NorthBay biz profiles Novato-based pharmaceutical giant BioMarin, which is filling a niche by targeting rare diseases.
Locally (as of March), Marin is at 8.9 percent, Napa county at 11.1 percent and Sonoma county at 11.3 percent. And while some companies and businesses have closed their doors and others are doing their best to simply maintain their market share, one company isn’t singing the blues. BioMarin Pharmaceutical in Novato is growing. It’s adding jobs, and it just spent approximately $60 million to double its manufacturing capacity, expanding a building in the Bel Marin Keys area in the process.
For instance, BioMarin is a public company, which means the value of its stock, investor attitudes and analysts’ perceptions impact the firm. In 2008, on an investor conference call, a couple of doctors said the company’s newest drug, Kuvan, might not find a patient population as rapidly as first hoped. In the next few weeks, BioMarin’s stock price slid 17 percent.
Another factor separating BioMarin from its brethren is its appetite for growth via acquisitions. Twice in the last year, BioMarin has gone shopping. The biotech company acquired Huxley Pharmaceuticals in October 2009 for an upfront cost of $15 million, though Huxley could see as much as $50 million if certain domestic and international sales goals are reached. This past February, BioMarin picked up Lead Therapeutics for $18 million up front, though the deal’s end cost could climb as high as $97 million.
To be fair, these acquisitions are somewhat misleading. BioMarin had little interest in the actual acquirement of the companies or even the inside talent, according to CEO Jean-Jacques Bienaimé, though six employees from Lead are now on the BioMarin payroll. Rather, in each case, the acquired company controlled a compound that BioMarin believes has commercial value—either as a stand-alone product or via BioMarin using a process in place to enhance its own future drug development.
Caring for the orphans
To fully appreciate all that sets BioMarin apart from other North Bay companies, it’s worthwhile to understand the complicated biopharmaceutical industry. Essentially, BioMarin creates drugs derived from the use of biotechnology. The introduction and use of proteins as well as other essential biological materials are key to the development of drugs for diagnostic or therapeutic uses.
But BioMarin’s corporate mission and business strategy is more complicated than relying on biotechnology for drug development. Large pharmaceutical companies tend to target conditions and diseases for which there are large or growing patient populations so as to maximize possible profit, justify high research and development costs to shareholders, and finally to serve the largest number of patients. But BioMarin’s model calls for the development of compounds the Federal Drug Administration (FDA) calls “orphan drugs.”
The orphan drug designation provides incentives for companies to develop drugs to treat or cure rare diseases, where the pool of patients is less than 200,000 people in the United States (which works out to less than five people per 10,000 in a community). The incentives include tax breaks as well as exclusive manufacturing rights for seven years. The approval process can also be streamlined, in part because clinical sample size requirements are smaller, since rare disease patient populations are very small.
From 1972 to 1982, just 10 drugs that would have qualified for orphan status were brought to market. Since the FDA created the orphan drug status in 1982, 360 drugs have come to market.
In the pharmaceutical industry, every company worth its TV ad begging people to go to their own doctor seeking a drug to treat a condition or disease described in heartbreaking detail wants a drug that becomes the industry’s standard treatment. If a company can bring such a drug to market, it’s granted a status that allows sole manufacturing and distribution rights in the United States for a set period of time before everybody else in the business piles on producing cheaper generic alternatives.
For good or ill, the industry also has a predisposition for developing drugs that appeal directly to a larger segment of the population to treat diseases or conditions that are readily understood—hello Cialis—as opposed to Maroteaux-Lamy Syndrome, a rare lysosomal storage disorder estimated to occur once in every 340,000 live births. BioMarin has developed Naglazyme to treat the underlying causes of that disease as a therapeutic option.
Besides Naglazyme, BioMarin manufactures Aldurazyme, a drug used to treat another form of progressive lysosomal storage disorder that causes a buildup of glycosaminoglycans. This buildup causes major organ damage and is commonly fatal. Kuvan, another of BioMarin’s approved drugs, treats PKU, an inherited metabolic disorder that robs the body of an enzyme required for the breakdown of amino acid found in many foods. Without treatment, the buildup can cause brain damage, tremors and other neurological complications. Kuvan is the only FDA-approved drug for treating PKU and may represent BioMarin’s best long-term product to date.
