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Horizon Therapeutics or BioMarin: Which Is a Better Bet in July?

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The better pick

Horizon Therapeutics (HZNP) is up 23.13%, and BioMarin (BMRN) is down 6.62% YTD (year-to-date) in 2019. Let’s study the drivers and risks for both these rare disease players in greater detail.

Share price movements and valuation

On July 2, Horizon Therapeutics closed at $24.76, 0.76% lower than its previous close, 53.69% higher than its 52-week low of $16.11, and 15.90% lower than its 52-week high of $29.44. The company’s market cap was $4.58 billion, and its PE, forward PE, PEG (PE-to-growth), PS (price-to-sales), PB (price-to-book), and PC (price-to-cash) ratios were 317.44x, 12.40x, 19.36x, 3.62x, 2.85x, and 4.43x, respectively.

On June 28, BioMarin Pharmaceutical closed at $84.05, 0.12% lower than its previous close, 6.22% higher than its 52-week low of $79.13, and 21.26% lower than its 52-week high of $106.74. The company’s market cap is $14.98 billion, and its forward PE, PS, PB, and PC ratios are 278.31x, 9.87x, 5.10x, and 16.74x, respectively.

Compared to BioMarin Pharmaceutical, Horizon Therapeutics is trading at lower forward PE, PS, PB, and PC ratios.

Financial performance in the first quarter

In the first quarter, Horizon Therapeutics reported revenue of $280.37 million, a YoY (year-over-year) rise of 25.23% and $42.02 million ahead of the consensus estimate. The company reported adjusted EBITDA of $88.4 million, a YoY rise of 163%. Horizon also reported non-GAAP (generally accepted accounting principles) EPS of $0.30, a YoY rise of 900.00% and $0.18 ahead of the consensus estimate.

BioMarin Pharmaceutical reported revenue of $400.75 million in the first quarter, a YoY rise of 7.31% and $10.8 million ahead of the consensus estimate. The company reported non-GAAP EPS of -$0.32, a YoY fall of 28.00%.

Revenue comparison

On its first-quarter earnings call, Horizon Therapeutics increased its 2019 revenue guidance from $1.23 billion–$1.25 billion to $1.26 billion–$1.28 billion. The company raised its guidance despite having to increase investments to support the potential launch of investigational active TED (thyroid eye disease) therapy teprotumumab.

Analysts expect Horizon Therapeutics’ revenues to rise 4.68% YoY to $1.26 billion in 2019, 8.26% YoY to $1.37 billion in 2020, and 11.29% YoY to $1.52 billion in 2021. Analysts also expect the company’s revenues to see YoY changes of -1.61% to $297.97 million in the second quarter, 1.08% to $328.83 million in the third quarter, and 0.33% to $356.73 million in the fourth quarter.

On its first-quarter earnings call, BioMarin Pharmaceutical guided for revenue of $1.68 billion–$1.75 billion in 2019. The company expects its revenue to be $2.0 billion in 2020, which excludes the contribution of late-stage assets such as valrox and vosoritide.

Analysts expect BioMarin Pharmaceutical’s revenues to rise 13.79% YoY to $1.70 billion in 2019, 15.45% YoY to $1.96 billion in 2020, and 16.20% YoY to $2.28 billion in 2021. Analysts also expect the company’s revenues to see YoY rises of 11.11% to $414.28 million in the second quarter, 10.82% to $434.07 million in the third quarter, and 26.28% to $446.02 million in the fourth quarter.

Compared to Horizon Therapeutics, BioMarin Pharmaceutical’s revenue is expected to grow at a higher compound annual growth rate from 2019 to 2021.

Earnings comparison

On its first-quarter earnings call, Horizon Therapeutics raised its 2019 adjusted EBITDA guidance from $440 million–$445 million to $450 million–$465 million.

Analysts expect Horizon Therapeutics’ adjusted EBITDA to rise 0.39% YoY to $453.16 million in 2019, 13.21% YoY to $513.02 million in 2020, and 19.91% YoY to $615.15 million in 2021. Analysts also expect the company’s adjusted EBITDA to see YoY falls of -13.27% to $101.33 million in the second quarter, -17.52% to $123.64 million in the third quarter, and -1.95% to $148.13 million in the fourth quarter.

BioMarin has guided for a non-GAAP income of $130 million–$170 million and a GAAP net loss of $45 million–$85 million in 2019. The company expects its cost of sales as a percentage of its total revenue to be 20%–21%, while its research and development and selling, general, and administrative expenses are expected to be $740 million–$780 million and $650 million–$690 million, respectively, in 2019.

Horizon Therapeutics’ revenue drivers

According to its first-quarter earnings call, Horizon Therapeutics’ gout therapy, Krystexxa, is expected to report a double-digit YoY rise in net sales in 2019. The drug’s annual peak sales potential is expected to be more than $750 million.

Krystexxa reported revenue of $52.30 million in the first quarter, a YoY rise of 12% driven by a 30% YoY increase in volumes. Horizon Therapeutics’ commercial team is focused on increasing the number of accounts ordering Krystexxa as well as the number of vials ordered by each account.

