BioMarin Pharmaceutical Inc.

BMRN Details

Business Update: BioMarin Pharmaceutical Inc. (NASDAQ: BMRN) is a biotechnology company that develops and commercializes therapies for people with rare diseases. The market capitalization of the company as on 19 May 2021, stood at ~$13.96 billion. The company has recently provided an update to its previously reported results from an open-label Phase 1/2 study of valoctocogene roxaparvovec and plans to share the data at the upcoming International Society on Thrombosis and Haemostasis (ISTH) 2021 Virtual Congress, to be held between July 17-21. The results reflect a sustained treatment benefit of valoctocogene roxaparvovec for the five-year and four-year post-treatment follow-up of the 6e13 vg/kg and 4e13 vg/kg cohorts, respectively.

Q1FY21 Results Update: During the period, the company reported total net revenues of $486.03 million. The revenues were impacted due to lower Kuvan product revenues owing to generic competition in the U.S. The net income stood at $17.4 million in Q1FY21. It ended the period with a cash position of $667.31 million as of 31 March 2021.

Q1FY21 Financial Performance (Source: Company Reports)

Key Risks: The company is exposed to competition from its peers in the sector. As a result, there might be an impact on the market share of the company.

Outlook: The company has reaffirmed its FY21 guidance revenues to be between $1,750 million to $1,850 million. It expects Vimizim Net Product Revenues to be between $570 to $610 million in FY21 and anticipates GAAP Net Loss to be between negative $130 million and negative $80 million.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Data Source: Refinitiv, Thomson Reuters, 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.

Stock Recommendation: On 28 April 2021, the Allen Institute and BioMarin Pharmaceutical Inc. have announced that they will work in collaboration and will use technologies developed by Allen to create new gene therapies for treating rare genetic diseases of the central nervous system. The stock of BMRN is trading below its average 52-weeks’ levels of $131.94-$71.35. The stock of BMRN gave a positive return of ~3.03% in the past six months and a positive return of ~1.08% in the past one week. On a technical analysis front, the stock of BMRN has a support level of ~$74.12 and a resistance level of ~$79.16. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight discount to its peer median EV/Sales (NTM Trading multiple), considering the decrease in top-line, increase in the cost of sales and prudent regulatory watch in the sector. For the purpose, we have taken peers such as Zai Lab Ltd (NASDAQ: ZLAB), Regenxbio Inc (NASDAQ: RGNX), Sangamo Therapeutics Inc (NASDAQ: SGMO), to name a few. Considering the positive results from Phase 1/2 study, collaboration with Allen Institute and the decent cash position of the company, we recommend a ‘Buy’ rating on the stock at the closing price of $76.42, down by ~1.61% as on May 19, 2021.

BMRN Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Fastly, Inc.

FSLY Details

Q1FY21 Performance Update: Fastly, Inc. (NYSE: FSLY) provides an edge cloud platform that enables customers to create digital experiences. The market capitalization of the company as on 19 May 2021 stood at ~$4.98 billion. During the period, the company delivered robust revenue growth to ~$85 million, an increase of ~35% on the previous corresponding period. There was an improvement in the non-GAAP gross margin to 60.1% in Q1FY21, from a level of 57.6% in Q1FY20. It made a capital expenditure of ~$9 million during the period. It ended the period with a cash position of $1.1 billion, including restricted cash and investments.

Q1FY21 Financial Performance (Source: Company Reports)

Partnership with Okta: FSLY has recently entered into a partnership with Okta to provide in-depth identity protection to its customers against security and fraud threats. The partnership will enable the security and engineering teams to act swiftly and will provide intelligence to protect firms from illegitimate users and threats.

Key Risks: The company’s line of business exposes it to technological threats and cyber security breaches. Therefore, the company should invest in its technology to keep the systems updated and secured.

Outlook: The company is positive about its prospects and expects to carry forward the growth momentum. It expects total revenue of $84- $87 million in Q2FY21 and a full year FY21 revenue of $380 - $390 million. FSLY is anticipating non- GAAP operating loss to be between negative $22 - $18 million in Q2FY21. 

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Data Source: Refinitiv, Thomson Reuters, 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.

Stock Recommendation:   The company’s customer count has increased to 2,207 in Q1FY21 from 2,084 in the previous quarter. The stock of FSLY is trading below its average 52-weeks’ levels of $136.50-$36.03. The stock of FSLY gave a positive return of ~7.32% in the past one year and a positive return of ~3.98% in the past one week. On a technical analysis front, the stock of FSLY has a support level of ~$39.55 and a resistance level of ~$48.72. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight premium to its peer average EV/Sales (NTM Trading multiple), considering the improved financial performance and optimistic outlook. For the purpose, have taken peers such as CrowdStrike Holdings Inc (NASDAQ: CRWD), Fortinet Inc (NASDAQ: FTNT), ServiceNow Inc (NASDAQ: NOW), to name a few. Considering the robust growth in top-line, increase in margins, optimistic outlook, current trading levels and valuation, we recommend a ‘Buy’ rating on the stock at the closing price of $43.10, down by ~1.4% as on May 19, 2021.

FSLY Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Note: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.