a steady increase in the number of cases
  • Since late 2020: Weak quarterly results, but continued improvement in demand and progress with vaccine development buoy market sentiment. Multiple countries have undertaken large-scale vaccine programs for Covid-19, though new variants of coronavirus resulted in uptick in active cases.

As the global economy opens up and restrictions are lifted in phases, overall volume of new patient starts will rise, boding well for BMRN stock in the near term. We believe that BMRN stock could rally back to levels of over $95, implying around 24% upside from the current price.

While BMRN stock can see a rebound, it is helpful to see how its peers stack up. BioMarin Pharmaceutical Stock Comparison With Peers summarizes how BioMarin Pharmaceutical compares against peers on metrics that matter. You can find more such useful comparisons on Peer Comparisons.

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