At first glance, a business strategy that calls for focusing on the development of orphan drugs might seem counterintuitive. But don’t mount that argument with BioMarin CEO Bienaimé. On a drizzling February morning, Bienaimé holds court on the success of his company and explains why the pursuit of orphan drugs pleases investors. To begin with, FDA incentives in the form of tax breaks helps R&D pencil out better, and orphan drugs generally enjoy an approval process that’s shorter than conventional drug development.
The man in charge
Bienaimé’s corner office is squirreled away on the second floor of the company’s headquarters in Bel Marin Keys and is not easily accessed. Running the gauntlet is a classic study in polished corporate style mixed with mandatory high-tech touches and a little security paranoia thrown in for good measure. The lobby at 105 Digital Drive comes complete with large corporate art adorning the walls, a sitting area and enough BioMarin reading material to give visitors a crash course on the company’s products. A suspension bridge runs the length of the lobby, letting second floor inhabitants traverse the space without dipping down to the ground floor. The lobby ceilings are perhaps 60 feet tall, adding to the scale of the building.
An unpretentious reception desk sits back from the front door, almost splitting the distance between the two doors that lead in opposite directions to the inner sanctum. A quiet security desk takes up one corner and spits out temporary IDs based on the visitor’s driver license. Once you’re cleared for takeoff, you’re escorted to wherever you need to go. This is indeed a good thing, since the doors require entry badges, and the lobby itself includes video coverage in case anything is YouTube worthy.
On this day, Susan Berg, BioMarin’s senior manager of corporate communications, ushers me into Bienaimé’s suite, which looks out onto a lagoon, part of the small system of Keys in the southern Novato neighborhood. The CEO’s desk is awash in paperwork, obviously a place where work gets done. We’re seated at a conference table complete with a pile of aging copies of Fortune and BusinessWeek. Bienaimé, in a blue tie and white shirt has the casual elegance that the French seem to have invented. He speaks in a clipped accent, and at times seems to study his palms while considering questions. He has the company running smoothly, and it actually turned a profit in all four quarters of 2009; three of those quarters were on a GAAP (generally accepted accounting practices) basis. Biotech companies are the very model of a slow build, so sneaking into the black is a tribute to Bienaimé and his company. “We became profitable more quickly than other biotech firms, and if one of our drugs in development gains approval, we’ll perform even better,” he says.
Bienaimé is leading the company into a growth mode, with plans to increase headcount by up to 15 percent in 2010. “While the economy is difficult, the fact is our patients need our drugs regardless. In that way, [a difficult economy] doesn’t impact us as much as other companies.”
Not bad for a company that flirted with bankruptcy in 2004. Founded in 1997, BioMarin has enjoyed a far more rapid success than most biotech firms. Historically, biotech companies are financed via venture capital investment and struggle for years to turn out products while battling the high costs of research, complicated marketing and efforts to repay debt, go public or both.
BioMarin has developed a reputation among the biotech community as a preferred place to work. “Our people are very passionate about their work, and I think, if you talk to them, you find they really do enjoy being here,” says Bienaimé.
Smoothing out the rough spots
While 2010 finds BioMarin on a roll, it’s had its share of ups and down as well. In 2005, BioMarin bought Orapred, a drug that treated childhood asthma, for $175 million. Three months later, a lower cost generic hit the market, making the Orapred deal obsolete. Bienaimé cut the company’s losses, turning loose 75 Orapred sales staffers. Last year, the company gambled $15 million (half in cash, half in equity) by investing in La Jolla Pharmaceutical’s development of a drug to treat lupus. Though the drug could have made as much as $1 billion, in the end, research was halted and, after recovery of some equity, BioMarin was out $12 million.
But at a time when too many companies are over-leveraged with debt and struggling to keep the lights on, BioMarin is at the top of its game. “We have no straight debt on our books, we have money in the bank, and our investors are happy,” says Bienaimé. “We’re cash flow positive, we’re a young company, and investors like potential.”
BioMarin is hoping for positive results from a new treatment under development for a form of muscular dystrophy. Duchenne muscular dystrophy affects one in 3,500 male births worldwide and usually forces patients into a wheelchair by the time they’re 12. By the late teens, respiratory failure and cardiac failure due to cardiac muscle disease begins, and typically results in patients dying in their early twenties. But if BMN-195, a treatment using a small molecule inducer of utrophin gene expression that’s now in Phase 1 clinical trials, is successful, it’s hoped that the dystrophy results can be stopped and reversed.
While the drug is still in the early stages, Bienaimé is hopeful—not only about the impact it would have for thousands of patients in terms of quality of life and survival, but also on how it could effect the company bottom line.
“It could be a billion dollar drug.”
