RBC Capital Positive on BioMarin Pharma (BMRN) Following Talazoparib Sale (MDVN)

RBC Capital affirms BioMarin Pharmaceutical Inc. (Nasdaq: BMRN) with an Outperform rating and $145 price target after the company announced that it and Medivation (Nasdaq: MDVN) entered into an asset purchase agreement under which Medivation will acquire all worldwide rights to talazoparib (formerly referred to as BMN 673), a highly-potent, orally-available poly ADP ribose polymerase (PARP) inhibitor currently in a Phase 3 study for the treatment of patients with deleterious germline BRCA 1 or BRCA 2 mutations and locally advanced and/or metastatic breast cancer.

Analyst Michael J. Yee commented, We view this as a fundamental positive for BMRN and the $410M plus back-end and royalties as reasonable/fair on BMRN side equating to a value of around a few dollars per share within the overall BMRN franchise value. This is based on using our prior assumptions of a basecase franchise around $500M+ with 85% probability of success, using a 3x multiple of sales and then discounting back at 15% over 7-8 years to peak from today. The royalty at around 5% would be worth $25M+ per year and an 8x multiple would imply value around $200M of value or $100M if we discount that back with time value and an 85% probability as well.

The key fundamental positives are: BMRN offloads expenses of enrolling pivotal programs for BMN-673 and brings in non-dilutive capital while maintaining a royalty economic interest if the drug becomes much bigger than expected down the road. BMRN is not highly focused on cancer right now and the PARP market is competitive so this should be developed and enrolled and commercialized by a cancer company (TSRO and CLVS and AZN etc and more also have competing PARP programs), Yee noted.

For an analyst ratings summary and ratings history on BioMarin Pharmaceutical Inc. click here. For more ratings news on BioMarin Pharmaceutical Inc. click here.

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