BioMarin Pharmaceutical Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Financial statements are unaudited; dollar amounts below are in millions unless otherwise noted. BioMarin develops and commercializes therapies primarily for rare genetic diseases.
Financial results and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Total revenue | $581.3 | $505.3 | $1,773.0 | $1,558.5 |
| Operating income (loss) | $25.7 | $(2.4) | $143.9 | $174.1 |
| Net income (loss) | $40.4 | $(6.7) | $147.3 | $141.8 |
| Diluted EPS | $0.21 | $(0.04) | $0.77 | $0.75 |
| Gross margin | 78.5% | 77.0% | 78.6% | 77.1% |
- Q3 revenue rose about 15%; nine-month revenue rose about 14%. Net product revenue was $568.3 million in Q3 and $1,739.4 million for nine months.
- Q3 operating results moved to a profit from a loss. Nine-month operating income declined despite higher revenue, in part because the 2022 period included a $108.0 million gain from selling a Priority Review Voucher; there was no comparable gain in 2023.
- Q3 product drivers included VOXZOGO revenue of $123.0 million, up from $48.3 million, and PALYNZIQ of $78.9 million, up from $66.2 million. KUVAN fell to $42.9 million from $57.0 million amid generic competition. Nine-month NAGLAZYME revenue also declined, attributed principally to timing of large government orders and foreign exchange.
- For the first nine months, operating cash flow was $131.8 million, down from $169.1 million. Investing cash flow was an outflow of $46.3 million versus an inflow of $34.7 million; financing cash flow was an outflow of $29.6 million. Cash and cash equivalents increased to $785.4 million from $724.5 million.
- Cash, cash equivalents and investments totaled $1,673.8 million at September 30, 2023. Current assets were $2,955.3 million and current liabilities $1,163.2 million.
- Convertible notes had $1.095 billion net carrying value and $1.1 billion undiscounted principal: $495 million at 0.599% due August 2024 and $600 million at 1.25% due May 2027. The $200 million revolving credit facility was terminated in August 2023 with no borrowings outstanding.
Outlook, management commentary and material items
- Management expects gross margin of approximately 77.8%–79.0% for the remainder of 2023. It expects R&D and SG&A expense to rise in future periods, reflecting development activity, product launches and global brand expansion.
- VOXZOGO demand exceeded projections. BioMarin warned of supply constraints through the first half of 2024, potentially tempering revenue growth and delaying market entries or development activities. It is increasing fill-finish capacity and secured additional supply commitments beginning in mid-2024; management expects no material revenue impact if manufacturing plans succeed.
- Management said available cash, cash equivalents and short-term investments, together with product-generated cash, should meet liquidity needs for at least 12 months. It also noted that additional financing could be needed for debt repayment, milestones, development, commercialization or other operations.
- ROCTAVIAN was approved by the FDA in June 2023 and generated $0.8 million of product revenue through September. The first commercial patient was treated in Germany in Q3; pricing and reimbursement work continued in Germany and Italy. VOXZOGO’s U.S. age expansion and EU indication expansion were approved in October 2023, after the reporting period.
- Accrued a $39.0 million estimated loss for a ROCTAVIAN-related shareholder class action and recorded an equal expected insurance recovery, resulting in no net income-statement impact. Final settlement approval was pending at filing. A separate BMN 307 securities class-action dismissal was appealed; two ROCTAVIAN-related derivative actions were also pending.
- Reasonably possible contingent payments totaled $788.3 million, including $591.5 million associated with early-stage programs licensed from two third parties. Firm purchase commitments were approximately $246.0 million, of which $134.4 million was expected to be paid in 2023 as goods and services were received.
- Other risks include reimbursement and pricing pressure, international sales and foreign-exchange exposure, generic KUVAN competition, reliance on manufacturing capacity and suppliers, and the development, durability, reimbursement and acceptance risks of gene therapies. Three customers represented 38% of Q3 net product revenue.
- After quarter-end, BioMarin announced the CEO’s retirement and Alexander Hardy’s appointment, both effective December 1, 2023.
Important facts for investors to verify
- Whether VOXZOGO supply expansion meets demand and whether the temporary constraint affects sales, market launches or clinical programs.
- ROCTAVIAN uptake, reimbursement progress, patient treatment rates and the durability and commercial acceptance assumptions underlying its outlook.
- The 2024 note repayment or conversion plan and the company’s ability to preserve liquidity while funding development and commercialization.
- The pace of generic erosion in KUVAN, variability in government order timing, foreign-exchange effects and customer payment concentration.
- Final approval and insurance coverage of the ROCTAVIAN shareholder settlement, plus outcomes of the BMN 307 appeal and derivative litigation.
- The size, timing and conditions of the $788.3 million in reasonably possible contingent payments and the $246.0 million purchase commitments.