BioMarin Pharmaceutical Inc. — 2015 Form 10-K
Reporting period: Fiscal year ended December 31, 2015. The filing was signed February 29, 2016. Amounts are in U.S. dollars unless stated otherwise.
Business context
BioMarin develops and commercializes therapies for serious and rare diseases. Its five marketed products were Vimizim, Naglazyme, Kuvan, Aldurazyme and Firdapse; the company also had several clinical-stage candidates. This was a year of commercial growth and heavy pipeline investment, alongside major transactions including the Prosensa acquisition and sale of talazoparib.
Financial performance and liquidity
| Metric | 2015 | 2014 |
|---|---|---|
| Total revenue | $889.9 million | $749.3 million |
| Net product revenue | $884.5 million | $738.4 million |
| Research and development expense | $634.8 million | $461.5 million |
| Selling, general and administrative expense | $402.3 million | $302.2 million |
| Net loss | $171.8 million | $134.0 million |
| Net loss per share, diluted | $1.07 | $0.92 |
| Cash, cash equivalents and investments at year-end | $1,018.3 million | $1,043.1 million |
| Net cash used in operating activities | $221.7 million | $71.9 million |
| Working capital | $644.1 million | $1,161.9 million |
| Convertible debt, net on balance sheet | $662.3 million | $642.9 million |
Product revenue grew about 20% year over year, led by Vimizim’s expanded launch and growth in Kuvan. By product, 2015 revenue was Vimizim $228.1 million, Naglazyme $303.1 million, Kuvan $239.3 million, Aldurazyme $98.0 million and Firdapse $16.0 million. Reported product gross margins included Vimizim 84%, Naglazyme 87%, Kuvan 83% and Aldurazyme 68%.
Operating expenses rose faster than revenue, principally due to higher R&D and SG&A spending. The company remained loss-making and stated it expected operating losses and net cash outflows for at least the next 12 months. The filing reports $781.4 million of undiscounted convertible debt principal at year-end, including $375 million due in 2018 and $375 million due in 2020, as well as $31.4 million of 2017 notes. Reported 2015 interest expense was $38.2 million.
Material changes versus 2014
- Total revenue increased $140.6 million. Vimizim revenue rose $150.8 million; Kuvan rose $36.3 million. These gains were partly offset by declines in Naglazyme ($31.3 million), Aldurazyme ($7.6 million) and Firdapse ($2.1 million).
- R&D expense increased $173.3 million and SG&A increased $100.1 million, reflecting pipeline activity, commercialization and expanded staffing.
- Operating cash use increased by $149.8 million, primarily reflecting greater R&D activity and inventory purchases. Investing cash use was $1,179.6 million, including acquisition-related payments and purchases of investments and property.
- The company recorded a $369.5 million gain on the talazoparib sale and a $198.7 million impairment charge for Kyndrisa IPR&D. The Kyndrisa impairment followed the FDA’s January 2016 complete response letter, which concluded that substantial evidence of effectiveness had not been met.
- The annual net loss widened by $37.8 million despite the talazoparib gain; the comparison also reflects the prior-year $67.5 million gain from selling a priority review voucher.
Outlook, commentary and principal risks
- 2016 outlook: Management planned continued pipeline progression and commercial-product uptake, with increased R&D spending versus 2015 as several programs advanced. It also anticipated higher SG&A from product pre-commercialization and international expansion. No numerical 2016 revenue or earnings guidance is provided in the supplied filing text.
- Kyndrisa: The U.S. NDA received a complete response letter in January 2016. The EU application remained under review; management anticipated an EMA committee opinion in Q2 2016 and an EC decision in the second half of 2016. Approval was uncertain, and failure could lead to further trials, abandonment or additional impairment.
- PKU franchise: BioMarin paid Merck Serono a $371.8 million deposit in December 2015 and completed the transfer of global Kuvan and pegvaliase rights, except Kuvan in Japan, effective January 1, 2016. Potential additional payments are up to €60 million for Kuvan sales milestones and €125 million for pegvaliase development milestones. Transfer of Kuvan authorizations in some countries and transition services remained outstanding.
- Kuvan competition: BioMarin settled U.S. tablet litigation with Dr. Reddy’s, granting a generic license effective on a confidential future date more than five years after settlement, subject to exceptions. Litigation against Par remained pending for tablets; a separate powder case was filed in February 2016.
- Funding and execution: Management expects substantial ongoing investment and says additional financing may be needed depending on spending, business development and debt settlement choices. Risks include clinical and regulatory failure, manufacturing and single-source supply interruptions, reimbursement and pricing pressure, foreign-exchange movements, and collection delays from government customers.
- Other unusual items: Prosensa was acquired for a total purchase price of approximately $751.5 million; BioMarin recorded $772.8 million of acquired IPR&D at acquisition. The talazoparib sale generated $410 million upfront, with up to $160 million in milestones and mid-single-digit royalties. Three customers generated 42% of 2015 net product revenue for Vimizim, Naglazyme, Kuvan and Firdapse; Genzyme is the sole Aldurazyme customer.
Important facts for investors to verify
- Progress and regulatory outcomes for Kyndrisa in the EU, and any revised U.S. development plan or related impairment.
- Clinical results, timelines and spending for pegvaliase, reveglucosidase alfa, vosoritide, cerliponase alfa and BMN 270.
- Actual revenue and cash contribution from the expanded Kuvan franchise, transition costs, and timing and impact of generic competition.
- Operating cash burn, capital spending, liquidity after the $371.8 million PKU deposit, and capacity to meet convertible-debt obligations.
- Performance of the core products, including Naglazyme and Aldurazyme, and exposure to foreign exchange, government purchasing patterns and customer concentration.