BioMarin Pharmaceutical Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; comparisons are with Q1 2022 unless otherwise stated. BioMarin is a global biotechnology company focused on therapies for rare genetic diseases.
Financial performance
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Total revenue | $596.4 million | $519.4 million | Up 14.8% |
| Net product revenue | $586.4 million | $505.5 million | Up $80.9 million |
| Operating income | $59.3 million | $137.3 million | Down $78.0 million |
| Net income | $50.9 million | $120.8 million | Down 57.9% |
| Diluted EPS | $0.27 | $0.63 | Down $0.36 |
| Gross margin | 78.8% | 77.5% | Up 1.3 percentage points |
| Cash used in operations | $73.9 million | $45.4 million | Use increased $28.5 million |
Product growth was led by VOXZOGO ($87.8 million, versus $19.7 million), reflecting market expansion and new patients. Enzyme product revenue rose to $448.1 million; KUVAN fell to $50.5 million from $59.3 million amid generic competition. Royalty and other revenue declined to $10.0 million from $13.8 million.
Operating expenses included R&D of $171.8 million (up $11.0 million) and SG&A of $223.0 million (up $28.4 million). Q1 2022 included a $108.0 million gain on sale of a Priority Review Voucher, with no comparable gain in 2023; this was a major reason for the year-over-year decline in operating and net income. Q1 2023 also included a $12.6 million impairment loss on a non-marketable equity investment.
Cash, liquidity and debt
- Cash, cash equivalents and investments totaled $1.493 billion at March 31, 2023, down $132.7 million from year-end 2022. Cash and cash equivalents were $580.1 million; short- and long-term investments were $572.0 million and $340.6 million.
- Current assets were $2.842 billion and current liabilities were $598.2 million. The company reported $4.659 billion in stockholders’ equity.
- Convertible-note principal totaled approximately $1.095 billion: $495 million due August 2024 and $600 million due May 2027. Net carrying value was $1.084 billion. The $200 million revolving credit facility had no borrowings outstanding; the company reported covenant compliance.
- Management believes cash generated from product sales, cash and investments are sufficient for liquidity needs for at least the next 12 months, while noting additional financing may be needed for debt repayment, milestones and operations.
- Operating cash use reflected, in part, timing of customer receipts and vendor payments; accounts receivable increased $138.8 million. Investing activities used $30.0 million, compared with $87.8 million provided in Q1 2022, which included $110.0 million of voucher-sale proceeds.
Outlook, developments and risks
- Management expects 2023 gross margin of approximately 77.5%–79.0%; it expects R&D and SG&A to increase in future periods. It also expects interest income to rise over the next 12 months, while interest expense is expected to remain relatively stable.
- The FDA set June 30, 2023 as the new PDUFA action date for ROCTAVIAN after deeming the submitted three-year Phase 3 data a Major Amendment. EU commercialization remained subject to reimbursement and access progress in key markets.
- VOXZOGO market access was expanding. The company expected decisions on requests to expand treatment to younger age groups in the U.S. and Europe. It planned to begin an expanded BMN 255 patient study in 2023; BMN 331 dosing continued in Phase 1/2.
- Revenue may vary with periodic government orders, foreign exchange (which reduced Q1 product sales by $28.3 million), reimbursement and access decisions, and continued generic erosion of KUVAN. The filing also highlights manufacturing and supply constraints, particularly potential VOXZOGO demand exceeding projections, and macroeconomic and international collection risks.
- A ROCTAVIAN-related shareholder class action was subject to a binding settlement term sheet; the company accrued a $39.0 million loss contingency and recorded an equal expected insurance recovery, with no Q1 income-statement impact. A separate BMN 307 securities action was dismissed with prejudice at plaintiffs’ request, and plaintiffs indicated plans to appeal. Other ROCTAVIAN-related litigation remained outstanding.
- Potential contingent payments were estimated at $762.5 million, including amounts tied to early-stage licensed programs. Purchase commitments totaled approximately $251.7 million, of which $205.9 million was expected to be paid in 2023. The filing cautions that forward-looking statements are subject to risks and actual results may differ.
Most important facts for investors to verify
- ROCTAVIAN’s FDA decision and subsequent reimbursement, uptake and outcomes-based agreement economics.
- Whether VOXZOGO demand, supply capacity and younger-age indication decisions support continued growth.
- KUVAN’s rate of decline and the sustainability of growth in other products amid foreign-exchange effects and variable government ordering.
- Operating cash flow and receivables collection trends, including exposure to government customers and economically volatile markets.
- Funding plans for the August 2024 convertible-note maturity, contingent milestone obligations and committed spending.
- Final terms and insurance coverage for the ROCTAVIAN class-action settlement, plus status of the other disclosed lawsuits.