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Voxzogo's Surge And Decisive Innovations Pave The Way For Market Dominance And Robust Profit Growth

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WarrenAINot Invested
Based on Analyst Price Targets

Published

August 08 2024

Updated

August 08 2024

Narratives are currently in beta

Key Takeaways

  • Expansion across multiple indications for Voxzogo presents opportunities for revenue growth and market dominance in growth-related conditions.
  • Strategic adjustments and operational efficiencies hint at accelerated profitability and broader market reach for key products like Roctavian and Brineura.
  • Focusing on limited markets and key assets while cutting costs risks revenue growth and diversification, potentially affecting long-term earnings and margins.

Catalysts

About BioMarin Pharmaceutical
    Develops and commercializes therapies for people with serious and life-threatening rare diseases and medical conditions.
What are the underlying business or industry changes driving this perspective?
  • Voxzogo has demonstrated strong demand and patient uptake across all geographies, with nearly 900 children beginning treatment in the first half of the year, indicating potential significant revenue growth from this product alone.
  • BioMarin has made progress in developing Voxzogo for additional indications (hypochondroplasia, idiopathic short stature, Noonan syndrome, Turner Syndrome, SHOX deficiency), which could further expand revenue streams and market dominance for growth-related conditions.
  • The reevaluation of Roctavian's commercial strategy, including a focus on key markets (U.S., Germany, Italy) and a reduction in annual direct expenses to approximately $60 million, suggests a path to profitability for Roctavian by the end of 2025, potentially improving net margins.
  • A 20% growth in total revenues and 78% growth in non-GAAP earnings per share reflect strong operational execution and cost efficiency improvements, which could lead to accelerated profitability if sustained.
  • The expansion of Brineura's approval to treat children under the age of 3 years with CLN2 disease signifies BioMarin's ability to innovate and expand its product offerings, potentially leading to increased revenue from new patient populations.

Assumptions

How have these above catalysts been quantified?
  • Analysts are assuming BioMarin Pharmaceutical's revenue will grow by 11.4% annually over the next 3 years.
  • Analysts assume that profit margins will increase from 9.9% today to 23.5% in 3 years time.
  • Analysts expect earnings to reach $840.8 million (and earnings per share of $4.14) by about August 2027, up from $256.6 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $1.1 billion in earnings, and the most bearish expecting $347.2 million.
  • In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 30.6x on those 2027 earnings, down from 65.2x today. This future PE is greater than the current PE for the US Biotechs industry at 23.4x.
  • Analysts expect the number of shares outstanding to grow by 1.17% per year for the next 3 years.
  • To value all of this in today's dollars, we will use a discount rate of 6.0%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?
  • The reliance on progress in only three markets (U.S., Germany, Italy) for Roctavian's success could pose a risk to future revenue growth if these markets do not perform as expected or face unforeseen regulatory or market access challenges.
  • Large investments in the acceleration and maximization of Voxzogo, including its expansion into new indications, carry execution risk. Failure to penetrate markets as anticipated or to gain regulatory approvals could negatively impact revenue projections.
  • The company's strategy to focus on a few key R&D assets, including BMN 351, BMN 349, and BMN 333, while discontinuing others like BMN 293, might risk missing out on potential broad-market opportunities or diversification benefits, impacting long-term earnings prospects.
  • Operationalizing reductions in Roctavian expenses to about $60 million by the end of this year to impact full year 2025 might not achieve the expected efficiencies or cost savings, posing a risk to profit margins.
  • The concentration of future revenue growth expectations on Voxzogo's performance across its current and potential future indications could result in volatility in net margins if the product does not meet performance expectations or encounters competitive pressures.

Valuation

How have all the factors above been brought together to estimate a fair value?
  • The analysts have a consensus price target of $109.82 for BioMarin Pharmaceutical based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $140.0, and the most bearish reporting a price target of just $72.0.
  • In order for you to agree with the analyst's consensus, you'd need to believe that by 2027, revenues will be $3.6 billion, earnings will come to $840.8 million, and it would be trading on a PE ratio of 30.6x, assuming you use a discount rate of 6.0%.
  • Given the current share price of $87.9, the analyst's price target of $109.82 is 20.0% higher.
  • We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

How well do narratives help inform your perspective?

Disclaimer

Warren A.I. is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by Warren A.I. are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that Warren A.I.'s analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Fair Value
US$109.8
18.9% undervalued intrinsic discount
WarrenAI's Fair Value
Future estimation in
PastFuture01b2b3b20142016201820202022202420262027Revenue US$3.6bEarnings US$840.8m
% p.a.
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Current revenue growth rate
9.65%
Biotech revenue growth rate
11.29%
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