BioMarin eyes SG&A efficiency on Kuvan; no worries on rare-disease pricing

BioMarin ($BMRN) made a half-billion-dollar deal last week, centered on the rare disease drug Kuvan. The company agreed to pay its partner, Merck KGaA, €340 million plus sales-related milestones for all-but-global rights to that drug, which treats phenylketonuria in pediatric patients.

But the deal goes beyond Kuvan to a franchise-building move in that field. And though the deal comes at a time when all eyes are seemingly on drug prices, BioMarin execs don't see much of a threat to their pricey rare disease treatments, Kuvan included.

That €340 million also covers rights to a late-stage drug, PEG-PAL, which is under study in adults with the same disease. And BioMarin agreed to another €125 million in follow-up payments as PEG-PAL moves through the regulatory pipeline.

The company expects the two meds to eventually become a blockbuster-level franchise, though it hasn't said just when. It does say that it's expecting to be clear of generics through 2020 in both the U.S. and Europe, and beyond that, generic erosion won't amount to much because of the drug's specialty distribution model.

Though the company will up spending on Kuvan marketing outside the U.S., it won't amount to much; as Evercore ISI analyst Mark Schoenebaum wrote in an investor note, BioMarin "believes there's a high degree of commercial overlap between Merck Serono's and BioMarin's commercial territories."

That means BioMarin's sales-and-marketing operations that now focus on its other enzyme therapies--the Morquio A treatment Vimizim and mucopolysaccharidosis med Naglazyme--will be taking on Kuvan as well, "minimizing the net increase in SG&A expenses," Leerink Partners analyst Joseph Schwartz pointed out. And that means Kuvan will deliver bigger margins than the company's other marketed products do.

Perhaps best of all these days, BioMarin expects any pricing crackdown to steer clear of its meds, including Kuvan--and, if and when it's approved, PEG-PAL. That's because orphan drugs address such small populations, their outsize prices don't have a huge effect on overall drug spending. Also, the high prices on the meds are justified by their accompanying R&D costs, which are significant, CEO J.J. Bienaime told Leerink recently--unlike the controversial price hikes engineered by Turing Pharmaceutical and Valeant.

- read the FiercePharma story

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