BioMarin's recent Q1 2024 earnings call was a symphony of optimism, a crescendo of growth pronouncements, and a chorus of confidence in the company's future. Analysts focused, predictably, on the explosive growth of VOXZOGO, the challenges of ROCTAVIAN's launch, and the tantalizing potential of the prioritized pipeline. But beneath the surface, nestled amongst discussions of supply chains and regulatory approvals, lies a subtle but potentially explosive revelation: BioMarin is quietly preparing for a future defined by external innovation, not just internal development.

While Alexander Hardy, BioMarin's CEO, explicitly stated that current guidance does not reflect any "incremental BD activity," his repeated emphasis on the role of external innovation signals a tectonic shift in the company's strategic thinking. This isn't just lip service to the hot topic of business development; it's a calculated foreshadowing of a bolder BioMarin, a company poised to leverage its financial strength and expertise to acquire late-stage assets that can fuel sustained, long-term growth.

The urgency behind this strategic pivot is palpable. BioMarin, while celebrating VOXZOGO's success, recognizes the limitations of a portfolio heavily reliant on a single, albeit remarkable, product. The company's history is punctuated by the challenges of commercializing complex therapies like ROCTAVIAN, a gene therapy for Hemophilia A, where reimbursement complexities and site-level hurdles have hampered uptake. This experience underscores the inherent volatility of relying solely on internal R&D, particularly in the unforgiving realm of gene therapies.

The clues are sprinkled throughout the transcript. Hardy stresses BioMarin's commitment to "sustained growth into the long, long term," a goal that necessitates expanding beyond the 21,000-patient global market for achondroplasia, even with VOXZOGO's potential expansion into other statural conditions. He highlights the need to augment the existing portfolio with assets that "leverage our distinctiveness," a clear signal that BioMarin is seeking late-stage therapies that align with their specialized expertise in rare diseases.

"Projected Revenue Growth and Key Drivers"

Further fueling this hypothesis is BioMarin's impressive financial position. The company is projecting double-digit revenue growth for 2024, with a non-GAAP operating margin expanding to a healthy 24%-25%. They're also confidently projecting to repay $495 million in convertible notes maturing in August with available cash, a testament to their robust cash flow and disciplined financial management. This financial strength, coupled with a stated commitment to a "capital allocation strategy that's in the interest of maximizing shareholder value," creates a compelling argument for a strategic acquisition in the near future.

While the specifics remain shrouded until Investor Day, the financial implications of this potential acquisition are staggering. BioMarin is already guiding for $2.7 billion to $2.8 billion in revenue for 2024. A well-chosen late-stage asset, particularly one addressing a larger patient population than VOXZOGO's current market, could add hundreds of millions, if not billions, to their top line in the coming years.

Consider, for example, the market for idiopathic short stature (ISS), one of the potential indications for VOXZOGO. Hank Fuchs, BioMarin's President of R&D, referenced the vastness of this market, encompassing "2.5% of basically the human population." Even capturing a fraction of this market, even focusing on more severe cases, could translate to an enormous revenue opportunity.

Potential Revenue from Idiopathic Short Stature (ISS)

The following chart illustrates the potential revenue opportunity for BioMarin if VOXZOGO gains approval for ISS. The chart assumes various penetration rates within the target patient population.

The strategic portfolio review, while designed to prioritize internal R&D, is also likely paving the way for this external acquisition. By streamlining the pipeline, discontinuing less promising programs, and accelerating the development of high-potential assets like BMN 351 for Duchenne muscular dystrophy, BioMarin is creating the financial and operational bandwidth to seamlessly integrate a new therapy into their portfolio.

This strategic shift, this embrace of external innovation, isn't just a logical next step for BioMarin; it's a potential game-changer for the company's future. By combining their proven expertise in rare disease therapies with a bold acquisition strategy, BioMarin can position itself not just for continued growth, but for a future of market dominance. The whispers in the transcript are clear: BioMarin is no longer just playing the game; they're poised to change it.

"Fun Fact:"

BioMarin has a history of successful external innovation. The company's flagship product, VOXZOGO, was originally developed by a company called Versartis, which BioMarin acquired in 2019. This acquisition proved to be a masterstroke, as VOXZOGO has become a major commercial success for BioMarin.