BioMarin Pharmaceutical Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual filing, not a standalone fourth-quarter report. Figures are in U.S. dollars; amounts below are in millions unless noted.
Business context
BioMarin develops and commercializes therapies for rare diseases. Its marketed portfolio included Vimizim, Kuvan, Naglazyme, Palynziq, Brineura and Aldurazyme. Major development programs included valoctocogene roxaparvovec for severe hemophilia A, vosoritide for achondroplasia and BMN 307 for PKU.
Key financial metrics
| Metric | 2020 | 2019 | Change / context |
|---|---|---|---|
| Total revenue | $1,860.5 | $1,704.0 | Up $156.5, or about 9% |
| Net product revenue | $1,805.9 | $1,661.0 | Up $144.9 |
| Operating loss | $(36.8) | $(100.5) | Improved, but operations remained loss-making |
| Net income (loss) | $859.1 | $(23.8) | Primarily reflects a large income tax benefit, not operating profitability |
| Diluted EPS | $4.53 | $(0.13) | Includes the tax-related benefit |
| Product gross margin | 71.0% | 78.4% | Down 7.4 percentage points |
| Cash from operating activities | $85.4 | $48.3 | Up $37.1 |
| Cash, equivalents and investments | $1,350.9 | $1,165.8 | Up $185.1 |
| Convertible debt, net | $1,075.1 | $848.1 | Includes $600.0 principal of 2027 Notes issued in 2020 |
Cost of sales rose to $524.3 million, including an $87.2 million charge for pre-launch valoctocogene roxaparvovec inventory after regulatory requests delayed anticipated approval. R&D expense declined to $628.1 million from $715.0 million; SG&A increased to $737.7 million from $680.9 million.
The $901.4 million income tax benefit included an $835.1 million deferred tax benefit from transferring certain intellectual property rights to an Irish subsidiary. The transfer did not generate a taxable gain, and the company expects to realize the deferred tax asset through future tax deductions.
Product revenue highlights
- Vimizim: $544.4 million, essentially unchanged year over year.
- Kuvan: $457.7 million, down from $463.4 million; U.S. generics entered the market in October 2020 and materially reduced fourth-quarter U.S. sales.
- Naglazyme: $391.3 million, up from $374.3 million.
- Palynziq: $171.0 million, up from $86.9 million.
- Brineura: $110.2 million, up from $72.0 million.
- Aldurazyme: $130.1 million, up from $97.8 million; revenue is based on sales by Sanofi Genzyme and product fulfillment timing.
Material changes and unusual items
- Net income shifted from a loss to substantial profit chiefly because of the $835.1 million deferred tax benefit associated with the intra-entity IP transfer. The company still recorded an operating loss.
- Product gross margin fell, in part because of the $87.2 million valoctocogene roxaparvovec inventory charge and product mix.
- BioMarin sold worldwide rights to Firdapse in January 2020 for $67.2 million plus residual royalties and recorded a $59.5 million gain. Firdapse product revenue thereafter was minimal.
- The company issued $600 million of 1.25% convertible notes due 2027 and repaid approximately $375 million of notes that matured in October 2020.
- Three customers represented 43% of 2020 net product revenue, compared with 41% in 2019, creating customer-concentration exposure.
Outlook, management commentary and risks
- Management expects COVID-19 to continue affecting business and financial results in 2021, including through missed infusions, delayed treatment starts and disruption to clinical development. No quantified financial guidance is provided in the filing text.
- Management expects significant declines in U.S. Kuvan revenue due to generic competition, continued growth in the other established products, increased R&D spending versus 2020, and higher SG&A as the company prepares for potential product launches. It expects total product gross margin to remain near 75% over the next 12 months.
- Valoctocogene roxaparvovec’s U.S. BLA received an FDA Complete Response Letter in August 2020 requesting two-year safety and efficacy follow-up for all Phase 3 participants; the last participant was expected to complete that follow-up in November 2021. The company reported positive topline Phase 3 results in January 2021, but those results do not resolve the regulatory request. The EMA application was withdrawn, with resubmission targeted for the second quarter of 2021, subject to discussions.
- Vosoritide’s NDA received FDA priority review; the PDUFA target date was August 20, 2021. The FDA had raised concerns about the design of the clinical program, and approval was uncertain. Management reported two-year Phase 3 data showing a cumulative 3.52 cm height gain versus untreated children.
- COVID-19, pricing and reimbursement pressure, small patient populations, generic competition, dependence on specialty products and international government purchasers, manufacturing and supply constraints, and gene-therapy durability and safety are principal risks.
- Convertible notes had $1.095 billion of total principal outstanding at year-end, due in 2024 and 2027. The company also had a $200 million revolving facility maturing October 2021, with no borrowings outstanding at year-end; it reported compliance with its covenants.
- A shareholder class action filed in 2020 alleges misleading statements concerning the valoctocogene roxaparvovec regulatory review. The company says it believes the claims lack merit and intends to defend the action.
Most important facts for investors to verify
- Whether the large deferred tax asset from the Irish IP transfer is realizable as management expects, and how future tax deductions affect reported results.
- The pace and extent of U.S. Kuvan revenue erosion after generic entry, and whether growth in other products offsets it.
- FDA and EMA requirements, timelines and eventual decisions for valoctocogene roxaparvovec, including durability and follow-up data.
- Vosoritide’s regulatory outcome, including whether the FDA considers the existing clinical program sufficient.
- COVID-19’s ongoing effects on patient access, clinical trials, manufacturing and cash generation, alongside the company’s liquidity and debt maturities.
- Customer concentration, international receivables and the company’s ability to maintain margins amid pricing, reimbursement and product-mix pressures.