Baird Buying Ultragenyx And BioMarin

Baird has initiated coverage on Ultragenyx Pharmaceutical Inc

with an Outperform rating, citing diversified pipeline with multiple near-term catalysts. It also assumed coverage on BioMarin Pharmaceutical Inc.

and upgraded the stock to Outperform with a $110 price target. Ultragenyx' pipeline consists of six programs in late stage development with approval of its first drug expected in the second half of 2016. "Over the next 12 months, there are a number of meaningful value-creating events that have the potential to drive upside. Hence, we are initiating coverage with an Outperform rating and an $85 price target," analyst Michael Ulz wrote in a note to clients. RARE'S KRN23 represents a $1 billion plus market opportunity (Baird: $1.5 billion) in the treatment of X-linked hypophosphatemia (XLH), a disease which has no current treatment. KRN23 is currently in a Phase 2 trial in pediatric patients and a Phase 3 study in adults. Updated results from the Phase 2 pediatric study could further support regulatory filing in Europe in the second half of 2016, with possible improvements in growth velocity meaningfully strengthening KRN23's profile. Meanwhile, Triheptanoin (UX007) is expected to begin a Phase 3 study on long-chain fatty acid oxidation disorders in 2017, with updated Phase 2 data in 2H16 potentially demonstrating even broader benefits with a reduction in medical events. The analyst noted that Ace-ER and rhGUS provide near-term revenue opportunities, though relatively modest in size. Combined, Ace-ER in GNE Myopathy and rhGUS in Sly Syndrome represent a peak combined about $200 million revenue opportunity. On BioMarin, analyst Ulz said the company has a robust pipeline with multiple de-risking events near term (pegvaliase, vosoritide and BMN 270) expected to drive upside. This, coupled with a recent commitment to managing operating expenses to drive bottom-line profitability and the recent removal of the Duchenne muscular dystrophy (DMD) overhang, creates an attractive investment opportunity. "The base business has room to grow with sales expected to exceed $1B for the first time in 2016 (Guidance: $1.05-1.10B; Baird: $1.1B). This growth (21% y/y) is driven by a combination of the ongoing Vimizim launch (now in its 3rd year) and the addition of Ex-US Kuvan sales (rights recently acquired from Merck Serono)," Ulz said. In addition, Pegvaliase Phase 3 data in March is a near-term growth driver, and could support regulatory filing in the second half of 2016. "Based on prior data, we expect pegvaliase (PEG-PAL) to reduce Phe levels and meet the primary endpoint," Ulz noted. Meanwhile, additional positive data readouts at R&D Day (April) could drive upside. Updated Phase 2 vosorotide data at one year should confirm encouraging six-month data. Early Phase 1/2 data from BMN 270 (gene therapy) will provide insights into safety, factor expression, and durability in Hemophilia A, which represents a large market opportunity. Shares of RARE were down 3 percent at $63.85 and BMRN dipped 2 percent at $86.30. RARE shares declined 43 percent and BMRN shares fell 17 percent this year.