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| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
March 31, 2021
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| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
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Delaware | 68-0397820 | |||||||||||
| (State or other jurisdiction of
| (I.R.S. Employer
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| 770 Lindaro Street | San Rafael | California | 94901 | |||||||||
(Address of principal executive offices) | (Zip Code) | |||||||||||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
| Common Stock, par value $0.001 | BMRN | The Nasdaq Global Select Market | ||||||||||||
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| Large Accelerated Filer | ☒ | Accelerated Filer | ☐ | ||||||||||||||||||||
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Non-accelerated Filer | ☐ | Smaller Reporting Company | ☐ | ||||||||||||||||||||
| Emerging | ☐ | ||||||||||||||||||||||
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Condensed Consolidated Balance Sheets as |
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2
September 30, 2017
2020
|
| September 30, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2016(1) |
| ||
ASSETS |
| (unaudited) |
|
|
|
|
| |
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 431,399 |
|
| $ | 408,330 |
|
Short-term investments |
|
| 825,700 |
|
|
| 381,347 |
|
Accounts receivable, net |
|
| 251,891 |
|
|
| 215,280 |
|
Inventory |
|
| 457,393 |
|
|
| 355,126 |
|
Other current assets |
|
| 83,646 |
|
|
| 61,708 |
|
Total current assets |
|
| 2,050,029 |
|
|
| 1,421,791 |
|
Noncurrent assets: |
|
|
|
|
|
|
|
|
Long-term investments |
|
| 416,304 |
|
|
| 572,711 |
|
Property, plant and equipment, net |
|
| 878,624 |
|
|
| 798,768 |
|
Intangible assets, net |
|
| 530,957 |
|
|
| 553,780 |
|
Goodwill |
|
| 197,039 |
|
|
| 197,039 |
|
Deferred tax assets |
|
| 484,759 |
|
|
| 446,786 |
|
Other assets |
|
| 22,985 |
|
|
| 32,815 |
|
Total assets |
| $ | 4,580,697 |
|
| $ | 4,023,690 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
| $ | 364,920 |
|
| $ | 370,505 |
|
Short-term convertible debt, net |
|
| — |
|
|
| 22,478 |
|
Short-term contingent acquisition consideration payable |
|
| 52,609 |
|
|
| 46,327 |
|
Total current liabilities |
|
| 417,529 |
|
|
| 439,310 |
|
Noncurrent liabilities: |
|
|
|
|
|
|
|
|
Long-term convertible debt, net |
|
| 1,166,036 |
|
|
| 660,761 |
|
Long-term contingent acquisition consideration payable |
|
| 126,790 |
|
|
| 115,310 |
|
Other long-term liabilities |
|
| 56,780 |
|
|
| 42,034 |
|
Total liabilities |
|
| 1,767,135 |
|
|
| 1,257,415 |
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
Common stock, $0.001 par value: 500,000,000 shares authorized; 175,495,350 and 172,647,588 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively. |
|
| 176 |
|
|
| 173 |
|
Additional paid-in capital |
|
| 4,435,449 |
|
|
| 4,288,113 |
|
Company common stock held by Nonqualified Deferred Compensation Plan (NQDC) |
|
| (14,473 | ) |
|
| (14,321 | ) |
Accumulated other comprehensive income (loss) |
|
| (21,434 | ) |
|
| 12,816 |
|
Accumulated deficit |
|
| (1,586,156 | ) |
|
| (1,520,506 | ) |
Total stockholders’ equity |
|
| 2,813,562 |
|
|
| 2,766,275 |
|
Total liabilities and stockholders’ equity |
| $ | 4,580,697 |
|
| $ | 4,023,690 |
|
|
|
| March 31, 2021 | December 31, 2020 (1) | ||||||||||
| ASSETS | (unaudited) | ||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 667,313 | $ | 649,158 | |||||||
| Short-term investments | 420,178 | 416,228 | |||||||||
| Accounts receivable, net | 396,097 | 448,351 | |||||||||
| Inventory | 713,929 | 698,548 | |||||||||
| Other current assets | 91,249 | 129,934 | |||||||||
| Total current assets | 2,288,766 | 2,342,219 | |||||||||
| Noncurrent assets: | |||||||||||
| Long-term investments | 321,127 | 285,473 | |||||||||
| Property, plant and equipment, net | 1,022,474 | 1,032,471 | |||||||||
| Intangible assets, net | 405,903 | 417,271 | |||||||||
| Goodwill | 196,199 | 196,199 | |||||||||
| Deferred tax assets | 1,429,386 | 1,432,150 | |||||||||
| Other assets | 141,198 | 142,237 | |||||||||
| Total assets | $ | 5,805,053 | $ | 5,848,020 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable and accrued liabilities | $ | 399,225 | $ | 492,548 | |||||||
| Short-term contingent consideration | 30,810 | 0 | |||||||||
| Total current liabilities | 430,035 | 492,548 | |||||||||
| Noncurrent liabilities: | |||||||||||
| Long-term convertible debt, net | 1,076,127 | 1,075,145 | |||||||||
| Long-term contingent consideration | 29,153 | 60,130 | |||||||||
| Other long-term liabilities | 107,728 | 114,195 | |||||||||
| Total liabilities | 1,643,043 | 1,742,018 | |||||||||
| Stockholders’ equity: | |||||||||||
| Common stock, $0.001 par value: 500,000,000 shares authorized; 182,670,614 and 181,740,999 shares issued and outstanding, respectively. | 183 | 182 | |||||||||
| Additional paid-in capital | 5,010,619 | 4,993,407 | |||||||||
| Company common stock held by Nonqualified Deferred Compensation Plan (the NQDC) | (9,558) | (9,839) | |||||||||
| Accumulated other comprehensive income (loss) | 5,004 | (16,139) | |||||||||
| Accumulated deficit | (844,238) | (861,609) | |||||||||
| Total stockholders’ equity | 4,162,010 | 4,106,002 | |||||||||
| Total liabilities and stockholders’ equity | $ | 5,805,053 | $ | 5,848,020 | |||||||
INCOME
2020
(Unaudited)
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
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REVENUES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net product revenues |
| $ | 298,752 |
|
| $ | 278,262 |
|
| $ | 916,868 |
|
| $ | 812,195 |
|
Royalty and other revenues |
|
| 35,396 |
|
|
| 1,634 |
|
|
| 38,473 |
|
|
| 4,568 |
|
Total revenues |
|
| 334,148 |
|
|
| 279,896 |
|
|
| 955,341 |
|
|
| 816,763 |
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
| 59,480 |
|
|
| 50,738 |
|
|
| 165,791 |
|
|
| 145,473 |
|
Research and development |
|
| 154,103 |
|
|
| 160,831 |
|
|
| 442,145 |
|
|
| 486,663 |
|
Selling, general and administrative |
|
| 130,532 |
|
|
| 118,758 |
|
|
| 394,056 |
|
|
| 333,635 |
|
Intangible asset amortization and contingent consideration |
|
| 3,760 |
|
|
| 9,654 |
|
|
| 26,096 |
|
|
| (34,318 | ) |
Impairment of intangible assets |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 599,118 |
|
Total operating expenses |
|
| 347,875 |
|
|
| 339,981 |
|
|
| 1,028,088 |
|
|
| 1,530,571 |
|
LOSS FROM OPERATIONS |
|
| (13,727 | ) |
|
| (60,085 | ) |
|
| (72,747 | ) |
|
| (713,808 | ) |
Equity in the loss of BioMarin/Genzyme LLC |
|
| (253 | ) |
|
| (104 | ) |
|
| (996 | ) |
|
| (374 | ) |
Interest income |
|
| 3,976 |
|
|
| 1,633 |
|
|
| 10,031 |
|
|
| 4,561 |
|
Interest expense |
|
| (10,884 | ) |
|
| (9,980 | ) |
|
| (31,043 | ) |
|
| (29,767 | ) |
Other income, net |
|
| 267 |
|
|
| 1,723 |
|
|
| 4,282 |
|
|
| 504 |
|
LOSS BEFORE INCOME TAXES |
|
| (20,621 | ) |
|
| (66,813 | ) |
|
| (90,473 | ) |
|
| (738,884 | ) |
Benefit from income taxes |
|
| (8,094 | ) |
|
| (29,388 | ) |
|
| (24,823 | ) |
|
| (199,394 | ) |
NET LOSS |
| $ | (12,527 | ) |
| $ | (37,425 | ) |
| $ | (65,650 | ) |
| $ | (539,490 | ) |
NET LOSS PER SHARE, BASIC |
| $ | (0.07 | ) |
| $ | (0.22 | ) |
| $ | (0.38 | ) |
| $ | (3.29 | ) |
NET LOSS PER SHARE, DILUTED |
| $ | (0.07 | ) |
| $ | (0.22 | ) |
| $ | (0.38 | ) |
| $ | (3.30 | ) |
Weighted average common shares outstanding, basic |
|
| 175,103 |
|
|
| 167,714 |
|
|
| 174,071 |
|
|
| 163,963 |
|
Weighted average common shares outstanding, diluted |
|
| 175,103 |
|
|
| 167,714 |
|
|
| 174,071 |
|
|
| 164,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE LOSS |
| $ | (19,303 | ) |
| $ | (39,795 | ) |
| $ | (99,900 | ) |
| $ | (558,365 | ) |
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||
| REVENUES: | |||||||||||||||||||||||
| Net product revenues | $ | 467,769 | $ | 489,043 | |||||||||||||||||||
| Royalty and other revenues | 18,261 | 13,026 | |||||||||||||||||||||
| Total revenues | 486,030 | 502,069 | |||||||||||||||||||||
| OPERATING EXPENSES: | |||||||||||||||||||||||
| Cost of sales | 120,166 | 111,374 | |||||||||||||||||||||
| Research and development | 148,725 | 142,257 | |||||||||||||||||||||
| Selling, general and administrative | 174,318 | 187,295 | |||||||||||||||||||||
| Intangible asset amortization and contingent consideration | 17,735 | 15,677 | |||||||||||||||||||||
| Gain on sale of nonfinancial assets | 0 | (59,495) | |||||||||||||||||||||
| Total operating expenses | 460,944 | 397,108 | |||||||||||||||||||||
| INCOME FROM OPERATIONS | 25,086 | 104,961 | |||||||||||||||||||||
| Equity in the loss of BioMarin/Genzyme LLC | (1,351) | (77) | |||||||||||||||||||||
| Interest income | 2,439 | 5,244 | |||||||||||||||||||||
| Interest expense | (3,804) | (6,915) | |||||||||||||||||||||
| Other income, net | 858 | (1,861) | |||||||||||||||||||||
| INCOME BEFORE INCOME TAXES | 23,228 | 101,352 | |||||||||||||||||||||
| Provision for income taxes | 5,857 | 19,971 | |||||||||||||||||||||
| NET INCOME | $ | 17,371 | $ | 81,381 | |||||||||||||||||||
| NET INCOME PER SHARE, BASIC | $ | 0.10 | $ | 0.45 | |||||||||||||||||||
| NET INCOME PER SHARE, DILUTED | $ | 0.09 | $ | 0.44 | |||||||||||||||||||
| Weighted average common shares outstanding, basic | 181,772 | 179,898 | |||||||||||||||||||||
| Weighted average common shares outstanding, diluted | 184,365 | 187,163 | |||||||||||||||||||||
| COMPREHENSIVE INCOME | $ | 38,514 | $ | 95,344 | |||||||||||||||||||
Nine
March 31, 2021 and 2020
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
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| Company |
|
| Accumulated |
|
|
|
|
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|
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|
|
|
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|
|
|
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| Additional |
|
| Common |
|
| Other |
|
|
|
|
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| Total |
| ||||
|
| Common stock |
|
| Paid-in |
|
| Stock Held |
|
| Comprehensive |
|
| Accumulated |
|
| Stockholders' |
| ||||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| by NQDC |
|
| Income (Loss) |
|
| Deficit |
|
| Equity |
| |||||||
Balance at December 31, 2016 |
|
| 172,648 |
|
| $ | 173 |
|
| $ | 4,288,113 |
|
| $ | (14,321 | ) |
| $ | 12,816 |
|
| $ | (1,520,506 | ) |
| $ | 2,766,275 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (65,650 | ) |
|
| (65,650 | ) |
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (34,250 | ) |
|
| — |
|
|
| (34,250 | ) |
Issuances under equity incentive plans, net of tax |
|
| 1,648 |
|
|
| 2 |
|
|
| 7,550 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7,552 |
|
Issuances of common stock under the Employee Stock Purchase Plan (the ESPP) |
|
| 95 |
|
|
| — |
|
|
| 6,704 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,704 |
|
Conversion of convertible notes, net |
|
| 1,104 |
|
|
| 1 |
|
|
| 22,476 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 22,477 |
|
Common stock held by NQDC |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (152 | ) |
|
| — |
|
|
| — |
|
|
| (152 | ) |
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 110,606 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 110,606 |
|
Balance at September 30, 2017 |
|
| 175,495 |
|
| $ | 176 |
|
| $ | 4,435,449 |
|
| $ | (14,473 | ) |
| $ | (21,434 | ) |
| $ | (1,586,156 | ) |
| $ | 2,813,562 |
|
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||
Shares of common stock, beginning balances (1) | 181,741 | 179,838 | |||||||||||||||||||||
| Issuances under equity incentive plans | 930 | 924 | |||||||||||||||||||||
| Shares of common stock, ending balances | 182,671 | 180,762 | |||||||||||||||||||||
Total stockholders' equity, beginning balances (1) | $ | 4,106,002 | $ | 3,122,381 | |||||||||||||||||||
| Common stock: | |||||||||||||||||||||||
Beginning balances (1) | 182 | 180 | |||||||||||||||||||||
| Issuances under equity incentive plans, net of tax | 1 | 1 | |||||||||||||||||||||
| Ending balance | 183 | 181 | |||||||||||||||||||||
| Additional paid-in capital: | |||||||||||||||||||||||
Beginning balance (1) | 4,993,407 | 4,832,707 | |||||||||||||||||||||
| Issuances under equity incentive plans, net of tax | (29,916) | (24,227) | |||||||||||||||||||||
| Stock-based compensation | 47,409 | 46,463 | |||||||||||||||||||||
| Common stock held by the NQDC | (281) | (129) | |||||||||||||||||||||
| Ending balance | 5,010,619 | 4,854,814 | |||||||||||||||||||||
| Company common stock held by the NQDC: | |||||||||||||||||||||||
Beginning balance (1) | (9,839) | (9,961) | |||||||||||||||||||||
| Common stock held by the NQDC | 281 | 129 | |||||||||||||||||||||
| Ending balance | (9,558) | (9,832) | |||||||||||||||||||||
| Accumulated other comprehensive income: | |||||||||||||||||||||||
Beginning balance (1) | (16,139) | 20,164 | |||||||||||||||||||||
| Other comprehensive income (loss) | 21,143 | 13,963 | |||||||||||||||||||||
| Ending balance | 5,004 | 34,127 | |||||||||||||||||||||
| Accumulated Deficit: | |||||||||||||||||||||||
Beginning balance (1) | (861,609) | (1,720,709) | |||||||||||||||||||||
| Net income | 17,371 | 81,381 | |||||||||||||||||||||
| Ending balance | (844,238) | (1,639,328) | |||||||||||||||||||||
| Total stockholders' equity, ending balances | $ | 4,162,010 | $ | 3,239,962 | |||||||||||||||||||
Nine
2020
(Unaudited)
|
| 2017 |
|
| 2016 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net loss |
| $ | (65,650 | ) |
| $ | (539,490 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 59,197 |
|
|
| 76,805 |
|
Non-cash interest expense |
|
| 23,792 |
|
|
| 22,276 |
|
Accretion of discount on investments |
|
| 2,162 |
|
|
| 681 |
|
Stock-based compensation |
|
| 106,678 |
|
|
| 97,220 |
|
(Gain) loss on the sale of equity investments |
|
| (3,252 | ) |
|
| 2,020 |
|
Impairment of intangible assets |
|
| — |
|
|
| 599,118 |
|
Deferred income taxes |
|
| (36,150 | ) |
|
| (218,700 | ) |
Unrealized foreign exchange (gain) loss |
|
| 4,348 |
|
|
| (10,961 | ) |
Non-cash changes in the fair value of contingent acquisition consideration payable |
|
| 3,382 |
|
|
| (56,954 | ) |
Other |
|
| 4,657 |
|
|
| 1,044 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
| (21,598 | ) |
|
| (52,023 | ) |
Inventory |
|
| (80,885 | ) |
|
| (59,802 | ) |
Other current assets |
|
| (20,787 | ) |
|
| (1,556 | ) |
Other assets |
|
| (1,030 | ) |
|
| (5,002 | ) |
Accounts payable and accrued liabilities |
|
| (1,732 | ) |
|
| (77,852 | ) |
Other long-term liabilities |
|
| 3,497 |
|
|
| (4,451 | ) |
Net cash used in operating activities |
|
| (23,371 | ) |
|
| (227,627 | ) |
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
| (159,329 | ) |
|
| (96,806 | ) |
Funds held in escrow for the purchase of real property |
|
| — |
|
|
| (8,383 | ) |
Maturities and sales of investments |
|
| 325,678 |
|
|
| 302,801 |
|
Purchase of available-for-sale securities |
|
| (609,794 | ) |
|
| (370,393 | ) |
Business acquisitions, net of cash acquired |
|
| — |
|
|
| (1,467 | ) |
Other |
|
| (1,560 | ) |
|
| (150 | ) |
Net cash used in investing activities |
|
| (445,005 | ) |
|
| (174,398 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from exercises of stock options and the ESPP |
|
| 46,119 |
|
|
| 49,498 |
|
Taxes paid related to net share settlement of equity awards |
|
| (31,863 | ) |
|
| (55,241 | ) |
Proceeds from public offering of common stock, net |
|
| — |
|
|
| 712,938 |
|
Proceeds from convertible senior subordinated note offering, net |
|
| 481,713 |
|
|
| — |
|
Payment of contingent acquisition consideration payable |
|
| (1,894 | ) |
|
| — |
|
Other |
|
| (26 | ) |
|
| — |
|
Net cash provided by financing activities |
|
| 494,049 |
|
|
| 707,195 |
|
Effect of exchange rate changes on cash |
|
| (2,604 | ) |
|
| 5,139 |
|
NET DECREASE IN CASH AND CASH EQUIVALENTS |
|
| 23,069 |
|
|
| 310,309 |
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
Beginning of period |
| $ | 408,330 |
|
| $ | 397,040 |
|
End of period |
| $ | 431,399 |
|
| $ | 707,349 |
|
SUPPLEMENTAL CASH FLOW DISCLOSURES: |
|
|
|
|
|
|
|
|
Cash paid for interest, net of interest capitalized into fixed assets |
|
| 4,287 |
|
|
| 4,564 |
|
Cash paid for income taxes |
|
| 21,744 |
|
|
| 95,163 |
|
Stock-based compensation capitalized into inventory |
|
| 12,077 |
|
|
| 8,960 |
|
Depreciation capitalized into inventory |
|
| 17,899 |
|
|
| 13,402 |
|
SUPPLEMENTAL CASH FLOW DISCLOSURES FOR NON CASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Decrease in accounts payable and accrued liabilities related to fixed assets |
|
| (25,047 | ) |
|
| (13,988 | ) |
Conversion of convertible debt |
|
| 22,477 |
|
|
| 8,924 |
|
Accrual for inventory purchases related to the acquisition of the Merck PKU Business |
|
| — |
|
|
| 1,322 |
|
| Three Months Ended March 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
| Net income | $ | 17,371 | $ | 81,381 | |||||||
| Adjustments to reconcile net income to net cash used in operating activities: | |||||||||||
| Depreciation and amortization | 27,983 | 25,964 | |||||||||
| Non-cash interest expense | 1,043 | 4,618 | |||||||||
| Amortization of premium on investments | 673 | 60 | |||||||||
| Stock-based compensation | 49,503 | 46,994 | |||||||||
| Gain on sale of nonfinancial assets | 0 | (59,495) | |||||||||
| Deferred income taxes | 3,335 | 10,603 | |||||||||
| Unrealized foreign exchange loss | 3,950 | 9,400 | |||||||||
| Non-cash changes in the fair value of contingent consideration | 2,255 | (4) | |||||||||
| Other | (871) | (383) | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable, net | 40,294 | (31,898) | |||||||||
| Inventory | (6,425) | (20,706) | |||||||||
| Other current assets | 42,784 | 8,302 | |||||||||
| Other assets | 1,617 | (441) | |||||||||
| Accounts payable and accrued liabilities | (72,304) | (94,733) | |||||||||
| Other long-term liabilities | 2,304 | 5,144 | |||||||||
| Net cash provided by (used in) operating activities | 113,512 | (15,194) | |||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
| Purchases of property, plant and equipment | (25,507) | (40,554) | |||||||||
| Maturities and sales of investments | 194,637 | 94,701 | |||||||||
| Purchases of available-for-sale securities | (237,171) | (40,104) | |||||||||
| Proceeds from sale of nonfinancial assets | 0 | 67,159 | |||||||||
| Purchase of intangible assets | (2,747) | (3,463) | |||||||||
| Other | 0 | (335) | |||||||||
| Net cash provided by (used in) investing activities | (70,788) | 77,404 | |||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
| Proceeds from exercises of awards under equity incentive plans | 5,817 | 10,116 | |||||||||
| Taxes paid related to net share settlement of equity awards | (29,097) | (28,844) | |||||||||
| Principal repayments of financing leases | (1,084) | (943) | |||||||||
| Net cash used in financing activities | (24,364) | (19,671) | |||||||||
| Effect of exchange rate changes on cash | (205) | (3,353) | |||||||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS | 18,155 | 39,186 | |||||||||
| Cash and cash equivalents: | |||||||||||
| Beginning of period | $ | 649,158 | $ | 437,446 | |||||||
| End of period | $ | 667,313 | $ | 476,632 | |||||||
| SUPPLEMENTAL CASH FLOW DISCLOSURES: | |||||||||||
| Cash paid for income taxes | $ | 2,998 | $ | 2,267 | |||||||
| Cash paid for interest | $ | 1,465 | $ | 1,403 | |||||||
| SUPPLEMENTAL CASH FLOW DISCLOSURES FOR NON-CASH INVESTING AND FINANCING ACTIVITIES: | |||||||||||
| Decrease in accounts payable and accrued liabilities related to fixed assets | $ | (12,795) | $ | (19,927) | |||||||
| Increase in accounts payable and accrued liabilities related to intangible assets | $ | 1,298 | $ | 2,218 | |||||||
candidates for the treatment of various diseases.
The Company is subject to a number of risks, including: the financial performance of its commercial products; the potential need for additional financings; the Company’s ability to successfully commercialize its approved products; the uncertainty of the Company’s research and development (R&D) efforts resulting in future successful commercial products; the Company’s ability to successfully obtain regulatory approval for new products; significant competition from larger organizations; reliance on the proprietary technology of others; dependence on key personnel; uncertain patent protection; dependence on corporate partners and collaborators; and possible restrictions on reimbursement from governmental agencies and healthcare organizations, as well as other changes in the health care industry. Please see “Risk Factors” included in Part II, Item 1A of this Quarterly Report on Form 10-Q for a more detailed discussion of these risks.
The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2021 or any other period.
change materially in future periods.
7
BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands of U.S. dollars, except per share amounts or as otherwise disclosed)
Except as described below, there
Effective January, 1, 2018, the Company will adopt Accounting Standards Update (ASU) No. 2014-09 (ASU 2014-09), Revenue from Contracts with Customers, as amended (commonly referred to as ASC Topic 606), which provides principles for recognizing revenue to depict the transfer
As of September 30, 2017, the Company has not elected to early adopt ASC Topic 606 and plans to adopt the new standard using the modified retrospective method. The Company has formed a task force that is in the process of analyzing the Company’s customer contracts and the potential impacts the standard may have on previously reported revenues and future revenues. As the Company completes its analysis of the accounting for the Company’s customer contracts under the new revenue standard, management is assessing the required changes to the Company’s accounting policies, systems and internal control over financial reporting. Based on management’s preliminary analysis of the Company’s material contracts with customers, management does not anticipate that ASC Topic 606 will have a material impact on the timing of revenue recognition for the products that are marketed by the Company. Management is still assessing the application of ASC Topic 606 to Aldurazyme revenues earned from Genzyme Corporation (Genzyme).
In January 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-01 (ASU 2016-01), Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 changes accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. In addition, the update clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The guidance will become effective for the Company’s fiscal year beginning January 1, 2018 and must be adopted using a modified retrospective approach, with certain exceptions. Early adoption is permitted for certain provisions. The Company is currently evaluating the impact that the standard will have on its Consolidated Financial Statements. Management’s assessment indicates that the amendment will not have a significant impact as the Company currently has no significant equity investments, however, the update may have a significant impact in the future. As of September 30, 2017, the Company has not elected to early adopt the amendments of ASU 2016-01.
In February 2016, the FASB issued ASU No. 2016-02, Leases (ASU 2016-02). The amended guidance requires balance sheet recognition of lease right-of-use (ROU) assets and liabilities by lessees for leases classified as operating leases, with an option to not recognize lease ROU assets and lease liabilities for leases with a term of 12 months or less. The amendments also require new disclosures providing additional qualitative and quantitative information about the amounts recorded in the financial statements. Lessor accounting is largely unchanged. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted, but, as of September 30, 2017, the Company has not made the election to do so. ASU 2016-02 will be effective for the Company’s fiscal year beginning January 1, 2019. The amendments require a modified retrospective approach with optional practical expedients.
As of September 30, 2017, the Company has formed a task force that is in the process of analyzing the Company’s lease contracts and the potential impacts the standard may have on its Consolidated Financial Statements and related disclosures. After completing the analysis of the accounting for the Company’s lease contracts under the amendments, management will assess the required changes to the Company’s accounting policies, systems and internal control over financial reporting. Based on management’s preliminary analysis, the Company anticipates the amendments may have a material impact on the Company’s Consolidated Balance Sheets due to the requirement to recognize lease ROU assets and corresponding liabilities related to leases on the Company’s Consolidated Balance Sheets, but they are not anticipated to have a material impact on the Company’s other Consolidated Financial Statements.
