BioMarin Pharmaceuticals (BMRN 1.70%) did not escape the market sell-off caused by the COVID-19 pandemic. The stock dropped 21% from its high of $97.10 set in March before quickly rebounding. Year to date, the biopharma's shares are down 0.40%, and nearing the mid-point of its 52-week range. BioMarin is trading at 52.1 times future earnings, and the company's forward to price-earnings-growth (PEG) ratio is 0.62. Given these valuation metrics, should investors consider adding shares to their portfolio?
Broad portfolio of drugs
BioMarin has a broad portfolio of commercialized drugs targeting rare genetic disorders. These drugs are marketed globally in over 75 countries and offer steady revenue growth.
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2019 was a year of record results for the company. It demonstrated continued operational excellence and productive research and development (R&D) that will lead to new products and top-line growth in the coming years. The company ended with a strong finish, with all brands contributing to total revenue of $1.7 billion, a 14% increase year over year.
Net product revenue from six products marketed by BioMarin -- Vimizim, Kuvan, Naglazyme, Palynziq, Brineura, and Firdapse -- generated $1.6 billion, increasing 17% from 2018 total revenue. Remaining net product revenue came from products marketed by Genzyme, generating $97.8 million, a decline of 28% year over year.
Of the commercialized products, Vimizim became the first BioMarin brand to reach and surpass $500 million in annual sales. Moreover, performance of two newer brands, Palynziq and Brineura, was impressive, contributing to 10% of the net product revenue. Management expects Palynziq to drive better growth in the coming years.
Looking ahead to 2020 and beyond, continued operational excellence and BioMarin's R&D pipeline will be of interest to investors. In January 2020, it divested its Firdapse assets to a third party in a sale transaction. This year and the coming years will be focused on the potential approval of Valoctocogene Roxaparvovec (Valrox) for treatment of Hemophilia A, application submission for treatment of achondroplasia (a genetic disorder that results in dwarfism), and enrollment into a phase 2 study for another Phenylketonuria (PKU) treatment. The success of these catalysts will contribute to the top-line growth and continue to strengthen its sales in a path toward profitability.
Rock-solid finances
There may be more volatility in the market due to the pandemic, but BioMarin's business seems stable for the current situation. It has plenty of cash for operations ($1.2 billion) and is in a healthy financial situation in which its assets exceed its liabilities.
It manages its debt effectively and currently boasts a debt-to-equity ratio (D/E) of 27.2%. A D/E ratio under 30% implies that company is using less debt to finance its operations and is ideal for operating in economic downturns. In the past five years, the company has managed to reduce its debt levels from a high of 41.8%.
In its fourth-quarter earnings call in February, CEO Jean-Jacques Bienaime noted that executives expect to turn profitable under generally accepted accounting principles (GAAP) in 2020.
"For the first time in the history of the company, our revenue growth and improvement in profitability is also increasing our operating cash flows as our total cash and investment grew for the second straight quarter in Q4 of last year," he said. With the current situation, analysts currently forecast BioMarin to become profitable over the next three years.
Positioned to dominate
BioMarin's broad portfolio of drugs and strong financials offer investors a stable long-term investment for the next three to five years. With plenty of cash and effective financial management, the company looks positioned to dominate in the current market conditions. Moreover, success with its upcoming pipeline and approval of Valrox will put the company in position to reach profitability in the next few years. Analysts project an average price target of $118.48, with a range of $77 to $164. Investors should consider the current bargain price in the market and consider adding shares to their portfolio.