Horizon Therapeutics plans to study Krystexxa in combination with methotrexate in a MIRROR immunomodulation trial for uncontrolled gout. The company also plans to initiate a trial evaluating Krystexxa in the treatment of kidney transplant patients suffering from uncontrolled gout in the second half of 2019. The company has also selected PASylated uricase technology HZN-007 as a next-generation biologic to be studied in uncontrolled gout indications.

Besides Krystexxa, there are other promising orphan and rheumatology drugs in the company’s portfolio. In the first quarter, immunology therapy Rayos reported revenue of $19.4 million, a YoY rise of 82%. Urea cycle disorder drug Ravicti reported revenue of $49.9 million in the quarter, a YoY rise of 2%. Nephropathic cystinosis drug Procysbi reported revenue of $39.6 million, a YoY improvement of 13%. According to the company’s first-quarter earnings call, Ravicti and Procysbi benefited from mid-single-digit YoY rises in total patients and improving patient compliance rates.

Horizon Therapeutics expects its primary care franchise, which comprises Pennsaid 2%, Duexis, Vimovo, and Migergot, to report flat net sales in 2019 on a YoY basis.

BioMarin Pharmaceutical’s revenue drivers

BioMarin Pharmaceutical expects the net product revenue of its commercialized rare disease drugs Vimizim, Naglazyme, and Brineura to be $530 million–$570 million, $350 million–$380 million, and $55 million–$75 million, respectively, in 2019.

The company also has two commercialized assets, Kuvan and Palynziq, which target PKU (phenylketonuria). According to BioMarin’s first-quarter earnings release, the older PKU drug, Kuvan, reported net product sales of $106.9 million in the first quarter, a YoY rise of 8% driven by new patient demand in the US and increased sales volumes in Europe. The company has guided for Kuvan sales of $420 million–$460 million in 2019.

According to its first-quarter earnings release, PKU drug Palynziq, which was launched in the US in the third quarter of 2018, reported revenue of $12.3 million as patients from clinical trials transitioned to a commercial setting. The company has guided for net product revenue of $70 million–$100 million for Palynziq in 2019.

According to its first-quarter earnings call, BioMarin increased its reimbursed base of Palynziq patients by ~60% from 252 patients at the end of the fourth quarter to 414 patients at the end of the first quarter. Out of 414 patients, 136 were transitioning from clinical trials, while the remainder were naïve to Palynziq treatments. At the end of the first quarter, the company had enrolled an additional 140 naïve patients, who were awaiting shipment of their first Palynziq injection. Around 37% of the new Palynziq patients were those switching from Kuvan. At the end of the first quarter, the company had managed to complete one enrollment for Palynziq at 89 of the 125 PKU centers in the US.

On May 6, BioMarin Pharmaceutical announced the European Commission’s approval of Palynziq for PKU patients aged 16 and older.

BioMarin is also working to file an initial new drug application for its investigational PKU gene therapy BMN 307.

Horizon Therapeutics’ lead research program

On February 28, Horizon Therapeutics announced positive top line results from its Phase 3 OPTIC trial evaluating its leading late-stage asset teprotumumab in active TED indications. The investigational therapy demonstrated a statistically significant improvement in terms of proptosis compared to the placebo in this trial. On April 26, the company released new data that further highlighted the efficacy of teprotumumab in reducing proptosis in active TED patients. Based on this data, the company expects to file a biologics license application with the FDA in mid-2019, and it expects approval in the first half of 2020.

According to Horizon’s first-quarter earnings call, teprotumumab is expected to reach annual peak net sales of more than $750 million in the US market. The company has estimated the annual incidence of teprotumumab-eligible active TED patients to be 15,000–20,000. TED patients generally have the active disease for three years, which can result in rollover demand for teprotumumab in subsequent years. There are no FDA-approved treatments for the disease. Endocrinologists and ophthalmologists wait for active TED to progress to inactive TED, at which time patients are referred to an oculoplastic surgeon for a highly invasive and complex surgery to reduce proptosis, or eye bulging. These trends highlight the need for teprotumumab as a paradigm change in active TED indications.

BioMarin Pharmaceutical’s leading research programs

On May 28, BioMarin Pharmaceutical announced results from its Phase 1/2 study highlighting the durability of response after three years of a single 6e13 vg/kg dose of investigational gene therapy valoctocogene roxaparvovec in severe hemophilia A indications. The results demonstrated significant control in the bleed rate in patients who had previously required daily Factor VIII infusions. Investors, however, weren’t impressed, as they’d been expecting more robust data.

On May 28, the company also announced positive top line results from its Phase 3 GENEr8-1 study evaluating valoctocogene roxaparvovec in hemophilia A patients on Factor VIII levels after 23–26 weeks of one-time doses.

According to its first-quarter earnings call, BioMarin Pharmaceutical will announce whether it will explore an accelerated approval pathway for valoctocogene roxaparvovec by the end of 2019.

BioMarin Pharmaceutical has also completed the enrollment of patients in a Phase 3 trial evaluating its investigational therapy vosoritide in achondroplasia indications. The company expects data readouts from this trial by the end of 2019. Vosoritide is expected to target 25,000 achondroplasia patients in the company’s current markets. Regulatory approvals for these two late-stage assets are expected to expand the company’s addressable market by 50,000 patients.

To check out how industry peers Gilead Sciences and Johnson & Johnson stack up, be sure to read What Are Analysts Recommending for Johnson & Johnson and Gilead?

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