ContentsIn May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting (ASU 2017-09). The amendment provides clarification about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years and early adoption is permitted. The Company has
8
- (continued)
elected to early adopt ASU 2017-09, which did not have a material impact on
| March 31, 2021 | |||||||||||||||||||||||||||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Aggregate Fair Value | Cash and Cash Equivalents | Short-term Marketable Securities (1) | Long-term Marketable Securities (2) | |||||||||||||||||||||||||||||||||||
| Level 1: | |||||||||||||||||||||||||||||||||||||||||
| Cash | $ | 311,301 | $ | 0 | $ | 0 | $ | 311,301 | $ | 311,301 | $ | 0 | $ | 0 | |||||||||||||||||||||||||||
| Level 2: | |||||||||||||||||||||||||||||||||||||||||
| Money market instruments | 352,440 | 0 | 0 | 352,440 | 352,440 | 0 | 0 | ||||||||||||||||||||||||||||||||||
| Corporate debt securities | 403,903 | 2,022 | (190) | 405,735 | 3,572 | 176,374 | 225,789 | ||||||||||||||||||||||||||||||||||
| U.S. government agency securities | 269,560 | 1,081 | (7) | 270,634 | 0 | 207,737 | 62,897 | ||||||||||||||||||||||||||||||||||
| Commercial paper | 36,067 | 1 | (1) | 36,067 | 0 | 36,067 | 0 | ||||||||||||||||||||||||||||||||||
| Asset-backed securities | 31,683 | 58 | (7) | 31,734 | 0 | 0 | 31,734 | ||||||||||||||||||||||||||||||||||
| Foreign and other | 550 | 157 | 0 | 707 | 0 | 0 | 707 | ||||||||||||||||||||||||||||||||||
| Subtotal | 1,094,203 | 3,319 | (205) | 1,097,317 | 356,012 | 420,178 | 321,127 | ||||||||||||||||||||||||||||||||||
| Total | $ | 1,405,504 | $ | 3,319 | $ | (205) | $ | 1,408,618 | $ | 667,313 | $ | 420,178 | $ | 321,127 | |||||||||||||||||||||||||||
| December 31, 2020 | |||||||||||||||||||||||||||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Aggregate Fair Value | Cash and Cash Equivalents | Short-term Marketable Securities (1) | Long-term Marketable Securities (2) | |||||||||||||||||||||||||||||||||||
| Level 1: | |||||||||||||||||||||||||||||||||||||||||
| Cash | $ | 370,325 | $ | 0 | $ | 0 | $ | 370,325 | $ | 370,325 | $ | 0 | $ | 0 | |||||||||||||||||||||||||||
| Level 2: | |||||||||||||||||||||||||||||||||||||||||
| Money market instruments | 264,833 | 0 | 0 | 264,833 | 264,833 | 0 | 0 | ||||||||||||||||||||||||||||||||||
| Corporate debt securities | 413,137 | 3,261 | (8) | 416,390 | 0 | 220,551 | 195,839 | ||||||||||||||||||||||||||||||||||
| U.S. government agency securities | 265,298 | 1,555 | (1) | 266,852 | 14,000 | 192,488 | 60,364 | ||||||||||||||||||||||||||||||||||
| Asset-backed securities | 31,659 | 85 | (2) | 31,742 | 0 | 3,189 | 28,553 | ||||||||||||||||||||||||||||||||||
| Foreign and other | 549 | 168 | 0 | 717 | 0 | 0 | 717 | ||||||||||||||||||||||||||||||||||
| Subtotal | 975,476 | 5,069 | (11) | 980,534 | 278,833 | 416,228 | 285,473 | ||||||||||||||||||||||||||||||||||
| Total | $ | 1,345,801 | $ | 5,069 | $ | (11) | $ | 1,350,859 | $ | 649,158 | $ | 416,228 | $ | 285,473 | |||||||||||||||||||||||||||
In August 2017, the FASB issued ASU No. 2017-12, Derivativesone year or less.
(5) ACQUISITIONS
On October 1, 2015, the Company entered into a Termination and Transition Agreement with Ares Trading S.A. (Merck Serono), as amended and restated on December 23, 2015 (the A&R Kuvan Agreement), to terminate the Development, License and Commercialization Agreement, dated May 13, 2005, as amended (the License Agreement), between the Company and Merck Serono, including the license to KuvanMarch 31, 2021, the Company had grantedthe ability and intent to Merck Serono underhold all investments that were in an unrealized loss position until maturity. The Company considered its intent and ability to hold the License Agreement. Also on October 1, 2015,securities until recovery of amortized cost basis, the Company and Merck Serono entered into a Termination Agreement (the Pegvaliase Agreement)extent to terminate the license to pegvaliase the Company had granted to Merck Serono under the License Agreement. On January 1, 2016, pursuantwhich fair value is less than amortized cost basis, conditions specifically related to the A&R Kuvan Agreementsecurity’s industry and the Pegvaliase Agreement, the Company completed the acquisition from Merck Seronogeography, payment structure and its affiliates of certain rightshistory and other assets with respect to Kuvan and pegvaliase (the Merck PKU Business). As a result, the Company acquired all global rights to Kuvan and pegvaliase from Merck Serono, with the exception of Kuvan in Japan. Previously, the Company had exclusive rights to Kuvan in the U.S. and Canada and pegvaliase in the U.S. and Japan. In connection with the acquisition of the Merck PKU Business, the Company recognized transaction costs of $0.6 million, of which $0.3 million was recognized in each of the years ended December 31, 2016 and 2015.
Pursuantchanges to the A&R Kuvan Agreement,ratings (if any) in determining that the Company paid Merck Serono $374.5 million,decline in cash, the majority of which was paid in January 2016, andfair value compared to carrying value is obligated to pay Merck Serono upnot related to a maximumcredit loss.
Prior to the consummation of the transactions described above, the Company sold Kuvan to Merck Serono at a price near its manufacturing costs, and Merck Serono resold the product to end-users outside the U.S., Canada and Japan. The royalty earned by the Company from Kuvan product sold by Merck Serono was included as a component of Net Product Revenues in the period earned.
Kuvan is a commercialized product for the treatment of patients with phenylketonuria (PKU) and/or for primary BH4 deficiency in certain countries. At the time of the acquisition, pegvaliase was in pivotal studies as a potential therapeutic option for adult patients with PKU. In March 2016, the Company announced that its pivotal Phase 3 PRISM-2 study of pegvaliase met the primary endpoint of change in blood Phe compared with placebo (p<0.0001); and the Company submitted a marketing application in the U.S. in June 2017 and announced its plans to submit an application for registration in the European Union (EU). Kuvan has Orphan Drug exclusivity in the EU until 2020, and pegvaliase has Orphan Drug designation in the U.S. and the EU.
ContentsThe acquisition date fair value of the contingent acquisition consideration payments, Kuvan global marketing rights, with the exception of Japan, and pegvaliase in process research and development (IPR&D) acquired was estimated by applying a probability-based income approach utilizing an appropriate discount rate. This estimation was based on significant inputs that are not observable in the market, referred to as level 3 inputs. Key assumptions include a discount rate and various probability factors. The range of outcomes and assumptions used to develop these estimates has been updated to estimate the fair value of the contingent acquisition consideration payable as of September 30, 2017. See Note 13 to these Condensed Consolidated Financial Statements for additional
9
- (continued)
discussion regarding fair value measurements of the contingent acquisition consideration payable included on the Company’s Condensed Consolidated Balance Sheet.
Cash payments |
| $ | 374,545 |
|
Estimated fair value of contingent acquisition consideration payable |
|
| 138,974 |
|
Total consideration |
| $ | 513,519 |
|
Kuvan intangible assets |
| $ | 172,961 |
|
Pegvaliase IPR&D |
|
| 326,359 |
|
Inventory |
|
| 14,199 |
|
Total identifiable assets acquired |
| $ | 513,519 |
|
The amount allocated to the Kuvan intangible assets is considered to be finite-lived and will be amortized on a straight-line basis over its estimated useful life through 2024.
The amount allocated to acquired pegvaliase IPR&D is considered to be indefinite-lived until the completion or abandonment of the associated research and development efforts. During the period the assets are considered indefinite-lived, they will not be amortized but will be tested for impairment on an annual basis and between annual tests if the Company becomes aware of any events occurring or changes in circumstances that would indicate the reduction in the fair value of the IPR&D assets below their respective carrying amounts. When development is complete, which generally occurs if and when regulatory approval to market a product is obtained, the associated assets would be deemed finite-lived and would then be amortized based on their respective estimated useful lives at that point. See Note 8 to these Condensed Consolidated Financial Statements for further discussion of the indefinite-lived intangible assets.
(6) NET LOSS PER COMMON SHARE
Potentially issuable shares of common stock include shares issuable upon the exercise of outstanding employee stock option awards, common stock issuable under the Company’s ESPP, unvested restricted stock units (RSUs), common stock held by the NQDC and contingent issuances of common stock related to convertible debt.
The following table sets forth the computation of basic and diluted earnings per common share (in thousands of common shares):
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss, basic |
| $ | (12,527 | ) |
| $ | (37,425 | ) |
| $ | (65,650 | ) |
| $ | (539,490 | ) |
Less: gain on common stock held by the NQDC |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,753 |
|
Net loss, diluted |
| $ | (12,527 | ) |
| $ | (37,425 | ) |
| $ | (65,650 | ) |
| $ | (541,243 | ) |
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding, basic |
|
| 175,103 |
|
|
| 167,714 |
|
|
| 174,071 |
|
|
| 163,963 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares held by the NQDC |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 253 |
|
Weighted-average common shares outstanding, diluted |
|
| 175,103 |
|
|
| 167,714 |
|
|
| 174,071 |
|
|
| 164,216 |
|
Net loss per common share, basic |
| $ | (0.07 | ) |
| $ | (0.22 | ) |
| $ | (0.38 | ) |
| $ | (3.29 | ) |
Net loss per common share, diluted |
| $ | (0.07 | ) |
| $ | (0.22 | ) |
| $ | (0.38 | ) |
| $ | (3.30 | ) |
10
BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands of U.S. dollars, except per share amounts or as otherwise disclosed)
The table below presents potential shares of common stock that were excluded from the computation of basic and diluted earnings per common share as they were anti-dilutive using the if-converted or treasury stock method (in thousands):
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Options to purchase common stock |
|
| 8,328 |
|
|
| 9,610 |
|
|
| 8,328 |
|
|
| 9,610 |
|
Common stock issuable under the 2017 Notes |
|
| — |
|
|
| 1,105 |
|
|
| — |
|
|
| 1,105 |
|
Common stock issuable under the 2018 and 2020 Notes |
|
| 7,966 |
|
|
| 7,966 |
|
|
| 7,966 |
|
|
| 7,966 |
|
Common stock issuable under the 2024 Notes |
|
| 3,970 |
|
|
| — |
|
|
| 3,970 |
|
|
| — |
|
Unvested restricted stock units |
|
| 2,923 |
|
|
| 2,728 |
|
|
| 2,923 |
|
|
| 2,728 |
|
Common stock potentially issuable for ESPP purchases |
|
| 365 |
|
|
| 330 |
|
|
| 365 |
|
|
| 330 |
|
Common stock held by the NQDC |
|
| 224 |
|
|
| 253 |
|
|
| 224 |
|
|
| — |
|
Total number of potentially issuable shares |
|
| 23,776 |
|
|
| 21,992 |
|
|
| 23,776 |
|
|
| 21,739 |
|
The potential effect of the capped call transactions with respect to the Company’s 0.75% senior subordinated convertible notes due in 2018 (the 2018 Notes) and the Company’s 1.50% senior subordinated convertible notes due in 2020 (the 2020 Notes) was excluded from the diluted net income/loss per share as the Company’s closing stock price on September 30, 2017 and 2016 did not exceed the conversion price of $94.15 per share for the 2018 Notes and the 2020 Notes. There is no similar capped call transaction associated with the Company’s 0.599% senior subordinated convertible notes due in 2024 (the 2024 Notes). See Note 11 to these Condense Consolidated Financial Statements for information on the Company’s debt.
(7) AVAILABLE-FOR-SALE SECURITIES
All investments were classified as available-for-sale at September 30, 2017 and December 31, 2016. The amortized cost, gross unrealized holding gains or losses, and fair value of the Company’s available-for-sale securities by major security type at September 30, 2017 and December 31, 2016 are summarized in the tables below:
|
| Amortized Cost |
|
| Gross Unrealized Holding Gains |
|
| Gross Unrealized Holding Losses |
|
| Aggregate Fair Value at September 30, 2017 |
| ||||
Corporate debt securities |
| $ | 762,462 |
|
| $ | 413 |
|
| $ | (1,091 | ) |
| $ | 761,784 |
|
Commercial paper |
|
| 28,039 |
|
|
| — |
|
|
| — |
|
|
| 28,039 |
|
U.S. government agency securities |
|
| 434,533 |
|
|
| 2 |
|
|
| (980 | ) |
|
| 433,555 |
|
Foreign and other |
|
| 18,525 |
|
|
| 123 |
|
|
| (22 | ) |
|
| 18,626 |
|
Total |
| $ | 1,243,559 |
|
| $ | 538 |
|
| $ | (2,093 | ) |
| $ | 1,242,004 |
|
|
| Amortized Cost |
|
| Gross Unrealized Holding Gains |
|
| Gross Unrealized Holding Losses |
|
| Aggregate Fair Value at December 31, 2016 |
| ||||
Certificates of deposit |
| $ | 2,800 |
|
| $ | — |
|
| $ | — |
|
| $ | 2,800 |
|
Corporate debt securities |
|
| 641,670 |
|
|
| 329 |
|
|
| (2,282 | ) |
|
| 639,717 |
|
Commercial paper |
|
| 16,075 |
|
|
| — |
|
|
| — |
|
|
| 16,075 |
|
U.S. government agency securities |
|
| 310,635 |
|
|
| 37 |
|
|
| (747 | ) |
|
| 309,925 |
|
Foreign and other |
|
| 48 |
|
|
| 86 |
|
|
| — |
|
|
| 134 |
|
Total |
| $ | 971,228 |
|
| $ | 452 |
|
| $ | (3,029 | ) |
| $ | 968,651 |
|
As of December 31, 2016, the Company had one investment in marketablenon-marketable equity securities, measured using quoted prices in its active market,unobservable valuation inputs remeasured on a nonrecurring basis, which wasare collectively considered a strategic investment. In the first quarter of 2017, the strategic investment was sold for a realized gain of $3.3 million.investments. As of March 31, 2021 and December 31, 2016,2020, the fair value of the Company’s marketable equity securitiesstrategic investments was $4.1 million, which included an unrealized gain of $2.3$10.4 million and was$10.5 million, respectively. These investments were recorded in Other Assets in the Company’s Condensed Consolidated Balance Sheet.
11
| March 31, 2021 | December 31, 2020 | ||||||||||
| Finite-lived intangible assets | $ | 648,228 | $ | 644,087 | |||||||
| Less: Accumulated amortization | (242,325) | (226,816) | |||||||||
| Net carrying value | $ | 405,903 | $ | 417,271 | |||||||
| March 31, 2021 | December 31, 2020 | ||||||||||
| Building and improvements | $ | 764,189 | $ | 761,560 | |||||||
| Manufacturing and laboratory equipment | 428,785 | 414,439 | |||||||||
| Computer hardware and software | 190,788 | 189,740 | |||||||||
| Land | 90,418 | 90,418 | |||||||||
| Leasehold improvements | 55,838 | 55,134 | |||||||||
| Furniture and equipment | 40,266 | 40,223 | |||||||||
| Land improvements | 7,412 | 7,412 | |||||||||
| Construction-in-progress | 102,074 | 109,140 | |||||||||
| 1,679,770 | 1,668,066 | ||||||||||
| Accumulated depreciation | (657,296) | (635,595) | |||||||||
| Total property, plant and equipment, net | $ | 1,022,474 | $ | 1,032,471 | |||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||
| Depreciation expense | $ | 22,585 | $ | 21,520 | |||||||||||||||||||
| Depreciation capitalized into inventory | $ | 9,987 | $ | 11,236 | |||||||||||||||||||
|
| September 30, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
Maturing in one year or less |
| $ | 825,700 |
|
| $ | 395,940 |
|
Maturing after one year through five years |
|
| 416,304 |
|
|
| 572,711 |
|
Total |
| $ | 1,242,004 |
|
| $ | 968,651 |
|
Impairment assessments are made at the individual security level each reporting period. When the fair value of an investment is less than its cost at the balance sheet date, a determination is made as to whether the impairment is other-than-temporary and, if it is other-than-temporary, an impairment loss is recognized in earnings equal to the difference between the investment’s amortized cost and fair value at such date. As of September 30, 2017, some of the Company’s investments were in an unrealized loss position, which the Company considers temporary in nature. The Company has the ability and intent to hold all investments that have been in a continuous loss position until maturity or recovery, thus no other-than-temporary impairment is deemed to have occurred.
See Note 13 to these Condensed Consolidated Financial Statements for additional discussion regarding the fair value of the Company’s available-for-sale securities.
(8) INTANGIBLE ASSETS
Intangible assetsSUPPLEMENTAL BALANCE SHEET INFORMATION
|
| September 30, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
Intangible assets: |
|
|
|
|
|
|
|
|
Finite-lived intangible assets |
| $ | 303,297 |
|
| $ | 305,122 |
|
Indefinite-lived intangible assets |
|
| 332,199 |
|
|
| 332,199 |
|
Gross intangible assets: |
|
| 635,496 |
|
|
| 637,321 |
|
Accumulated amortization |
|
| (104,539 | ) |
|
| (83,541 | ) |
Net carrying value |
| $ | 530,957 |
|
| $ | 553,780 |
|
| March 31, 2021 | December 31, 2020 | ||||||||||
| Raw materials | $ | 78,572 | $ | 76,673 | |||||||
| Work-in-process | 355,760 | 308,286 | |||||||||
| Finished goods | 279,597 | 313,589 | |||||||||
| Total inventory | $ | 713,929 | $ | 698,548 | |||||||
Indefinite-Lived Intangible Assets
Intangible assets related to IPR&D assets are considered to be indefinite-lived until
During the second quarter of 2016, the Company recorded impairment charges of $574.1 million based on the status of development efforts. These impairments reduced the remaining book value of certain IPR&D assets to zero due to the termination of the Kyndrisa and other exon programs. During the second quarter of 2016, the Company also recognized an impairment charge of $25.0 million related to the reveglucosidase alfa IPR&D assets due to the decision to terminate that development program. When a triggering event occurs, management evaluates both IPR&D assets and goodwill for possible impairments. Although management concluded these IPR&D assets were impaired as of June 30, 2016, management determined that goodwill was not impaired as of June 30, 2016. Because the Company’s single reporting unit is the consolidated entity, management compares the total carrying value of the single reporting unit, including goodwill, to the fair value of the reporting unit, as evidenced by the Company’s market capitalization. As of June 30, 2016, the Company’s capitalization exceeded the carrying value of its single reporting unit supporting management’s conclusion that goodwill was not impaired.
In July 2017, the Company executed a license agreement and a settlement agreement (the Agreements) with Sarepta Therapeutics (Sarepta) that provide Sarepta with global exclusive rights to our Duchenne muscular dystrophy (DMD) patent estate for EXONDYS 51 and all future exon-skipping products. The Agreements resolved the ongoing worldwide patent proceedings related to
12
BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands of U.S. dollars, except per share amounts or as otherwise disclosed)
the use of EXONDYS 51 and all future exon-skipping productscandidate for the treatment of DMD. Pursuantachondroplasia in children, the most common form of disproportionate short stature in humans. The Company must receive marketing approval from the applicable regulators before the vosoritide inventory can be sold commercially. Starting in the first quarter of 2021, the Company believed that material uncertainties related to the Agreements, Sarepta paidultimate regulatory approval of vosoritide for commercial sale in certain markets had been significantly reduced. A number of factors were taken into consideration, including the Company a one-time upfront fee of $35.0 million, which was recognizedcurrent status in the drug development process, pivotal clinical trial results for the underlying product candidate, results from meetings with the relevant regulatory authorities, historical experience, as license revenue. Under the Agreements, Sarepta may pay certain additional regulatory and commercial milestone fees for exons 51, 45, 53 and possibly on future exon-skipping productswell as potential impediments to the Company if certain developmentapproval process such as product safety or efficacy, as well as commercialization and sales milestones are achieved. Additionally, Sarepta will pay the Company royalties based on 5% of net sales in the U.S. through the end of 2023 and 8% of net sales through September 30, 2024 in the EU and in other countries where certain of the Company’s patents exist. The Company retained the right to convert the license to a co-exclusive right in the event it decides to proceed with an exon-skipping therapy for DMD.
marketplace trends.
(9) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, net consisted of the following:
|
| September 30, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
Building and improvements |
| $ | 636,697 |
|
| $ | 510,805 |
|
Manufacturing and laboratory equipment |
|
| 284,269 |
|
|
| 242,899 |
|
Computer hardware and software |
|
| 139,241 |
|
|
| 129,506 |
|
Leasehold improvements |
|
| 43,900 |
|
|
| 44,184 |
|
Furniture and equipment |
|
| 29,451 |
|
|
| 27,229 |
|
Land improvements |
|
| 4,881 |
|
|
| 4,881 |
|
Land |
|
| 62,702 |
|
|
| 55,412 |
|
Construction-in-progress |
|
| 68,204 |
|
|
| 126,446 |
|
|
|
| 1,269,345 |
|
|
| 1,141,362 |
|
Accumulated depreciation |
|
| (390,721 | ) |
|
| (342,594 | ) |
Total property, plant and equipment, net |
| $ | 878,624 |
|
| $ | 798,768 |
|
The construction-in-process balance primarily includes costs relatedpolicies on inventory produced prior to the Company’s significant in-process projects at its facilities in Marin County, California, and in Shanbally, Ireland.
Depreciation expense for the three and nine months ended September 30, 2017 was $19.4 million and $54.8 million, respectively, of which $6.1 million and $17.9 million, respectively, was capitalized into inventory. Depreciation expense for the three and nine months ended September 30, 2016 was $23.2 million and $56.1 million, respectively, of which $4.4 million and $13.4 million, respectively, was capitalized into inventory. Capitalized interest related to the Company’s property, plant and equipment purchases for each of the three and nine months ended September 30, 2017 and 2016 was insignificant.
(10) SUPPLEMENTAL BALANCE SHEET INFORMATION
Inventory consisted of the following:
|
| September 30, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
Raw materials |
| $ | 48,355 |
|
| $ | 51,250 |
|
Work-in-process |
|
| 262,840 |
|
|
| 167,788 |
|
Finished goods |
|
| 146,198 |
|
|
| 136,088 |
|
Total inventory |
| $ | 457,393 |
|
| $ | 355,126 |
|
In the third quarter of 2016, process qualification production activities commenced in the Company’s Shanbally facility related to the Brineura manufacturing process. As of September 30, 2017, the value of the Shanbally qualification campaign was $25.4 million, which was capitalized into inventory because the product is expected to be sold commercially. While the Company believes it is unlikely that the manufacturing process will not be approved for Brineura, should that occur, the value of the inventory would be expensed at that time.
13
BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands of U.S. dollars, except per share amounts or as otherwise disclosed)
Accounts Payable and Accrued Liabilities consisted of the following:
|
| September 30, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
Accounts payable and accrued operating expenses |
| $ | 157,024 |
|
| $ | 191,353 |
|
Accrued compensation expense |
|
| 100,481 |
|
|
| 109,038 |
|
Accrued rebates payable |
|
| 38,321 |
|
|
| 34,737 |
|
Accrued royalties payable |
|
| 16,419 |
|
|
| 15,151 |
|
Value added taxes payable |
|
| 10,577 |
|
|
| 7,848 |
|
Forward foreign currency exchange contracts |
|
| 14,428 |
|
|
| 5,201 |
|
Deferred Revenue |
|
| 17,430 |
|
|
| 985 |
|
Other |
|
| 10,240 |
|
|
| 6,192 |
|
Total accounts payable and accrued liabilities |
| $ | 364,920 |
|
| $ | 370,505 |
|
(11) DEBT
Convertible Notes
In August 2017, the Company issued $495.0 million in aggregate principal amount
| March 31, 2021 | December 31, 2020 | ||||||||||
| Accounts payable and accrued operating expenses | $ | 165,001 | $ | 191,429 | |||||||
| Accrued compensation expense | 117,934 | 165,023 | |||||||||
| Accrued rebates payable | 65,782 | 65,526 | |||||||||
| Accrued royalties payable | 18,275 | 17,155 | |||||||||
| Lease liabilities | 11,227 | 11,754 | |||||||||
| Forward foreign currency exchange contracts | 8,642 | 17,798 | |||||||||
| Accrued income taxes | 7,212 | 9,661 | |||||||||
| Value added taxes payable | 1,406 | 9,562 | |||||||||
| Other | 3,746 | 4,640 | |||||||||
| Total accounts payable and accrued liabilities | $ | 399,225 | $ | 492,548 | |||||||
- (continued)
|
| September 30, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
Convertible Notes due in 2017 |
| $ | — |
|
| $ | 22,503 |
|
Unamortized deferred offering costs |
|
| — |
|
|
| (25 | ) |
Convertible Notes due in 2017, net |
|
| — |
|
|
| 22,478 |
|
|
|
|
|
|
|
|
|
|
Convertible Notes due in 2018 |
|
| 374,980 |
|
|
| 374,980 |
|
Unamortized discount |
|
| (16,329 | ) |
|
| (27,566 | ) |
Unamortized deferred offering costs |
|
| (2,030 | ) |
|
| (3,484 | ) |
Convertible Notes due in 2018, net |
|
| 356,621 |
|
|
| 343,930 |
|
|
|
|
|
|
|
|
|
|
Convertible Notes due in 2020 |
|
| 374,993 |
|
|
| 374,993 |
|
Unamortized discount |
|
| (43,593 | ) |
|
| (53,239 | ) |
Unamortized deferred offering costs |
|
| (3,954 | ) |
|
| (4,923 | ) |
Convertible Notes due in 2020, net |
|
| 327,446 |
|
|
| 316,831 |
|
|
|
|
|
|
|
|
|
|
Convertible Notes due in 2024 |
|
| 495,000 |
|
|
| — |
|
Unamortized discount |
|
| (9,707 | ) |
|
| — |
|
Unamortized deferred offering costs |
|
| (3,324 | ) |
|
| — |
|
Convertible Notes due in 2024, net |
|
| 481,969 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
Total convertible debt, net |
| $ | 1,166,036 |
|
| $ | 683,239 |
|
|
|
|
|
|
|
|
|
|
Fair value of fixed rate convertible debt |
|
|
|
|
|
|
|
|
Convertible Notes due in 2017 (1) |
| $ | — |
|
| $ | 90,977 |
|
Convertible Notes due in 2018 (1) |
|
| 417,956 |
|
|
| 423,202 |
|
Convertible Notes due in 2020 (1) |
|
| 454,334 |
|
|
| 442,754 |
|
Convertible Notes due in 2024 (1) |
|
| 502,960 |
|
|
| — |
|
Total |
| $ | 1,375,250 |
|
| $ | 956,933 |
|
|
|
Interest expense on the Company’s convertible debt consistedpolicy described in Note 3 –
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Coupon interest |
| $ | 2,692 |
|
| $ | 2,466 |
|
| $ | 7,250 |
|
| $ | 7,491 |
|
Amortization of issuance costs |
|
| 1,138 |
|
|
| 826 |
|
|
| 2,910 |
|
|
| 2,476 |
|
Accretion of debt discount |
|
| 7,054 |
|
|
| 6,688 |
|
|
| 20,883 |
|
|
| 19,800 |
|
Total interest expense on convertible debt |
| $ | 10,884 |
|
| $ | 9,980 |
|
| $ | 31,043 |
|
| $ | 29,767 |
|
In April 2017, the Company’s 1.875% senior subordinated convertible notes due in 2017 (the 2017 Notes) matured, with holders thereof converting $22.5 million of the 2017 Notes prior to the maturity date into 1,103,704 shares of the Company’s common stock. During three and nine months ended September 30, 2016, certain existing holders of the Company’s 2017 Notes elected to convert $2.0 million and $8.9 million, respectively, in aggregate principal amount of the 2017 Notes into 97,348 and 438,315 shares of the Company’s common stock, respectively.
