BioMarin Pharmaceutical Inc. — 2019 Form 10-K Summary
Business context and reporting period. BioMarin is a biotechnology company developing and commercializing therapies for rare diseases. This annual report covers the fiscal year ended December 31, 2019; quarterly figures below identify the three months ended December 31 where relevant. Unless stated otherwise, amounts are in U.S. dollars.
Financial performance and position
| Metric | 2019 | 2018 | Change / context |
|---|---|---|---|
| Total revenue | $1.704 billion | $1.491 billion | Up $212.8 million, or about 14.3% |
| Net product revenue | $1.661 billion | $1.470 billion | Up $190.6 million, or about 13.0% |
| Operating loss | $100.5 million | $123.5 million | Loss narrowed |
| Net loss | $23.8 million | $77.2 million | Loss narrowed; 2019 included a $71.0 million income tax benefit |
| Diluted loss per share | $0.13 | $0.44 | Improved year over year |
| Product gross margin | 78.4% | 78.6% | Relatively flat |
| Cash from operating activities | $48.3 million | $20.2 million | Higher, but affected by working-capital timing and inventory |
| Cash, cash equivalents and investments | $1.166 billion | $1.320 billion | Down $154.4 million |
| Convertible debt, principal | $870.0 million | $870.0 million | $375.0 million due October 2020; $495.0 million due August 2024 |
Capital expenditures were $145.0 million. Cash from operations less purchases of property, plant and equipment was approximately negative $96.8 million. Current assets were $1.942 billion and current liabilities were $932.5 million; current liabilities included $361.9 million of net short-term convertible debt. No amounts were drawn on the $200 million revolving credit facility at year-end.
Largest 2019 product revenues included Vimizim ($544.3 million), Kuvan ($463.4 million), Naglazyme ($374.3 million), Aldurazyme ($97.8 million), Palynziq ($86.9 million) and Brineura ($72.0 million). Palynziq and Brineura grew substantially; Aldurazyme revenue declined.
Material changes and developments
- Revenue growth was led by Palynziq’s U.S. launch, patient growth for Brineura and Kuvan, and higher Vimizim and Naglazyme sales. Aldurazyme sales to Genzyme fell.
- Research and development expense rose to $715.0 million from $696.3 million, with increased activity in BMN 307, valoctocogene roxaparvovec and vosoritide. Selling, general and administrative expense rose to $680.9 million from $604.4 million, mainly reflecting commercial expansion and preparation for a potential gene therapy launch.
- 2019 quarterly revenue was $454.4 million in the fourth quarter, versus $353.2 million a year earlier. Fourth-quarter net income was $15.0 million, compared with a $3.7 million net loss in the fourth quarter of 2018.
- Revenue concentration remained significant: three customers accounted for 43% of net product revenue excluding Aldurazyme, and three customers represented 41% of total net product revenue in the filing’s customer concentration disclosure.
Outlook, risks and unusual items
- Management expected 2020 R&D spending to be generally flat compared with 2019 and anticipated product gross margin near 80% over the next 12 months. It expected SG&A to increase with Palynziq commercialization and valoctocogene roxaparvovec pre-commercialization. The filing does not provide a clear numerical revenue or earnings forecast.
- Vosoritide’s Phase 3 study met its primary endpoint, with a placebo-adjusted increase in growth velocity of 1.6 cm/year. BioMarin planned discussions with regulators in the first half of 2020 regarding marketing applications.
- The FDA accepted the valoctocogene roxaparvovec application for priority review after year-end, with an August 21, 2020 target action date; the EMA had validated its application. These were pending regulatory decisions, not approvals. The company reported interim clinical results and cautioned that later data could differ.
- BioMarin capitalized $29.2 million of pre-launch valoctocogene roxaparvovec manufacturing costs as inventory, subject to expensing if regulatory approval is not obtained.
- Generic versions of Kuvan were expected to enter the U.S. market in the fourth quarter of 2020 under settlement agreements. This poses a material commercial risk.
- The $375.0 million 2020 Notes were due in October 2020 and could be converted under specified conditions. Repayment or cash settlement could reduce liquidity; the filing notes potential need for additional financing.
- Other disclosed risks include pricing and reimbursement pressure, foreign-exchange exposure (2019 currency movements reduced product sales by $24.8 million), reliance on a limited number of customers and suppliers, and manufacturing, clinical, regulatory and gene-therapy durability risks.
- In January 2020, BioMarin completed the sale of worldwide Firdapse rights for $67.0 million. In October 2019, it licensed tralesinidase alfa (BMN 250) to a third party, which assumed ongoing development and commercialization costs; BioMarin retained potential milestone and royalty rights.
- The financial statements received an unqualified audit opinion, and management and the auditor reported effective internal control over financial reporting as of year-end.
Key facts for investors to verify
- Progress and final results for valoctocogene roxaparvovec, including durability, safety, regulatory decisions and the treatment of its capitalized inventory.
- Funding and settlement of the October 2020 Notes, including any conversion, cash repayment or financing plan.
- Timing and commercial impact of U.S. generic Kuvan entry, including the effect on Kuvan sales and margins.
- Whether commercial growth in Palynziq, Brineura and other products can offset pricing pressure, customer concentration and variable government ordering patterns.
- Completion and financial impact of the Firdapse divestiture and the company’s 2020 operating-spending outlook.