Summary:
ASND’s share price surged following the release of positive topline data, causing a market capitalization increase of $1.16 billion. In response, BMRN's stock dropped sharply, erasing $2.9 billion in market value due to concerns over the potential erosion of Voxogo’s market share.
Across several scenario targets, BMRN's projected price targ et is $83.67, reflecting a 19.19% potential upside from its current price of $70.20.
Catalyst
About a month ago, Ascendis Pharma A/S (Nasdaq: ASND) announced topline data from the pivotal double-blind, placebo-controlled ApproaCH Trial of TransCon CNP (navepegritide). In this trial, children treated with once-weekly TransCon CNP showed superior annualized growth velocity (AGV) compared to placebo, indicating that, if approved, TransCon CNP could address the unmet needs of children with achondroplasia [1]. Ascendis plans to submit a regulatory filing to the Food and Drug Administration early next year, potentially leading to a regulatory decision and market entry by late 2025 or early 2026 [2].
The trial results appear competitive with BioMarin's (Nasdaq: BMRN) Voxzogo, which was approved three years ago and remains the only available treatment [2]. Following the announcement, ASND's shares surged by 17%, while BMRN's stock dropped by 18%.
Analytical Framework Outline
In this research, we present a compelling long thesis for BioMarin Pharmaceutical Inc. (BMRN) by conducting a series of comprehensive impact analyses. First, we estimate BMRN's potential price by drawing a direct comparison with Ascendis Pharma (ASND), aiming to derive insights into an efficient price target for BMRN. Additionally, we examine the historical share price movement following BMRN's approval of Voxzogo, using this event as a reference to further refine our price estimate.
Comparison Against ASND
Following the release of positive topline data from ASND, the company’s share price increased by $20.35 per share. This translated to a total market capitalization gain of $1.16 billion, based on the number of shares outstanding. In response, shares of competitors, particularly BMRN, experienced a significant decline, driven by concerns over potential market share erosion in an already highly competitive pharmaceutical landscape. BMRN’s stock dropped more sharply than ASND's increase, resulting in a total market capitalization loss of $2.9 billion. Assuming all other factors remain constant, apart from the direct competitive threat posed by ASND's topline data, we can model the impact on market share in isolation. The following scenarios outline the potential outcomes.
Each scenario is assigned a percentage weight, as indicated by the bolded figures above the various market capitalization amounts. This percentage simply reflects the proportion of ASND's market capitalization change on the day of the disclosure. From an economic standpoint, and in the context of analyzing BMRN, this can be interpreted as the dollar impact of BMRN's market share erosion, with the percentages representing the expected market share ASND is projected to capture. By subtracting these impacts from BMRN’s share price prior to the announcement, we arrive at the following results:
It is important to note that this analysis is based on two key assumptions. First, we assumed that ASND’s share price movement on the day of the announcement was entirely driven by the disclosure itself, with no influence from other factors, such as broader market trends or external catalysts. Similarly, we assumed that BMRN’s price decline was solely due to the same announcement. Second, we made a significant assumption regarding market efficiency between the two securities. By using ASND’s share price as our benchmark, we are assuming that ASND’s price reflected all available information efficiently, whereas BMRN’s share price did not fully account for the new information.
Comparison against Voxogo
Given that ASND's topline data directly threatens BMRN's existing product, Voxogo (the only approved and active drug addressing this market need), we also conducted a historical impact analysis of BMRN’s stock performance following Voxogo’s approval. By examining the price reaction at the time of approval, we can estimate how much Voxogo’s market share effectiveness and competitive positioning may have been eroded due to the concerns raised by ASND’s positive topline results.
Looking back, the approval of Voxogo had a notable impact on November 19th, 2021, with BMRN’s share price increasing by $8.53, translating to a total market capitalization gain of $1.56 billion. Using the same analytical framework as previously discussed, we estimate how much of this positive impact has been diminished or subdued due to the growing concerns stemming from ASND’s topline disclosure. The results are presented below.
By comparing the price relative to BMRN's pre-announcement level, we arrive at the following price estimates for BMRN across the three scenarios.
Note the key assumptions made here as well. We assumed that BMRN’s share price was efficient at the time of FDA approval but remained inefficient in response to the recent news. While this approach addresses the issue of relying solely on ASND’s price efficiency to develop a price estimate, it introduces the assumption of differing market efficiencies over time.
Putting it All Together
To account for the uncertainty regarding the most appropriate approach—whether to rely on ASND’s price impact or to look historically at BMRN’s previous share reactions to similar developments—we have built our price estimate by calculating both the average and median values across the scenario targets outlined above. With a current share price of $70.20, we are initiating our coverage on BMRN with a target price of $83.67, representing a potential 19.19% upside as of today.
Sources:
[1] Press Release : Pivotal ApproaCH Trial of TransCon™ CNP (Navepegritide) (globenewswire.com)
[2] Biopharmadive : Ascendis trial data piles pressure on BioMarin | BioPharma Dive