See Note 13 to the Consolidated Financial StatementsSignificant Accounting Policies
15
| Fair Value Measurements as of March 31, 2021 | ||||||||||||||||||||
| Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||||||||
| Assets: | ||||||||||||||||||||
| Other current assets: | ||||||||||||||||||||
| NQDC Plan assets | $ | 391 | $ | 0 | $ | 391 | ||||||||||||||
| Other assets: | ||||||||||||||||||||
| NQDC Plan assets | 21,925 | 0 | 21,925 | |||||||||||||||||
Restricted investments (1) | 3,187 | 0 | 3,187 | |||||||||||||||||
| Total other assets | 25,112 | 0 | 25,112 | |||||||||||||||||
| Total assets | $ | 25,503 | $ | 0 | $ | 25,503 | ||||||||||||||
| Liabilities: | ||||||||||||||||||||
| Current liabilities: | ||||||||||||||||||||
| NQDC Plan liability | $ | 391 | $ | 0 | $ | 391 | ||||||||||||||
| Contingent consideration | 0 | 30,810 | 30,810 | |||||||||||||||||
| Total current liabilities | 391 | 30,810 | 31,201 | |||||||||||||||||
| Other long-term liabilities: | ||||||||||||||||||||
| NQDC Plan liability | 21,925 | 0 | 21,925 | |||||||||||||||||
| Contingent consideration | 0 | 29,153 | 29,153 | |||||||||||||||||
| Total other long-term liabilities | 21,925 | 29,153 | 51,078 | |||||||||||||||||
| Total liabilities | $ | 22,316 | $ | 59,963 | $ | 82,279 | ||||||||||||||
- (continued)
In November 2016, the Company entered into a credit agreement (the Credit Agreement) with Bank of America, N.A., as the administrative agent, swing line lender and letter of credit issuer.
| Fair Value Measurements as of December 31, 2020 | |||||||||||||||||||||||
| Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | |||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Other current assets: | |||||||||||||||||||||||
| NQDC Plan assets | $ | 2,415 | $ | 0 | $ | 2,415 | |||||||||||||||||
| Other assets: | |||||||||||||||||||||||
| NQDC Plan assets | 19,962 | 0 | 19,962 | ||||||||||||||||||||
Restricted investments (1) | 4,487 | 0 | 4,487 | ||||||||||||||||||||
| Total other assets | 24,449 | 0 | 24,449 | ||||||||||||||||||||
| Total assets | $ | 26,864 | $ | 0 | $ | 26,864 | |||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Current liabilities: | |||||||||||||||||||||||
| NQDC Plan liability | $ | 2,415 | $ | 0 | $ | 2,415 | |||||||||||||||||
| Other long-term liabilities: | |||||||||||||||||||||||
| NQDC Plan liability | 19,962 | 0 | 19,962 | ||||||||||||||||||||
| Contingent consideration | 0 | 60,130 | 60,130 | ||||||||||||||||||||
| Total other long-term liabilities | 19,962 | 60,130 | 80,092 | ||||||||||||||||||||
| Total liabilities | $ | 22,377 | $ | 60,130 | $ | 82,507 | |||||||||||||||||
In connection with the Revolving Credit Facility, the Company and certainthree months ended March 31, 2021.
(12)contingent consideration.
| Contingent consideration as of December 31, 2020 | $ | 60,130 | |||
| Changes in the fair value of contingent consideration | 2,255 | ||||
| Foreign exchange remeasurement of Euro denominated contingent consideration | (2,422) | ||||
| Contingent consideration as of March 31, 2021 | $ | 59,963 | |||
The Company designates certain Certain of these forward foreign currency exchange contracts are designated as hedging instruments and have maturities up to two years. The Company also enters into some forward foreign currency exchange contracts that are considered to be economic hedges that are not designated as hedging instruments.instruments and have maturities up to three months. Whether designated or undesignated, these forward foreign currency exchange contracts protect against the reduction in value of forecasted foreign currency cash flows resulting from product revenues, royalty revenues, operating expenses and asset or liability positions designated in currencies other than the U.S. dollar. The fair valuesUSD. To receive hedge accounting treatment, cash
- (continued)
|
|
|
|
|
| Aggregate Notional |
|
|
| |
|
| Number of |
|
| Amount in |
|
|
| ||
Foreign Exchange Contracts |
| Contracts |
|
| Foreign Currency |
|
| Maturity | ||
Brazilian Reais – Sell |
|
| 2 |
|
|
| 33.0 |
|
| Oct. 2017 |
Canadian Dollars – Sell |
|
| 6 |
|
|
| 6.1 |
|
| Oct. 2017 - Dec. 2017 |
Colombian Pesos – Sell |
|
| 3 |
|
|
| 15,576.0 |
|
| Oct. 2017 - Dec. 2017 |
Euros – Purchase |
|
| 72 |
|
|
| 116.7 |
|
| Oct. 2017 - Sep. 2020 |
Euros – Sell |
|
| 304 |
|
|
| 381.9 |
|
| Oct. 2017 - Sep. 2020 |
Total |
|
| 387 |
|
|
|
|
|
|
|
The maximum length of time over which the Company is hedging its exposureoffsetting changes to the reduction in value of forecasted foreign currency revenues through forward foreign currency exchange contracts is through September 2020. Over the next twelve months, the Company expects to reclassify unrealized losses of $12.9 million from accumulated other comprehensive income (loss) to earnings as the forecasted revenue and operating expense transactions occur.
expected future cash flows on hedged transactions. The Company also enters into forward foreign currency exchange contracts that aredoes not designated as hedges for accounting purposes. The changes in fair value of these forward foreign currency exchange contracts are included as a part of selling, general and administrative (SG&A) expense in the Company’s Condensed Consolidated Statements of Comprehensive Loss.
The following table summarizes the Company’s non-designated forward foreign currency exchange contracts outstanding as of September 30, 2017 (notional amounts in millions):
|
|
|
|
|
| Aggregate Notional |
|
|
| |
|
| Number of |
|
| Amount in |
|
|
| ||
Foreign Exchange Contracts |
| Contracts |
|
| Foreign Currency |
|
| Maturity | ||
Brazilian Reais – Purchase |
|
| 1 |
|
|
| 33.0 |
|
| Oct. 2017 |
British Pounds – Sell |
|
| 1 |
|
|
| 5.2 |
|
| Oct. 2017 |
Euros – Purchase |
|
| 4 |
|
|
| 109.8 |
|
| Oct. 2017 |
Total |
|
| 6 |
|
|
|
|
|
|
|
The fair value carrying amounts of the Company’shold or issue derivative instruments were as follows:
|
| Asset Derivatives |
|
| Liability Derivatives |
| ||||||
|
| September 30, 2017 |
|
| September 30, 2017 |
| ||||||
|
| Balance Sheet Location |
| Fair Value |
|
| Balance Sheet Location |
| Fair Value |
| ||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
Forward foreign currency exchange contracts |
| Other current assets |
| $ | 3,096 |
|
| Accounts payable and accrued liabilities |
| $ | 14,428 |
|
Forward foreign currency exchange contracts |
| Other assets |
|
| 4,414 |
|
| Other long- term liabilities |
|
| 11,380 |
|
Total |
|
|
|
| 7,510 |
|
|
|
|
| 25,808 |
|
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
Forward foreign currency exchange contracts |
| Other current assets |
|
| 1,139 |
|
| Accounts payable and accrued liabilities |
|
| — |
|
Total |
|
|
|
| 1,139 |
|
|
|
|
| — |
|
Total value of derivative contracts |
|
|
| $ | 8,649 |
|
|
|
| $ | 25,808 |
|
17
BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands of U.S. dollars, except per share amountsfor trading or as otherwise disclosed)
|
| Asset Derivatives |
|
| Liability Derivatives |
| ||||||
|
| December 31, 2016 |
|
| December 31, 2016 |
| ||||||
|
| Balance Sheet Location |
| Fair Value |
|
| Balance Sheet Location |
| Fair Value |
| ||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
Forward foreign currency exchange contracts |
| Other current assets |
| $ | 13,048 |
|
| Accounts payable and accrued liabilities |
| $ | 5,176 |
|
Forward foreign currency exchange contracts |
| Other assets |
|
| 8,194 |
|
| Other long- term liabilities |
|
| 2,342 |
|
Total |
|
|
|
| 21,242 |
|
|
|
|
| 7,518 |
|
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
Forward foreign currency exchange contracts |
| Other current assets |
|
| 964 |
|
| Accounts payable and accrued liabilities |
|
| 25 |
|
Total |
|
|
|
| 964 |
|
|
|
|
| 25 |
|
Total value of derivative contracts |
|
|
| $ | 22,206 |
|
|
|
| $ | 7,543 |
|
The effect of the Company’s derivative instruments on the Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2017 and 2016 was as follows:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Derivatives Designated as Hedging Instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain (loss) recognized in accumulated other comprehensive loss (1) |
| $ | (10,569 | ) |
| $ | (1,984 | ) |
| $ | (33,933 | ) |
| $ | (5,857 | ) |
Net gain (loss) reclassified from accumulated other comprehensive income (loss) into earnings (2) |
|
| (3,700 | ) |
|
| 1,486 |
|
|
| (489 | ) |
|
| 4,616 |
|
Net gain recognized in net loss (3) |
|
| 689 |
|
|
| 9 |
|
|
| 2,395 |
|
|
| 5,276 |
|
Derivatives Not Designated as Hedging Instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain (loss) recognized in net loss(4) |
| $ | 1,655 |
|
| $ | 826 |
|
| $ | 7,286 |
|
| $ | (2,446 | ) |
|
|
|
|
|
|
|
|
The Company is exposed to counterparty credit risk on all of its derivative financial instruments.derivatives. The Company has established and maintains strict counterparty credit guidelines and enters into hedges onlyhedging agreements with financial institutions that are investment grade or better to minimize the Company’s exposure to potential defaults. The Company doesis not requirerequired to pledge collateral to be pledged under these agreements.
18
| Foreign Exchange Contracts | March 31, 2021 | December 31, 2020 | |||||||||
| Derivatives designated as hedging instruments: | |||||||||||
| Sell | $ | 695,209 | $ | 782,327 | |||||||
| Purchase | $ | 183,737 | $ | 189,540 | |||||||
| Derivatives not designated as hedging instruments: | |||||||||||
| Sell | $ | 85,622 | $ | 98,343 | |||||||
| Purchase | $ | 12,272 | $ | 12,277 | |||||||
| Balance Sheet Location | March 31, 2021 | December 31, 2020 | |||||||||
| Derivatives designated as hedging instruments: | |||||||||||
Asset Derivatives - Level 2 (1) | |||||||||||
| Other current assets | $ | 11,026 | $ | 6,268 | |||||||
| Other assets | 4,143 | 3,148 | |||||||||
| Subtotal | $ | 15,169 | $ | 9,416 | |||||||
Liability Derivatives - Level 2 (1) | |||||||||||
| Accounts payable and accrued liabilities | $ | 8,611 | $ | 17,551 | |||||||
| Other long-term liabilities | 3,371 | 11,020 | |||||||||
| Subtotal | $ | 11,982 | $ | 28,571 | |||||||
| Derivatives not designated as hedging instruments: | |||||||||||
Asset Derivatives - Level 2 (1) | |||||||||||
| Other current assets | $ | 101 | $ | 84 | |||||||
Liability Derivatives - Level 2 (1) | |||||||||||
| Accounts payable and accrued liabilities | $ | 31 | $ | 247 | |||||||
| Total Derivatives Assets | $ | 15,270 | $ | 9,500 | |||||||
| Total Derivatives Liabilities | $ | 12,013 | $ | 28,818 | |||||||
- (continued)
(13) FAIR VALUE MEASUREMENTS
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||
| Derivatives Designated as Cash Flow Hedging Instruments | Cash Flow Hedging Gains (Losses) Reclassified into Earnings | Cash Flow Hedging Gains (Losses) Reclassified into Earnings | |||||||||||||||||||||
| Net product revenues as reported | $ | 467,769 | $ | (2,757) | $ | 489,043 | $ | 6,329 | |||||||||||||||
| Operating expenses as reported | $ | 460,944 | $ | 5 | $ | 397,108 | $ | (1,673) | |||||||||||||||
| Derivatives Not Designated as Hedging Instruments | Gains (Losses) Recognized in Earnings | Gains (Losses) Recognized in Earnings | |||||||||||||||||||||
| Operating expenses | $ | 4,269 | $ | 3,809 | |||||||||||||||||||
| March 31, 2021 | December 31, 2020 | ||||||||||
| 1.25% senior subordinated convertible notes due in May 2027 (the 2027 Notes) | $ | 600,000 | $ | 600,000 | |||||||
| Unamortized discount | (11,834) | (12,312) | |||||||||
| Unamortized deferred offering costs | (656) | (683) | |||||||||
| 2027 Notes, net | 587,510 | 587,005 | |||||||||
| 0.599% senior subordinated convertible notes due in August 2024 (the 2024 Notes) | 495,000 | 495,000 | |||||||||
| Unamortized discount | (4,761) | (5,116) | |||||||||
| Unamortized deferred offering costs | (1,622) | (1,744) | |||||||||
| 2024 Notes, net | 488,617 | 488,140 | |||||||||
| Total convertible debt, net | $ | 1,076,127 | $ | 1,075,145 | |||||||
Fair value of fixed rate convertible debt (1): | |||||||||||
| 2027 Notes | $ | 589,956 | $ | 627,090 | |||||||
| 2024 Notes | 508,177 | 530,714 | |||||||||
| Total fair value of fixed rate convertible debt | $ | 1,098,133 | $ | 1,157,804 | |||||||
|
| Fair Value Measurements at September 30, 2017 |
| |||||||||||||
|
| Quoted Price in Active Markets For Identical Assets (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Total |
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market instruments |
| $ | — |
|
| $ | 223,845 |
|
| $ | — |
|
| $ | 223,845 |
|
Total cash and cash equivalents |
|
| — |
|
|
| 223,845 |
|
|
| — |
|
|
| 223,845 |
|
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities |
|
| — |
|
|
| 444,966 |
|
|
| — |
|
|
| 444,966 |
|
Commercial paper |
|
| — |
|
|
| 28,039 |
|
|
| — |
|
|
| 28,039 |
|
U.S. government agency securities |
|
| — |
|
|
| 334,241 |
|
|
| — |
|
|
| 334,241 |
|
Foreign and other |
|
| — |
|
|
| 18,454 |
|
|
| — |
|
|
| 18,454 |
|
Long-term: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities |
|
| — |
|
|
| 316,818 |
|
|
| — |
|
|
| 316,818 |
|
U.S. government agency securities |
|
| — |
|
|
| 99,314 |
|
|
| — |
|
|
| 99,314 |
|
Foreign and other |
|
| — |
|
|
| 172 |
|
|
| — |
|
|
| 172 |
|
Total available-for-sale securities |
|
| — |
|
|
| 1,242,004 |
|
|
| — |
|
|
| 1,242,004 |
|
Other current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NQDC Plan assets |
|
| — |
|
|
| 1,226 |
|
|
| — |
|
|
| 1,226 |
|
Forward foreign currency exchange contract(1) |
|
| — |
|
|
| 4,235 |
|
|
| — |
|
|
| 4,235 |
|
Restricted investments (2) |
|
| — |
|
|
| 14,878 |
|
|
| — |
|
|
| 14,878 |
|
Total other current assets |
|
| — |
|
|
| 20,339 |
|
|
| — |
|
|
| 20,339 |
|
Other assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NQDC Plan assets |
|
| — |
|
|
| 11,272 |
|
|
| — |
|
|
| 11,272 |
|
Forward foreign currency exchange contract(1) |
|
| — |
|
|
| 4,414 |
|
|
| — |
|
|
| 4,414 |
|
Total other assets |
|
| — |
|
|
| 15,686 |
|
|
| — |
|
|
| 15,686 |
|
Total assets |
| $ | — |
|
| $ | 1,501,874 |
|
| $ | — |
|
| $ | 1,501,874 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NQDC Plan liability |
| $ | 2,635 |
|
| $ | 1,226 |
|
| $ | — |
|
| $ | 3,861 |
|
Forward foreign currency exchange contract(1) |
|
| — |
|
|
| 14,428 |
|
|
| — |
|
|
| 14,428 |
|
Contingent acquisition consideration payable |
|
| — |
|
|
| — |
|
|
| 52,609 |
|
|
| 52,609 |
|
Total current liabilities |
|
| 2,635 |
|
|
| 15,654 |
|
|
| 52,609 |
|
|
| 70,898 |
|
Other long-term liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NQDC Plan liability |
| $ | 18,405 |
|
| $ | 11,272 |
|
|
| — |
|
|
| 29,677 |
|
Forward foreign currency exchange contract(1) |
|
| — |
|
|
| 11,380 |
|
|
| — |
|
|
| 11,380 |
|
Contingent acquisition consideration payable |
|
| — |
|
|
| — |
|
|
| 126,790 |
|
|
| 126,790 |
|
Total other long-term liabilities |
|
| 18,405 |
|
|
| 22,652 |
|
|
| 126,790 |
|
|
| 167,847 |
|
Total liabilities |
| $ | 21,040 |
|
| $ | 38,306 |
|
| $ | 179,399 |
|
| $ | 238,745 |
|
19
- (continued)
|
| Fair Value Measurements at December 31, 2016 |
| |||||||||||||
|
| Quoted Price in Active Markets For Identical Assets (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Total |
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market instruments |
| $ | — |
|
| $ | 235,571 |
|
| $ | — |
|
| $ | 235,571 |
|
Corporate debt securities |
|
| — |
|
|
| 8,593 |
|
|
| — |
|
|
| 8,593 |
|
U.S. government agency securities |
|
| — |
|
|
| 6,000 |
|
|
| — |
|
|
| 6,000 |
|
Total cash and cash equivalents |
|
| — |
|
|
| 250,164 |
|
|
| — |
|
|
| 250,164 |
|
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit |
|
| — |
|
|
| 2,800 |
|
|
| — |
|
|
| 2,800 |
|
Corporate debt securities |
|
| — |
|
|
| 193,974 |
|
|
| — |
|
|
| 193,974 |
|
Commercial paper |
|
| — |
|
|
| 16,075 |
|
|
| — |
|
|
| 16,075 |
|
U.S. government agency securities |
|
| — |
|
|
| 168,498 |
|
|
| — |
|
|
| 168,498 |
|
Long-term: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities |
|
| — |
|
|
| 437,150 |
|
|
| — |
|
|
| 437,150 |
|
U.S. government agency securities |
|
| — |
|
|
| 135,427 |
|
|
| — |
|
|
| 135,427 |
|
Greek government-issued bonds |
|
| — |
|
|
| 134 |
|
|
| — |
|
|
| 134 |
|
Total available-for-sale securities |
|
| — |
|
|
| 954,058 |
|
|
| — |
|
|
| 954,058 |
|
Other current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NQDC Plan assets |
|
| — |
|
|
| 163 |
|
|
| — |
|
|
| 163 |
|
Forward foreign currency exchange contract(1) |
|
| — |
|
|
| 14,012 |
|
|
| — |
|
|
| 14,012 |
|
Restricted investments (2) |
|
| — |
|
|
| 3,754 |
|
|
| — |
|
|
| 3,754 |
|
Total other current assets |
|
| — |
|
|
| 17,929 |
|
|
| — |
|
|
| 17,929 |
|
Other assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NQDC Plan assets |
| — |
|
|
| 9,121 |
|
|
| — |
|
|
| 9,121 |
| |
Forward foreign currency exchange contract(1) |
| — |
|
|
| 8,194 |
|
|
| — |
|
|
| 8,194 |
| |
Strategic investment (3) |
|
| 4,064 |
|
|
| — |
|
|
| — |
|
|
| 4,064 |
|
Total other assets |
|
| 4,064 |
|
|
| 17,315 |
|
|
| — |
|
|
| 21,379 |
|
Total assets |
| $ | 4,064 |
|
| $ | 1,239,466 |
|
| $ | — |
|
| $ | 1,243,530 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NQDC Plan liability |
| $ | 2,073 |
|
| $ | 163 |
|
| $ | — |
|
| $ | 2,236 |
|
Forward foreign currency exchange contract(1) |
|
| — |
|
|
| 5,201 |
|
|
| — |
|
|
| 5,201 |
|
Contingent acquisition consideration payable |
| — |
|
| — |
|
|
| 46,327 |
|
|
| 46,327 |
| ||
Total current liabilities |
|
| 2,073 |
|
|
| 5,364 |
|
|
| 46,327 |
|
|
| 53,764 |
|
Other long-term liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NQDC Plan liability |
|
| 17,303 |
|
|
| 9,121 |
|
| — |
|
|
| 26,424 |
| |
Forward foreign currency exchange contract(1) |
| — |
|
|
| 2,342 |
|
| — |
|
|
| 2,342 |
| ||
Contingent acquisition consideration payable |
| — |
|
| — |
|
|
| 115,310 |
|
|
| 115,310 |
| ||
Total other long-term liabilities |
|
| 17,303 |
|
|
| 11,463 |
|
|
| 115,310 |
|
|
| 144,076 |
|
Total liabilities |
| $ | 19,376 |
|
| $ | 16,827 |
|
| $ | 161,637 |
|
| $ | 197,840 |
|
|
|
|
|
20
BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands of U.S. dollars, except per share amounts or as otherwise disclosed)
There were no transfers between levels during the three and nine months ended September 30, 2017.
The Company’s Level 2 securities are valued using third-party pricing sources. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities, prepayment/default projections based on historical data and other observable inputs.
The Company validates the prices provided by its third-party pricing services by understanding the models used, obtaining market values from other pricing sources, analyzing pricing data in certain instances and confirming those securities traded in active markets. See Note 6 to these Condensed Consolidated Financial Statements for further information regarding the Company’s financial instruments.
Liabilities measured at fair value using Level 3 inputs consisted of contingent acquisition consideration payable and asset retirement obligations.
The Company’s contingent acquisition consideration payable is estimated using a probability-based income approach utilizing an appropriate discount rate. Key assumptions used by management to estimate the fair value of contingent acquisition consideration payable include estimated probabilities, the estimated timing of when a milestone may be attained and assumed discount periods and rates. Subsequent changes in the fair value of the contingent acquisition consideration payable, resulting from management’s revision of key assumptions, will be recorded in Intangible Asset Amortization and Contingent Consideration in the Company’s Condensed Consolidated Statements of Comprehensive Loss. The probability-based income approach used by management to estimate the fair value of the contingent acquisition consideration is most sensitive to changes in the estimated probabilities.
Contingent acquisition consideration payable at December 31, 2016 |
| $ | 161,637 |
|
Milestone payments to former Huxley Pharmaceuticals, Inc. shareholders |
|
| (3,500 | ) |
Reversal of contingent liability related to revised estimate of Firdapse FDA acceptance and approval milestones |
|
| (4,245 | ) |
Changes in the fair value of other contingent acquisition consideration payable |
|
| 7,627 |
|
Foreign exchange remeasurement of Euro denominated contingent acquisition consideration payable |
|
| 17,880 |
|
Contingent acquisition consideration payable at September 30, 2017 |
| $ | 179,399 |
|
Under certain of the Company’s lease agreements, the Company is contractually obligated to return leased space to its original condition upon termination of the lease agreement. The Company records an asset retirement obligation liability and a corresponding capital asset in an amount equal to the estimated fair value of the obligation, when estimable. In subsequent periods, for each such lease, the Company records interestInterest expense to accrete the asset retirement obligation liability to full value and depreciates each capitalized asset retirement obligation asset, both over the term of the associated lease agreement. As of September 30, 2017, the balance of the asset retirement obligation liability was $4.1 million.
The Company acquired intangible assets as a result of various business acquisitions. The estimated fair value of these long-lived assets was measured using Level 3 inputs as of the acquisition date.
(14) STOCK-BASED COMPENSATION
The Company’s stock-based compensation plans include the 2017 Equity Incentive Plan (the 2017 Equity Incentive Plan) and the ESPP. The 2017 Equity Incentive Plan, which was approved by the Company’s stockholders on June 6, 2017 and became effective that same date, and is the successor to and continuation of the Company’s Amended and Restated 2006 Share Incentive Plan (the 2006 Share Incentive Plan), provides for awards of RSUs and stock options as well as other forms of equity compensation. No additional awards will be granted under the 2006 Share Incentive Plan; however, there are vested and unvested awards outstanding under the 2006 Share Incentive Plan. Stock option awards granted to employees generally vest over a four-year period on a cliff basis one year after the grant date and then monthly thereafter. The contractual term of the outstanding options is generally ten years. RSUs granted to employees generally vest annually on a straight-line basis over a four-year period after the grant date. RSUs granted to directors
21
BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands of U.S. dollars, except per share amounts or as otherwise disclosed)
generally vest in full one year after the grant date. Shares formerly reserved for future issuance under the 2006 Share Incentive Plan were transferred to the 2017 Equity Incentive Plan, from which future shares shall be issued. The Company’s stock-based compensation plans are administered by the Company’s Board of Directors, or designated Committee thereof, which selects persons to receive awards and determines the number of shares subject to each award and the terms, conditions, performance measures and other provisions of the awards.
Determining the Fair Value of Stock Options and Stock Purchase Rights
The fair value of each option award is estimated on the date of grant using the Black-Scholes valuation model and the assumptions noted in the tables below. The expected life of options is based on observed historical exercise patterns. Groups of employees that have similar historical exercise patterns are considered separately for valuation purposes. The Company has identified two groups with distinctly different exercise patterns. The two groups identified are executive and non-executive employees. The executive employee group has a history of holding options for longer periods than non-executive employees. The expected volatility of stock options is based upon the weighted-average of the historical volatility of the Company’s common stock and the implied volatility of traded options on the Company’s common stock for fiscal periods in which there is sufficient trading volume in options on the Company’s common stock. The risk-free interest rate is based on the implied yield on a U.S. Treasury zero-coupon issue with a remaining term equal to the expected termconvertible debt consisted of the option. The dividend yield reflects that the Company has not paid any cash dividends since inception and does not intend to pay any cash dividends in the foreseeable future. Effective January 1, 2016, forfeitures were accounted for as they occurred. The assumptions used to estimate the per share fair value of stock options granted under the 2017 Equity Incentive Plan and the 2006 Share Incentive Plan were as follows:
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||
|
| 2017 |
| 2016 |
| 2017 |
| 2016 |
Expected volatility |
| 38 – 40% |
| 38 – 40% |
| 38 – 40% |
| 36 – 44% |
Dividend yield |
| 0.0% |
| 0.0% |
| 0.0% |
| 0.0% |
Expected life |
| 4.9 – 6.6 years |
| 5.0 – 6.7 years |
| 4.9 – 6.6 years |
| 5.0 – 8.1 years |
Risk-free interest rate |
| 1.8 – 2.1% |
| 1.1 – 1.4% |
| 1.8 – 2.2% |
| 1.1 – 2.1% |
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||
| Coupon interest expense | $ | 2,616 | $ | 2,172 | |||||||||||||||||||
| Accretion of discount on convertible notes | 834 | 4,110 | |||||||||||||||||||||
| Amortization of debt issuance costs | 148 | 508 | |||||||||||||||||||||
| Total interest expense on convertible debt | $ | 3,598 | $ | 6,790 | |||||||||||||||||||
During the nine months ended September 30, 2017, the Company granted options to purchase 785,300 shares of common stock with a weighted-average fair value of $36.11 per share.
