BioMarin Pharmaceutical Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. BioMarin develops and commercializes therapies for rare diseases; it reported seven commercial products. Figures below are in U.S. dollars, generally millions unless stated otherwise.
Financial performance and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Total revenue | $533.8 | $501.7 | $1,053.2 | $987.7 |
| Operating income | $39.2 | $11.7 | $176.5 | $36.8 |
| Net income | $27.7 | $12.9 | $148.5 | $30.3 |
| Diluted EPS | $0.15 | $0.07 | $0.79 | $0.16 |
| Gross margin | 76.9% | 74.7% | 77.2% | 75.0% |
- Q2 revenue increased 6.4% year over year; six-month revenue increased 6.6%. Net product revenue was $517.7 million in Q2 and $1,023.2 million for the half-year.
- Q2 product growth included Voxzogo ($34.4 million), Brineura (+$7.4 million year over year) and Aldurazyme (+$9.2 million). Kuvan fell $21.2 million in Q2 and $32.7 million for the first half, primarily due to generic competition.
- Six-month net income included a $108 million gain from selling a Voxzogo-related FDA Priority Review Voucher for $110 million. This one-time gain materially contributed to the year-over-year increase in operating income and net income.
- Six-month operating cash flow was $10.8 million, versus $196.3 million in the prior-year period. Management attributed the decline primarily to customer-receipt timing, no repeat of a prior-year federal tax refund, and higher employee compensation payments.
- Cash and cash equivalents were $619.8 million; short- and long-term investments totaled $902.4 million. Cash, cash equivalents and investments were $1.522 billion, essentially unchanged from year-end 2021.
- Convertible debt was $1.1 billion principal: $495 million due August 2024 and $600 million due May 2027. No borrowings were outstanding under the $200 million revolving facility; the company reported covenant compliance.
- At June 30, current assets were $2.518 billion and current liabilities $464.7 million. Total assets were $6.146 billion and total liabilities $1.641 billion.
Material changes and management outlook
- Voxzogo’s international launch continued, with increasing treated patients and active markets. Japan and Australia approved the product during the quarter; commercial sales were anticipated to begin in Q3 2022.
- The European medicines committee recommended conditional marketing authorization for valoctocogene roxaparvovec for adults with severe hemophilia A. A European Commission decision was expected in Q3 2022. BioMarin targeted U.S. BLA resubmission by the end of September 2022 and anticipated a review potentially three months longer than the typical six-month procedure.
- Management expected 2022 gross margin of approximately 75.5%–77.5%. It expected R&D and SG&A expenses to rise in future periods, reflecting early-stage research, continued development and launch preparation. No full-year revenue or earnings guidance is provided in the supplied filing text.
- Management said cash generated from product sales, together with available cash and investments, should meet liquidity needs for at least the next 12 months. Longer-term needs are expected to be funded through operating cash flow, available balances and the revolving facility; additional financing could be needed depending on spending, debt repayment and other commitments.
Risks, contingencies and unusual items
- COVID-19 continued to cause missed infusions and delayed treatment starts, and BioMarin expected effects on 2022 results. The company also cited uncertainty from macroeconomic conditions, foreign exchange, inflation, government purchasing and collection delays.
- Reasonably possible contingent payments totaled $778 million, including $381.5 million and $225 million associated with two early-stage licensed programs. These are contingent exposures, not reported as currently payable liabilities.
- Firm purchase commitments were approximately $140.8 million. The balance sheet also included $30.0 million of short-term acquisition-related contingent consideration.
- Valoctocogene roxaparvovec inventory included $31.8 million of capitalized manufacturing costs and cannot be sold commercially without regulatory approval. Gene-therapy approval, durability, safety, manufacturing, pricing and reimbursement remain material uncertainties.
- BMN 307 remained on FDA clinical hold following preclinical findings of liver tumors in some high-dose mice; additional nonclinical work was requested and was expected to take several quarters.
- BioMarin disclosed securities class actions concerning valoctocogene roxaparvovec and BMN 307. It said it believed the claims lacked merit and intended to defend them. The filing does not provide a clear estimate of potential loss.
- Other key risks include Kuvan generic erosion, payer coverage and pricing pressure, dependence on small patient populations and international markets, supply and manufacturing constraints, and the $1.1 billion debt maturity obligations.
Most important facts for investors to verify
- Whether Voxzogo launch growth and anticipated market access translate into sustained revenue, including sales following Japan and Australia approvals.
- Regulatory progress and timing for valoctocogene roxaparvovec in Europe and the U.S., including the BLA resubmission and review timeline.
- Underlying operating cash generation excluding the $108 million voucher gain, and the drivers of working-capital movements.
- The pace of Kuvan revenue decline and the durability of growth in other products, particularly amid foreign-exchange effects and government-order timing.
- Potential timing and amount of the $778 million contingent-payment exposure, the $140.8 million purchase commitments, and funding needs for 2024 debt repayment.
- Developments in the BMN 307 clinical hold, COVID-19 impacts, and the disclosed securities litigation.