BioMarin Pharmaceutical Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparisons are with Q1 2020 unless stated otherwise. BioMarin is a biotechnology company focused on developing and commercializing therapies for rare diseases. Figures below are in U.S. dollars; financial statement amounts are converted from thousands to millions.
Financial performance and position
| Metric | Q1 2021 | Q1 2020 / prior date |
|---|---|---|
| Total revenue | $486.0 million | $502.1 million |
| Net product revenue | $467.8 million | $489.0 million |
| Royalty and other revenue | $18.3 million | $13.0 million |
| Operating income | $25.1 million | $105.0 million |
| Net income | $17.4 million | $81.4 million |
| Diluted earnings per share | $0.09 | $0.44 |
| Product gross margin | 74.3% | 77.2% |
| Operating cash flow | $113.5 million provided | $15.2 million used |
| Cash, cash equivalents and investments | $1,408.6 million | $1,350.9 million at Dec. 31, 2020 |
| Convertible debt, net | $1,076.1 million | $1,075.1 million at Dec. 31, 2020 |
Cash and cash equivalents were $667.3 million at quarter-end. Total liabilities were $1,643.0 million and stockholders’ equity was $4,162.0 million. The company reported no borrowings under its $200 million revolving credit facility; the facility matures October 19, 2021. Convertible notes have principal of $495 million due in August 2024 and $600 million due in May 2027.
Material changes versus the prior period
- Revenue declined 3.2%; net product revenue fell 4.3%. Kuvan revenue decreased $51.2 million to $70.8 million, primarily reflecting U.S. generic competition following loss of market exclusivity in October 2020.
- Growth in Vimizim ($21.2 million) and Palynziq ($19.4 million) partly offset declines in Kuvan, Naglazyme and Aldurazyme.
- Net income fell to $17.4 million from $81.4 million. The comparison was affected by the absence of the $59.5 million Firdapse sale gain recognized in Q1 2020, lower product gross profit, and higher R&D spending; lower SG&A partially offset these effects.
- R&D expense increased to $148.7 million from $142.3 million, including increased research and early-development and vosoritide costs. SG&A declined to $174.3 million from $187.3 million, mainly due to lower foreign-exchange losses.
- Gross margin contracted 2.9 percentage points, attributed to higher per-unit manufacturing costs for Palynziq and Naglazyme and product mix. Operating income also reflected the prior-year Firdapse gain.
- Operating cash flow improved by $128.7 million year over year, which management attributed mainly to the timing of customer and tax-authority receipts and lower bonus payments, partly offset by vendor payments.
Outlook, developments and risks
- Management said existing cash, investments and expected operating cash generation should meet liquidity needs for the next 12 months. Additional financing may be required for debt repayment, milestones, operations or increased development and acquisition spending.
- The company expects COVID-19 to continue affecting 2021 results. Missed infusions and delayed treatment starts may reduce sales, and lost doses or delayed starts may not be recovered. The pandemic may also disrupt trials, manufacturing, supply and regulatory activity.
- No quantified full-year revenue or earnings guidance is provided in the supplied filing text. Management expects R&D and SG&A expense to increase in future periods; interest income is expected to be lower over the next 12 months.
- Vosoritide’s U.S. review timeline was extended after submission of two-year extension-study results; the PDUFA target date became November 20, 2021. The company anticipated a June 2021 European committee opinion and possible European authorization in Q3 2021.
- For valoctocogene roxaparvovec, the company reported positive one-year Phase 3 topline results, including an 84% reduction in annualized bleeding rate versus prior prophylactic Factor VIII treatment. It planned an EU application in June 2021 and targeted a U.S. BLA in Q2 2022, subject to two-year follow-up data and regulatory review.
- Other pipeline updates included completed enrollment in a vosoritide Phase 2 study in younger children, dose escalation in the BMN 307 Phase 1/2 study, and planned development work for BMN 255, BMN 331 and BMN 351.
- Potential contingent payments totaled approximately $654.5 million, subject to future milestones; $70.4 million was considered probable, and $60.0 million of contingent liabilities was recorded at quarter-end. Clinical and post-marketing service commitments were estimated at $122.9 million.
- A shareholder securities class action concerning statements about valoctocogene roxaparvovec was pending. The company said it considered the claims meritless and intended to defend itself.
Important facts for investors to verify
- How generic Kuvan competition and COVID-related treatment interruptions affect product sales through the rest of 2021.
- Vosoritide regulatory decisions and whether its review timelines or launch assumptions change.
- Valoctocogene roxaparvovec follow-up data, regulatory requirements and the timing and prospects of U.S. and European submissions.
- Whether product mix, manufacturing costs and pipeline investment continue to pressure margins and earnings.
- Cash generation, upcoming credit-facility maturity, convertible-note repayment needs and the timing or likelihood of contingent milestone payments.
- Concentrated customer exposure: four customers represented 48% of Q1 net product revenue, and two customers accounted for 31% and 15% of quarter-end receivables.