The Company did not issue any new stock purchase rights under the ESPP during the three months ended September 30, 2017.
Restricted Stock Unit Awards with Service-Based Vesting Conditions
RSUs are generally subject to forfeiture if employment terminates prior to the release of vesting restrictions. The Company expenses the cost of the RSUs, which is determined to be the fair value of the shares of common stock underlying the RSUs at the date of grant, based on the closing price of the Company’s common stock on that date, ratably over the period during which the vesting restrictions lapse. During the nine months ended September 30, 2017, the Company granted 1,312,350 RSUs with service-based vesting conditions with a weighted-average fair value of $87.82 per share.
Restricted Stock Unit Awards with Performance Conditions
On March 22, 2017, pursuant to Board approval, the Company granted 133,250 RSUs with performance-vesting conditions (the 2017 Base RSUs) under the 2006 Share Incentive Plan to certain executive officers. The award of the RSUs under this specific grant is contingent upon the achievement of a 2017 revenue target and the awarded RSUs, if any, vest ratably over a three-year service period. The number of RSUs to be awarded upon achievement of the performance condition may range between 50% and 200% of the 2017 Base RSUs, dependent on the percentage of 2017 “managed revenues” (defined as the Company’s net product revenues, excluding net revenues attributable to Aldurazyme) achieved against the target managed revenues with a threshold achievement level of 75% of target and a ceiling achievement level of 125% of target. Stock-based compensation for these awards will be recognized over the service period beginning in the period the Company determines it is probable that the revenue target will be achieved. The cost of the 2017 Base RSUs was determined to be $87.42 per RSU, based on the fair value of the common stock underlying the 2017 Base RSUs on the grant date based on the closing price of the Company’s common stock on that date. The Company evaluated the 2017 revenue target in the context of its current 2017 revenue forecast and related confidence level in the forecast, and determined that attainment of the revenue target was probable for accounting purposes commencing with the first quarter of 2017. As a result, the Company recognized $1.2 million and $2.8 million of compensation expense related to these awards during the three and nine months ended September 30, 2017, respectively.
22
BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands of U.S. dollars, except per share amounts or as otherwise disclosed)
On March 15, 2016, pursuant to Board approval, the Company granted 130,310 RSUs with performance-vesting conditions (the 2016 Base RSUs) and a three-year service period, under the 2006 Share Incentive Plan, to certain executive officers. Based on the Company’s performance against the 2016 revenue target, the Company applied a multiplier of 103% and issued 134,219 RSUs with a grant date fair value of $83.43 per RSU. The Company recognized $0.9 million and $3.2 million of compensation expense related to these awards during the three and nine months ended September 30, 2017, respectively. The Company recognized $1.0 million and $2.1 million of compensation expense related to these awards during the three and nine months ended September 30, 2016, respectively.
On March 3, 2015, pursuant to Board approval, the Company granted 58,300 RSUs with performance-vesting conditions (the 2015 Base RSUs) and a three-year service period, under the 2006 Share Incentive Plan, to certain executive officers. Based on the Company’s performance against the 2015 revenue target, the Company applied a multiplier of 111% and issued 64,713 RSUs with a grant date fair value of $108.36 per RSU. The Company recognized $0.5 million and $1.7 million of compensation expense related to these awards during the three and nine months ended September 30, 2017, respectively. The Company recognized $0.6 million and $1.8 million of compensation expense related to these awards during the three and nine months ended September 30, 2016, respectively.
Compensation expense
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Cost of sales |
| $ | 3,007 |
|
| $ | 2,092 |
|
| $ | 7,803 |
|
| $ | 5,943 |
|
R&D |
|
| 13,832 |
|
|
| 14,165 |
|
|
| 39,973 |
|
|
| 42,929 |
|
SG&A |
|
| 19,064 |
|
|
| 16,645 |
|
|
| 58,902 |
|
|
| 48,348 |
|
Total stock-based compensation expense |
| $ | 35,903 |
|
| $ | 32,902 |
|
| $ | 106,678 |
|
| $ | 97,220 |
|
The Company adopted ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, in 2016, noting that the impact of the election to use actual forfeitures rather than estimated forfeituresAnnual Report on quarterly reporting was not significant.
Stock-based compensation expense of $4.5 million and $12.1 million was capitalized into inventoryForm 10-K for the threeyear ended December 31, 2020 for additional information related to the Company’s convertible debt.
23
BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands of U.S. dollars, except per share amounts or as otherwise disclosed)
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Consolidated Statement of | ||||||||||
Details about AOCI Components |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| Comprehensive Loss Classification | ||||
Gains (losses) on cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward foreign currency exchange contracts |
| $ | (4,643 | ) |
| $ | 1,436 |
|
| $ | 18 |
|
| $ | 4,036 |
|
| Net product revenues |
Forward foreign currency exchange contracts |
|
| 943 |
|
|
| 50 |
|
|
| (507 | ) |
|
| 4,874 |
|
| SG&A |
Total gain (loss) on cash flow hedges |
|
| (3,700 | ) |
|
| 1,486 |
|
|
| (489 | ) |
|
| 8,910 |
|
|
|
Gain (loss) on sale of available-for-sale securities |
|
| — |
|
|
| 7 |
|
|
| 3,252 |
|
|
| (2,020 | ) |
| Other income |
Income tax effect of the above |
|
| — |
|
|
| (2 | ) |
|
| (1,176 | ) |
|
| 735 |
|
| Benefit from income taxes |
|
| $ | (3,700 | ) |
| $ | 1,491 |
|
| $ | 1,587 |
|
| $ | 7,625 |
|
| Net loss |
| Condensed Consolidated Statement of Comprehensive Income Classification | Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||||||||
| Details about AOCI Components | 2021 | 2020 | |||||||||||||||||||||||||||||||||||||||
| Gains (losses) on cash flow hedges: | |||||||||||||||||||||||||||||||||||||||||
| Forward contracts | Net product revenues | $ | (2,757) | $ | 6,329 | ||||||||||||||||||||||||||||||||||||
| Forward contracts | Operating expenses | 5 | (1,673) | ||||||||||||||||||||||||||||||||||||||
| Total gain (loss) on cash flow hedges | $ | (2,752) | $ | 4,656 | |||||||||||||||||||||||||||||||||||||
|
| Three Months Ended September 30, 2017 |
| ||||||||||||||||||||||||||||||||||||
|
| Unrealized Gains (Losses) on Cash Flow Hedges |
|
| Unrealized Gains (Losses) on Available-for-Sale Securities |
|
| Foreign Currency Items |
|
| Total |
| Three Months Ended March 31, 2021 | ||||||||||||||||||||||||||
AOCI balance at June 30, 2017 |
| $ | (13,569 | ) |
| $ | (1,080 | ) |
| $ | (9 | ) |
| $ | (14,658 | ) | |||||||||||||||||||||||
| Unrealized Gains (Losses) on Cash Flow Hedges | Unrealized Gains (Losses) on Available for-Sale Debt Securities | Other | Total | ||||||||||||||||||||||||||||||||||||
| AOCI balance at December 31, 2020 | AOCI balance at December 31, 2020 | $ | (20,028) | $ | 3,889 | $ | 0 | $ | (16,139) | ||||||||||||||||||||||||||||||
Other comprehensive income (loss) before reclassifications |
|
| (10,569 | ) |
|
| 147 |
|
|
| 2 |
|
|
| (10,420 | ) | Other comprehensive income (loss) before reclassifications | 19,893 | (1,945) | 0 | 17,948 | ||||||||||||||||||
Less: net loss reclassified from AOCI |
|
| (3,700 | ) |
|
| — |
|
|
| — |
|
|
| (3,700 | ) | |||||||||||||||||||||||
| Less: gain (loss) reclassified from AOCI | Less: gain (loss) reclassified from AOCI | (2,752) | 0 | 0 | (2,752) | ||||||||||||||||||||||||||||||||||
Tax effect |
|
| — |
|
|
| (56 | ) |
|
| — |
|
|
| (56 | ) | Tax effect | 0 | 443 | 0 | 443 | ||||||||||||||||||
Net current-period other comprehensive income (loss) |
|
| (6,869 | ) |
|
| 91 |
|
|
| 2 |
|
|
| (6,776 | ) | Net current-period other comprehensive income (loss) | 22,645 | (1,502) | 0 | 21,143 | ||||||||||||||||||
AOCI balance at September 30, 2017 |
| $ | (20,438 | ) |
| $ | (989 | ) |
| $ | (7 | ) |
| $ | (21,434 | ) | |||||||||||||||||||||||
| AOCI balance at March 31, 2021 | AOCI balance at March 31, 2021 | $ | 2,617 | $ | 2,387 | $ | 0 | $ | 5,004 | ||||||||||||||||||||||||||||||
|
| Three Months Ended September 30, 2016 |
| |||||||||||||
|
| Unrealized Gains (Losses) on Cash Flow Hedges |
|
| Unrealized Gains (Losses) on Available-for-Sale Securities |
|
| Foreign Currency Items |
|
| Total |
| ||||
AOCI balance at June 30, 2016 |
| $ | 2,305 |
|
| $ | 2,231 |
|
| $ | (8 | ) |
| $ | 4,528 |
|
Other comprehensive income (loss) before reclassifications |
|
| (1,984 | ) |
|
| 1,738 |
|
|
| (1 | ) |
|
| (247 | ) |
Less: gain reclassified from AOCI |
|
| 1,486 |
|
|
| 7 |
|
|
| — |
|
|
| 1,493 |
|
Tax effect |
|
| — |
|
|
| (630 | ) |
|
| — |
|
|
| (630 | ) |
Net current-period other comprehensive income (loss) |
|
| (3,470 | ) |
|
| 1,101 |
|
|
| (1 | ) |
|
| (2,370 | ) |
AOCI balance at September 30, 2016 |
| $ | (1,165 | ) |
| $ | 3,332 |
|
| $ | (9 | ) |
| $ | 2,158 |
|
24
- (continued)
|
| Nine Months Ended September 30, 2017 |
| ||||||||||||||||||||||||||||||||||||
|
| Unrealized Gains (Losses) on Cash Flow Hedges |
|
| Unrealized Gains (Losses) on Available-for-Sale Securities |
|
| Foreign Currency Items |
|
| Total |
| Three Months Ended March 31, 2020 | ||||||||||||||||||||||||||
AOCI balance at December 31, 2016 |
| $ | 13,006 |
|
| $ | (178 | ) |
| $ | (12 | ) |
| $ | 12,816 |
| |||||||||||||||||||||||
| Unrealized Gains (Losses) on Cash Flow Hedges | Unrealized Gains (Losses) on Available for-Sale Debt Securities | Other | Total | ||||||||||||||||||||||||||||||||||||
| AOCI balance at December 31, 2019 | AOCI balance at December 31, 2019 | $ | 16,614 | $ | 3,565 | $ | (15) | $ | 20,164 | ||||||||||||||||||||||||||||||
Other comprehensive income (loss) before reclassifications |
|
| (33,933 | ) |
|
| 1,981 |
|
|
| 5 |
|
|
| (31,947 | ) | Other comprehensive income (loss) before reclassifications | 19,630 | (1,334) | 15 | 18,311 | ||||||||||||||||||
Less: gain (loss) reclassified from AOCI |
|
| (489 | ) |
|
| 3,252 |
|
|
| — |
|
|
| 2,763 |
| Less: gain (loss) reclassified from AOCI | 4,656 | 0 | 0 | 4,656 | ||||||||||||||||||
Tax effect |
|
| — |
|
|
| 460 |
|
|
| — |
|
|
| 460 |
| Tax effect | 0 | 308 | 0 | 308 | ||||||||||||||||||
Net current-period other comprehensive income (loss) |
|
| (33,444 | ) |
|
| (811 | ) |
|
| 5 |
|
|
| (34,250 | ) | Net current-period other comprehensive income (loss) | 14,974 | (1,026) | 15 | 13,963 | ||||||||||||||||||
AOCI balance at September 30, 2017 |
| $ | (20,438 | ) |
| $ | (989 | ) |
| $ | (7 | ) |
| $ | (21,434 | ) | |||||||||||||||||||||||
| AOCI balance at March 31, 2020 | AOCI balance at March 31, 2020 | $ | 31,588 | $ | 2,539 | $ | 0 | $ | 34,127 | ||||||||||||||||||||||||||||||
|
| Nine Months Ended September 30, 2016 |
| |||||||||||||
|
| Unrealized Gains (Losses) on Cash Flow Hedges |
|
| Unrealized Gains (Losses) on Available-for-Sale Securities |
|
| Foreign Currency Items |
|
| Total |
| ||||
AOCI balance at December 31, 2015 |
| $ | 13,602 |
|
| $ | 7,441 |
|
| $ | (10 | ) |
| $ | 21,033 |
|
Other comprehensive income (loss) before reclassifications |
|
| (5,857 | ) |
|
| (8,477 | ) |
|
| 1 |
|
|
| (14,333 | ) |
Less: gain (loss) reclassified from AOCI |
|
| 8,910 |
|
|
| (2,020 | ) |
|
| — |
|
|
| 6,890 |
|
Tax effect |
|
| — |
|
|
| 2,348 |
|
|
| — |
|
|
| 2,348 |
|
Net current-period other comprehensive income (loss) |
|
| (14,767 | ) |
|
| (4,109 | ) |
|
| 1 |
|
|
| (18,875 | ) |
AOCI balance at September 30, 2016 |
| $ | (1,165 | ) |
| $ | 3,332 |
|
| $ | (9 | ) |
| $ | 2,158 |
|
(16)
Net Product Revenue - The Company considers there to be revenue concentration risks for regions where net product revenue exceeds 10% of consolidated net product revenue. The concentration of the Company’s net product revenue within the regions below may have a material adverse effect on the Company’s revenue and results of operations if sales in the respective regions experience difficulties.
The table below summarizes consolidated net product revenue concentrations based on patient location for Brineura, Firdapse, Kuvan, Naglazyme, and Vimizim, which are sold directly by the Company, and global sales of Aldurazyme, which is marketed by Genzyme. Genzyme is the Company’s sole customer for Aldurazyme and is responsible for marketing and selling Aldurazyme to third-parties.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
United States |
|
| 43 | % |
|
| 38 | % |
|
| 39 | % |
|
| 38 | % |
Europe |
|
| 22 | % |
|
| 23 | % |
|
| 21 | % |
|
| 23 | % |
Latin America |
|
| 9 | % |
|
| 14 | % |
|
| 13 | % |
|
| 13 | % |
Rest of world |
|
| 19 | % |
|
| 16 | % |
|
| 20 | % |
|
| 19 | % |
Total net product revenue marketed by the Company |
|
| 93 | % |
|
| 91 | % |
|
| 93 | % |
|
| 93 | % |
Aldurazyme net product revenues marketed by Genzyme |
|
| 7 | % |
|
| 9 | % |
|
| 7 | % |
|
| 7 | % |
Total net product revenues |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
25
BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands of U.S. dollars, except per share amounts or as otherwise disclosed)
The following table illustrates the percentage of the Company’s consolidated net product revenues attributed to the Company’s largest customers for the three and nine months ended September 30, 2017 and 2016.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Customer A |
|
| 20 | % |
|
| 19 | % |
|
| 18 | % |
|
| 19 | % |
Customer B |
|
| 16 | % |
|
| 13 | % |
|
| 14 | % |
|
| 13 | % |
Customer C |
|
| 11 | % |
|
| 10 | % |
|
| 10 | % |
|
| 10 | % |
Total |
|
| 47 | % |
|
| 42 | % |
|
| 42 | % |
|
| 42 | % |
On a consolidated basis, the Company’s two largest customer accounts receivable balances accounted for 20% and 17% of the September 30, 2017 total accounts receivable balance, respectively, compared to December 31, 2016, when the two largest customer accounts receivable balances accounted for 26% and 20% of the total accounts receivable balance, respectively. As of September 30, 2017, and December 31, 2016, the accounts receivable balance for Genzyme included $17.8 million and $30.7 million, respectively, of unbilled accounts receivable related to net incremental Aldurazyme product transfers to Genzyme. The Company does not require collateral from its customers, but does perform periodic credit evaluations of its customers’ financial condition and requires immediate payment in certain circumstances.
The Company sells its products in countries, including Southern European countries, Russia, Chile and Brazil, which face economic crises and local currency devaluation. Although the Company has historically collected receivables from customers in those countries, sustained weakness or further deterioration of the local economies and currencies may cause customers in those countries to be unable to pay for the Company’s products. The Company has not historically experienced a significant level of uncollected receivables and has received continued payments from its more aged accounts in these countries. The Company believes that the allowances for doubtful accounts related to these countries, if any, is adequate based on its analysis of the specific business circumstances and expectations of collection for each of the underlying accounts in these countries.
(17) SEGMENT INFORMATION
The Company operates in one1 business segment, which primarily focuses on the development and commercialization of innovative therapies for people with serious and life threateninglife-threatening rare diseases and medical conditions. All products are included in one segment because allThe Company considers there to be revenue concentration risks for regions where Net Product Revenues exceed 10% of consolidated Net Product Revenues. The concentration of the Company’s productsNet Product Revenues within the regions below may have similar economica material adverse effect on the Company’s revenues and other characteristics, includingresults of operations if sales in the nature of the products and production processes, type of customers, distribution methods and regulatory environment.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Net product revenues by product: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aldurazyme |
| $ | 22,341 |
|
| $ | 23,751 |
|
| $ | 61,681 |
|
| $ | 58,819 |
|
Brineura |
|
| 3,107 |
|
|
| — |
|
|
| 3,361 |
|
|
| — |
|
Firdapse |
|
| 5,086 |
|
|
| 4,981 |
|
|
| 14,051 |
|
|
| 13,685 |
|
Kuvan |
|
| 105,837 |
|
|
| 90,899 |
|
|
| 300,127 |
|
|
| 257,806 |
|
Naglazyme |
|
| 72,083 |
|
|
| 77,728 |
|
|
| 238,392 |
|
|
| 221,575 |
|
Vimizim |
|
| 90,298 |
|
|
| 80,903 |
|
|
| 299,256 |
|
|
| 260,310 |
|
Total net product revenues |
| $ | 298,752 |
|
| $ | 278,262 |
|
| $ | 916,868 |
|
| $ | 812,195 |
|
26
BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands of U.S. dollars, except per share amounts or as otherwise disclosed)
The following table summarizes total revenuesdisaggregates Total Revenues from external customers and collaborative partners by geographic region. Net product revenues by geographic region are based on patient location for the Company’s commercial products, except for Aldurazyme, which is based on the location of Genzyme’s headquarters. Althoughsold exclusively to Sanofi Genzyme (Genzyme) who markets and sells Aldurazyme worldwide, theworldwide. Aldurazyme revenues earned by the Company based on Genzyme’s net sales are included in the U.S. region as the transactions are with Genzyme, whose headquarters areis located in the U.S.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| 2021 | 2020 | |||||||||||||||||||||||||
Total revenues by geographic region: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total revenues by geographic region: | ||||||||||||||||||||||
United States |
| $ | 151,010 |
|
| $ | 130,356 |
|
| $ | 425,107 |
|
| $ | 365,674 |
| United States | $ | 208,186 | $ | 244,172 | ||||||||||||||||||
Europe |
|
| 97,825 |
|
|
| 62,821 |
|
|
| 228,775 |
|
|
| 187,328 |
| Europe | 161,841 | 145,036 | ||||||||||||||||||||
Latin America |
|
| 26,356 |
|
|
| 38,789 |
|
|
| 121,824 |
|
|
| 106,803 |
| Latin America | 59,705 | 59,924 | ||||||||||||||||||||
Rest of world |
|
| 58,957 |
|
|
| 47,930 |
|
|
| 179,635 |
|
|
| 156,958 |
| Rest of world | 56,298 | 52,937 | ||||||||||||||||||||
Total revenues |
| $ | 334,148 |
|
| $ | 279,896 |
|
| $ | 955,341 |
|
| $ | 816,763 |
| Total revenues | $ | 486,030 | $ | 502,069 | ||||||||||||||||||
(18)
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||
| Net product revenues by product: | |||||||||||||||||||||||
| Vimizim | $ | 158,298 | $ | 137,203 | |||||||||||||||||||
| Naglazyme | 107,336 | 114,256 | |||||||||||||||||||||
| Kuvan | 70,763 | 122,028 | |||||||||||||||||||||
| Palynziq | 54,038 | 34,632 | |||||||||||||||||||||
| Brineura | 27,325 | 23,970 | |||||||||||||||||||||
| Firdapse | 0 | 1,288 | |||||||||||||||||||||
| Total net product revenues marketed by the Company | $ | 417,760 | $ | 433,377 | |||||||||||||||||||
| Aldurazyme net product revenues marketed by Genzyme | $ | 50,009 | $ | 55,666 | |||||||||||||||||||
| Total net product revenues | $ | 467,769 | $ | 489,043 | |||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||
| United States | $ | 155,064 | $ | 181,671 | |||||||||||||||||||
| Europe | 148,872 | 140,851 | |||||||||||||||||||||
| Latin America | 59,705 | 59,924 | |||||||||||||||||||||
| Rest of world | 54,119 | 50,931 | |||||||||||||||||||||
| Total net product revenues marketed by the Company | 417,760 | 433,377 | |||||||||||||||||||||
| Aldurazyme net product revenues marketed by Genzyme | 50,009 | 55,666 | |||||||||||||||||||||
| Total net product revenues | $ | 467,769 | $ | 489,043 | |||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||
| Customer A | 16 | % | 13 | % | |||||||||||||||||||
| Customer B | 12 | % | 12 | % | |||||||||||||||||||
| Customer C | 11 | % | 11 | % | |||||||||||||||||||
| Customer D | 9 | % | 11 | % | |||||||||||||||||||
| Total | 48 | % | 47 | % | |||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||
| Cost of sales | $ | 6,481 | $ | 5,084 | |||||||||||||||||||
| Research and development | 17,517 | 13,711 | |||||||||||||||||||||
| Selling, general and administrative | 25,505 | 28,199 | |||||||||||||||||||||
| Total stock-based compensation expense | $ | 49,503 | $ | 46,994 | |||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net income, basic | $ | 17,371 | $ | 81,381 | |||||||||||||||||||
| Add: Interest on convertible notes | 0 | 936 | |||||||||||||||||||||
| Net Income, diluted | $ | 17,371 | $ | 82,317 | |||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted-average common shares outstanding, basic | 181,772 | 179,898 | |||||||||||||||||||||
| Effect of dilutive securities: | |||||||||||||||||||||||
| Options to purchase common stock | 1,010 | 1,708 | |||||||||||||||||||||
| Common stock issuable under the 2024 notes | 0 | 3,970 | |||||||||||||||||||||
| Unvested RSUs | 1,031 | 1,037 | |||||||||||||||||||||
| Common stock potentially issuable for ESPP purchases | 359 | 346 | |||||||||||||||||||||
| The Company’s common stock held by the NQDC | 193 | 204 | |||||||||||||||||||||
| Weighted-average common shares outstanding, diluted | 184,365 | 187,163 | |||||||||||||||||||||
| Net income per common share, basic | 0.10 | 0.45 | |||||||||||||||||||||
| Net income per common share, diluted | 0.09 | 0.44 | |||||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||
| Options to purchase common stock | 6,217 | 6,063 | |||||||||||||||||||||
| Common stock issuable under the 2020 Notes | 0 | 3,983 | |||||||||||||||||||||
| Common stock issuable under the 2024 Notes | 3,970 | 0 | |||||||||||||||||||||
| Common stock issuable under the 2027 Notes | 4,365 | 0 | |||||||||||||||||||||
| Unvested RSUs | 3,920 | 3,811 | |||||||||||||||||||||
| Common stock potentially issuable for ESPP purchases | 301 | 232 | |||||||||||||||||||||
| Total number of potentially issuable shares | 18,773 | 14,089 | |||||||||||||||||||||
The process of
Paragraph IV Notices
The Company received a paragraph IV notice letter, dated December
The Company also received two separate paragraph IV notice letters, dated January 14, 2016 and January 22, 2015, from Par Pharmaceutical, Inc. (Par), notifying it that Par had filed an ANDA seeking approval of proposed generic versions of Kuvan 100 mg oral powder and Kuvan 100 mg oral tablets, respectively, prior to the expiration of the Company’s patents listed in the FDA’s Orange Book. The Company filed two lawsuits alleging patent infringement against Par (the lawsuit against Par pertaining to the proposed generic version of Kuvan 100 mg oral tablets was filed together with Merck & Cie), and the two Par cases were consolidated. In April 2017, the Company and Merck & Cie entered into a settlement agreement with Par (the Par Settlement Agreement) that resolved both cases against Par. Under the Par Settlement Agreement, the Company granted Par a non-exclusive license to its Kuvan-related patents to allow Par to market a generic version of sapropterin dihydrochloride in 100 mg oral tablets and oral powder in 100 mg and 500 mg packet formulations in the U.S. for the indications approved for Kuvan beginning on: April 1, 2021 if Par is not entitled to the statutory 180-day first filer exclusivity period; October 1, 2020 if Par is entitled to the statutory 180-day first filer exclusivity period; or earlier under certain circumstances.
ContentsThe Company also received a paragraph IV notice letter, dated October 3, 2014, from DRL notifying it that DRL had filed an ANDA seeking approval of a proposed generic version of Kuvan 100 mg oral tablets prior to the expiration of the Company’s patents
27
listed in the FDA’s Orange Book. The Company, together with Merck & Cie, filed a lawsuit alleging patent infringement against DRL. In September 2015,
Contingent Payments
As of September 30, 2017, the Company iswas subject to contingent payments totaling approximately $600.2$654.5 million upon achievement of certain development and regulatory activities and commercial sales and licensing milestones if they occur before certain dates in the future. Of this amount, $218.3$70.4 million (or €185were considered probable and comprised of commercial milestones related to the acquisition of certain rights and other assets with respect to Kuvan and Palynziq from a third party, $235.0 million basedwere considered reasonably possible and related to milestones for early stage development programs licensed from a third party in the second quarter of 2020 and $234.7 million were considered remote as the Company is no longer developing the related programs.
As of September 30, 2017, theconsideration.
Other Commitments
perform certain research and development (R&D) activities. These amounts are included as R&D expense as services are provided. In the normal course of business, the Company enters into various firm purchase commitments primarily related to active pharmaceutical ingredients and certain inventory related items. As of September 30, 2017, these commitments for the next five years were approximately $41.5 million. The amounts primarily represent minimum purchase requirements for active pharmaceutical ingredients, certain inventory-related items and certain third-party R&D services. As of March 31, 2021, such commitments and other minimum contractual obligations for clinical and post-marketing commitments related to the Company’s approved products.
(19) BENEFIT FROM INCOME TAXES
services were estimated at approximately $122.9 million. The Company has historically computed its interim period benefit from income taxes by applying its forecasted effective tax ratealso licensed technology, for which it is required to year-to-date earnings. However, duepay royalties upon future sales, subject to a significant amountcertain annual minimums.
