BioMarin Earnings: Reducing Our Fair Value Estimate as Roctavian's Prospects Dim

BioMarin Pharmaceutical's nearly $650 million in first-quarter revenue (9% growth) puts the company on track to reach management’s $2.7 billion-$2.8 billion revenue guidance for the full year, with achondroplasia drug Voxzogo continuing to see impressive growth as more children initiate therapy. However, the launch of hemophilia gene therapy Roctavian is still stalled due to reimbursement issues in the US and Europe. We’ve reduced our Roctavian forecast to less than $500 million in peak annual sales, although we recognize that BioMarin could opt to divest the program; management will outline its long-term strategy at the investor day in September. BioMarin is also culling its pipeline in an effort to focus on the most impactful programs, leading management to reduce guidance for research and development expenses this year and increase guidance for operating margins and earnings per share. All of the programs that were discontinued were too early to be explicitly included in our valuation model. After these adjustments, we’re reducing our fair value estimate to $87 per share from $96 and think the shares look fairly valued. We think BioMarin’s current rare-disease portfolio already warrants a narrow moat, but we’re watching for advancement of Voxzogo in new indications and data from earlier-stage pipeline drugs as potential catalysts for raising our fair value estimate.