BioMarin Pharmaceutical Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. BioMarin develops and sells therapies for rare diseases. Financial amounts below are in U.S. dollars; “Q2” refers to the three-month period.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Total revenue | $501.7 million | $429.5 million | $987.7 million | $931.6 million |
| Operating income (loss) | $11.7 million | $(40.9) million | $36.8 million | $64.0 million |
| Net income (loss) | $12.9 million | $(29.2) million | $30.3 million | $52.2 million |
| Diluted EPS | $0.07 | $(0.16) | $0.16 | $0.28 |
| Gross margin | 74.7% | 77.2% | 75.0% | 77.5% |
| Cash provided by operating activities | Not separately presented for Q2 | $196.3 million | $12.5 million |
- Q2 revenue rose about 17%; first-half revenue rose about 6%. Higher Vimizim, Naglazyme and Palynziq sales were partly offset by lower Kuvan sales.
- Q2 net income improved from a loss, supported by higher product sales and lower R&D expense, including the absence of a $26.3 million upfront license fee recorded in Q2 2020. First-half net income declined, mainly because 2020 included a $59.5 million gain on the Firdapse divestiture.
- Gross margin declined 2.5 percentage points in both comparisons, reflecting higher manufacturing costs and lower Kuvan sales prices amid generic competition.
- At June 30, cash and cash equivalents were $641.5 million; short- and long-term investments totaled $832.1 million. Cash, equivalents and investments were $1.474 billion, up from $1.351 billion at year-end 2020.
- Convertible debt, net of discounts and issuance costs, was $1.077 billion; undiscounted principal was $1.095 billion: $495 million due in August 2024 and $600 million due in May 2027. The $200 million revolving facility had no borrowings outstanding and matures May 28, 2024 after an amendment.
- Current assets were $2.358 billion and current liabilities $443.3 million. The filing reports no separate current ratio. Management said existing liquidity and expected operating cash flows should cover requirements for the next 12 months.
Material changes and operating drivers
- Q2 product revenue increased to $486.7 million from $419.0 million. Vimizim revenue rose to $171.7 million from $116.7 million; Naglazyme to $118.8 million from $81.0 million; and Palynziq to $58.9 million from $40.6 million. Management attributed growth in Vimizim and Naglazyme primarily to the timing of European and Middle Eastern orders, and Palynziq growth to more patients initiating and reaching maintenance dosing.
- Kuvan revenue fell to $78.8 million from $122.6 million in Q2 and to $149.6 million from $244.6 million for the first half, following the start of U.S. generic competition in October 2020.
- Royalty and other revenue increased to $15.0 million in Q2 from $10.5 million and to $33.3 million for the first half from $23.5 million, reflecting third-party license revenue and a regulatory milestone payment.
- First-half operating cash flow increased to $196.3 million from $12.5 million, primarily due to a tax refund, timing of customer receipts and lower employee compensation payments. Investing activities used $191.0 million; financing activities used $13.4 million, compared with $544.0 million of financing inflows in 2020 that included convertible-note proceeds.
- Regional Q2 revenue shifted: U.S. revenue declined to $204.2 million from $232.6 million, while Europe increased to $172.7 million from $109.3 million. Government order timing can cause quarterly volatility.
Outlook, developments and risks
- Pipeline and regulatory timing: In June, the European Medicines Agency’s CHMP recommended marketing authorization for vosoritide; a European Commission decision was expected in Q3 2021. FDA review of the vosoritide application was extended, with a target action date of November 20, 2021, following submission of additional two-year data.
- Valoctocogene roxaparvovec: FDA requested two-year follow-up safety and efficacy data from all GENEr8-1 participants. Management targeted a BLA submission in Q2 2022, subject to favorable results, and anticipated a CHMP opinion in the first half of 2022. Clinical updates reported in July 2021 are post-quarter developments described in the filing; early or interim data may differ from final results.
- Other programs included BMN 307 in Phase 1/2 for PKU, BMN 255 in clinical dosing, BMN 331 with an IND cleared in July 2021, and BMN 351 in preclinical development; management anticipated an IND filing for BMN 351 in the first half of 2022 if studies supported it.
- Management expected COVID-19 to continue affecting results for the remainder of 2021, particularly through missed infusions and delayed treatment starts. The duration and degree of impact remained uncertain. Management also expected R&D and SG&A expenses to increase in future periods; interest income was expected to decline over the next 12 months.
- Principal risks include regulatory delays or failure, clinical and gene-therapy durability or safety uncertainty, manufacturing and supply constraints, pricing and reimbursement pressure, generic Kuvan competition, COVID-19 effects, foreign-exchange and international collection risks, and dependence on small patient populations and concentrated customers.
- Potential contingent payments totaled approximately $727.3 million upon specified milestones; $71.5 million was considered probable and $235.0 million reasonably possible. Recorded contingent liabilities were $63.0 million, including $32.2 million current. Clinical and post-marketing service commitments were estimated at $126.7 million.
- A shareholder class action concerning statements about valoctocogene roxaparvovec and FDA review remained pending. BioMarin said it believed the claims lacked merit and intended to defend the action. The filing does not quantify potential loss.
Most important facts for investors to verify
- Progress and final regulatory decisions for vosoritide, including the U.S. review date and any European approval.
- Valoctocogene roxaparvovec’s two-year GENEr8-1 data, FDA submission timing, safety and durability evidence, and commercial prospects.
- Whether growth in Vimizim, Naglazyme and Palynziq offsets continuing Kuvan erosion and COVID-related missed treatments.
- Cash generation and liquidity relative to debt maturities, milestone obligations, planned development spending and potential commercialization costs.
- Customer concentration and receivable collection: four customers represented 50% of Q2 product revenue; two customers represented 43% of accounts receivable at June 30.
- Developments in the securities litigation, manufacturing capacity and supply continuity, and the uncertainty of contingent milestone payments.