The following discussion of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and the related Notes thereto included in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that could impact our business. In particular, we encourage you to review the risksrisk factor related to the impact of the coronavirus pandemic, “The coronavirus, or COVID-19, pandemic could materially adversely affect our business, results of operations and uncertaintiesfinancial condition.” described in “Risk Factors” in Part II, Item 1A in this Quarterly Report on Form 10-Q.10-Q, amongst the other risk factors. These risks and uncertainties could cause actual results to differ significantly from those projected in forward-looking statements contained in this report or implied by past results and trends. Forward-looking statements are statements that attempt to forecast or anticipate future developments in our business, financial condition or results of operations. See the section titled “Forward-Looking Statements” that appears at the beginning of this Quarterly Report on Form 10-Q. These statements, like all statements in this report, speak only as of the date of this Quarterly Report on Form 10-Q (unless another date is indicated), and, except as required by law, we undertake no obligation to update or revise these statements in light of future developments.
Our Condensed Consolidated Financial Statements have been prepared in accordance with United States (U.S.) generally accepted accounting principles (U.S GAAP) and are presented in U.S. Dollars (USD).
| Commercial Products | Indication | United States Orphan Drug Exclusivity Expiration (1) | United States Biologic Exclusivity Expiration (2) | European Union Orphan Drug Exclusivity Expiration (1) | ||||||||||||||||||||||
| Aldurazyme (laronidase) | MPS I (3) | Expired | Expired | Expired | ||||||||||||||||||||||
| Brineura (cerliponase alfa) | CLN2 (4) | 2024 | 2029 | 2027 | ||||||||||||||||||||||
| Kuvan (sapropterin dihydrochloride) | PKU (5) | Expired | Not Applicable | Expired | ||||||||||||||||||||||
| Naglazyme (galsulfase) | MPS VI (6) | Expired | Expired | Expired | ||||||||||||||||||||||
Palynziq (pegvaliase-pqpz) (7) | PKU | 2025 | 2030 | 2029 | ||||||||||||||||||||||
| Vimizim (elosulfase alpha) | MPS IVA (8) | 2021 | 2026 | 2024 | ||||||||||||||||||||||
IVA)
| Major Product Candidates in Development | Target Indication | U.S. Orphan Designation | EU Orphan Designation | Stage | ||||||||||||||||||||||
| Valoctocogene roxaparvovec | Severe Hemophilia A | Yes | Yes | Clinical Phase 3 | ||||||||||||||||||||||
| Vosoritide | Achondroplasia | Yes | Yes | Clinical Phase 3 | ||||||||||||||||||||||
| BMN 307 | PKU | Yes | Yes | Clinical Phase 1/2 | ||||||||||||||||||||||
•Vosoritide - In October 2017,March, 2021, we announced that we have completed enrollment in our Phase 2 randomized, placebo-controlled study of vosoritide for treatment of infants and young children with achondroplasia, aged zero to less than five years (60 months) old. Vosoritide is an investigational, once daily injection analog of C-type Natriuretic Peptide (CNP) for children with achondroplasia, the FDA had completed its reviewmost common form of disproportionate short stature in humans. The objectives of the Investigationalstudy are to evaluate safety, tolerability, and the effect of vosoritide on growth. The company also plans to augment the height data with assessments including proportionality, functionality, quality of life, sleep apnea, and foramen magnum dimension, as well as the advent of major illnesses and surgeries.
In October 2017, we announced the selection of our next drug development candidate, BMN 290, a selective chromatin modulation therapy intended for treatment of Friedreich's Ataxia (FA), a rare autosomal recessive disorder that results in disabling neurologic and cardiac progressive decline. Currently, there are no approved disease modifying therapies for FA. BMN 290 is a second-generation compound derived from a compound acquired from Repligen Corporation (Repligen) that had human clinical data demonstrating increases in frataxin in FA patients. BMN 290 was selected for its favorable penetration into the central nervous system and cardiac target tissues, and its preservation of the selectivity of the original Repligen compound. We expect to submit the IND applicationone-year height change improvement in the second halfyear of 2018.
|
In August 2017,As anticipated, the FDA accepted for Priority Reviewdesignated this submission as a major amendment to our NDA, thus extending the Biologics License Application (BLA) for pegvaliase, a PEGylated phenylanine-metabolizing enzyme product, to reduce blood phenylalanine (Phe) levels in adult patients with PKU who have uncontrolled blood Phe levels on existing management. The FDA is not currently planning to hold an advisory committee meeting to discuss the BLA. The Prescription Drug User Fee Act (PDUFA) target action date is February 28, 2018. However,by three months to November 20, 2021 to provide time for a full review of the submission. Also in the first quarter of 2021, the FDA has requested additional Chemistry, Manufacturing, and Controls (CMC) information, whichpre-approval inspection of BioMarin’s Novato facility for the manufacture of vosoritide drug substance was completed.
In August 2017,During the first quarter of 2021, the FDA reiterated their recommendation that we entered intosubmit two-year follow-up safety and efficacy data on all study participants from the GENEr8-1 study to support their benefit/risk assessment and assuming favorable results, we are targeting submitting a settlement agreementBiologics License Application (BLA) with Dr. Reddy's Laboratories, Inc. and Dr. Reddy's Laboratories, Ltd. (collectively, DRL) that resolves the patent litigation with DRLthese results in the U.S. relatedsecond quarter of 2022, followed by an expected six-month review procedures by the FDA.
In July 2017, we executedBMN 255, a license agreement and a settlement agreement (the Agreements) with Sarepta Therapeutics (Sarepta) that provide Sarepta with global exclusive rights to our Duchenne muscular dystrophy (DMD) patent estate for EXONDYS 51 and all future exon-skipping products. The Agreements resolved the ongoing worldwide patent proceedings related to the use of EXONDYS 51 and all future exon-skipping productssmall molecule for the treatment of DMD. Pursuant to the Agreements, Sarepta paid us a one-time upfront feesubset of $35.0 million, which we recognized as license revenue. Under the Agreements, Sarepta may pay certain additional regulatorychronic renal disease. BMN 255 was driven by genetic discoveries for both mechanism and commercial milestone fees for exons 51, 45, 53 and possibly on future exon-skipping products to us if certain development and sales milestonesidentifying individuals for treatment.
In July 2017, we commissioned our commercial gene therapy manufacturing facility, located in Novato, California, and began Good Manufacturing Practices (GMP) production of valoctocogene roxaparvovec to support clinical development activities and anticipated commercial demand. This facility is capable of supporting the manufacturing of product for approximately 2,000 patients per year, and the production process was developed in accordance with International Conference on Harmonisation guidance for Pharmaceuticals for Human Use facilitating worldwide registration with health authorities.
In June 2017, the European Commission granted marketing authorization for Brineura in the European Union (EU) to treat children with CLN2 disease. The marketing authorization for Brineura includes all 28 countries of the EU, Norway, Iceland and Liechtenstein. Brineura is the first treatment approved in the EUBMN 331 for the treatment of CLN2 disease.hereditary angioedema, our third gene therapy product candidate. We immediately began marketing Brineuraare on track to file an IND for BMN 331 in the EU and began shippingmiddle of 2021.
In April 2017,a DMD mouse model treated at 18.7mg/kg/week for 13 weeks (measured 2 weeks following latest administration). If results from the United States (U.S.) Food and Drug Administration (FDA) approved Brineura to treat children with CLN2 disease. Brineura isongoing pre-clinical studies are supportive, we anticipate filing an IND in the first treatment approved in the U.S. to slow the progressionhalf of loss of ambulation in children with CLN2 disease. We immediately began marketing Brineura in the U.S., and began shipping the product within the U.S. in June 2017.
In April 2017, we entered into a settlement agreement with Par Pharmaceutical (Par) that resolves patent litigation in the U.S. with Par related to our Kuvan (sapropterin dihydrochloride) 100 mg oral tablets and powder for oral solution in 100 mg packets. Under the terms of the settlement, we granted Par a non-exclusive license to our patents related to Kuvan to allow Par to market a generic version of sapropterin dihydrochloride 100 mg tablets and powder for oral solution in 100 mg and 500 mg sachets in the U.S. for the indications approved for Kuvan beginning on: April 1, 2021 if Par is not entitled to the statutory 180-day first filer exclusivity period; October 1, 2020 if Par is entitled to the statutory 180-day first filer exclusivity period; or earlier under certain circumstances.
|
We reported total revenues of $334.1 million $955.3 million for the three and nine months ended September 30, 2017, respectively, compared to $279.9 million and $816.8 million for the three and nine months ended September 30, 2016, respectively.
Financial Highlights
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| 2021 | 2020 | |||||||||||||||||||||||||
Total revenues |
| $ | 334.1 |
|
| $ | 279.9 |
|
| $ | 955.3 |
|
| $ | 816.8 |
| Total revenues | $ | 486.0 | $ | 502.1 | ||||||||||||||||||
Cost of sales |
|
| 59.5 |
|
|
| 50.7 |
|
|
| 165.8 |
|
|
| 145.5 |
| Cost of sales | $ | 120.2 | $ | 111.4 | ||||||||||||||||||
Research and development (R&D) expense |
|
| 154.1 |
|
|
| 160.8 |
|
|
| 442.1 |
|
|
| 486.7 |
| Research and development (R&D) expense | $ | 148.7 | $ | 142.3 | ||||||||||||||||||
Selling, general and administrative (SG&A) expense |
|
| 130.5 |
|
|
| 118.8 |
|
|
| 394.1 |
|
|
| 333.6 |
| Selling, general and administrative (SG&A) expense | $ | 174.3 | $ | 187.3 | ||||||||||||||||||
Intangible asset amortization and contingent consideration expense |
|
| 3.8 |
|
|
| 9.7 |
|
|
| 26.1 |
|
|
| (34.3 | ) | |||||||||||||||||||||||
Impairment of intangible assets |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 599.1 |
| |||||||||||||||||||||||
Net loss |
|
| (12.5 | ) |
|
| (37.4 | ) |
|
| (65.7 | ) |
|
| (539.5 | ) | |||||||||||||||||||||||
Stock-based compensation expense |
|
| 35.9 |
|
|
| 32.9 |
|
|
| 106.7 |
|
|
| 97.2 |
| |||||||||||||||||||||||
| Intangible asset amortization and contingent consideration | Intangible asset amortization and contingent consideration | $ | 17.7 | $ | 15.7 | ||||||||||||||||||||||||||||||||||
| Gain on sale of nonfinancial assets | Gain on sale of nonfinancial assets | $ | — | $ | (59.5) | ||||||||||||||||||||||||||||||||||
| Other income (expense), net | Other income (expense), net | $ | (1.8) | $ | (3.5) | ||||||||||||||||||||||||||||||||||
| Provision for income taxes | Provision for income taxes | $ | 5.9 | $ | 20.0 | ||||||||||||||||||||||||||||||||||
| Net Income | Net Income | $ | 17.4 | $ | 81.4 | ||||||||||||||||||||||||||||||||||
Total Revenues include net product revenues and royalty and other revenues. Net Product Revenues are generated from the six approved products in our product portfolio as of September 30, 2017. In the U.S., our commercial products are generally sold to specialty pharmacies or end-users, such as hospitals, which act as retailers. Outside the U.S., our commercial products are sold to our authorized distributors or directly to government purchasers or hospitals, which act as the end-users. Royalty and Other Revenues include royalties on net sales of products to licensees or sublicensees, collaborative agreement revenues and rental income associated with the tenants in our San Rafael, California facility.
Cost of Sales includes raw materials, personnel and facility and other costs associated primarily with manufacturing Aldurazyme, Brineura, Naglazyme and Vimizim at our production facilities. Cost of Sales also includes third-party manufacturing costs for the production of the active ingredient in Kuvan and Firdapse and third-party production costsadditional information related to final formulation and packaging services for all products and cost of royalties payable to third parties for all products.
R&D Expense includes costs associated with the research and development of product candidates and post-marketing research commitments related to our approved products. R&D Expense primarily includes preclinical and clinical studies, personnel and raw materials costs associated with manufacturing product candidates, quality control and assurance, research and development, facilities and regulatory costs.
SG&A Expense primarily includes expenses associated with the commercialization of approved products and general and administrative costs to support our operations. These expenses include: product marketing and sales operations personnel; corporate facility operating expenses; information technology expenses and depreciation; and core corporate support functions, including human resources, finance and legal, and other external corporate costs such as insurance, legal fees and other professional services.
Net Income fluctuations presented above.
Judgments future periods. 2020. Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 Change 2017 2016 Change Total revenues $ 334.1 $ 279.9 $ 54.2 $ 955.3 $ 816.8 $ 138.5 Cost of sales 59.5 50.7 8.8 165.8 145.5 20.3 R&D expense 154.1 160.8 (6.7 ) 442.1 486.7 (44.6 ) SG&A expense 130.5 118.8 11.7 394.1 333.6 60.5 Intangible asset amortization and contingent consideration expense 3.8 9.7 (5.9 ) 26.1 (34.3 ) 60.4 Impairment of intangible assets — — — — 599.1 (599.1 ) Other, net (1) (6.8 ) (6.7 ) (0.1 ) (17.7 ) (25.1 ) 7.4 Benefit from income taxes (8.1 ) (29.4 ) 21.3 (24.8 ) (199.4 ) 174.6 Net loss $ (12.5 ) $ (37.4 ) $ 24.9 $ (65.7 ) $ (539.5 ) $ 473.8 Net Product Revenues Commercial Products Indication U.S. Orphan Drug Exclusivity Expiration U.S. Biologic Exclusivity Expiration EU Orphan Drug Exclusivity Expiration Aldurazyme MPS I Expired Expired Expired Brineura CLN2 2024 2029 2027 Firdapse LEMS NA (1) NA 2019 Kuvan PKU Expired NA 2020 (2) Naglazyme MPS VI Expired Expired Expired Vimizim MPS IVA 2021 2026 2024 Net Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 Change 2017 2016 Change Aldurazyme $ 22.4 $ 23.7 $ (1.3 ) $ 61.7 $ 58.8 $ 2.9 Brineura 3.1 — 3.1 3.4 — 3.4 Firdapse 5.1 5.0 0.1 14.0 13.7 0.3 Kuvan 105.8 90.9 14.9 300.1 257.8 42.3 Naglazyme 72.1 77.8 (5.7 ) 238.4 221.6 16.8 Vimizim 90.3 80.9 9.4 299.3 260.3 39.0 Total net product revenues $ 298.8 $ 278.3 $ 20.5 $ 916.9 $ 812.2 $ 104.7 adversely affect our revenues and results of operations” in “Risk Factors” included in Part II, Item 1A of this Quarterly Report for additional information. Additionally, the responses received from the FDA and EMA requesting additional safety and efficacy data from our valoctocogene roxaparvovec Phase 3 studies and our submission of the two-year results from the Phase 3 extension study of vosoritide have extended our anticipated FDA regulatory approval decision timelines which will have a negative impact on net product revenue growth for remainder of 2021. For the Three Months Ended September 30, For the Nine Months Ended September 30, 2017 2016 Change 2017 2016 Change Sales denominated in USD $ 178.4 $ 168.2 $ 10.2 $ 544.9 $ 473.8 $ 71.1 Sales denominated in foreign currencies 120.4 110.1 10.3 372.0 338.4 33.6 Total net product revenues $ 298.8 $ 278.3 $ 20.5 $ 916.9 $ 812.2 $ 104.7 future. For the Three Months Ended September 30, For the Nine Months Ended September 30, 2017 2016 Change 2017 2016 Change Total net product sales $ 298.8 $ 278.3 $ 20.5 $ 916.9 $ 812.2 $ 104.7 Cost of sales 59.5 50.7 8.8 165.8 145.5 20.3 Product gross margin 80 % 82 % (2.0 )% 82 % 82 % 0 % products. We manage our R&D expense by identifying the R&D activities we anticipate will be performed during a given period and then prioritizing efforts based on scientific data, probability of successful development, market potential, available human and capital resources and other similar considerations. We continually review our product pipeline and the development status of product candidates and, as necessary, reallocate resources among the research and development portfolio that we believe will best support the future growth of our Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 Change 2017 2016 Change BMN 250 $ 17.0 $ 11.4 $ 5.6 $ 37.9 $ 35.3 $ 2.6 Brineura 10.8 20.2 (9.4 ) 39.5 52.4 (12.9 ) Pegvaliase 28.7 19.5 9.2 85.1 59.0 26.1 Valoctocogene roxaparvovec 29.7 12.8 16.9 83.6 38.9 44.7 Vosoritide 13.3 11.6 1.7 39.2 35.5 3.7 Other approved products 17.4 16.2 1.2 54.7 49.9 4.8 Early stage programs 16.3 15.3 1.0 47.7 40.0 7.7 Other and non-allocated 20.9 53.8 (32.9 ) 54.4 175.7 (121.3 ) Total $ 154.1 $ 160.8 $ (6.7 ) $ 442.1 $ 486.7 $ (44.6 ) We have $5.9 million of manufacturing-related costs for vosoritide capitalized as pre-launch inventory as of March 31, 2021. See Note 8 to our accompanying Consolidated Financial Statements for additional information regarding our inventory. Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 Change 2017 2016 Change Sales and marketing (S&M) expense $ 67.0 $ 61.3 $ 5.7 $ 201.9 $ 174.9 $ 27.0 General and administrative (G&A) expense 63.5 57.5 6.0 192.2 158.7 33.5 Total SG&A expense $ 130.5 $ 118.8 $ 11.7 $ 394.1 $ 333.6 $ 60.5 Three Months Ended September 30, Nine Months Ended September 30, S&M expense by product 2017 2016 Change 2017 2016 Change Brineura $ 8.3 $ 4.9 $ 3.4 $ 20.7 $ 9.2 $ 11.5 Kuvan 19.4 13.6 5.8 62.6 42.9 19.7 Naglazyme 11.9 12.6 (0.7 ) 37.3 36.6 0.7 Vimizim 18.4 16.9 1.5 53.7 48.0 5.7 Other and not allocated 9.0 13.3 (4.3 ) 27.6 38.2 (10.6 ) Total S&M expense $ 67.0 $ 61.3 $ 5.7 $ 201.9 $ 174.9 $ 27.0 a decrease in foreign currency exchange losses. Intangible Asset Amortization and Contingent Consideration and Gain on Sale of Nonfinancial Assets Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 Change 2017 2016 Change Changes in the fair value of contingent acquisition consideration payable $ (3.8 ) $ 2.1 $ (5.9 ) $ 3.4 $ (57.0 ) $ 60.4 Amortization of intangible assets 7.6 7.6 — 22.7 22.7 — Total intangible asset amortization and contingent consideration $ 3.8 $ 9.7 $ (5.9 ) $ 26.1 $ (34.3 ) $ 60.4 discussion on this transaction. rates and yields on our cash equivalents and investments. Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 Change 2017 2016 Change Coupon interest $ 2.7 $ 2.5 $ 0.2 $ 7.2 $ 7.5 $ (0.3 ) Amortization of issuance costs 1.1 0.8 0.3 2.9 2.5 0.4 Accretion of discount on convertible notes 7.1 6.7 0.4 20.9 19.8 1.1 Total interest expense $ 10.9 $ 10.0 $ 0.9 $ 31.0 $ 29.8 $ 1.2 2020. The credits. Our ability to raise additional capital may also be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, financial markets in the U.S. and worldwide resulting from the ongoing COVID-19 pandemic. 2020. Our liquidity and capital resources as of September 30, December 31, 2017 2016 Change Cash and cash equivalents $ 431.4 $ 408.3 $ 23.1 Short-term investments 825.7 381.3 444.4 Long-term investments 416.3 572.8 (156.5 ) Cash, cash equivalents and investments $ 1,673.4 $ 1,362.4 $ 311.0 Convertible debt $ 1,166.0 $ 683.2 $ 482.8 2017 2016 Change Cash and cash equivalents at the beginning of the period $ 408.3 $ 397.0 $ 11.3 Net cash used in operating activities (23.4 ) (227.6 ) 204.2 Net cash used in investing activities (445.0 ) (174.4 ) (270.6 ) Net cash provided by financing activities 494.0 707.2 (213.2 ) Foreign exchange impact (2.5 ) 5.1 (7.6 ) Cash and cash equivalents at the end of the period $ 431.4 $ 707.3 $ (275.9 ) Short-term and long-term investments 1,242.0 690.5 551.5 Cash, cash equivalents and investments $ 1,673.4 $ 1,397.8 $ 275.6 year ended December 31, 2020. Our investment in our product development programs and continued development of our existing commercial products has a major impact on our operating performance. Our R&D expenses for the period since inception as of Since Program Inception BMN 250 $ 136.5 Brineura 227.7 Pegvaliase 485.9 Valoctocogene roxaparvovec 204.7 Vosoritide 213.8 Other approved products 962.4 Other and non-allocated Not meaningful Payments Due Within More 1 Year >1 -3 > 3 - 5 Than 5 or Less Years Years Years Total 2018 Notes and related interest $ 2.8 $ 376.4 $ — $ — $ 379.2 2020 Notes and related interest 5.6 11.3 377.8 — 394.7 2024 Notes and related interest 3.0 5.9 5.9 500.9 515.7 Operating leases 8.8 6.2 4.2 12.2 31.4 R&D and purchase commitments 41.5 — — — 41.5 Total $ 61.7 $ 399.8 $ 387.9 $ 513.1 $ 1,362.5 March 31, 2021. (b) Change in Internal Control over Financial Reporting investment. 26, 2021. affect our ability to source materials and supplies and successfully otherwise limit our ability to therapies. Our *Because the target patient populations for our products are small, we must achieve significant market share and maintain high per-patient prices for our products to achieve and maintain profitability. If we fail to compete successfully with respect to product sales, we may be unable to generate sufficient sales to recover our expenses related to the development of a product program or to justify continued marketing of a product and our revenue could be adversely affected. disease. * operations. operations. effectively and have a material adverse effect on our business, reputation, financial condition, and results of operations. our products and product candidates. Our Galli Drive facility, located in Novato, California, is currently our only manufacturing facility for Aldurazyme, Naglazyme and 3.1 31.2* 32.1*+ XBRL Instance Document Inline XBRL Taxonomy Extension Schema Document Inline XBRL Taxonomy Extension Calculation Document Inline XBRL Taxonomy Extension Definition Linkbase Inline XBRL Taxonomy Extension Labels Linkbase Document Inline XBRL Taxonomy Extension Presentation Link Document Dated: By /S/ Brian R. MuellerEstimatesgenerally accepted accounting principles (U.S. GAAP)GAAP and pursuant to the rules and regulations promulgated by the Securities and Exchange Commission (SEC)(the SEC), we make assumptions, judgments and estimates that can have a significant impact on our net income/loss and affect the reported amounts of certain assets, liabilities, revenue and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and discuss our critical accounting policies and estimates with the Audit Committee of our Board of Directors. We base our assumptions, judgments and estimates on historical experience and various other factorsassumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions.On a regular basis, we evaluateassumptions, judgmentsbusiness, results of operations and estimates. We also discussfinancial condition, including revenues, expenses, reserves and allowances, manufacturing, clinical trials and research and development costs will depend on future developments that continue to remain highly uncertain at this time. As events continue to evolve and additional information becomes available, our critical accounting policies and estimates with the Audit Committee of our Board of Directors. We believe that the assumptions, judgments and estimates involvedmay change materially in the accounting for business combinations, contingent acquisition consideration payable, income taxes, long-lived assets and revenue recognition have the greatest impact on our Condensed Consolidated Financial Statements, so we consider these to be our critical accounting policies. Historically, our assumptions, judgments and estimates relative to our critical accounting policies have not differed materially from actual results.estimatesjudgments during the ninethree months ended September 30, 2017,March 31, 2021, compared to the critical accounting policies, estimates and estimatesjudgments disclosed in “Management’s“Management’s Discussion and Analysis of Financial Condition and Results of Operations”Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2016.if any, on our results of operations and financial condition.Net LossOur net loss for the three months ended September 30, 2017 was $12.5 million, compared to a net loss (continued)$37.4 million for the three months ended September 30, 2016. Our net loss for the nine months ended September 30, 2017, was $65.7 million, compared to a net lossU.S. dollars, except as otherwise disclosed)$539.5 million for the nine months ended September 30, 2016. The decrease in net loss was primarily a result of the following (in millions):(1)Includes Equity in the loss of BioMarin/Genzyme LLC, interest income, interest expense and other income, net.The decrease in net loss for the three and nine months ended September 30, 2017 was primarily attributed to an increase in total revenues mainly due to a $31.5 million net upfront license payment from Sarepta and patients initiating therapy. The increase in revenues was partially offset by a decrease in the benefit from income taxes for the three and nine months ended September 30, 2017 compared to the same periods in 2016. Additionally, during the nine months ended September 30, 2016 we recorded an impairment charge of $599.1 million primarily due to the termination of the Kyndrisa program, which was partially offset by the reversal of the deferred tax liability that had been established for the future amortization of those intangible assets. There was no similar charge during the nine months ended September 30, 2017. See below for additional information related to the net loss fluctuations presented above, including details of our operating expense fluctuations and the aforementioned impairment charge.A summary of our various commercial products, including key metrics as of September 30, 2017, is provided below:(1)Firdapse has not received marketing approval in the U.S. We have licensed the North American rights to develop and market Firdapse to a third party.(2)Kuvan has been granted orphan drug status in the EU, which together with pediatric exclusivity, confers 12 years of market exclusivity in the EU that expires in 2020. Furthermore, Merck Serono marketed Kuvan in the EU until January 1, 2016. See Note 5 to our accompanying Condensed Consolidated Financial for further discussion.product revenuesProduct Revenues consisted of the following (in millions):Three Months Ended
March 31,2021 2020 Change Net product revenues by product: Net product revenues by product: Vimizim Vimizim $ 158.4 $ 137.2 $ 21.2 Naglazyme Naglazyme 107.3 114.3 (7.0) Kuvan Kuvan 70.8 122.0 (51.2) Palynziq Palynziq 54.0 34.6 19.4 Brineura 27.3 24.0 3.3 Firdapse — 1.2 (1.2) Total net product revenues marketed by the Company Total net product revenues marketed by the Company $ 417.8 $ 433.3 $ (15.5) Aldurazyme net product revenues marketed by Sanofi Genzyme Aldurazyme net product revenues marketed by Sanofi Genzyme 50.0 55.7 (5.7) Total net product revenues $ 467.8 $ 489.0 $ (21.2) Our Brineura, Firdapse, Kuvan, NaglazymeVimizim customers include a limited number ofAldurazyme, are generally sold to specialty pharmacies andor end-users, such as hospitals, and foreign government agencies. We also sell Brineura, Kuvan, Naglazyme and Vimizim to our authorized distributors and to certain larger pharmaceutical wholesalers globally, which act as intermediaries between usretailers. Palynziq is distributed in the U.S. through certain certified specialty pharmacies under the Palynziq Risk Evaluation and end-usersMitigation Strategy (REMS) program, and generally do not stock significant quantities ofAldurazyme is marketed worldwide by Sanofi Genzyme (Genzyme). Outside the U.S., our products. However, incommercial products are sold to authorized distributors or directly to government purchasers or hospitals, which act as the end-users. In certain countries, particularlysuch as in Latin America, governments place large periodic orders for Naglazyme and Vimizim. The timing of these large government orders can be inconsistent and can create significant quarter to quarter variation in our revenues.Genzyme Corporation (Genzyme) issole customerproducts are administered via infusions in a clinic or hospital setting and/or by a healthcare professional. Although we are working with our patient community and health care providers to find alternative arrangements where necessary, such as providing infusions at home, the revenue from the doses of our products that are missed by patients and the lost revenue from delayed treatment starts for Aldurazymenew patients will never be recouped. See the risk factor “The COVID-19 pandemic could materially adversely affect our business, results of operations and is responsiblefinancial condition” in “Risk Factors” included in Part II, Item 1A of this Quarterly Report for marketingadditional information.selling Aldurazymeadversely affect our revenue and results of operations in the future. See the risk factor “The sale of generic versions of Kuvan by generic manufacturers has adversely affected and will continue to third parties.net product revenuesNet Product Revenues denominated in U.S. dollar (USD)USD and foreign currencies (in millions):Three Months Ended
March 31,2021 2020 Change Sales denominated in USD $ 255.4 $ 274.5 $ (19.1) Sales denominated in foreign currencies 212.4 214.5 (2.1) Total net product revenues $ 467.8 $ 489.0 $ (21.2) nine months ended September 30, 2017 was positiveRussian Ruble, partially offset by $0.2 million and $1.6 million, respectively, comparedfavorable rate movements in the Euro relative to a positivethe USD. This compares to an unfavorable impact of $0.5$4.6 million for the three months ending March 31, 2020 primarily driven by weakening of currencies in emerging markets relative to the USD, such as the Brazilian Real, Colombian Peso and a negative impactArgentinian Peso, partially offset by the Euro.$3.0 million, respectively, duringproducts sold and milestones achieved by licensees or sublicensees. Other revenues include revenues earned from the three and nine months ended September 30, 2016.The following is additional discussionsale of licenses of our revenue results by product:Aldurazyme: The Aldurazyme net product revenues for the threeintellectual property and nine months ended September 30, 2017, compared to the three and nine months ended September 30, 2016, remained relatively flat. The modest changes were primarily attributable to the timing of Aldurazyme revenues reported by Genzyme, offset in part by the timing of shipments to Genzyme. Aldurazyme revenues reported by Genzyme totaled $58.4 million and $176.3 million for the three and nine months ended September 30, 2017, respectively, compared to $58.9 million and $168.5 million for the three and nine months ended September 30, 2016, respectively. Although Genzyme sells Aldurazyme worldwide, the net product revenues earned by us on Genzyme’s net sales are denominated in USD.Brineura: The FDA and European Commission granted marketing approval for Brineura in April 2017 and June 2017, respectively. We began marking the product following approval in each of these marketsrental income associated with the first commercial shipmentstenants in the U.S. and EU occurring in June 2017 and July 2017, respectively.Three Months Ended
March 31,2021 2020 Change Royalty revenues $ 17.8 $ 8.7 $ 9.1 Other revenues 0.5 4.3 (3.8) Total Royalty and Other revenues $ 18.3 $ 13.0 $ 5.3 Kuvan: The increase in Kuvan net productroyalty revenues for the three and nine months ended September 30, 2017, compared to the three and nine months ended September 30, 2016, was primarily attributable to an increase in patients on Kuvan therapy in the U.S. and the completion of the transition of the ex-North American territories acquired in 2016.Naglazyme: The decrease in Naglazyme net product revenues for the three months ended September 30, 2017,March 31, 2021 compared to the three months ended September 30, 2016,same period in 2020 was mainlyprimarily due to timinga license payment received from a third party due to their achievement of government ordersa regulatory milestone.Latin America, partially offset by new patients initiating therapy. The increaseother revenues is due primarily to license revenues earned, in Naglazyme net product revenues for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016, was primarily attributable to new patients initiating therapy.Vimizim: The increase in Vimizim net product revenues for the three and nine months ended September 30, 2017, compared to the three and nine months ended September 30, 2016, was primarily attributed to new patients initiating therapy.Royalty and Other RevenuesRoyalty and Other Revenues for the three and nine months ended September 30, 2017 included recognition of the $31.5 million net upfront license revenue from Sarepta and $1.4 million in royalty revenue earned on Sarepta net sales during the thirdfirst quarter of 2017. 2020, from the third-party that licensed tralesinidase alfa from us.Sarepta’s net sales underthird parties in the terms of the Agreements in future quarters.costCost of goods soldSales and product gross margin (in millions, except percentages):margin:Three Months Ended
