BioMarin Pharmaceutical Inc. — 2013 Form 10-K
Reporting period: Fiscal year ended December 31, 2013. The filing also reports unaudited fourth-quarter results. BioMarin develops and commercializes medicines for serious and rare diseases; its portfolio included five approved products, with VIMIZIM approved in the U.S. after year-end.
Financial performance and liquidity
| Metric | 2013 | 2012 |
|---|---|---|
| Total revenue | $548.5 million | $500.7 million |
| Net product revenue | $538.4 million | $496.5 million |
| Operating loss | $156.0 million | $110.2 million |
| Net loss | $176.4 million | $114.3 million |
| Net loss per share, basic and diluted | $1.28 | $0.95 |
| Operating cash flow | $(59.6) million | $17.6 million |
| Cash, cash equivalents and investments at year-end | $1,052.4 million | $563.8 million |
| Working capital at year-end | $954.1 million | $573.0 million |
| Convertible debt carrying value at year-end | $655.6 million | $348.2 million |
- Fourth-quarter 2013 revenue was $146.9 million and net loss was $62.0 million; quarterly basic and diluted loss per share were reported as $(0.43) and $(0.44), respectively.
- Product gross profit was $442.7 million in 2013, versus $404.6 million in 2012; product gross margin was approximately 82% of net product revenue.
- Investing activities used $298.8 million, including $116.5 million placed in escrow for the San Rafael Corporate Center purchase. Financing activities provided $746.7 million, principally from the convertible-note offering.
- The October 2013 offering comprised $375 million of 0.75% notes due 2018 and $375 million of 1.50% notes due 2020. The company reported approximately $696.4 million net proceeds after fees, costs and capped-call purchase; debt carrying value is lower than principal in part because of the accounting discount.
Business trends and changes versus 2012
- Total revenue rose about 9.5%. Net product revenue growth was led by Kuvan, up $24.3 million to $167.4 million, and Naglazyme, up $14.2 million to $271.2 million. Aldurazyme revenue was $83.6 million, and Firdapse revenue was $16.1 million.
- Management attributed growth mainly to additional patients beginning therapy. Naglazyme and Kuvan gross margins were 86% and 84%, respectively; Firdapse margin declined to 77% from 80%, primarily due to higher manufacturing costs and depletion of previously expensed inventory.
- R&D expense increased 17% to $354.8 million, with higher spending on PEG PAL, BMN 673 and BMN 701. SG&A increased 19% to $235.4 million, including higher commercial and VIMIZIM pre-commercial costs. Net loss widened as expense growth exceeded increased product gross profit.
- Operating cash flow shifted from $17.6 million provided to $59.6 million used, reflecting the larger net loss and increased inventory, partly offset by noncash expenses and other working-capital movements.
Outlook, management commentary and risks
- Management expected 2014 R&D spending to exceed 2013 levels as clinical programs advanced, and anticipated higher SG&A from commercialization and expansion. The company expected to operate at a net loss for at least the next 12 months.
- On February 14, 2014, the FDA approved VIMIZIM for MPS IV A; U.S. commercial sales began. On February 20, 2014, the EMA’s CHMP issued a positive opinion, with an EC decision expected in the second quarter of 2014. These are post-year-end developments, not 2013 revenue drivers.
- Key programs included Phase 3 PEG PAL for PKU and BMN 673 for germline BRCA-mutated breast cancer; management expected PEG PAL trial results in fourth-quarter 2014 and planned a BMN 701 Phase 3 switching trial in early 2014. These are forward-looking expectations, not assured outcomes.
- Manufacturing expansion in Ireland will require substantial facility modifications and regulatory qualification. The company also cited dependence on third-party and single-source suppliers, manufacturing execution, clinical and regulatory uncertainty, reimbursement and pricing pressure, competition, and intellectual-property risks.
- Customer and geographic exposure warrants attention: three customers generated 41% of combined Naglazyme, Kuvan and Firdapse revenue; Genzyme is Aldurazyme’s sole customer. About 16% of year-end receivables related to Italy, Spain, Portugal and Greece, where collections may be delayed or impaired.
- Contingent milestone payments were approximately $422.2 million if specified milestones are achieved; $56.4 million related to programs no longer in development. The filing reported no material pending legal proceedings and no material off-balance-sheet arrangements.
Important facts for investors to verify
- Whether VIMIZIM’s commercial launch, EU authorization and manufacturing capacity meet the company’s expectations.
- Pipeline trial progress, data quality, regulatory milestones and the timing and scale of future R&D spending.
- Revenue growth, product-level margins, customer concentration, international reimbursement and collection of overdue receivables.
- Cash burn, the use of financing proceeds, convertible-note principal and conversion/dilution terms, and future capital requirements.
- Potential obligations from contingent acquisition milestones and the cost, timing and regulatory readiness of the Ireland facility build-out.