BioMarin's Hunt for Break-Even

The biotech needs a way to recover from a rare-disease setback.

BioMarin is going back to the future.

The biotech promised on its fourth-quarter earnings call Thursday to once again head toward profitability -- or at least profitability's milquetoast second cousin, "non-GAAP break-even or better in 2017," with actual bottom-line growth to follow. The company last reported positive net income in 2010, but has lost money at a growing clip each year since.

BioMarin promised to deliver these results regardless of what happens with its high-profile and troubled drug for Duchenne Muscular Dystrophy (DMD), Kyndrisa. Breaking even without Kyndrisa will require a combination of commercial execution and cost discipline that has seemed to elude the company. To restore investor confidence and get back to its former status as a stock-market darling, it needs to execute well and for some of its current shots on FDA goal to land. 

Investors seemed to like the promise well enough, sending shares up 5 percent on Friday. But they're still down 45 percent from last year's peak. 

Back to Black

More than a decade into its public existence, BioMarin is setting a breakeven deadline

The company's goals, or at least its language, have moderated since the FDA rejected its DMD drug in January. In its earnings call a year ago, BioMarin projected "non-GAAP profitability in 2017" driven by approval of Kyndrisa. This year, the company projects a non-GAAP operating loss of $75 to $100 million on revenue of a bit more than $1 billion, an improvement from last year.     

Nyet Income

BioMarin has invested heavily in recent years, and is now under pressure to produce profit.

Source: Bloomberg

BioMarin's break-even hopes for 2017 depend on sales of the drugs it already has on the market; its forecast holds for a variety of different outcomes for its late-stage drug pipeline. Its two most important marketed drugs are its rapidly growing metabolic disorder drug Vimizim, approved in 2014, and hyperphenylalaninemia drug Kuvan. Analysts expect both to add $100 million to sales over the next two years. Still, the company is putting a substantial burden on those drugs.

On the Market

BioMarin's four products already on sale may help it pass $1 billion in revenue this year

Source: Bloomberg

The other side of the equation is costs; BioMarin is something of a big spender. Its operating expenses, heavily weighted toward R&D, have consistently neared or exceeded revenue, even before any other investments. This year, the company spent $634.8 million on R&D and $402.3 million on sales, general, and administrative expenses, versus revenue of less than $900 million.

Operating expenses grew more than 30 percent in 2015. BioMarin projects those will moderate eventually, but the high end of the company's projections next year would put operating expenses above $1.2 billion. If drug sales are slow and the pipeline disappointing, then expenses will have to get under control more quickly than that. 

The real hope beyond 2017, and for BioMarin's stock price, is in that pipeline. It still has hopes for Kyndrisa and says it is cautiously optimistic of E.U. approval. But after a U.S. rejection, that seems less certain. BioMarin is getting data on two promising rare-disease drugs this year. Positive results may mean the company could file for approval this year, and potentially get the drugs on the market next year.

Given the slow ramp-up rate for orphan drugs, however, these two are unlikely to make or break the company's 2017 goals. At most, they might push the company past break-even to a little profit. But any good news on that front will go a long way toward restoring confidence in the company's research spending and pipeline, and toward making its lofty projections for future revenue seem possible. In the company's bullish view, revenue could pass $2 billion in 2020. 

Coming Down the Pipe

BioMarin has a promising pipeline of drugs, according to analyst consensus estimates of annual sales upon FDA approval.

Source: Bloomberg

BioMarin is a somewhat frustrating company. It's been successful at getting rare-disease drugs to market, but less so at translating that into operating profit. Its DMD troubles cast some doubt on its abilities on both fronts, at a time when the biotech market is particularly unfriendly to uncertainty. Investors clearly needed to hear it make a commitment to profit. Now it just needs to deliver that using real math

    This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

    To contact the author of this story:
    Max Nisen in New York at

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    Mark Gongloff at

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