March 31,2021 2020 Change Total net product revenues Total net product revenues $ 467.8 $ 489.0 $ (21.2) Cost of sales $ 120.2 $ 111.4 $ 8.8 Product gross margin 74.3 % 77.2 % (2.9) % Product gross margin (defined as net product revenues less costCost of sales, expressed as a percentage of net product revenues)Sales increased for the three months ended September 30, 2017March 31, 2021 compared to 2016 decreased modestly. The decreasethe same period in product2020 primarily due to increased sales volumes of Vimizim and Palynziq. Product gross margin for the three months ended September 30, 2017 wasMarch 31, 2021 compared toattributeddue to increasedthe higher per-unit manufacturing costs for Palynziq and Naglazyme, and Vimizim manufacturing costs. Product grossproduct mix as there were higher sales of lower margin for the nine months ended September 30, 2017 compared to the comparable period in 2016 remained flat. We expect product gross margin to remain in the low 80 percent range over the next twelve months.A summaryon-going major development programs, including key metrics as of September 30, 2017, is provided below:approved products. R&D expense primarily includes preclinical and clinical studies, personnel and raw materials costs associated with manufacturing clinical product, quality control and assurance, other R&D activities, facilities and regulatory costs.U.S. OrphanEU OrphanMajor Products in DevelopmentTarget IndicationDesignationDesignationStageBMN 250MPS IIIBYesYesClinical Phase 1/2PegvaliasePKUYesYesMarketing authorizationregulatory reviewValoctocogene roxaparvovecHemophilia AYesYesClinical Phase 1/2VosoritideAchondroplasiaYesYesClinical Phase 3business.R&D Expense decreased to $154.1 million and $442.1 million for the three and nine months ended September 30, 2017, respectively, from $160.8 million and $486.7 million for the three and nine months ended September 30, 2016, respectively. R&D expense consisted of the following (in millions):For the three and nine months ended September 30, 2017, R&D expense decreased by $6.7 million and $44.6 million, respectively, compared to the same periods in 2016. The decrease in R&D expense was primarily a result of the following:a decrease in R&D expense for other and non-allocated programs is primarily related to R&D spending in 2016 on the Kyndrisa, other exon-skipping, and reveglucosidase alfa development programs, all of which were terminated in 2016; anda decrease in R&D expense related to Brineura due to the approval of the product in the U.S. and EU in June 2017 and July 2017, respectively; offset byan increase in clinical trial activities related to BMN 250, pegvaliase, valoctocogene roxaparvovec and vosoritide product candidates; andan increase in pre-clinical activity for our early stage programs.During the remainder of 2017, we expect our R&D spending to increase over 2016 levels due to our BMN 250, pegvaliase, valoctocogene roxaparvovec, and vosoritide programs progressing in their development. We also expect increased spending on pre-clinical activities for our early development stage programs. Additionally, we expect to continue incurring significant R&D expense for the foreseeable future due to long-term clinical activities related to post-approval regulatory commitments for our approved products. We continuously evaluate the recoverability of costs associated with pre-launch or pre-qualification manufacturing activities, and capitalize the costs incurred related to those activities if it is determined that recoverability is highly likely and therefore future revenues are expected, the costs subsequently incurred related to pre-launch or pre-qualification manufacturing activities for purposes of commercial sales will likely be capitalized.expected. When regulatory approval and the likelihood of future revenues for a product candidate are less certain, the related manufacturing costs are expensed as R&D expenses.Three Months Ended
March 31,2021 2020 Change Research and early development $ 41.2 $ 28.5 $ 12.7 Vosoritide 36.3 31.1 5.2 Approved products 26.0 33.3 (7.3) Valoctocogene roxaparvovec 25.8 30.8 (5.0) BMN 307 15.4 17.5 (2.1) Other 4.0 1.1 2.9 Total R&D expense $ 148.7 $ 142.3 $ 6.4 SG&A Expense increased to $130.5 million$394.1 million for the three and nine months ended September 30, 2017, respectively, from $118.8 million and $333.6 million for the three and nine months ended September 30, 2016, respectively. The increase in SG&A expense was primarily a result of the following (in millions):S&Mmarketing (S&M) expense primarily consisted of employee-related expenses for our sales group, brand marketing, patient support groups and pre-commercialization expenses related to our product candidates. For the threeGeneral and nine months ended September 30, 2017, the increase$27.0 million in S&M expense, respectively, compared to the same periods in 2016, was primarily related to the following:an increase in Kuvan S&M expense due to continued worldwide expansionAnalysis of commercial activitiesFinancial Condition and Results of Operations (continued)a result of acquiring the worldwide rights to Kuvan, except for Japan, on January 1, 2016;otherwise disclosed)an increase in Brineura S&M expense primarily due to commercial marketing expense related to the launch of Brineura; andan increase in Vimizim S&M expense due to continued expansion of our worldwide commercial activities; offset bya decrease in other and not allocated S&M expense primarily due to the decrease in S&M expenses related to the terminated programs, primarily Kyndrisa.G&Aadministrative (G&A) expense primarily consisted of corporate support and other administrative expenses, including administrative employee-related expenses.which increased inconsisted of the following:Three Months Ended
March 31,2021 2020 Change S&M expense $ 94.2 $ 94.9 $ (0.7) G&A expense 80.1 92.4 (12.3) Total SG&A expense $ 174.3 $ 187.3 $ (13.0) Three Months Ended
March 31,2021 2020 Change PKU Products (Kuvan and Palynziq) $ 30.8 $ 30.8 $ — MPS Products (Aldurazyme, Naglazyme and Vimizim) 24.4 28.5 (4.1) Vosoritide 16.5 5.6 10.9 Valoctocogene roxaparvovec 12.2 18.1 (5.9) Brineura 8.1 10.2 (2.1) Other 2.2 1.7 0.5 Total S&M expense $ 94.2 $ 94.9 $ (0.7) and nine months ended September 30, 2017,March 31, 2021 as compared to the same periods in 2020 was largely flat as resources were redirected from other programs to support pre-commercialization activities related to vosoritide based on anticipated approval timelines. and nine months ended September 30, 2016,March 31, 2021 as compared to the same period in 2020 was primarily due to increased personnel and related costs mainly due to increased headcount.the continued commercialpreparing to launch new products and support of Brineura, pre-commercialization efforts related to product candidates, the continued international expansion of Kuvan and Vimizim, and the increase in administrative support required for our expanding operations.global business as it grows.Three Months Ended
March 31,2021 2020 Change Changes in the fair value of contingent consideration (gain) / loss $ 2.3 $ — $ 2.3 Amortization of intangible assets 15.4 15.7 (0.3) Total intangible asset amortization and contingent consideration $ 17.7 $ 15.7 $ 2.0 Gain on sale of nonfinancial assets $ — $ 59.5 $ (59.5) acquisition consideration payable result from updatesfor the three months ended March 31, 2021 as compared to the estimated probability of achievement or assumed timing of milestones and adjustments to the discount periods and rates. Intangible asset amortization and contingent consideration expense consisted of the following (in millions):The changessame period in the fair value of the contingent acquisition consideration payable were primarily2020 was attributable to changes in the estimated probability of achieving developmentsales milestones based onrelated to our PKU products.current status of the related development programs as well as the passage of time. The majority of the changes in fair value of contingent acquisition consideration payableexpense for each period presented was attributed to the following:during the three months ended September 30, 2017, we reducedMarch 31, 2021 as compared to the estimated probabilitysame periods in 2020 was largely flat.Firdapse FDA approval milestone prior to its expiration date to zero, which resulted in a decrease of $4.2 millionis due to the reversal of the fair valuerecognition of a portiongain of the contingent consideration payable to the former Huxley Pharmaceuticals Inc. shareholders;during the nine months ended September 30, 2017, the continued progress of the PKU developmental program for pegvaliase, offset by the reversal of the fair value of the Firdapse FDA approval milestone; andduring the nine months ended September 30, 2016, the termination of the Kyndrisa and reveglucosidase alfa development programs that resulted in the reversal of the fair value of the remaining contingent consideration payable to the former Prosensa Holding N.V. and Zystor Therapeutics, Inc. shareholders.Impairment of Intangible AssetsIn the second quarter of 2016, we recorded an impairment charge of $599.1$59.5 million related to the Kyndrisa and other exon and reveglucosidase alfa IPR&D assets based on the termination of the internal development of the respective programs. No impairment charges were recorded in the three and nine months ended September 30, 2017.March 31, 2020 due to the divestiture and sale of Firdapse. See Note 86 to our accompanying Condensed Consolidated Financial Statements for additional information regarding our Intangible Assets.short-termequivalents and long-term investments in U.S. government securities and other high credit quality debt securities in order to limit default and market risk. Interest income totaled $4.0 million and $10.0 millionIncome comprised the following:Three Months Ended March 31, 2021 2020 Change Interest income $ 2.4 $ 5.2 $ (2.8) and nine months ended September 30, 2017, respectively,March 31, 2021 compared to $1.6 million and $4.6 million for the three and nine months ended September 30, 2016, respectively. The increase in interest income during the three and nine months ended September 30, 2017, compared to the three and nine months ended September 30, 20162020 was primarily due to higher investment balances, which increased duelower interest rates.the investment of the net proceeds of $481.7 million from the August 2017 issuance of $495.0 million in aggregate principal amount of 0.599% senior subordinated convertible notes due in 2024 (the 2024 Notes) and higher average interest rate on investments. Due to higher investment balances offset in part by planned spend,be lower over the next 12 months we expect an increase indue to lower interest income from present levels.following (in millions):following:Three Months Ended March 31, 2021 2020 Change Interest expense $ 3.8 $ 6.9 $ (3.1) InterestThe interest expense on convertible debt for the three months ended March 31, 2021 compared to 2020 was lower due primarily consistedto the settlement of amounts related to our senior subordinated convertible notes. Interest expensethe 2020 Notes in the three and nine months ended September 30, 2017, compared to the three and nine months ended September 30, 2016 increased due to the issuancefourth quarter of the 2024 Notes. 2020.increasebe lower over the next 12 months duedue to the couponsettlement of the 2020 Notes, partially offset by increased interest and amortization of issuance costs related toexpense for the 20242027 Notes. See Note 11 to our accompanying Condensed Consolidated Financial Statements additional information regarding our debt. Benefit from Income TaxesFor the three and nine months ended September 30, 2017, we recognized a benefit from income taxes of $8.1 million and $24.8 million, respectively, compared to the three and nine months ended September 30, 2016 when we recognized anbenefit of $29.4 million and $199.4 million, respectively. The benefit from income taxes for the nine months ended September 30, 2016 primarily included the reversal of the deferred tax liability associated with the write-off of the IPR&D related to Kyndrisa and reveglucosidase alfa. We have historically computed our interim period benefit from income taxes by applying our forecasted effective tax rate to year-to-date earnings. However, due to a significant amount of U.S. permanent differences relative to the amount of U.S. forecasted income used in computing the effective tax rate, the effective tax rate can be highly sensitive to minor fluctuations in U.S. forecasted income. As such, we have computed the U.S. component of the consolidated benefit from income taxes for the three and nine months ended September 30, 2017 and 2016 using an actual year-to-date tax calculation. Foreign taxprovision:Three Months Ended March 31, 2021 2020 Change Provision for income taxes $ 5.9 $ 20.0 $ (14.1) and nine months ended September 30, 2017March 31, 2021 and 2016.benefit fromprovision for income taxes for the three and nine months ended September 30, 2017March 31, 2021 and 2016 also2020 consisted of state, federal and foreign current tax expense thatwhich was offset by deferred tax benefits from federal orphan drug credits and the federal and California R&D credits, and the tax benefit related to stock option exercises during these periods, which resulted in a net tax benefit in both periods. See Note 15 to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2016 for additional discussion of the components of our benefit from income taxes.September 30, 2017,March 31, 2021, we had approximately $1.7$1.4 billion in cash, cash equivalents and short-term and long-term investments. We expect to fund our operations with our net product revenues from our commercial products, cash, cash equivalents and short-term and long-term investments, supplemented as may become necessary by proceeds from equity or debt financings and loans, or collaborative agreements with corporate partners. We believe that our existing cash, cash equivalents and investments and cash we expect to generate from operations will be sufficient to satisfy our liquidity requirements for the next 12 months. We may require additional financing to fund the repayment of our convertible debt, future milestone payments and our future operations, including the commercialization of our products and product candidates currently under development, preclinical studies and clinical trials, and potential licenses and acquisitions. We will need to raise additional funds from equity or debt securities, loans or collaborative agreements if we are unable to satisfy our liquidity requirements. The timing and mix of our funding options could change depending on many factors, including how much we elect tofunds and we have not provided for U.S. federal or state income taxes on these undistributed foreign earnings.funds. As of September 30, 2017, $87.3March 31, 2021, $189.3 million of our $1.7$1.4 billion balance of cash, cash equivalents, and investments was held in foreignnon-U.S. subsidiaries, a significant portion of which is required to fund the liquidity needs of these foreignnon-U.S. subsidiaries. For additional discussion regarding income taxes, see Note 1518 to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2016.SomeWe sell our products in countries that face economic volatility and weakness. Although we have historically collected receivables from customers in such countries, sustained weakness or further deterioration of the factors that could affectlocal economies and currencies and adverse effects of the impact of the ongoing COVID-19 pandemic may cause customers in those countries to be unable to pay for our business include: future changes to healthcare reform in the U.S., a continuation of uncertainty with respect to, or worsening of, global economic conditions, patent expirations of competitive products and the launch of generic competitors, continued government pricing pressures internationally and the potential volatility in foreign currency exchange rates.products. We will continue to monitor these conditions and will attempt to adjust our business processes, as appropriate, to mitigate thesemacroeconomic risks to our business.September 30, 2017March 31, 2021 and December 31, 20162020 were as follows (in millions):March 31, 2021 December 31, 2020 Change Cash and cash equivalents $ 667.3 $ 649.2 $ 18.1 Short-term investments 420.2 416.2 4.0 Long-term investments 321.1 285.5 35.6 Cash, cash equivalents and investments $ 1,408.6 $ 1,350.9 $ 57.7 Total convertible debt, net Total convertible debt, net $ 1,076.1 $ 1,075.1 $ 1.0 ninethree months ended September 30, 2017March 31, 2021 and 20162020 are summarized as follows (in millions):follows:March 31, 2021 March 31, 2020 Change Cash and cash equivalents at the beginning of the period $ 649.2 $ 437.4 $ 211.8 Net cash provided by (used in) operating activities Net cash provided by (used in) operating activities 113.5 (15.2) 128.7 Net cash provided by (used in) investing activities Net cash provided by (used in) investing activities (70.8) 77.4 (148.2) Net cash used in financing activities Net cash used in financing activities (24.4) (19.7) (4.7) Foreign exchange impact (0.2) (3.4) 3.2 Cash and cash equivalents at the end of the period $ 667.3 $ 476.6 $ 190.7 Short-term and long-term investments 741.3 672.6 68.7 Cash, cash equivalents and investments $ 1,408.6 $ 1,149.2 $ 259.4 Used inProvided by (Used in) Operating ActivitiesCashdecreased by $204.2of $15.2 million from $227.6 million duringin the ninethree months ended September 30, 2016March 31, 2020. The increase is primarily attributed to $23.4 million during the nine months ended September 30, 2017. Cash used in operating activities primarily consistedtiming of net loss of $65.7 million, adjusted for non-cash items such as $106.7 million for stock-basedcash receipts from our customers, tax authorities and lower bonus compensation expenses, $59.2 million for depreciation and amortization expense, $23.8 million of non-cash interest expense,payments made to our employees partially offset by $36.2 million for deferred income taxes and $3.3 million gain on the sale of strategic investments. payments to vendors.used in operating activities in the comparable period in 2016 was adjusted for the non-cash impairment of intangible assets of $599.1 million. Changes in operating assets and liabilities during the nine months ended September 30, 2017 resulted in a net cash outflow of $122.5 million that consisted primarily of increased cash outflow for increased inventory spending for all commercial products to meet anticipated future sales demand.Cash Used inProvided by (Used in) Investing Activities$270.6$148.2 million from $174.4to $70.8 million duringin the ninethree months ended September 30, 2016March 31, 2021, compared to $445.0cash provided by investing activities of $77.4 million duringin the ninethree months ended September 30, 2017. March 31, 2020. The increase in net cash used in investing activities during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 wasis primarily attributable to a $216.5 million increase inhigher net purchases of available-for-sale debt securities and a $62.5 million increase of capital purchases. We expect to continue to make significant capital investments in our manufacturing and administrative facilities to accommodate anticipated demand for new commercial products, clinical studies and the related growth in personnel to support those activities.Cash Provided by Financing ActivitiesNet cash provided by financing activities decreased by $213.2 million from $707.2 million for the nine months ended September 30, 2016 to $494.0 million during the nine months ended September 30, 2017. The decrease in net cash provided by financing activities for the nine months ended September 30, 2017 was primarily attributable to a decrease of $712.9 million in proceeds from public offerings of common stock and a $3.4$67.2 million decrease inemployee equity transactions, partially offsetthe sale of nonfinancial assets resulting from divestiture and sale of Firdapse to a third party in the first quarter of 2020. $481.7 $4.7 million to $24.4 million in the three months ended March 31, 2021, compared to cash used in financing activities of net$19.7 million in the three months ended March 31, 2020 due primarily to the lower proceeds from the 2024 Notes issued in August 2017 and a $23.4 million decrease in taxes paid relatedexercise of awards under our equity incentive plans.net share settlementthe semi-annual cash interest payments. As of employee equity awards.OurMarch 31, 2021, our indebtedness consists primarilyconsisted of the Company’s 0.75%our 1.25% senior subordinated convertible notes due in 20182027 (the 20182027 Notes), the Company’s 1.50% and our 0.599% senior subordinated convertible notes due in 20202024 (the 2020 Notes) and the 2024 Notes and together with the 2027 Notes, the Notes), which, if not converted, will be required to be repaid in cash at maturity in 2018, 2020August 2024 and 2024,May 2027, respectively. The 2018We will need cash not only to pay the ongoing interest due on the Notes 2020 Notes and 2024 Notes are referredduring their term, but also to collectively herein asrepay the Notes. Our senior subordinated convertible notes due in 2017 matured on April 23, 2017, with conversion of all principal amounts except for a final cash settlement of $26,000. In August 2017, we completed an offering of $495.0 million in aggregate principalprinciple amount of the 2024 Notes if not converted.resulted in net proceedstime all outstanding amounts become due and payable. The 2018 Credit Facility contains financial covenants requiring us to maintain a minimum interest coverage ratio and a minimum liquidity requirement. As of $481.7 million, after deducting commissions and offering expenses. The 2024 Notes bear interest atMarch 31, 2021, there were no outstanding amounts due on nor any usage of the stated annual rates, which is payable semiannually in arrears on February 1 and August 1 of each year beginning on February 1, 2018. See2018 Credit Facility.for additional discussion.Our $1.2 billion (undiscounted) of total convertible debt as of September 30, 2017 will impactand Note 13 - liquidity due to the semi-annual cash interest payments and will further impact our liquidity if we elect to settle all or portions of the 2018 Notes or the 2020 Notes in cash upon conversion. In addition, in the event the conditional conversion feature of the 2018 Notes or 2020 Notes is triggered, holders of such 2018 Notes and 2020 Notes will be entitled to convert the 2018 Notes and 2020 Notes at any time during specified periods at their option. Our liquidity could be adversely affected if we do not elect to settle conversions of the 2018 Notes and 2020 Notes solely in shares of our common stock. Even if holders of the 2018 Notes or 2020 Notes do not elect to convert their 2018 Notes and 2020 Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of such Notes as a current rather than long-term liability (for example, if there are 12 months or less remaining until maturity), which would result in a material reduction of our net working capital. Moreover, if holders of the Notes do not elect to convert their Notes and we are unable to refinance the Notes, we must repay the Notes. We may seek to refinance or repay these obligations through funds raised from third-party financing, or equity or debt financings, none of which may be availableAnnual Report on commercially reasonable terms, if at all. In addition, depending on market conditions, our financial position and performance and other factors, we may in the future choose to use a portion of our cash or cash equivalents to repurchase our convertible debt or other securities.In August 2016, we sold 7.5 million shares of our common stock at a price of $96.00 per share in an underwritten public offering pursuant to an effective registration statement previously filed with the SEC. We received net proceeds of approximately $712.9 million from this public offering after accountingForm 10-K for the underwriting discount and offering costs. In November 2016 we entered into a credit agreement (the Credit Agreement) providing for up to $100.0 million in revolving loans (the Revolving Credit Facility). We expect to use the proceeds of the Revolving Credit Facility to finance ongoing working capital needs (including timing differences resulting from the strategic management of short-term investments) and for other general corporate purposes. As of September 30, 2017, we had not drawn on the Revolving Credit Facility. Although quarterly interest payments will be due on any outstanding balance due, we anticipate any balance due to be short-term in nature. See Note 11 to our accompanying Condensed Consolidated Financial Statements for additional discussion.We sell our products in other countries, including Southern European countries, Russia, Chile and Brazil, which face economic volatility and weakness. Although we have historically collected receivables from customers in those countries, sustained weakness or further deterioration of the local economies and currencies may cause customers in those countries to be unable to pay for our products.“Risk Factors”“Risk Factors” included in Part II, Item 1A of this Quarterly Report on Form 10-Q, for a discussion of the reasons we are unable to estimate such information, and in particular the following risk factors:If we fail to obtain regulatory approval to commercially market and sell our product candidates, or if approval of our product candidates is delayed, we will be unable to generate revenue from the sale of these product candidates, our potential for generating positive cash flow will be diminished, and the capital necessary to fund our operations will increase;If we are unable to successfully develop and maintain manufacturing processes for our products to produce sufficient quantities at acceptable costs, we may be unable to meet demand for our products and lose potential revenue, have reduced margins or be forced to terminate a program;If we do not achieve our projected development goals in the timeframes we announce and expect, the commercialization of our product candidates may be delayed and the credibility of our management may be adversely affected and, as a result, our stock price may decline.our major development programs from inception to September 30, 2017March 31, 2021 were as follows (in millions):Since Program Inception Palynziq $ 750.3 Valoctocogene roxaparvovec $ 735.8 Vosoritide $ 607.0 BMN 307 $ 195.3 Other approved products $ 1,540.4 and consequently we mayto be unableable to achieve our long-term goals. This may increase our capital requirements, including: costs associated with the commercialization of our products;products; additional clinical trials; investments in the manufacturing of our commercial products; pre-clinicalproducts; preclinical studies and clinical trials for our other product candidates; potential licenses and other acquisitions of complementary technologies, products and companies; and general corporate purposes.product sales and profitability of our products;manufacturing, supply or distribution of our product candidates and commercial products;progress of our product candidates through the regulatory process and •our ability to successfully commercialize any such products that receive regulatory approval;results•the progress and success of our preclinical studies and clinical trials announcements(including the manufacture of technological innovations or new products by us or our competitors;generic competition to Kuvan relating to our settlements with DRL (related to Kuvan tablets•the timing, number, size and powder) and Par (related to Kuvan tablets and powder) or potential generic competition from future competitors;government regulatory action affecting our product candidates, our products or our competitors’ product candidates and products in both the U.S. and non-U.S. countries;developments or disputes concerning patent or proprietary rights;general market conditions and fluctuations for the emerging growth and pharmaceutical market sectors;economic conditions in the U.S. or abroad;negative publicity about our company or the pharmaceutical industry;broad market fluctuations in the U.S., the EU or in other parts of the world;actual or anticipated fluctuations in our operating results, including due to timing of large order for our products, in particular in Latin America, where governments place large periodic orders for Naglazyme and Vimizim;changes in company assessments or financial estimates by securities analysts;acquisitions of products, businesses, or other assets; andsalesscope of our sharespreclinical studies and clinical trials;us, our significant stockholders, or membersregulatory authorities; andour management or Board of Directors. operating leases and other obligations related to R&D activities, purchase commitments, licenses and sales royalties with annual minimums. OurAs of March 31, 2021, such commitments and other minimum contractual obligations asfor clinical and post-marketing services were estimated at approximately $122.9 million.September 30, 2017 are presented in the table below (in millions).We areMarch 31, 2021, we were also subject to contingent payments related tototaling approximately $654.5 million upon achievement of certain development and regulatory activities and commercial sales and licensing milestones totaling approximately $600.2 million as of September 30, 2017, which are due upon achievement of certain development and commercial milestones, and if they occur before certain dates in the future. Of this amount, $218.3$70.4 million (USD equivalentwere considered probable and comprised of 185 million Euros translated at 1.18 USD per Euro) relatescommercial milestones related to the Merck PKU Business acquisition of certain rights and $53.3other assets with respect to Kuvan and Palynziq from a third party, $235.0 million relateswere considered reasonably possible and related to milestones for early stage development programs thatlicensed from a third party in the second quarter of 2020 and $234.7 million were considered remote as we are no longer being developed. See Note 18developing the related programs.accompanying Condensed Consolidated Financial Statementscontractual and commercial obligations during the three months ended March 31, 2021, as compared to the obligations disclosed in Management’s Discussion and Analysis in our Annual Report on Form 10-K for additional discussion.the year ended December 31, 2020.ninethree months ended September 30, 2017March 31, 2021 have not materially changed from those discussed in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC on February 27, 2017.2020.September 30, 2017.are utilizingcontinue to utilize the Committee of Sponsoring Organizations of the Treadway Commission (COSO) 2013 Framework on internal control.Paragraph IV NoticesWe receivedparagraph IV notice letter, datedpurported shareholder class action lawsuit was filed against us, our Chief Executive Officer, our President of Worldwide Research and Development and our Executive Vice President and Chief Financial Officer in the United States District Court in the Northern District of California, alleging violations under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The complaint alleges that the Company made materially false or misleading statements regarding the clinical trials and Biologics License Application (BLA) for valoctocogene roxaparvovec by purportedly failing to disclose that differences between the Company’s Phase 1/2 and Phase 3 clinical studies limited the ability of the Phase 1/2 study to support valoctocogene roxaparvovec’s durability of effect and, as a result, that it was foreseeable that the FDA would not approve the BLA without additional data. The complaint seeks an unspecified amount of damages, pre-judgment and post-judgment interest, attorneys’ fees, expert fees, and other costs. In December 23, 2016, from Dr. Reddy’s Laboratories, Inc. and Dr. Reddy’s Laboratories, Ltd. (collectively, DRL), notifying us that DRL had2020, the court hearing the case appointed Arbejdsmarkedets Tillægspension as lead plaintiff. The lead plaintiff filed an abbreviated new drug application (ANDA) seeking approvalamended complaint in February 2021, dropping our Chief Financial Officer as a defendant, and asserting that the Company misled investors about the progress of a proposed generic version of Kuvan (sapropterin dihydrochloride) 100 mg oral powder prior to the expirationFDA's review of our patents listed inBLA for valoctocogene roxaparvovec. Our motion to dismiss the FDA's Approved Drug Products with Therapeutic Equivalence Evaluations (the Orange Book). We filed a lawsuit alleging patent infringement against DRL. In August 2017, we entered into a settlement agreement with DRL (the DRL Powder Settlement Agreement) that resolved the patent litigation with DRL in the U.S. related to Kuvan 100 mg oral powder. Under the terms of the DRL Powder Settlement Agreement, we granted DRL a non-exclusive license to our Kuvan-related patents to allow DRL to market a generic version of sapropterin dihydrochloride in oral powder form in 100 mg and 500 mg packet formulations in the U.S. for the indications approved for Kuvan beginning on October 1, 2020, or earlier under certain circumstances.We also received two separate paragraph IV notice letters, dated January 14, 2016 and January 22, 2015, from Par Pharmaceutical, Inc. (Par), notifying us that Par had filed an ANDA seeking approval of proposed generic versions of Kuvan 100 mg oral powder and Kuvan 100 mg oral tablets, respectively, prior to the expiration of our patents listed in the FDA’s Orange Book. We filed two lawsuits alleging patent infringement against Par (the lawsuit against Par pertaining to the proposed generic version of Kuvan 100 mg oral tabletscomplaint was filed together with Merck & Cie),on April 22, 2021. We believe that the claims have no merit and the two Par cases were consolidated. In April 2017, we and Merck & Cie entered into a settlement agreement with Par (the Par Settlement Agreement) that resolved both cases against Par. Under the Par Settlement Agreement, we granted Par a non-exclusive licenseintend to our Kuvan-related patents to allow Par to market a generic version of sapropterin dihydrochloride in 100 mg oral tablets and oral powder in 100 mg and 500 mg packet formulations in the U.S. for the indications approved for Kuvan beginning on: April 1, 2021 if Par is not entitled to the statutory 180-day first filer exclusivity period; October 1, 2020 if Par is entitled to the statutory 180-day first filer exclusivity period; or earlier under certain circumstances.We also received a paragraph IV notice letter, dated October 3, 2014, from DRL notifying us that DRL had filed an ANDA seeking approval of a proposed generic version of Kuvan 100 mg oral tablets prior to the expiration of our patents listed in the FDA’s Orange Book. We, together with Merck & Cie, filed a lawsuit alleging patent infringement against DRL. In September 2015, we and Merck & Cie entered into a settlement agreement with DRL (the DRL Tablet Settlement Agreement) that resolved the patent litigation with DRL in the U.S. related to Kuvan 100 mg oral tablets. Under the terms of the DRL Tablet Settlement Agreement, we granted DRL a non-exclusive license to our Kuvan-related patents to allow DRL to market a generic version of sapropterin dihydrochloride 100 mg oral tablets in the U.S. for the indications approved for Kuvan beginning on October 1, 2020, or earlier under certain circumstances.
