BioMarin Pharmaceutical (BMRN) jumped to a 16-week high Friday after it gained approval for a rare-disease drug and priced it higher than analysts expected.
XLate Thursday, the Food and Drug Administration approved Palynziq to treat a disorder in which the amino acid phenylalanine builds up in the body. Phenylketonuria, also called PKU, is caused by a genetic defect. It can result in deformities, skin problems, mental disorders, seizures or intellectual disability.
Piper Jaffray analyst Christopher Raymond noted several pieces of "really good news" on the label and in the pricing. BioMarin set a wholesale acquisition cost of $488 per unit, which would equal $267,000 annually. The company expects it to cost $192,000 per year after discounts.
Raymond had expected an annual price of $175,000. Some analysts projected $180,000. Further, the label only requires patient monitoring for allergic reaction after the first dose, vs. earlier expectations for monitoring following the first two doses.
"We have long viewed this approval as the lynchpin to BioMarin's transformation to a sustainably high (earnings per share) growth story," he said in a report. "We would expect shares to move measurably higher from here in coming quarters."
On the stock market today, BioMarin shares popped 4.8% to close at 92.49. Shares jumped as much as 5% early to touch a high last seen in early February. Shares of biotech companies collectively advanced 0.2%.
PKU Treatment Approved
The label for the PKU treatment also only recommends having a trained observer watch the patient for allergic reaction, Raymond said. He noted "this is also less burdensome" than prior expectations that it would be required.
Raymond expects Palynziq to generate $19 million in 2018, growing to $603 million in 2022. RBC analyst Kennen MacKay sees just $9 million in sales of the drug in 2018. But he boosted his price target on BioMarin by 4 to 98.
"Palynziq's FDA approval lifts a key 2018 overhang for BioMarin, with focus now shifting towards commercial execution to realize Palynziq's potentially large market opportunity," he said in a report to clients.
MacKay estimates around 11,400 adults are PKU patients in the U.S. Of those, a PKU clinic monitors roughly 3,900, with around 36% already on BioMarin's drug Kuvan. That leaves 64% of those patients eligible for Palynziq, he said.
"Our model conservatively assumes that BioMarin is able to successfully transition the majority of these currently treated patients onto commercial drug by year-end, while we await signs of broader initial traction during quarterly earnings commentary," MacKay said.
Leerink analyst Joseph Schwartz is more conservative. He noted BioMarin's goal of $1 billion in sales of the PKU treatment may be possible, but it will require substantial uptake and compliance. He boosted his price target to 146 from 145, and kept his outperform rating on BioMarin.
Schwartz anticipates a slow launch and projects peak sales north of $500 million by 2029.
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