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Why Is BioMarin (BMRN) Down 2.2% Since the Last Earnings Report?

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A month has gone by since the last earnings report for BioMarin Pharmaceutical Inc. (BMRN - Free Report) . Shares have lost about 2.2% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

BioMarin Fourth-Quarter Loss Narrower than Expected

BioMarin reported a loss of $0.37 per share in the fourth quarter of 2016 (including stock-based compensation expense), narrower than the year-ago loss of $0.57 as well as the Zacks Consensus Estimate of a loss of $0.39 per share.

Total revenue came in at $300 million in the quarter, up 32% from the year-ago quarter. The top line was aided by strong net product sales. Revenues also beat the Zacks Consensus Estimate of $297 million by 1%.

Quarterly Details

Vimizim contributed $94 million to total revenue, up 59% year over year and 16% sequentially attributable to growth in new patients on Vimizim therapy.

In 2016, Vimizim patients on commercial therapy grew 40%, backed by further penetration in existing markets and addition of eight new markets. The company expects continued growth in 2017 as the franchise continues to benefit from robust underlying patient demand.

Last quarter, the company witnessed risk associated with order patterns in Brazil and Turkey. At the fourth quarter conference call, management said that though risks remain in Brazil, the company expects conditions in Turkey to stabilize.

Kuvan revenues soared 38% to $90 million, reflecting strong contribution from North America and the addition of new patients in the international markets. The number of patients on Kuvan therapy in North America increased by 15% in the fourth quarter.

Naglazyme sales rose 25% year over year to $75 million. Naglazyme revenues vary on a quarterly basis, primarily due to the timing of central government orders from Latin America. Nevertheless, the drug continued to witness steady patient growth in 2016 with the number of commercial patients increasing 9% in the year.

BioMarin received Aldurazyme royalties – totalling $35 million (down 10%) – from Sanofi’s Genzyme in the fourth quarter.

Research and development (R&D) expenses declined 3.8% to $152.0 million (excluding stock-based compensation expense) while selling, general and administrative (SG&A) expenses increased 25.5% to $118.0 million (excluding stock-based compensation expense).

2016 Results

Full-year sales improved 26% to $1.12 million, in line with the Zacks Consensus Estimate and also within the guidance range of $1.10−$1.15 billion.

Adjusted loss per share was $1.03 in 2016, narrower than the year-ago loss of $1.61 per share.

2017 Outlook

BioMarin expects total revenue in a range of $1.25 −$1.30 billion, representing double-digit revenue growth. The revenue guidance assumes the launch of Brineura in 2017. Beyond 2017, the company expects annual sales to grow approximately 15% throughout the rest of the decade.
Vimizim sales are expected in a range of $400–$430 million while Kuvan sales are projected in a range of $380−$410 million, representing an increase of about 14% over 2016 at the mid-point. Naglazyme sales are projected in a range of $300−$330 million.
R&D expenses are expected within $620–$650 million while SG&A expenses are projected in a range of $520–$550 million.

Adjusted earnings are expected to turn positive. The company expects adjusted net income of $30 - $70 million in 2017. Meanwhile, management committed to continued profitability improvements over the longer term.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed an upward trend in fresh estimates. There have been three upward revisions for the current quarter compared to two downward. However, in the past month, the consensus estimate  shifted downward by 9.1% due to these changes.

VGM Scores

At this time, BioMarin's stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with an 'F'. Also, the stock was allocated a grade of 'F' on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is suitable solely for growth investors.

Outlook

While estimates have been broadly trending upward for the stock, the magnitude of these revisions indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.


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