BioMarin Pharmaceutical Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022; financial statements are unaudited. BioMarin develops and commercializes therapies for rare diseases. Its portfolio included eight commercial products, including VOXZOGO and EU-conditionally approved ROCTAVIAN.
Financial performance
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Total revenue | $505.3 million | $408.7 million | $1,558.5 million | $1,396.5 million |
| Gross margin | 77.0% | 74.7% | 77.1% | 74.9% |
| Operating income (loss) | $(2.4) million | $(53.2) million | $174.1 million | $(16.5) million |
| Net income (loss) | $(6.7) million | $(36.5) million | $141.8 million | $(6.2) million |
| Diluted EPS | $(0.04) | $(0.20) | $0.75 | $(0.03) |
- Q3 revenue rose 24% year over year; nine-month revenue rose 12%. Product revenue drove growth, while royalty and other revenue declined.
- Q3 product revenue was led by VIMIZIM ($155.5 million), NAGLAZYME ($99.5 million), and VOXZOGO ($48.3 million, versus $0.1 million a year earlier). KUVAN fell to $57.0 million from $67.7 million, reflecting generic competition.
- Nine-month operating and net income included a $108 million gain from selling a VOXZOGO-related FDA priority review voucher for $110 million gross proceeds. This unusual gain materially supported reported profitability.
- Q3 R&D expense was $157.8 million, broadly unchanged; nine-month R&D was $476.9 million, up from $467.7 million. Q3 SG&A increased to $216.8 million from $183.3 million; nine-month SG&A was $608.3 million versus $541.8 million.
- Nine-month operating cash flow was $169.1 million, down from $293.4 million. The company attributed the decline mainly to timing of customer receipts and the absence of a prior-year tax refund. Cash and cash equivalents increased to $761.5 million from $587.3 million at year-end 2021.
- Cash, cash equivalents, and investments totaled $1.646 billion at September 30, 2022, up from $1.522 billion at year-end 2021. Current assets were $2.683 billion and current liabilities $521.0 million.
- Convertible debt was $1.1 billion principal: $495 million due August 2024 and $600 million due May 2027. No borrowings were outstanding under the $200 million revolving credit facility; the company reported covenant compliance.
Material changes and business developments
- VOXZOGO’s global launch expanded, including commercial availability in Japan during Q3. BioMarin planned U.S. and EU supplemental applications by year-end 2022 for use in younger children.
- ROCTAVIAN received conditional EU marketing approval in August 2022, and its EU commercial launch began. The FDA accepted BioMarin’s resubmitted BLA in October, with a reported PDUFA target date of March 31, 2023; the company said review could take an additional three months. A U.S. companion diagnostic application was also under review.
- Foreign exchange reduced product revenue by $18.1 million in Q3 and $40.6 million year to date compared with the prior-year periods. Growth also reflected timing of large government orders, which management said can make revenue uneven between periods.
- BioMarin corrected an immaterial prior-period error related to the 2020 Firdapse rights sale. The correction reduced beginning accumulated deficit and stockholders’ equity by $5.1 million; the filing states it was not material to current or prior financial statements.
Outlook, risks, and contingencies
- Management expected 2022 gross margin of approximately 75.5%–77.5%, and expected R&D and SG&A expenses to increase in future periods.
- Management stated existing cash, investments, and expected product cash flows should meet liquidity needs for at least 12 months. Longer-term needs may include financing, particularly for debt repayment, development, commercialization, and potential milestones.
- COVID-19 continued to disrupt patient infusions and treatment starts; the extent and duration of effects remained uncertain. The company also cited inflation, supply-chain pressures, foreign-exchange volatility, and economic weakness in certain markets.
- In October 2022, BioMarin announced a workforce reduction of about 120 employees, approximately 4% of staff. Estimated pre-tax charges were $20 million–$25 million; $4.8 million was accrued in Q3, with the remainder expected in Q4.
- Possible contingent payments totaled $777.6 million, including $381.5 million and $225 million associated with early-stage licensed programs. These are contingent, not current debt. Firm purchase commitments were approximately $171.5 million.
- Two securities class actions remained pending: one concerning ROCTAVIAN disclosures and one concerning BMN 307. BioMarin denied the claims and stated it intended to defend them. The ROCTAVIAN case had a trial scheduled for April 2024.
- Key risks include regulatory approval and gene-therapy durability or safety, ROCTAVIAN pricing and reimbursement and market acceptance, KUVAN generic erosion, payer price controls, manufacturing and supply constraints, international collections and currency exposure, and dependence on a concentrated customer base.
Important facts for investors to verify
- Whether ROCTAVIAN’s FDA review and companion diagnostic proceed on the disclosed timeline, and the commercial uptake and reimbursement terms in the EU.
- Whether VOXZOGO launch growth and planned younger-age applications translate into sustained sales, including the effect of access and reimbursement decisions.
- How much of reported nine-month earnings and cash generation is recurring, given the $108 million voucher-sale gain and lower operating cash flow year over year.
- The pace of KUVAN revenue erosion, foreign-exchange effects, and variability from large government orders and customer payment timing.
- Future cash requirements, including the 2024 note maturity, contingent milestones, purchase commitments, and the $20 million–$25 million restructuring charges.
- Developments in the ROCTAVIAN and BMN 307 securities litigation and the status of BMN 307’s FDA clinical hold.