GlaxoSmithKline PLC

GSK Details

GlaxoSmithKline plc (NYSE: GSK) operates as a science-led global healthcare company. Its operating segments are 1) Pharmaceuticals, 2) Vaccines, and 3) Consumer Healthcare. Respiratory disorders, human immunodeficiency virus (HIV)/infectious diseases, vaccines, immuno-inflammation, oncology, and rare diseases are the focus of the company's research. As of October 28, 2021, the company's market capitalization stood at USD 99.87 billion, with 2.52 billion American Depository Shares (ADS) listed and outstanding (each ADS representing two ordinary shares).

Latest News:

• Progress Towards Regulatory Approval: On September 28, 2021, GSK's subsidiary, ViiV Healthcare, a global specialist HIV company, announced that the US Food and Drug Administration (FDA) accepted and granted a Priority Review for a New Drug Application (NDA) for investigational, injectable cabotegravir for pre-exposure prophylaxis (PrEP). If approved, cabotegravir would be the first long-acting HIV preventive drug for those at risk of sexually transmitted HIV-1 infection and have tested negative for HIV-1 before starting the treatment. The FDA has set the deadline of January 24, 2022, for clearance.

Q3FY21 Results:

• Growth in Revenue: The company reported a YoY increase of 4.98% in revenues to GBP 9.08 billion during Q3FY21 (ended September 30, 2021) from GBP 8.65 billion during Q3FY20. The Pharmaceutical segment, which accounted for 48.44% of the total revenue in Q3FY21, improved by 4.89% YoY.
• Reduction in Profitability: GSK reported a decline in net income to GBP 1.17 billion during Q3FY21 vs. GBP 1.24 billion in Q3FY20.
• Cash and Debt Position: As of September 30, 2021, the company had cash and cash equivalents (including liquid investments) of GBP 3.51 billion and total debt of GBP 25.61 billion.

Key Risks:

• Competition Risk: GSK operates in the pharmaceutical industry and faces direct competition from prominent players with higher financial and operational resources at their disposal. Any advanced innovation or superior product development by these competitors could impact its operations.
• Currency Risk: GSK conducts its business in many currencies other than GBP, thus exposing it to exchange rate fluctuations.

Outlook:

• EPS Estimate: As of Q2FY21, GSK expects its FY21 adjusted EPS to decline by 2% – 4% at constant exchange rates (CER) excluding COVID-19 solution sales. It also anticipates a contribution of 7% – 9% from COVID-19 solutions at CER in FY21.

Valuation Methodology: Price/Earnings Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

GSK Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

GSK stock price rose 12.32% in the past six months and is currently leaning towards the higher end of its 52-week range of USD 33.26 to USD 42.68. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 78.05. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 47.26.

Considering the company's growth prospects, decent profit margins, current valuation, and associated risks, we recommend a "Hold" rating on the stock at the closing price of USD 42.12, up 4.21% as of October 28, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV. 

BioMarin Pharmaceutical Inc.

BMRN Details

BioMarin Pharmaceutical Inc. (NASDAQ: BMRN) is a global biotechnology company that discovers and commercializes novel medicines for rare and life-threatening genetic illnesses. Its product portfolio comprises seven commercialized medications (Vimizim, Naglazyme, Kuvan, Palynziq, Brineura, Voxzogo, and Aldurazyme) plus several clinical and pre-clinical candidates.

Latest News:

• BMN 307 Phearless Phase 1/2 Study Placed on Hold: On September 05, 2021, the company announced that its Phearless Phase 1/2 study for BMN 307, an experimental AAV5-phenylalanine hydroxylase (PAH) gene therapy for adults with phenylketonuria (PKU), has been put on hold by the US Food and Drug Administration (FDA) based on certain pre-clinical, non-GLP pharmacology findings.
• EC Approval for VOXZOGO: On August 27, 2021, BMRN stated that the European Commission (EC) gave VOXZOGO (vosoritide) marketing approval to treat achondroplasia in children from the age of two until their growth plates close. This is the first drug in Europe to be approved for the treatment of achondroplasia in children.

Q3FY21 Results:

• Decline in Revenues: The company reported a 14.27% decline in revenues to USD 408.74 million in Q3FY21 (ended September 30, 2021) compared to USD 476.78 million in Q3FY20, due to lower Kuvan, Aldurazyme, Vimizim and Naglazyme product revenues.
• Reporting Net Loss: Its Q3FY21 net loss was USD 36.49 million vs. a net income of USD 784.80 million reported in Q3FY20.
• Decent Balance Sheet: BMRN exited the quarter with a cash balance (including short-term investments) of USD 1.08 billion and a total debt of USD 1.08 billion.

Key Risks:

• Price Control: The government generally has control over pricing in the pharmaceutical industry. Any restriction on the amount that BMRN can charge for its products can adversely affect its revenue and results of operations.
• Regulatory Scrutiny: BMRN may be subject to suspensions/withdrawal of prior approvals if its products fail to comply with the regulatory requirements, which could negatively impact its business and financial condition.

Outlook:

• Top & Bottomline Estimate: In its Q3FY21 earnings release, BMRN stated that its revenues are expected to range between USD 1.82 and 1.88 billion in FY21, with GAAP net loss ranging from USD 45 to 85 million. The estimated range for non-GAAP net income is USD 215 – 255 million.
• Operating Expenses: Its R&D and selling, general & administrative expenses are estimated to range from USD 635 to 675 million and USD 735 to 775 million, respectively.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

BMRN Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

BMRN's stock price fell 7.70% in the past nine months and is currently close to the lower-band of the 52-week range of USD 71.59 to USD 92.57. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is 52.47. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 85.66.

Considering the slight correction in the stock price, strong product pipeline, decent balance sheet, and current valuation, we recommend a "Hold" rating on the stock at the current price of USD 76.75, up 7.01% as of October 28, 2021, 1:39 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

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