vigorously defend this action.investment.2016,2020, which was filed with the SEC on February 27, 2017. Related toBusiness*If we fail to obtain regulatory approval to commercially market and sell our product candidates, or if approval of our product candidates is delayed, we will be unable to generateglobal revenue from the sale of these product candidates, our potential for generating positive cash flow will be diminished, and the capital necessary to fund our operations will increase.We must obtain and maintain regulatory approval to market and sell our product candidates. For example,sources, mostly in the U.S.,form of demand interruptions such as missed patient infusions and delayed treatment starts for new patients, and our overall business operations were impacted by the COVID-19 pandemic during the three months ended March 31, 2021, and we must obtain Foodexpect that the pandemic will continue to adversely impact our financial results and Drug Administration (FDA) approvalour business generally for each product candidate that we intend to commercialize,the remainder of 2021. Ongoing and in Europe we must obtain approval from the European Medicines Agency (EMA). The FDA and EMA approval processes are typically lengthy and expensive, and approval is never certain. Accordingly, there are no assurances that we will obtain regulatory approval for any of our product candidates, including pegvaliase, in any jurisdiction. For example, even though the pivotal Phase 3 PRISM-2 study of pegvaliase met the primary endpoint of change in blood Phe compared with placebo (p<0.0001), we did not demonstrate a statistically significant improvement in inattention or mood scores, a key secondary clinical neurocognitive endpoint. In August 2017, the FDA accepted for Priority Review our Biologics License Application (BLA) for pegvaliase, but there is no assurance that a reduction in blood Phe alone will be sufficient to support the FDA’s full regulatory approval of pegvaliase.Although the FDA and the EMA have programs to facilitate accelerated approval processes, the timelines agreed under legislative goals or mandated by regulations are subject to the possibility of substantial delays. In addition, the FDA, the EMA and other international regulatory authorities have substantial discretion over the approval process for pharmaceutical products. These regulatory agencies may not agree that we have demonstrated the requisite level of product safety and efficacy to grant approval and may require additional data. If we fail to obtain regulatory approval for our product candidates, we will be unable to market and sell those product candidates. Becausefuture effects of the risks and uncertainties in pharmaceutical development, our product candidates could take a significantly longer time to gain regulatory approval than we expect or may never gain approval. We also relyCOVID-19 pandemic (or any future pandemic) on independent third-party contract research organizations (CROs) to file some of our foreign marketing applications and importantall aspects of the services performed for us by the CROs are out of our direct control. If we fail to adequately manage our CROs, if the CRO elects to prioritize work on our projects below other projects or if there is any dispute or disruption in our relationship with our CROs, the filing of our applications may be delayed.In addition, some of our product candidates are intended to be used in combination with a delivery device, such as an injector or other delivery system. Medical products containing a combination of new drugs, biological products or medical devices may be regulated as “combination products” in the U.S. A combination product generally is defined as a product consisting of components from two or more regulatory categories (e.g., drug/device, device/biologic, drug/biologic). Each component of a combination product is subject to the requirements established by the FDA for that type of component, whether a new drug, biologic or device. In order to facilitate pre-market review of combination products, the FDA designates one of its centers to have primary jurisdiction for the pre-market review and regulation of the overall product based upon a determination by the FDA of the primary mode of action of the combination product. The determination whether a product is a combination product or two separately regulated products is made by the FDA on a case-by-case basis. Our product candidates intended for use with such devices, or expanded indications that we may seek for our products used with such devices, may not be approved or may be substantially delayed in receiving approval if the devices do not gain and/or maintain their own regulatory approvals or clearances. Where approval of the drug or biologic product and device is sought under a single application, the increased complexity of the review process may delay approval. The FDA review process and criteria is not a well-established area, which could also lead to delays in the approval process. In addition, because these delivery devices are provided by unaffiliated third-party companies, we are dependent on the sustained cooperation and effort of those third-party companies both to obtain regulatory approval and to maintain their own regulatory compliance. Failure of third-party companies to assist in the approval process or to maintain their own regulatory compliance could delay or prevent approval of our product candidates, or limit our ability to sell a product once it is approved.From time to time during the regulatory approval process for our products and product candidates, we engage in discussions with the FDA and comparable international regulatory authorities regarding our development programs, including discussions about the regulatory requirements for approval. As part of these discussions, we sometimes seek advice in the design of our clinical programs from various regulatory agencies globally, but we do not always follow such guidance. This increases the chance of adverse regulatory actions, but we try to always provide appropriate scientific evidence to support approval. Also, sometimes different regulatory agencies provide different or conflicting advice. While we attempt to harmonize the advice we receive from multiple regulatory authorities, it is not always practical to do so. Also, we may choose not to harmonize conflicting advice when harmonization would significantly delay clinical trial data or is otherwise inappropriate. If we are unable to effectively and efficiently resolve and comply with the inquiries and requests of the FDA and other non-U.S. regulatory authorities, the approval of our product candidates may be delayed and their value may be reduced.Any product for which we have obtained regulatory approval, or for which we obtain approval in the future, is subject to, or will be subject to, extensive ongoing regulatory requirements by the FDA, the EMA and other comparable international regulatory authorities, and if we fail to comply with regulatory requirements or if we experience unanticipated problems with our products, we may be subject to penalties, we will be unable to generate revenue from the sale of such products, our potential for generating positive cash flow will be diminished, and the capital necessary to fund our operations will be increased.All of our products have received regulatory approval to be commercially marketed and sold in the U.S., the EU and certain other countries, with the exception of Firdapse, which has received regulatory approval to be commercially marketed only in the EU. Any product for which we have obtained regulatory approval, or for which we obtain regulatory approval in the future, along with the manufacturing processes and practices, post-approval clinical research, product labeling, advertising and promotional activities for such product, are subject to continual requirements of, and review by, the FDA, the EMA and other comparable international regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration and listing requirements, current good manufacturing practices (cGMP) requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians, import and export requirements and recordkeeping.Promotional communications with respect to prescription drugs, including biologics, are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product's approved labeling. Thus, we will not be able to promote any products we develop for indications or uses for which they are not approved.In addition, the FDA often requires post-marketing testing and surveillance to monitor the effects of products. The FDA, the EMA and other comparable international regulatory agencies may condition approval of our product candidates on the completion of such post-marketing clinical studies. These post-marketing studies may suggest that a product causes undesirable side effects or may present a risk to the patient.Discovery after approval of previously unknown problems with any of our products, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in actions such as:restrictions on our ability to conduct clinical trials, including full or partial clinical holds on ongoing or planned trials;restrictions on product manufacturing processes;restrictions on the marketing of a product;restrictions on product distribution;requirements to conduct post-marketing clinical trials;untitled or warning letters or other adverse publicity;withdrawal of the products from the market;refusal to approve pending applications or supplements to approved applications that we submit;recall of products;refusal to permit the import or export of our products;product seizure;fines, restitution or disgorgement of profits or revenue;imposition of civil or criminal penalties.If such regulatory actions are taken, the value of our company and our operating results will be adversely affected. Additionally, if the FDA, the EMA or any other comparable international regulatory agency withdraws its approval of a product, we will be unable to generate revenue from the sale of that product in the relevant jurisdiction, our potential for generating positive cash flow will be diminished and the capital necessary to fund our operations will be increased. Accordingly, we continue to expend significant time, money and effort in all areas of regulatory compliance, including manufacturing, production, product surveillance, post-marketing studies and quality control.If we fail to obtain or maintain orphan drug exclusivity for some of our products, our competitors may obtain approval to sell the same drugs to treat the same conditions and our revenues will be reduced.As part of our business strategy, we have developed and may in the future develop some drugs that may be eligible for FDAoperations, including revenues, expenses, reserves and EU orphan drug designation. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is intended to treat a rare disease or condition, defined as a patient population of fewer than 200,000 in the U.S. In the EU, orphan drug designation is granted to drugs intended to treat a rare disease or condition, defined as having a prevalence of no more than five in 10,000 people in the EU, which is equivalent to around 250,000 people or fewer. The company that first obtains FDA approval for a designated orphan drug for a given rare disease receives marketing exclusivity for use of that drug for the stated condition for a period of seven years. Orphan drug exclusive marketing rights may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug. Similar regulations are available in the EU with a ten-year period of market exclusivity.Because the extent and scope of patent protection for some of our products is limited, orphan drug designation is especially important for our products that are eligible for orphan drug designation. For eligible products, we plan to rely on the exclusivity period under the Orphan Drug Act to maintain a competitive position. If we do not obtain orphan drug exclusivity for our products that do not have broad patent protection, our competitors may then sell the same drug to treat the same condition and our revenues will be reduced.Even though we have obtained orphan drug designation for certain of our product candidates and even if we obtain orphan drug designation for our future product candidates, due to the uncertainties associated with developing biopharmaceutical products, we may not be the first to obtain marketing approval for any particular orphan indication, which means that we may not obtain orphan drug exclusivity and could also potentially be blocked from approval of certain product candidates until the competitor product’s orphan drug exclusivity period expires. Further, even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs can be approved for the same condition and the same drug can be approved for different conditions and potentially used off-label in the orphan indication. Even after an orphan drug is approved and granted orphan drug exclusivity, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that the later drug is safer or more effective or makes a major contribution to patient care. Orphan drug designation neither shortens the development time or regulatory review time of a drug, nor gives the drug any advantage in the regulatory review or approval process.*We may face competition from biosimilars approved through an abbreviated regulatory pathway.Our Aldurazyme, Brineura, Naglazyme and Vimizim products are regulated by the FDA as biologics under the Federal Food, Drug, and Cosmetic Act (the FDC Act) and the Public Health Service Act (the PHS Act). Biologics require the submission of a BLA and approval by the FDA prior to being marketed in the U.S. Historically, a biologic product approved under a BLA was not subject to the generic drug review and approval provisions of the FDC Act. However, the Biologics Price Competition and Innovation Act of 2009 (BPCIA) created a regulatory pathway under the PHS Act for the abbreviated approval of biological products that are demonstrated to be “biosimilar” or “interchangeable” with an FDA-approved biological product. In order to meet the standard of interchangeability, a sponsor must demonstrate that the biosimilar product can be expected to produce the same clinical result as the reference product, and for a product that is administered more than once, that the risk of switching between the reference product and biosimilar product is not greater than the risk of maintaining the patient on the reference product. Such biosimilars would reference biological products approved in the U.S. The BPCIA establishes a period of 12 years of exclusivity for reference products. Aldurazyme’s exclusivity under the BPCIA expired in 2015, Brineura’s exclusivity under the BPCIA expires in 2029, Naglazyme’s exclusivity under the BPCIA expired in June 2017, and Vimizim’s exclusivity under the BPCIA expires in 2026. Our products approved under BLAs, as well as products in development that may be approved under BLAs in the future, could be reference products for biosimilar marketing applications.*To obtain regulatory approval to market our products, preclinical studies and costly and lengthyallowances, manufacturing, clinical trials are required and the results of the studies and trials are highly uncertain.As part of the drug development process we must conduct, at our own expense, preclinical studies in the laboratory, including studies in animals, and clinical trials on humans for each product candidate. We expect the number of preclinical studies and clinical trials that the regulatory authorities will require will vary depending on the product candidate, the disease or condition the drug is being developed to address and regulations applicable to the particular drug. Generally, new drugs for diseases or conditions that affect larger patient populations, are less severe, or are treatable by alternative strategies must be validated through additional preclinical and clinical trials and/or clinical trials with higher enrollments. With respect to our early stage product candidates, we may need to perform multiple preclinical studies using various doses and formulations before we can begin clinical trials, which could result in delays to our development timeline. Furthermore, even if we obtain favorable results in preclinical studies, the results in humans may be significantly different. After we have conducted preclinical studies, we must demonstrate that our product candidates are safe and efficacious for use in the targeted human patients in order to receive regulatory approval for commercial sale. Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. The results of preclinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials, and favorable data from interim analyses do not ensure the final results of a trial will be favorable. Product candidates may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials, or despite having favorable data in connection with an interim analysis. A number of companies in the biopharmaceutical industry, including us with respect to Kyndrisa, have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Also, as noted above, we do not always follow the advice of regulatory authorities or comply with all of their requests regarding the design of our clinical programs. In those cases, we may choose a development program that is inconsistent with the advice of regulatory authorities, which may limit the jurisdictions where we conduct clinical trials and/or adversely affect our ability to obtain approval in those jurisdictions where we do not follow the regulatory advice.Adverse or inconclusive clinical results could stop us from obtaining regulatory approval of our product candidates. Additional factors that can cause delay or termination of our clinical trials include:slow or insufficient patient enrollment;slow recruitment of, and completion of necessary institutional approvals at, clinical sites;budgetary constraints or prohibitively high clinical trial costs;longer treatment time required to demonstrate efficacy;lack of sufficient supplies of the product candidate;adverse medical events or side effects in treated patients, including immune reactions;lack of effectiveness of the product candidate being tested;availability of competitive therapies to treat the same indication as our product candidates;regulatory requests for additional clinical trials or pre-clinical studies;deviations in standards for Good Clinical Practice (GCP); anddisputes with or disruptions in our relationships with clinical trial partners, including CROs, clinical laboratories, clinical sites, and principal investigatorsMoreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services reportable to the FDA or other regulatory authority. If the FDA or other regulatory authority concludes that a financial relationship between us and a principal investigator has created a conflict of interest, the FDA or other regulatory authority may question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized.*Our valoctocogene roxaparvovec (formerly referred to as BMN 270) program is based on a gene therapy approach, which, as a novel technology, presents additional treatment, regulatory, manufacturing, and commercial risks in relation to our other, more traditional drug development programs.In addition to the risks set forth in this Risk Factors section associated with developing and commercializing more traditional pharmaceutical drugs, there are additional, unique risks associated with gene therapy products like our product candidate valoctocogene roxaparvovec. The goal of gene therapy is to be able to correct an inborn genetic defect through one-time administration of therapeutic genetic material containing non-defective gene copies. The gene copies are designed to reside permanently in a patient, allowing the patient to produce an essential protein or ribonucleic acid (RNA) molecule that a healthy person would normally produce. There is a risk, however, that the new gene copies will produce too much or too little of the desired protein or RNA. There is also a risk that production of the desired protein or RNA will increase or decrease over time. Because the treatment is irreversible, there may be challenges in managing side effects, particularly those caused by overproduction. Adverse effects would not be able to be reversed or relieved by stopping dosing, and we may have to develop additional clinical safety procedures. Furthermore, because the new gene copies are designed to reside permanently in a patient, there is a risk that they will disrupt other normal biological molecules and processes, including other healthy genes, and we may not learn the nature and magnitude of these side effects until long after clinical trials have been completed.We may experience development problems related to our gene therapy program that cause significant delays or unanticipated costs, or that cannot be solved. Although numerous companies are currently advancing gene therapy product candidates through clinical trials, the FDA has only approved cell-based gene therapy treatments thus far and is only currently reviewing a vector-based gene therapy, with a decision expected in January 2018. Moreover, there are very few approved gene therapy products outside the U.S. As a result, it is difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for our product candidate in any jurisdiction. Regulatory requirements governing gene and cell therapy products are still evolving and may continue to change in the future. Regulatory review agencies and the new requirements and guidelines they promulgate may lengthen the regulatory review process, require us to perform additional or larger studies, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of our treatment candidate or lead to significant post-approval studies, limitations or restrictions. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring valoctocogene roxaparvovec to market could have a negative effect on our business and financial condition. Even if we do obtain regulatory approval, ethical, social and legal concerns about gene therapy arising in the future could result in additional regulations restricting or prohibiting sale of our product.Even if we obtain regulatory approval for valoctocogene roxaparvovec, we may experience delays, and increased costs, in developing a sustainable, reproducible and large-scale manufacturing process. Gene therapy products are novel, complex and difficult to manufacture, and have only in limited cases been manufactured at scales sufficient for pivotal trials and commercialization. Few pharmaceutical contract manufacturers specialize in gene therapy products and those that do are still developing appropriate processes and facilities for large-scale production. Whether we produce valoctocogene roxaparvovec at a contract manufacturer or at our own gene therapy manufacturing facility, we will likely face technical and scientific challenges, considerable capital costs, and potential difficulty in recruiting and hiring experienced, qualified personnel. As a result, we could experience manufacturing delays that prevent us from completing our clinical studies or commercializing valoctocogene roxaparvovec in a timely, or on a profitable, basis, if at all.Due to the relative novelty of gene therapy and the potential to provide extended duration therapeutic treatment with a one-time administration, we also face uncertainty with respect to the pricing, coverage and reimbursement of valoctocogene roxaparvovec, if approved. In order to recover our research and development costs, and commercialize this one-time treatment on a profitable basis, we expect the costduration of a single administration of valoctocogene roxaparvovecsuch effects, are highly uncertain and difficult to predict.substantial. Therefore,unable to initiate or continue conducting clinical trials as originally planned due to the prioritization of hospital resources toward the outbreak, difficulty in recruiting and retaining healthcare providers and staff due to their diversion toward treating COVID-19 patients or their heightened exposure to COVID-19, potential unwillingness of patients to enroll or continue in trials for fear of exposure to COVID-19 at sites, or the inability of patients to comply with clinical trial protocols as quarantines or travel restrictions impede patient movement or otherwise interrupt healthcare services. For example, we expect that coverageexperienced delays in certain clinical trials and reimbursement by governmentshave had to reevaluate expected timelines for those trials. In addition, we rely on independent clinical investigators, contract research organizations (CROs) and other third-party payors will be essential for the vast majority of patientsservice providers to be able to afford valoctocogene roxaparvovec. Accordingly, sales of valoctocogene roxaparvovec, if approved, will depend substantially, both domesticallyassist us in managing, monitoring and internationally, on the extent to which its cost will be paid by third-party payors. Even if coverage is provided, the reimbursement amounts approved by third-party payors may not be high enough to allow us to realize a sufficient return onotherwise carrying out our investment.We also face uncertainty as to whether gene therapy will gain the acceptance of the public or the medical community. Even if we obtain regulatory approval for valoctocogene roxaparvovec, the commercial success of valoctocogene roxaparvovec will depend, in part, on the acceptance of physicians, patients and health care payors of gene therapy products in general, and our product candidate in particular, as medically necessary, cost-effective and safe. In particular, our success will depend upon physicians prescribing our product candidate in lieu of existing treatments they are already familiar with and for which greater clinical data may be available. Even if valoctocogene roxaparvovec displays a favorable efficacy and safety profile in clinical trials and is ultimately approved, market acceptance of valoctocogene roxaparvovec will not be fully known until after it is launched. Negative public opinion or more restrictive government regulations or could have a negative effect on our business and financial condition and may delay or impair the development and commercialization of, and demand for, valoctocogene roxaparvovec.If we continue to incur operating losses and experience net cash outflows for a period longer than anticipated, we may be unable to continue our operations at planned levels and be forced to reduce our operations.Since we began operations in March 1997, we have been engaged in substantial research and development and capital investments, and we have operated at a net loss for each year since our inception, with the exception of 2008 and 2010. Based upon our current plan for investments in research and development for existing and new programs, as well as capital investments in our facilities and working capital needs, such as for inventory, we expect to operate at a net loss and experience net cash outflows for at least the next 12 months. Our future profitability and cash flows depend on our marketing and selling of our products, the receipt of regulatory approval of our product candidates, our ability to successfully manufacture and market any products, either by ourselves or jointly with others, our spending on our development programs, the impact of any possible future business development transactions and other risks set forth in this Risk Factors section. The extent of our future losses and the timing of profitability and positive cash flows are highly uncertain. If we fail to become profitable and cash flow positive or are unable to sustain profitability and positive cash flows on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce our operations.*If we fail to obtain the capital necessary to fund our operations, our financial results and financial condition will be adversely affected and we will have to delay or terminate some or all of our product development programs.As of September 30, 2017, we had cash, cash equivalents and short and long-term investments totaling $1.7 billion and long-term debt obligations of $1.2 billion (undiscounted). In January 2016 we terminated our License and Commercialization Agreement with Ares Trading, S.A. (Merck Serono). Pursuant to the Termination and Transition Agreement related to Kuvan and the Termination Agreement related to pegvaliase, we made cash payments on this transaction totaling $374.5 million in the nine months ended September 30, 2017, and may pay Merck Serono up to a maximum of €60 million, in cash, if future sales milestones are met with respect to Kuvan and up to a maximum of €125 million, in cash, if future development milestones are met with respect to pegvaliase. In October 2013, we completed an offering of senior subordinated convertible notes and received net proceeds of approximately $696.4 million, after deducting commissions, estimated offering expenses payable by us and the purchase of the related capped calls. In August 2017, we completed an offering of senior subordinated convertible notes and received net proceeds of approximately $481.7 million, after deducting commissions and estimated offering expenses payable by us. We will need cash to not only repay the principal amount of our 0.75% senior subordinated convertible notes due in 2018 (the 2018 Notes), 1.50% senior subordinated convertible notes due in 2020 (the 2020 Notes), and 0.599% senior subordinated convertible notes due in 2024, (the 2024 Notes, and together with the 2018 Notes and the 2020 Notes, the Notes) but also the ongoing interest due on the Notes during their term. We may require additional financing to fund the repayment of our Notes, future milestone payments and our future operations, including the commercialization of our products and product candidates currently under development, preclinical studies and clinical trials, and potential licensesthe outbreak may affect their ability to devote sufficient time and acquisitions. Weresources to our programs or to travel to sites to perform work for us. Additionally, the COVID-19 pandemic has delayed, and may be unablecontinue to raise additional financing due to a variety of factors, includingpostpone, necessary regulatory inspections and other interactions with regulators regarding our financial condition, the statusproducts in development, which could delay review or approval of our product programs, and the general condition of the financial markets. If we fail to raise any necessary additional financing we may have to delay or terminate some or all of our product development programs and our financial condition and operating results will beregulatory submissions.affected.We expect to continue to spend substantial amounts of capital for our operations for the foreseeable future. The amount of capital we will need depends on many factors, including:marketmanufacture and selldistribute our products;Genzyme’s ability to continue to successfully commercialize Aldurazyme;the progressproduct candidates and success of our preclinical studies and clinical trials (including studies and the manufacture of materials);the timing, number, size and scope of our preclinical studies and clinical trials;the time and cost necessary to obtain regulatory approvals and the costs of post-marketing studies which may be required by regulatory authorities;the time and cost necessary to develop commercial manufacturing processes, including quality systems, and to build or acquire manufacturing capabilities;the progress of research programs carried out by us;our possible achievement of milestones identified in our purchase agreements with the former stockholders of LEAD Therapeutics, Inc., ZyStor Therapeutics, Inc., Huxley Pharmaceuticals, Inc., and Zacharon Pharmaceuticals Inc., and under the termination agreements with Merck Serono related to Kuvan and pegvaliase milestones;whether our convertible debt is converted to common stock in the future.Moreover, our fixed expenses such as rent, license payments, interest expense and other contractual commitments are substantial and may increase in the future. These fixed expenses may increase because we may enter into:additional licenses and collaborative agreements;additional contracts for product manufacturing; andadditional financing facilities or arrangements.We will need to raise additional funds from equity or debt securities, loans or collaborative agreements if we are unable to satisfy our liquidity requirements.products. The sale of additional securities will result in additional dilution to our stockholders. Furthermore, additional financing may not be available in amounts or on terms satisfactory to us or at all. Thisoutbreak could result in the delay, reductionreduced operations of third-party suppliers of raw materials and supplies upon whom we rely or termination of our research, which could harm our business.*We have incurred substantial indebtedness that may decrease our business flexibility, access to capital, and/or increase our borrowing costs, which may adversely affect our operations and financial results.As of September 30, 2017, we had $1.2 billion (undiscounted) principal amount of indebtedness, including $375.0 million (undiscounted) of indebtedness under the 2018 Notes, $375.0 million (undiscounted) principal amount of indebtedness under the 2020 Notes, and $495.0 million (undiscounted) of indebtedness under the 2024 Notes. In November 2016, we also entered into a credit agreement (the Credit Agreement) with Bank of America, N.A., as the administrative agent, swing line lender and letter of credit issuer, providing for up to $100.0 million in revolving loans. Our indebtedness may:borrow additional fundsobtain sufficient materials and supplies necessary for working capital, capital expenditures, acquisitions or other general business purposes;limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions or other general business purposes;require us to use a substantial portionproduction of our cash flow from operations to make debt service payments;limit our flexibility to plan for, or react to, changes in our business and industry;place us at a competitive disadvantage compared to our less leveraged competitors; andincrease our vulnerability to the impact of adverse economic and industry conditions.In addition, the Credit Agreement does, and any future indebtedness that we may incur may, contain financial and other restrictive covenants that limit our ability to operate our business, raise capital or make payments under our other indebtedness. If we fail to comply with these covenants or to make payments under our indebtedness when due, then we would be in default under that indebtedness, which could, in turn, result in that and our other indebtedness becoming immediately payable in full. If we default under the Credit Agreement, the outstanding borrowings thereunder could become immediately due and payable, the Credit Agreement lenders could refuse to permit additional borrowings under the facility, or it could lead to defaults under agreements governing our current or future indebtedness, including the indentures governing our Notes. If we default under any of the Notes, such notes could become immediately due and payable and it could lead to defaults under the other Notes and/or the Credit Agreement.