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'Orphan' drug success puts BioMarin on acquisition agenda

by Jonathan Marino  |  Published November 6, 2012 at 1:52 PM
BioMarin Pharmaceutical Inc. has moved front and center as a biotech takeout candidate thanks to a drug for rare genetic diseases that appears poised for approval from regulators.

The San Rafael, Calif.-based biotech's experimental drug for Morquio A syndrome, GALNS, posted positive results in Phase 3 trials, sending the biotech's stock soaring and further establishing the company as an attractive target for large pharmaceutical companies with a presence in rare diseases.

BioMarin's stock climbed to an all-time high of $49.52 during midday trading Monday, Nov. 5, before closing at $49.07, a more than 30% jump from its $37.41 per share close on Nov. 2. The company now has a market capitalization of roughly $6.05 billion.

BioMarin's drug treats Morquio A syndrome -- also known as mucopolysaccharidosis IV, or MPS IV -- a rare genetic order caused by the deficiency of a specific enzyme needed to break down sugar chains in cells. The sugar chains then build up in the cells, blood and connective tissues, causing joint abnormalities and systemic skeletal dysplasia, which results in an abnormal shape or size of the skeleton.

MPS itself is a class of diseases that are each differentiated by the deficient enzyme (others, for example, are MPS I and MPS VI). There is no approved cure for MPS IV.

In a Phase 3 trial, GALNS -- which works by replacing the deficient enzyme -- met its primary endpoint by improving patients' results in a 6-minute walk test. Patients taking a weekly dosage of the drug walked 22.5 meters further, on average, than those taking a placebo. The numbers were strong enough to convince industry watchers that regulators will sanction the drug.

"Our consultants have said that given the unmet need in [Morquio A syndrome] the [Food and Drug Administration] could approve GALNS even if the statistics in the primary endpoint were missed," Cowen & Co.'s Phil Nadeau wrote in a research note to clients. "We believe the data are convincing and likely to support global regulatory approvals."

While Morquio A syndrome affects just 2,500 to 3,000 patients around the world, it is an orphan indication, drugs that are priced far higher than standard treatments given their small patient populations and the pressing need for them. BioMarin, for example, expects to price the drug at between $250,000 and $355,000 per patient for a year of treatment, leading analysts to believe the opportunity exists for a significant revenue producer. Nadeau estimated that the drug represents a $500 million to $800 million market opportunity for BioMarin and models $325 million in revenue for the drug in 2017.

BioMarin plans to seek regulatory approval of the drug in the first quarter of 2013. Barclays plc analyst Ying Huang expects BioMarin to win approval of the drug by the fourth quarter of 2013 in the U.S. and by the first quarter of 2014 in Europe.

With potential approval in the near term and a lucrative orphan drug in its cabinet -- of which it holds 100% of the rights -- observers suggest that BioMarin has firmly entrenched itself as an appetizing takeout target.

"We believe this ... solidifies [BioMarin] as an attractive takeover candidate for companies seeking orphan drug and biologic critical mass," Leerink Swann LLC analyst Joseph Schwartz wrote in a note to clients Monday.

Schwartz rated BioMarin's stock at outperform, and raised his 12-month fair value estimate to $65 per share from $44 per share. Huang raised his price target to $54 per share from $46 per share.

BioMarin already has established itself and its enzyme-replacement therapy platform by winning approval of four drugs: Aldurazyme, a drug that it co-developed with Genzyme Corp. for MPS I (BioMarin shares the revenue for the drug with Genzyme's owner, Sanofi); Naglazyme, for MPS VI; Kuvan, for phenylketonuria, or PKU, a genetic disorder that leaves babies without the ability to break down amino acid phenylalanine (BioMarin shares the rights to the drug with Merck Serono SA); and Firdapse, approved in Europe for adults with Myasthenic Syndrome, a rare autoimmune disease characterized by muscle weakness.

BioMarin brought in about $437.65 million in global revenue from the four drugs in 2011.

The company also has a few additional compounds in its pipeline: PEG-PAL, a treatment for PKU patients who can't take Kuvan; BMN-701, for Pompe disease, a glycogen storage disorder; cancer drug BMN-673; and BMN-111, for achondroplasia, the most common form of dwarfism.

Tags: achondroplasia | BioMarin Pharmaceutical Inc. | BMN-111 | BMN-673 | BMN-701 | dwarfism | GALNS | Kuvan | Morquio A syndrome | MPS IV | mucopolysaccharidosis IV | PEG-PAL | PKU | Pompe disease

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Jonathan Marino

Senior Editor: Private Equity

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