BioMarin Pharmaceutical Inc. (NASDAQ: BMRN) has received the anticipated FDA approval for expansion of the manufacturing facility in Novato, California. Wedbush Securities believes that with this approval, the company's long-term growth will be strengthened.

The original Novato facility was first approved in 2003 for Aldurazyme production, then in 2005 for Naglazyme. The expanded Novato facility is now approved to manufacture Naglazyme which will help support its worldwide sales growth.

The company previously guided that the Novato facility could manufacture about $1 billion in potential sales of Aldurazyme, Naglazyme and other pipeline biologics.

In addition to commercial drugs, the facility also produce drug candidates for clinical development, including GALNS, PEG-PAL, the CNP analog for Achondroplasia and a new biologic to be disclosed at the Dec. 8 R&D Day. The expanded facility may also commercially produce GALNS if results from the ongoing Phase 3 trial are positive in the second half of 2012.

The recently purchased Shanbally, Ireland, facility by BioMarin was estimated by management to potentially produce about $500 million in GALNS sales with the current capacity and expansion at the same site could double manufacturing capacity with about a $200 million investment. However, this cost could be covered by the tax savings over time since the Irish tax rate of 12.5 percent is less than half of the 30-plus percent in the U.S.

This facility was validated in 2009 and locally approved by the Irish Medicines Board in 2010. The plant is about 133,000 square feet and is on ten acres.

BioMarin intends to phase in the use of this facility and for the next 1 to 1.5 years, they will keep it maintained at a cost of about $4 million per year. The first phase of the use is expected to be GALNS depending on the success of the ongoing Phase 3 program with top line data expected in the second half of 2012.

We believe the company's expansion of its in-house manufacturing capacity is a wise investment. In addition to increasing capacity, the company updated its technology and automation control to reduce the potential risk of viral contamination, said Liana Moussatos, an analyst at Wedbush Securities.

Genzyme struggled with recurring manufacturing issues related to contamination. With the resulting negative impact on share price, the company was acquired by Sanofi-Aventis at a relative discount. Moussatos views BioMarin's efforts to expand its in-house capacity and attention to detail will strengthen its position and facilitate long-term growth.

In Moussatos' view, full top line Phase 2 PEG-PAL data is the main clinical catalyst remaining for BioMarin in 2011. The company guided to the release of additional data from the Phase 2 PEG-PAL trial during BioMarin's R&D Day Dec. 8.

Moussatos believes investors are concerned about the potential for serious immune reactions to PEG-PAL in the Phase 2 study. Manageable side effects would likely indicate that PEG-PAL has a potentially approvable clinical profile, in her view. She sees about $1 upside to BioMarin if clean data is reported on Dec. 8.

The brokerage maintained its neutral rating on shares of BioMarin with a fair value estimate of $34.

As BioMarin continues to trade in-line with our $34 fair value, we are maintaining a relative Neutral rating. Our fair value is calculated using a sum-of-parts of each drug candidate/disease combination showing clinical proof-of-concept efficacy. Each drug/disease component of the sum-of-parts is calculated using 30 percent annual discount from our 2013 sales projections for marketed products and then applying a 1-10 times multiple depending on stage of development to reflect risk, said Moussatos.

BioMarin stock is trading down 0.65 percent at $33.50 on the NASDAQ Stock Market at 9.35 am EST.

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