BioMarin Pharmaceutical Inc. (NASDAQ:BMRN)’s stock rose 5% on August 31 after the company announced that it has entered into binding agreements with Ascendis Pharma A/S (NASDAQ:ASND) to resolve a global patent dispute over Ascendis’s achondroplasia drug Yuviwel. The settlement resolves litigation currently pending in numerous jurisdictions, including a Section 337 investigation by the US International Trade Commission, which BioMarin has agreed to drop as part of the settlement. Ascendis reiterated the same terms in its own announcement the following day, calling the arrangement a binding term sheet awaiting a definitive agreement.
How the Dispute Started
The lawsuit stemmed from competing achondroplasia treatments produced by the two companies. BioMarin Pharmaceutical Inc. holds patents related to the condition, a genetic ailment that inhibits bone growth, and filed a complaint with the US International Trade Commission, alleging that Ascendis’ medicine, which was still under FDA assessment, infringed on that intellectual property. Ascendis Pharma A/S responded by bringing its own declaratory judgment action in federal court in California, claiming that its operations were protected by the “safe harbor” regulation, which protects regulatory-approval-related conduct from patent infringement lawsuits. That controversy made its way to the US Court of Appeals for the Federal Circuit earlier this year, with the two sides arguing over procedural issues such as which forum, the ITC or the district court, should hear the matter first.
The Terms of the Settlement
As part of the settlement, Ascendis Pharma A/S will pay BioMarin Pharmaceutical Inc. a royalty equal to 20% of Yuviwel’s net sales in the US, retroactive to the drug’s first commercial sale, and 18% of net sales in the European Union, Brazil, and South Korea. These royalties will be paid till May 20, 2030. In exchange, BioMarin will provide Ascendis a non-exclusive, worldwide, royalty-bearing license for navepegritide, Yuviwel’s active compound, allowing Ascendis to continue studying, developing, manufacturing, and commercializing the medication without restrictions.
The Outcome Seems Positive On Both Sides
Both companies rushed to portray the outcome positively. BioMarin CEO Alexander Hardy stated that the settlement encourages companies like BioMarin Pharmaceutical Inc. to continue investing in the type of long-term innovation required to bring breakthrough treatments to patients, tying the outcome to the company’s decades of research into the basic biology of rare genetic conditions. Ascendis CEO Jan Mikkelsen, for his part, cited Yuviwel’s commercial success as proof of the settlement terms, saying it reflects the drug’s differentiated profile and the significant unmet medical need it addresses as an important new foundation of care in achondroplasia and other skeletal dysplasias.
Institutional Positioning
Institutional positioning shifted in opposite directions for the two companies. BioMarin Pharmaceutical Inc. saw hedge fund ownership fall from 62 in the first quarter to 54 in the second, a drop that predates the settlement. Ascendis Pharma A/S witnessed a minor gain during the same period, from 47 to 49 funds, indicating that institutional investors were slightly more optimistic about Ascendis’s prospects for a resolution.
The Investment Case: Royalty Upside vs. Margin Pressure
The case for BioMarin Pharmaceutical Inc. is based on obtaining a long-term, high-value royalty stream, 20% of US net sales and 18% internationally through May 2030, without having to commercialize or carry the commercial risk of Yuviwel. The royalty is paid retroactively to the drug’s first commercial sale, which collects value that BioMarin would have missed if the settlement had been applied prospectively. For Ascendis Pharma A/S, the case is probably even more significant: settling the issue removes the litigation overhang that had clouded Yuviwel’s commercial prospects, including the ITC inquiry that could have restricted the drug’s availability, and ensures Ascendis has an unrestricted path for commercializing the drug in all current and potential indications.
The case for caution on the BioMarin Pharmaceutical Inc. side is that the value of the royalty stream depends directly on Yuviwel’s future sales and lasts only through May 20, 2030, with no upfront payment disclosed. For Ascendis Pharma A/S, a 20% US royalty and an 18% international royalty through 2030 suggests a significant, multi-year drag on Yuviwel’s net economics, decreasing the company’s margin on one of its most important commercial assets at a key early growth phase.
Insider Monkey’s Bottom Line
The resolution is a clear net win for both companies in terms of the uncertainty around ongoing litigation, providing BioMarin with a defined, long-term royalty stream and granting Ascendis full commercial flexibility for a medicine that it has already begun scaling. Investors in BioMarin Pharmaceutical Inc. should see this as a consistent but modest revenue source rather than a major growth driver, while investors in Ascendis Pharma A/S should measure Yuviwel’s commercial trajectory against the royalty burden that is now baked into its economics until 2030. The stock reactions indicate that the market sees this as removing uncertainty rather than crowning a clear financial winner, with Yuviwel’s sales growth over the next few years eventually determining how the settlement’s worth is split between the two companies.
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