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Innovating in Biotech This Stock Targets Unmet Medical Needs for Big Profit

Most biotechnology companies have a broad mandate to perform research and development that addresses the largest market possible. It makes logical sense, the largest market should be the most profitable. But Biomarin stands this model on its head, providing drug treatments for highly specialized, mostly small markets that are underserved, and overlooked, by its much larger competitors.

The J.P. Morgan (JPM) Healthcare Conference kicks off next week, one of the largest and most important annual healthcare conferences of the year. That makes this the perfect time to take a look at a stock in the biotechnology sector which was beaten down last year, but looks ready to emerge like a phoenix from the ashes in 2024. 

One biotechnology stock that had a rocky year in 2023, but looks like it’s already bottomed and is headed higher is Biomarin Pharmaceuticals (BMRN).  While the stock was moving lower last year, mainly due to the pull of the industry it was in, Biomarin was busy getting approval internationally for several drugs which have started hitting the bottom line. 

At first glance Biomarin may seem to be an unusual biotechnology company. As opposed to making drugs that benefit as many patients as possible, Biomarin focuses on addressing rare diseases that highly impact a small number…sometimes as little as 5,000…of people worldwide. These diseases are usually hereditary, are difficult to diagnose, appear globally often in areas without adequate healthcare, and are extremely debilitating. 

A perfect example is it’s VOXZOGO drug which treats children with achondroplasia, a bone disease which impacts growth. The drug has been gaining approval, and expanding its patient reach, both in the U.S. and internationally. While only around 2,600 children received VOXZOGO in 2023, revenue from the drug was projected in the range of $435 to $455 million. 

As with all biotechnology stocks, an important driver of Biomarin’s stock price is its drug pipeline. Currently Biomarin has seven drug products it hopes to have proof of concept for in the 2024-’26 time period. The drugs aim to treat a range of diseases from chronic liver disease to muscular dystrophy. 

Drugs like VOXZOGO, mentioned above, and ROCTAVIAN, a drug to treat hemophilia, which rolled out in 2023 and is receiving international approvals and pricing finalizations, have begun impacting Biomarin’s profitability. The company reported a 15% increase in revenue in the latest quarter YoY. 

In 2024 ROCTAVIAN in particular should have an outsized impact on Biomarin revenue as the drug goes through its full rollout. The company has also stated that supply issues still lingering from the Covid pandemic are easing as well, leading to higher profitability across its drug lineup.

As it ramps up this year, BMRN currently has gross margins of just over 73% and trades at just over 4 times book value. The stock is not cheap from a valuation perspective, but appears set to have a banner year in 2024. 

Biomarin has an overall B rating in our POWR Ratings, where it outshines 86.32% of the stocks we track in our database. Appropriately, given some of the data I shared above, the company ranks a stellar 99.83% in the Growth component.  

Another more speculative factor that may drive Biomarin higher this year is the possibility of increased mergers and acquisitions in the biotechnology space. M&A activity overall appears to have hit a low in 2023 due to a combination of an aggressive FTC looking at antitrust violations, and a higher interest rate environment caused by the Fed. 

Biomarin’s unique proposition of addressing low volume drugs that have a high impact may have the company in the crosshairs of its larger competitors who do not have ongoing drug development in these areas.

In either case, whether through the organic growth of its current drug offerings and pipeline, or as a possible takeover candidate, Biomarin deserves a close look as we enter the new year.

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BMRN shares were trading at $97.35 per share on Thursday afternoon, up $0.67 (+0.69%). Year-to-date, BMRN has gained 0.96%, versus a -1.26% rise in the benchmark S&P 500 index during the same period.



About the Author: Steven Adams

After earning a law degree cum laude with a focus on securities law, Steven worked as a Nasdaq market maker for a large broker dealer, and then as a trader for an arbitrage focused proprietary hedge fund. He subsequently worked as a consultant for a Fortune 500 consulting firm serving both government and commercial clients, including the NYSE, Prudential, FDIC, and NASA.

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