BioMarin Pharmaceutical Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter filing. Amounts are in U.S. dollars.
Business context
BioMarin develops and commercializes therapies for rare genetic diseases. Its portfolio includes enzyme therapies and the newer products VOXZOGO, ROCTAVIAN and KUVAN. In 2023, the FDA expanded VOXZOGO’s U.S. indication to children of all ages with open growth plates and approved ROCTAVIAN in the U.S.; the EU expanded VOXZOGO’s indication to children aged four months and older.
Financial performance
| Metric | 2023 | 2022 |
|---|---|---|
| Total revenue | $2.419 billion | $2.096 billion |
| Net product revenue | $2.373 billion | $2.042 billion |
| Cost of sales | $514.9 million | $483.7 million |
| Gross margin | 78.7% | 76.9% |
| Operating income | $158.1 million | $149.6 million |
| Net income | $167.6 million | $141.6 million |
| Diluted earnings per share | $0.87 | $0.75 |
| Cash from operating activities | $159.3 million | $175.9 million |
Revenue increased 15.4% year over year, driven primarily by VOXZOGO, PALYNZIQ and VIMIZIM. Gross margin improved with a higher contribution from higher-margin products, especially VOXZOGO, and lower per-unit manufacturing costs for enzyme products. Net income rose despite increased operating expenses; 2022 included a $108 million gain from the sale of a priority review voucher.
Research and development expense was $746.8 million, up from $649.6 million; selling, general and administrative expense was $937.3 million, up from $854.0 million. Interest income increased to $58.3 million from $18.0 million. Operating cash flow declined primarily due to timing of customer receipts and higher inventory, tax and ERP implementation payments.
Products and material changes
- VOXZOGO: Revenue was $469.9 million, up from $169.1 million. Demand in some markets exceeded forecasts; management expected supply constraints to temper revenue growth through the first half of 2024.
- VIMIZIM: Revenue was $701.0 million, up $37.2 million.
- PALYNZIQ: Revenue was $303.9 million, up $48.9 million.
- NAGLAZYME: Revenue was $420.3 million, down $23.5 million, partly reflecting timing of large government orders.
- KUVAN: Revenue was $180.8 million, down $46.8 million, primarily due to generic competition.
- ROCTAVIAN: U.S. FDA approval occurred in June 2023; revenue for the year was $3.5 million. The EU authorization remains conditional, with further clinical data required to seek standard authorization.
Three customers accounted for 36% of net product revenue in 2023. Government orders can be irregular and create quarter-to-quarter revenue variability. Foreign exchange reduced reported 2023 product sales by $100 million, with exposure mainly to the Euro and other currencies.
Liquidity, debt and commitments
Cash, cash equivalents and investments totaled $1.685 billion at year-end, compared with $1.625 billion a year earlier. Management stated that these resources and expected product cash generation should meet liquidity needs for at least the next 12 months. Total convertible-note principal was $1.095 billion: $495 million due August 2024 and $600 million due May 2027. The 2024 notes were classified as a current liability. The company terminated its $200 million revolving credit facility in August 2023; no amount was outstanding at year-end.
At December 31, 2023, purchase obligations were approximately $354.1 million, including $325.9 million expected to be paid in 2024. Lease payment obligations were $58.7 million. Reasonably possible contingent payments totaled $763.3 million, of which up to $30.1 million could be payable in 2024 if conditions are met. Unrecognized tax benefits were $277.5 million; the timing of any future payments was not estimable.
Outlook, management commentary and risks
- The filing provides no specific numerical 2024 revenue or earnings guidance. Management expected R&D spending to increase from 2023, principally for early-pipeline and later-stage clinical programs, and expected SG&A to rise with commercial expansion.
- A strategic review of R&D programs began in early 2024 to prioritize assets by potential patient impact and value creation. A VOXZOGO pivotal program for hypochondroplasia began in late 2023; the treatment study was expected to start in mid-2024.
- Management planned to increase VOXZOGO fill-finish capacity and had secured additional supply commitments beginning in mid-2024. It did not expect a material revenue impact if manufacturing plans were executed successfully, but noted that stronger-than-forecast demand could prolong constraints.
- Key risks include reimbursement and pricing pressure, gene-therapy acceptance and durability, clinical and regulatory uncertainty, product concentration and small patient populations, KUVAN generic erosion, manufacturing and single-source supply exposure, foreign exchange and international collection risk, and dependence on customer and government ordering patterns.
- The company received a U.S. Department of Justice subpoena seeking information about sponsored testing programs for VIMIZIM and NAGLAZYME, responded, and is cooperating; the outcome and potential impact were uncertain. The ROCTAVIAN securities class action settlement was finalized in November 2023, and the related settlement liability and insurance receivable were released. The BMN 307 securities case dismissal was affirmed on appeal in February 2024. Derivative actions related to ROCTAVIAN remained subject to court approval of a settlement.
- In December 2023, BioMarin entered into a cooperation agreement with Elliott Investment Management. CEO Alexander Hardy took office in December 2023, and the company announced that its chief commercial officer would step down effective July 2024.
- BioMarin recorded $38.6 million of asset impairment charges in 2023, including $14.0 million for tooling and fixed assets after discontinuing development of the first-generation VOXZOGO pen device, and impairment losses on strategic investments. The 2023 statements were audited by KPMG, which issued an unqualified opinion; management and the auditor reported effective internal control over financial reporting.
Important facts for investors to verify
- Whether VOXZOGO manufacturing capacity catches up with demand, and the resulting effect on revenue, market expansion and clinical development.
- How the August 2024 maturity of $495 million of convertible notes is settled, including any conversion, cash repayment or financing implications.
- ROCTAVIAN’s reimbursement, uptake, outcomes-based refund exposure and progress toward converting its EU conditional authorization to standard authorization.
- The pace of KUVAN revenue erosion and the impact of generic competition and patent challenges.
- The status and potential consequences of the DOJ inquiry, the derivative-action settlement approval, and other disclosed legal matters.
- Whether rising R&D and SG&A spending, customer concentration, foreign-exchange exposure and large government-order timing affect profitability and cash generation.