BioMarin Pharmaceutical Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Financial amounts below are in U.S. dollars; millions are used unless noted.
Business context
BioMarin develops and commercializes therapies for rare diseases. Its marketed portfolio included Aldurazyme, Brineura, Kuvan, Naglazyme, Palynziq and Vimizim. Voxzogo received European Commission approval in August 2021; its U.S. application was under FDA review, with a November 20, 2021 target action date stated in the filing.
Financial performance
| Metric | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 |
|---|---|---|---|---|
| Total revenue | $408.7 | $476.8 | $1,396.5 | $1,408.3 |
| Operating income (loss) | $(53.2) | $(55.9) | $(16.5) | $8.1 |
| Net income (loss) | $(36.5) | $784.8 | $(6.2) | $837.0 |
| Gross margin | 74.7% | 60.4% | 74.9% | 71.7% |
- Q3 net product revenue fell $66.8 million year over year, while nine-month net product revenue fell $20.5 million. Kuvan declined $56.4 million in Q3 and $151.4 million over nine months, principally because of U.S. generic competition following loss of exclusivity.
- For nine months, growth in Vimizim, Naglazyme, Palynziq and Brineura partly offset declines in Kuvan and Aldurazyme. Q3 declines also reflected timing of Aldurazyme fulfillment and certain European and Middle Eastern orders; Palynziq and Brineura grew.
- Cost of sales declined $85.3 million in Q3 and $47.3 million over nine months. The comparison benefited from the absence of an $81.2 million valoctocogene roxaparvovec pre-launch inventory charge recorded in Q3 2020.
- R&D expense was $157.9 million in Q3, up $10.8 million, and $467.7 million for nine months, down $3.7 million. SG&A was broadly flat year to date at $541.8 million.
- The large 2020 net income was not comparable to 2021: 2020 included an $835.1 million deferred tax benefit from transferring certain intellectual property to an Irish subsidiary. Nine-month 2020 also included a $59.5 million gain on the Firdapse business sale. Q3 2021 other income included insurance proceeds exceeding direct costs.
Cash flow, liquidity and debt
- For the first nine months of 2021, operating cash flow was $293.4 million, versus $98.7 million in 2020. Management attributed the increase mainly to timing of customer and licensee receipts, lower employee compensation payments and tax refunds.
- Investing cash outflow was $310.9 million, mainly reflecting purchases of available-for-sale securities; financing cash outflow was $14.4 million. Cash and cash equivalents were $617.1 million at September 30, versus $649.2 million at year-end 2020.
- Cash, cash equivalents and investments totaled $1.546 billion, up from $1.351 billion at year-end 2020. Current assets were $2.312 billion and current liabilities $514.9 million.
- Convertible debt had a $1.078 billion net carrying value and $1.095 billion aggregate principal: $495 million due in 2024 and $600 million due in 2027. The amended $200 million revolving facility matures in 2024; no amount was drawn, and the company reported covenant compliance.
Outlook, developments and risks
- Management said existing cash, investments and expected operating cash generation should meet liquidity needs for the next 12 months. It may need additional financing for debt repayment, milestones, operations or increased development spending.
- Management expected COVID-19 to continue affecting 2021 results through missed infusions and delayed treatment starts; the scale and duration remained uncertain. It expected R&D and SG&A to rise in future periods, and interest income to be lower over the next 12 months.
- Voxzogo’s European launch was underway, with remainder-of-2021 revenue expected from France, Germany and select early-access markets. Valoctocogene roxaparvovec’s EU review and planned U.S. resubmission depended on favorable two-year follow-up data; management anticipated an EU committee opinion in H1 2022 and U.S. resubmission in Q2 2022.
- The FDA placed BMN 307’s Phase 1/2 study on clinical hold in September 2021 following preclinical findings in mice. BioMarin said it was evaluating clinical significance and working with authorities to address the hold.
- Recorded contingent liabilities were $63.4 million, including $48.2 million current. Potential contingent payments totaled approximately $708.8 million: $70.0 million probable, $405.5 million reasonably possible and $233.3 million remote. Clinical and post-marketing service commitments were estimated at $107.7 million.
- Two securities class actions were disclosed: one relating to valoctocogene roxaparvovec, and a new suit filed October 22, 2021 relating to BMN 307. The company said it believed the claims lacked merit and intended to defend them.
- Key risks include continuing COVID-19 effects, Kuvan generic erosion, regulatory and clinical uncertainty, gene-therapy durability and safety, pricing and reimbursement pressure, manufacturing and supply constraints, international payment and currency risks, and reliance on small patient populations.
Investor verification checklist
- Track Voxzogo’s U.S. FDA decision and commercial uptake, reimbursement and launch progress in Europe.
- Verify the valoctocogene roxaparvovec follow-up data, regulatory timelines and any resulting changes to the U.S. filing plan.
- Monitor BMN 307’s clinical hold, regulatory resolution and any material safety updates.
- Assess ongoing Kuvan generic erosion against growth in other products and the timing of government orders.
- Review cash generation, investment levels, milestone exposure, and the company’s capacity to address 2024 and 2027 debt maturities.
- Follow COVID-19-related treatment interruptions, the disclosed securities litigation and the collectability of concentrated customer receivables.