BioMarin Pharmaceutical Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020; balance-sheet figures are as of March 31, 2020. The company develops and sells therapies for rare diseases.
Financial performance
| Metric | Q1 2020 | Q1 2019 |
|---|---|---|
| Total revenue | $502.1 million | $400.7 million |
| Net product revenue | $489.0 million | $394.5 million |
| Operating income (loss) | $105.0 million | $(54.0) million |
| Net income (loss) | $81.4 million | $(56.5) million |
| Diluted earnings (loss) per share | $0.44 | $(0.32) |
| Operating cash flow | $(15.2) million | $(54.9) million |
- Revenue increased 25%, led by Naglazyme, Palynziq, Kuvan, Vimizim, Brineura and Aldurazyme. Firdapse revenue fell following its January divestiture.
- Product gross margin was 77% in both periods. Cost of sales rose to $111.4 million as sales volumes increased.
- R&D expense declined to $142.3 million from $183.6 million, primarily reflecting capitalization of valoctocogene roxaparvovec manufacturing costs, fewer Palynziq trial costs and the tralesinidase alfa license-out. SG&A increased to $187.3 million from $162.2 million, including higher pre-commercialization spending.
- Cash and cash equivalents were $476.6 million; short- and long-term investments totaled $672.6 million. Combined cash, cash equivalents and investments were $1.149 billion, down from $1.166 billion at year-end 2019.
- Operating cash use improved year over year. Investing activities provided $77.4 million, including $67.2 million proceeds from the Firdapse sale; financing activities used $19.7 million. Ending cash and equivalents increased $39.2 million during the quarter.
- Total convertible debt was $870.0 million principal, or $852.7 million net carrying value. The $375.0 million 2020 Notes mature in October 2020; $495.0 million of 2024 Notes mature in August 2024. The $200 million revolving credit facility was undrawn, and the company reported covenant compliance.
Changes, outlook and notable items
- Net income turned positive from a year-earlier loss, reflecting revenue growth and a $59.5 million pretax gain on the Firdapse asset and inventory sale, as well as lower R&D expense. Higher SG&A and income-tax expense partly offset these factors.
- Management said COVID-19 had not materially affected Q1 revenue or operations but anticipated near-term financial impacts. Risks include missed or delayed infusions, fewer new patients, clinical-trial disruption, regulatory delays, supply and manufacturing constraints, and market volatility. The extent and duration were described as uncertain.
- Management expected 2020 R&D spending to be generally flat versus 2019, with lower costs for Palynziq and valoctocogene roxaparvovec and the tralesinidase alfa license-out offset by increased early-stage research. SG&A was expected to rise with Palynziq expansion and pre-commercialization work for valoctocogene roxaparvovec and vosoritide. Interest expense was expected to remain relatively flat over the next 12 months. No specific revenue or earnings guidance was provided in the supplied filing text.
- BioMarin planned to submit U.S. and EU marketing applications for vosoritide in Q3 2020, following positive Phase 3 results. Valoctocogene roxaparvovec had an FDA priority-review action date of August 21, 2020; COVID-related delays could extend the EMA review, with an opinion expected in late 2020 or early 2021. COVID-19 uncertainty pushed anticipated BMN 307 Phase 1/2 dosing to the second half of 2020.
- The company held $52.5 million of valoctocogene roxaparvovec manufacturing costs in inventory, based on its view that recovery was likely; absent regulatory approval, those costs would be expensed to R&D. Kuvan generics were expected to enter the U.S. market in Q4 2020 under settlements.
- Potential milestone payments totaled approximately $355.4 million if specified milestones are achieved; $50.5 million was recorded as contingent consideration. Other estimated clinical, post-marketing and purchase commitments were approximately $113.4 million.
Key investor verification points
- Track repayment, conversion or refinancing of the $375 million 2020 Notes and any effect on liquidity; assess the related credit-facility conditions.
- Monitor COVID-19 effects on infusion access, product demand, clinical programs, manufacturing, regulatory timelines and customer collections.
- Verify regulatory decisions and timing for valoctocogene roxaparvovec, vosoritide and BMN 307, and the recoverability of gene-therapy inventory costs.
- Assess sustainability of revenue growth, the 77% product gross margin, operating cash flow and the benefit from the one-time Firdapse gain.
- Evaluate expected Kuvan generic competition, customer concentration and milestone or other contractual obligations.