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Credit Suisse Cuts BioMarin Price Target As Company Gives Up Revenue For Profit

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BioMarin Pharmaceutical Inc. (NASDAQ: BMRN) announced the termination of the development of BMN-701 for Pompe disease, besides saying that it was planning to out-license the asset. Credit Suisse’s Alethia Young maintained an Outperform rating for the company, while reducing the price target from $114 to $103.

Reasons For Discontinuation

Management announced that it is focusing on products worth more than $500M and that BMN-701 represented a $400 million opportunity. Another reason cited by the company was the presence of another treatment for Pompe disorder.

Continued development of BMN-701 might have also proved expensive for BioMarin in light of the company’s 2017 guidance for non-GAAP profitability, analyst Alethia Young pointed out. The company is now seeking a partner to bring the asset into a Phase II trial.

Reduced Contribution From BMN-701

“We had previously given the company full economic credit for development. Now, we are adjusting to give BioMarin a 20% royalty on peak sales of ~$350M for BMN-701,” Young wrote. The probability of success of the treatment has also been lowered from 65 percent to 50 percent.

BioMarin’s shares have lost 9 percent over the past one week after the company announced the termination of Drispersen and modification of its Pompe strategy.

“We didn’t think drisapersen was in the valuation, but a negative headline. Pompe is impactful to the valuation, but likely the right decision. We want the company to focus development on highest value programs,” the analyst commented.

Latest Ratings for BMRN

Jan 2019Raymond JamesDowngradesMarket OutperformMarket Perform
Dec 2018GuggenheimInitiates Coverage OnNeutral
Dec 2018OppenheimerInitiates Coverage OnPerform

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Posted-In: Alethia Young Credit SuisseAnalyst Color Long Ideas Price Target Reiteration Analyst Ratings Trading Ideas


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