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Roche Still in M&A Hunt? Biomarin Rumors Swell

By Marie Powers

Staff Writer

Shares of Biomarin Pharmaceutical Inc. continued their steady ascent this morning, topping $80 one day after hitting a previous 52-week high of $78.83 and pushing the company’s market cap past $11 billion. Movement in the shares, which generated strong volume out of the gate, followed a solid R&D day for the company on Tuesday but seemed propelled more by buzz that Basel, Switzerland-based Roche AG might be lining up a debt financing to snag the biotech.

That premise gained momentum after analysts began to weigh in.

Citing a published report, Deutsche Bank analyst Robyn Karnauskas wrote in a research update that Roche “is lining up $15 [billion] in debt financing for an M&A in rare disease space. This article noted that Biomarin could be the target citing the valuation in $95-$105 range.”

That valuation sounded reasonable, according to Karnauskas, who wrote that, assuming 25 percent synergy in R&D and overhead expenses, Biomarin’s fair valuation would be approximately $92 per share.

In a flash comment, Wells Fargo analyst Brian Abrahams made the case that Biomarin’s PARP inhibitor BMN673 “could be a clear fit within Roche's heavily oncology-focused portfolio, especially Roche's focus on genetically defined cancers.”

Abrahams cited a potential connection to the biotech’s R&D day, noting that guest speaker Dennis Slamon, who discovered HER2/neu as a breast cancer target, was instrumental in developing the Roche drug Herceptin (trastuzumab). Slamon “told us after the meeting '673 was the most exciting program he has been involved in since Herceptin,” Abrahams wrote. “We imagine there is likely still a close relationship between Roche and Dr. Slamon, who lead-authored a large, recently published adjuvant Herceptin study.”

Abrahams also suggested potential overlaps in a Biomarin acquisition with Roche's expertise in protein engineering/manufacturing and diagnostics. Less obvious is the biotech’s distinctly orphan-focused pipeline, since Roche “has not typically played in the space directly,” he wrote. “Roche does have a heavy presence in biologics – the potential sustainability of which have always been an attractive attribute of BMRN's portfolio and we believe orphans remain of high interest to many given strong pricing and lower development risk.”

In a widely quoted Reuters news article published Sept. 11, Daniel O'Day, the head of pharmaceuticals at Roche, called ultra-rare diseases “a complementary but different business than we are in at Roche today." Abrahams suggested the comment might suggest “some reticence to enter, but potential interest should a full-fledged platform with regulatory/reimbursement experience become available.” (Reuters’ parent company, Thomson Reuters, recently acquired BioWorld Today.)

However, Abrahams questioned the timing of a bid, ahead of the Nov. 19 advisory committee meeting for Biomarin’s Vimizim (N-acetylgalactosamine 6-sulfatase), which is under review for the rare lysosomal storage disorder mucopolysaccharidosis Type IVA, also called Morquio A syndrome, and “a key potential revenue driver for BMRN,” he said. The drug has a PDUFA date of Feb. 28, 2014. (See BioWorld Today, June 6, 2013.)

Speculation about a Biomarin acquisition comes just two months after Roche was thought to be targeting rare disease developer Alexion Pharmaceuticals Inc., of Cheshire, Conn. In mid-July, Reuters reported that sources familiar with the matter said the pharma was seeking financing for a potential bid. (See BioWorld Today, July 16, 2013.)