BioMarin's M&A prospects decline as new rival emerges for top-selling drug.

BioMarin, a rare disease pharmaceutical company, has seen its stock rating downgraded due to the emergence of a new rival for its best-selling drug. As a result, the company is considered less likely to be a target for mergers and acquisitions. The downgrade highlights the increased competition in the market for rare disease treatments.

BioMarin Pharmaceutical Inc. (NASDAQ: BMRN), a leading rare disease pharmaceutical company, has seen its stock rating downgraded due to the emergence of a new rival for its best-selling drug, Voxzogo. This development has made the company less likely to be a target for mergers and acquisitions (M&A) and highlights the increased competition in the market for rare disease treatments.

The downgrade comes amidst significant market shifts. BioMarin's stock price has fallen from $73 per share in March to around $60 per share, a 16% drop since the last note. This decline is attributed to the potential approval of TransCon CNP, a therapy developed by Danish Pharma Ascendis (ASND), for achondroplasia in children. TransCon, a prodrug of C-type natriuretic peptide (CNP), offers a more sustained release and is administered once weekly via subcutaneous injection, potentially making it more effective and safer than Voxzogo.

The FDA has granted TransCon a priority review, which means it will be either approved or rejected by November 30, 2025. This rapid timeline poses a significant threat to BioMarin's market share, as Voxzogo has been the sole treatment for achondroplasia since its approval. Additionally, BridgeBio (BBIO) is also developing infigratinib, another therapy indicated for achondroplasia, which is currently in the Phase 3 study stage.

BioMarin's management has defended Voxzogo, highlighting its broad label, international reach, and strong commercial footprint. However, the company's ability to maintain its growth trajectory and achieve its stated targets of $4bn revenues by 2027, a non-GAAP operating margin of 40% by 2026, and $1.25bn of operating cash flow by 2027 is now under threat. Even if BioMarin hits its 2027 revenue target, the approval of TransCon could lead to a decline in subsequent years.

The downgrade also reflects concerns about BioMarin's pipeline. While the company has several assets in development, the pipeline's potential impact on the company's revenue and profitability remains uncertain. The acquisition of Inozyme, a late-stage enzyme replacement therapy for ENPP1 Deficiency, may add another high-revenue asset to the portfolio, but its impact is yet to be fully realized.

In conclusion, the increased competition in the rare disease market, particularly for achondroplasia treatments, has led to a downgrade in BioMarin's stock rating. While the company remains profitable and has a strong pipeline, the emergence of new rivals poses significant challenges to its growth prospects. As such, investors may want to approach BioMarin's stock with caution.

References:
[1] https://seekingalpha.com/article/4803723-biomarin-less-likely-m-and-a-target-as-rival-for-best-selling-drug-emerges