*In addition, our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. outstanding indebtedness consists primarily of the 2018 Notes, 2020 Notes and 2024 Notes, which, if not converted, will be required to be repaid in cash at maturity in 2018, 2020 and 2024, respectively. In addition, in the event the conditional conversion feature of the 2018 Notes or 2020 Notes is triggered, holders of such Notes will be entitled to convert the 2018 Notes or 2020 Notes at any time during specified periods at their option. Our liquidity could be adversely affected if we do not elect to settle conversions of the 2018 Notes and 2020 Notes solely in shares of our common stock. Even if holders of the 2018 or 2020 Notes do not elect to convert their 2018 or 2020 Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of such Notes as a current rather than long-term liability (for example, if there are 12 months or less remaining until maturity), which would result in a material reduction of our net working capital. Moreover, if holders of the Notes do not elect to convert their Notes and we are unable to refinance the Notes, we must repay the Notes. While we could seek to obtain third-partyfinancing to pay for any amounts due in cash upon such events, we cannot be sure that such third-party financing will be available on commercially reasonable terms, if at all. Furthermore, if we are required to share settle any conversions of Notes, due to lack of requisite liquidity or otherwise, we may cease to be eligible to account for the Notes using the treasury stock method, which may adversely impact our diluted earnings per share. In addition, although we had no outstanding balance under the Credit Agreement as of September 30, 2017, we also may borrow up to $100.0 million in revolving loans under the Credit Agreement, which would be required to be repaid in cash at maturity in 2018.*If we fail to comply with manufacturing regulations, our financial results and financial condition will be adversely affected.Before we can begin commercial manufacture of our products, regulatory authorities must approve marketing applications that identify manufacturing facilities operated by us or our contract manufacturers that have passed regulatory inspection and manufacturing processes that are acceptable to the regulatory authorities. In addition, our pharmaceutical manufacturing facilities are continuously subject to scheduled and unannounced inspection by the FDA and international regulatory authorities, before and after product approval, to monitor and ensure compliance with cGMP and other regulations. Our manufacturing facility in the U.S. has been approved by the FDA, the EC, and health agencies in other countries for the manufacture of Aldurazyme, Brineura, Naglazyme and Vimizim. Our manufacturing facility in Shanbally, Cork, Ireland has been approved by the FDA, the EC, and health agencies in other countries for the manufacture of Vimizim. In addition, our third-party manufacturers’ facilities involved with the manufacture of our products have also been inspected and approved by various regulatory authorities. Although we are not involved in the day-to-day operationsthose of our contract manufacturers are located in areas impacted by the COVID-19 pandemic, which may result in delays or disruptions in our ability to produce product candidates and products. If we or any thirdultimately responsibleadversely impacted by the COVID-19 pandemic, including as a result of required closures, staffing shortages, production slowdowns and disruptions in delivery systems, our operations may be disrupted, limiting our ability to manufacture and distribute our product candidates for ensuring thatclinical trials and research and development operations and our products for commercial sales.manufacturedadministered via infusions in accordance with cGMP regulations.Due toa clinic or hospital setting and/or by a healthcare professional. Treating COVID-19 patients has become the complexity of the processes used to manufacture our productspriority for many healthcare facilities and product candidates, weworkers, so it has become, and may be unable to continue to pass or initially pass federal or international regulatory inspections in a cost-effective manner. Forbe, difficult for some of our patients to receive our therapies that are administered by infusion. Although we are working with our patient community and healthcare providers to find alternative arrangements where necessary, such as providing infusions at home, the same reason, any potential third-party manufacturerrevenue from doses of our products that are missed by patients and the lost revenue from delayed treatment starts for new patients will never be recouped. Moreover, some patients may choose to skip infusions because they do not want to risk exposure to COVID-19 by having a healthcare provider administer the therapy at a healthcare facility or at home. The pandemic has also hindered our product candidates may be unableability to comply with cGMP regulations in a cost-effective mannerfind new patients and may be unablestart treating newly found patients, and it has limited our sales force’s ability to initially or continue to pass a federal or international regulatory inspection.If we, or third-party manufacturers with whom we contract, are unable to comply with manufacturing regulations, we may be subject to delay of approval of our product candidates, warning or untitled letters, fines, unanticipated compliance expenses, recall or seizure ofpromote our products total or partial suspension of production and/or enforcement actions, including injunctions,to distributors, hospitals, clinics, doctors and criminal or civil prosecution. These possible sanctions wouldpharmacies, which could adversely affect our financialrevenues and results and financial condition.*If we are unable to successfully develop and maintain manufacturing processes forof operations. In addition, the COVID-19 pandemic could adversely affect our products to produce sufficient quantities at acceptable costs, we may be unable to meet demand for our products and lose potential revenue, have reduced margins or be forced to terminate a program.Due to the complexity of manufacturing our products, we may not be able to manufacture products successfully with a commercially viable process or at a scale large enough to support their respective commercial markets or at acceptable margins.The development of commercially viable manufacturing processes typically is very difficult to achieve and is often very expensive and may require extended periods of time. Changes in manufacturing processes (including manufacturing cell lines), equipment or facilities (including moving manufacturing from one of our facilities to another one of our facilities or a third-party facility, or from a third-party facility to one of our facilities) may require us to complete clinical trials to receive regulatory approval of any manufacturing modifications.Also, we may be required to demonstrate product comparability between a biological product made after a manufacturing changeworkforce and the product made before implementationemployees of companies with which we do business, thereby disrupting our business operations. We have implemented work-from-home policies for employees whose jobs do not require them to be onsite. Increased reliance by us and the companies with which we do business on personnel working from home may negatively impact productivity, increase cyber security risk, create data accessibility issues, increase the risk for communication disruptions, or otherwise disrupt or delay normal business operations. For our employees whose jobs require them to be onsite, we have taken precautions to avoid the spread of COVID-19 among our employees, but we cannot guarantee our workforce will not face an outbreak that could adversely impact our operations.change through additional types of analytical and functional testing or may have to complete additional clinical studies. If we contract for manufacturing services with an unproven process, our contractor is subject to the same uncertainties, high standards and regulatory controls, and may therefore experience difficulty if further process development is necessary.Even a developed manufacturing process can encounter difficulties. Problems may arise during manufacturing for a variety of reasons, including human error, mechanical breakdowns, problems with raw materials and cell banks, malfunctions of internal information technology systems, and other events that cannot always be prevented or anticipated. Many of the processes include biological systems, which add significant complexity, as compared to chemical synthesis. We expect that, from time to time, consistent with biotechnology industry expectations, certain production lots will fail to produce product that meets our quality control release acceptance criteria. To date, our historical failure rates for all of our product programs, including Aldurazyme, Brineura, Naglazyme and Vimizim, have been within our expectations, which are based on industry norms. If the failure rate increased substantially, we could experience increased costs, lost revenue, damage to customer relations, time and expense investigating the cause and, depending upon the cause, similar losses with respect to other lots or products. If problems are not discovered before the product is released to the market, recall and product liability costs may also be incurred.In order to produce product within our time and cost parameters, we must continue to produce product within our expected success rate and yield expectations. Because of the complexity of our manufacturing processes, itCOVID-19 pandemic may be difficult to predict, the pandemic has resulted in, and may continue to result in, significant disruption of global financial markets, which could reduce our ability to access capital and could negatively affect our liquidity and the liquidity and stability of markets for our common stock and convertible notes. In addition, a recession, further market correction or impossible for us to determinedepression resulting from the causeCOVID-19 pandemic could materially adversely affect our business and the value of any particular lot failureour common stock and we must effectively take corrective action in response to any failure in a timely manner.Although weconvertible notes.entered into contractual relationships with third-party manufacturers to produce the active ingredient in Firdapse and Kuvan, if those manufacturers are unwilling or unable to fulfill their contractual obligations, we may be unable to meet demand for Firdapse and Kuvan or sell these products at all, we may lose potential revenue, and we may be forced to terminate a program. We have contracts for the productioneffect of final product for Firdapse and Kuvan. We also rely on third parties for portionsheightening many of the manufacture of Aldurazyme, Brineura, Naglazyme and Vimizim. Ifother risks described in this Risk Factors section, such as those manufacturers are unwilling or unablerelating to fulfill their contractual obligations or satisfy demand outside of or in excess of the contractual obligations, we may be unable to meet demand for these products or sell these products at all and we may lose potential revenue. Further, the availability of suitable contract manufacturing capacity at scheduled or optimum times is not certain.In addition, our manufacturing processes subject us to a variety of federal, state and local laws and regulations governing the use, generation, manufacture, storage, handling and disposal of hazardous materials and wastes resulting from their use. We incur significant costs in complying with these laws and regulations.Supply interruptions may disrupt our inventory levels and the availability of our products and product candidates and cause delays in obtaining regulatory approval for our product candidates, or harm our business by reducing our revenues.We depend on single-source suppliers for critical raw materials and a limited number of manufacturing facilities to manufacture our finished products and product candidates. Numerous factors could cause interruptions in the supply or manufacture of our products and product candidates, including:timing, scheduling and prioritization of production by our contract manufacturers or a breach of our agreements by our contract manufacturers;labor interruptions;changes in our sources for manufacturing;the timing and delivery of shipments;our failure to locate and obtain replacement suppliers and manufacturers as needed on a timely basis; andconditions affecting the cost and availability of raw materials.If one of our suppliers or manufacturers fails or refuses to supply us with necessary raw materials or finished products or product candidates on a timely basis or at all, it would takeconducting a significant amount of timeour sales and expenseoperations outside of the U.S., exposure to qualify a new supplier or manufacturer. We may not be ablechanges in foreign exchange rates, our substantial indebtedness, our need to obtain active ingredients or finished products from new suppliers or manufacturers on acceptable termsgenerate sufficient cash flows to service our indebtedness and at reasonable prices, or at all.Any interruption in the supply of finished products could hinderfinance our operations, our ability to distribute finished products to meet commercial demand.With respect tocomply with the covenants contained in the agreements that govern our product candidates, productionindebtedness and the volatility of product is necessary to perform clinical trials and successful registration batches are necessary to file for approval to commercially market and sell product candidates. Delays in obtaining clinical material or registration batches could adversely impact our clinical trials and delay regulatory approval for our product candidates.payors,payers, the sales of our products would be adversely affected or there may be no commercially viable markets for our products.payors.payers. Additionally, even if there is a commercially viable market, if the level of reimbursement is below our expectations, our revenue and gross margins will be adversely affected.payors,payers, such as government or private health carehealthcare insurers, carefully review and increasingly challenge the prices charged for drugs. Reimbursement rates from private companies vary depending on the third-party payor,payer, the insurance plan and other factors. Obtaining coverage and adequate reimbursement for our products may be particularly difficult because of the higher prices often associated with drugs administered under the supervision of a physician. Reimbursement systems in international markets vary significantly by country and by region, and reimbursement approvals must be obtained on a country-by-country basis.payorspayers are developing increasingly sophisticated methods of controlling healthcare costs, such as by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payorspayers are requiring that drug companies provide them with predetermined discounts from list prices as a condition of coverage, are using restrictive formularies and preferred drug lists to leverage greater discounts in competitive classes, and are challenging the prices charged for medical products. Further, no uniform policy requirement for coverage and reimbursement for drug products exists among third-party payorspayers in the U.S. Therefore, coverage and reimbursement for drug products can differ significantly from payorpayer to payor.payer. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each payorpayer separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.EUEuropean Union (EU) and many other territories must be negotiated on a country-by-country basis and in many countries the product cannot be commercially launched until reimbursement is approved. The timing to complete the negotiation process in each country is highly uncertain, and in some countries, we expect that it will exceed 12 months. Even after a price is negotiated, countries frequently request or require reductions to the price and other concessions over time.*A significant portion of our international sales are made based on special access programs, and changes to these programs could adversely affect our product sales and revenue in these countries.We make a significant portion of our international sales of Naglazyme and Vimizim through special access or “named patient” programs, which do not require full product approval, and we expect a significant portion of our international sales of Brineura will also be through such programs. The specifics of the programs vary from country to country. Generally, special approval must be obtained for each patient. The approval normally requires an application or a lawsuit accompanied by evidence of medical need. Generally, the approvals for each patient must be renewed from time to time.These programs are not well defined in some countries and are subject to changes in requirements and funding levels. Any change to these programs could adversely affect our ability to sell our products in those countries and delay sales. If the programs are not funded by the respective government, there could be insufficient funds to pay for all patients. Further, governments have in the past undertaken and may in the future undertake unofficial measures to limit purchases of our products, including initially denying coverage for purchasers, delaying orders and denying or taking excessively long to approve customs clearance. Any such actions could materially delay or reduce our revenues from such countries.Without the special access programs, we would need to seek full product approval to commercially market and sell our products in certain jurisdictions. This can be an expensive and time-consuming process and may subject our products to additional price controls. Because the number of patients is so small in some countries, it may not be economically feasible to seek and maintain a full product approval, and therefore the sales in such country would be permanently reduced or eliminated. For all of these reasons, if the special access programs that we are currently using are eliminated or restricted, our revenues could be adversely affected.Government price controls or other changespricing regulationmethods of treatment of disease could restrict the amount that we are able to chargereduce demand for our current and future products which would adversely affect our revenue and results of operations.We expect that coverage and reimbursement may be increasingly restricted both in the U.S. and internationally. The escalating cost of health care has led to increased pressure on the health care industry to reduce costs. In particular, drug pricing by pharmaceutical companies has recently come under increased scrutiny and continues to be subject to intense political and public debate in the U.S. and abroad. Governmental and private third-party payors have proposed health care reforms and cost reductions. A number of federal and state proposals to control the cost of health care, including the cost of drug treatments, have been made in the U.S. Specifically, there have been several recent U.S. Congressional inquiries and proposed bills designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. In some international markets, the government controls the pricing, which can affect the profitability of drugs. Current government regulations and possible future legislation regarding health care may affect coverage and reimbursement for medical treatment by third-party payors, which may render our products not commercially viable or may adversely affect our future revenues and gross margins.International operations are also generally subject to extensive price and market regulations, and there are many proposals for additional cost-containment measures, including proposals that would directly or indirectly impose additional price controls or mandatory price cuts or reduce the value of our intellectual property portfolio. As part of these cost containment measures, some countries have imposed or threatened to impose revenue caps limiting the annual volume of sales of our products. To the extent that these caps are significantly below actual demand, our future revenues and gross margins may be adversely affected.We cannot predict the extent to which our business may be affected by these or other potential future legislative or regulatory developments. However, future price controls or other changes in pricing regulation or negative publicity related to our product pricing or the pricing of pharmaceutical drugs generally could restrict the amount that we are able to charge for our current and future products or our sales volume, which would adversely affect our revenue and results of operations.*Government health care reform could increase our costs and adversely affect revenues.revenue and resultsproduct candidates are approved, if doctors elect a course of operations.Our industry is highly regulated and changes in law may adversely impacttreatment which does not include our business, operations or financial results. The U.S. the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (the PPACA) is a sweeping measure intended to, among other things, expand healthcare coverage within the U.S., primarily through the imposition of health insurance mandates on employers and individuals and expansion of the Medicaid program. Several provisions of the law have affected us and increased certain of our costs.Since its enactment, there have been judicial and Congressional challenges to certain aspects of the PPACA, as well as recent efforts by the Trump administration to repeal or replace certain aspects of the PPACA, and we expect there will be additionalchallenges and amendments to the PPACA in the future. Since January 2017, President Trump has signed two Executive Orders designed to delay the implementation of certain provisions of the PPACA or otherwise circumvent some of the requirements for health insurance mandated by the PPACA. The Trump administration has also announced that it will discontinue the payment of cost-sharing reduction (CSR) payments to insurance companies until Congress approves the appropriation of funds for such CSR payments. The loss of the CSR payments is expected to increase premiums on certain policies issued by qualified health plans under the PPACA. A bipartisan bill to appropriate funds for CSR payments has been introduced in the Senate, but the future of that bill is uncertain. Further, each chamber of Congress has put forth multiple bills designed to repeal or repeal and replace portions of the PPACA. Although none of these measures has been enacted by Congress to date, Congress may consider other legislation to repeal and replace elements of the PPACA. It is uncertain the extent to which any such changes may impact our business or financial condition. In addition, other legislative changes have been adopted since the PPACA was enacted. Some of these changes have resulted in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on our customers and, accordingly, our financial operations.We anticipate that the PPACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and an additional downward pressure on the reimbursement our customers may receiveproducts, this decision would reduce demand for our products. Recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products.products and adversely affect revenues. For example, there have been several recent U.S. Congressional inquiries and proposed bills designed to, among other things, bring more transparency to drug pricing, reviewif gene therapy becomes widely used as a treatment of genetic diseases, the relationship between pricing and manufacturer patient programs, reduce the costuse of drugs under Medicare, and reform government program reimbursement methodologies for drug products. Any reduction in reimbursement from Medicare and other government programs may result in a similar reduction in payments from private payors. In addition, individual states in the United States have also become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Legally mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, results of operations, financial condition and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our products. For more information regarding government health care reform, see “Government Regulation - Health Reform” in Part I, Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on February 27, 2017.We face credit risks from government-owned or sponsored customers outside of the U.S. that may adversely affect our results of operations.Our product sales to government-owned or supported customers in various countries outside of the U.S. are subject to significant payment delays due to government funding and reimbursement practices. This has resulted and may continue to result in an increase in days sales outstanding due to the average length of time that we have accounts receivable outstanding. If significant changes were to occur in the reimbursement practices of these governments or if government funding becomes unavailable, we may not be able to collect on amounts due to us from these customers and our results of operations would be adversely affected.*If we are found in violation of federal or state health care laws, we may be required to pay a penalty or be suspended from participation in federal or state health care programs, which may adversely affect our business, financial condition and results of operations.We are subject to various federal and state health care laws and regulations, including anti-kickback laws, false claims laws, data privacy and security laws, and laws related to ensuring compliance. The federal Anti-Kickback Statute makes it illegal for any person or entity, including a pharmaceutical company, to knowingly and willfully offer, solicit, pay or receive any remuneration, directly or indirectly, in exchange for or to induce the referral of business, including the purchase, order or prescription of a particular drug, for which payment may be made under federal health care programs,enzyme replacement therapy, such as Medicare and Medicaid. Under federal government regulations, certain arrangements, or safe harbors, are deemed not to violate the federal Anti-Kickback Statute. However, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration not intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor. Our practices may not in all cases meet all of the criteria for safe harbor protection from Anti-Kickback liability, although we seek to comply with these safe harbors. Many states have adopted laws similar to the federal Anti-Kickback Statute, some of which apply to referral of patients for health care services reimbursed by any source, not just governmental payors.Federal and state false claims laws, including the civil False Claims Act, prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a falsestatement to have a false claim paid, or knowingly making, using, or causing to be made or used, a false record or statement to avoid, decrease or conceal an obligation to pay money to the federal government. In addition, certain marketing practices, including off-label promotion, may also violate false claims laws. Under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), we also are prohibited from knowingly and willfully executing a scheme to defraud any health care benefit program, including private payors, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for health care benefits, items or services.HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes obligations, including mandatory contractual terms, on certain types of individuals and entities, with respect to safeguarding the privacy, security and transmission of individually identifiable health information. Many state and foreign laws also govern the privacy and security of health information. They often differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.Substantial new provisions affecting compliance have also been adopted, which may require us to modify our business practices with health care practitioners. The PPACA, through the Physician Payments Sunshine Act, requires drug manufacturers to collect and report to CMS information on payments or transfers of value to physicians and teaching hospitals, as well as investment and ownership interests held by physicians and their immediate family members during the preceding calendar year. Failure to submit required information may result in civil monetary penalties.In addition, there has been a recent trend of increased state regulation of payments made to physicians. Certain states mandate implementation of compliance programs, compliance with the Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers and the Pharmaceutical Research and Manufacturers of America (PhRMA) Code on Interactions with Healthcare Professionals, and/or the tracking and reporting of gifts, compensation and other remuneration to physicians. The shifting compliance environment and the need to implement systems to comply with multiple jurisdictions with different compliance and/or reporting requirements increases the possibility that a pharmaceutical manufacturer may violate one or more of the requirements.Due to the breadth of these laws, the narrowness of available statutory and regulatory exceptions and the increased focus by law enforcement agencies in enforcing such laws, our business activities could be subject to challenge under one or more of such laws.In addition, recent health care reform legislation has strengthened these laws. For example, the PPACA, among other things, amends the intent requirement of the federal Anti-Kickback Statute and criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of these statutes or specific intent to violate them in order to commit a violation. Moreover, the PPACA provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act. If we are found in violation of one of these laws, we may be subject to criminal, civil or administrative sanctions, including damages, fines, disgorgement, imprisonment, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, curtailment of our operations, debarment, suspension or exclusion from participation in federal or state health care programs, any of which could adversely affect our business, financial condition and results of operations.*We conduct a significant amount of our sales and operations outside of the U.S., which subjects us to additional business risks that could adversely affect our revenue and results of operations.A significant portion of the sales of Aldurazyme, Kuvan, Naglazyme, and Vimizim in MPS diseases, could be greatly reduced. Moreover, if we obtain regulatory approval for valoctocogene roxaparvovec, the commercial success of valoctocogene roxaparvovec will still depend, in part, on the acceptance of physicians, patients and allhealthcare payers of gene therapy products in general, and our product candidate in particular, as medically necessary, cost effective and safe. Changes in treatment method can be caused by the salesintroduction of Firdapse are generated from countries other thancompanies’ products or the U.S. Similarly, we expect a significant portiondevelopment of the sales of Brineura to be generated from countries other than the U.S. We have operations in Canada and in several European, Middle Eastern, Asian, and Latin American countries. We expect that we will continue to expand our international operations in the future. International operations inherently subject us to a number of risks and uncertainties, including:the increased complexity and costs inherent in managing international operations;diverse regulatory and compliance requirements, and changes in those requirements that could restrict our ability to manufacture, market and sell our products;political and economic instability;diminished protection of intellectual property in some countries outside of the U.S.;trade protection measures and importnew technologies or export licensing requirements;difficulty in staffing and managing international operations;potentially negative consequences from changes in or interpretations of tax laws;changes in international medical reimbursement policies and programs;financial risks such as longer payment cycles, difficulty collecting accounts receivable, exposure to fluctuations in foreign currency exchange rates and potential currency controls imposed by foreign governments;regulatory and compliance risks that relate to maintaining accurate information and control over sales and distributors’ and service providers’ activities that may fall within the purview of the Foreign Corrupt Practices Act (the FCPA); andregulations relating to data security and the unauthorized use of, or access to, commercial and personal information.Any of these factors may, individually or as a group, have a material adverse effect on our business and results of operations.As we continue to expand our existing international operations, we may encounter new risks. For example, as we focus on building our international sales and distribution networks in new geographic regions, we must continue to develop relationships with qualified local distributors and trading companies. If we are not successful in developing and maintaining these relationships, wesurgical procedures which may not be able to grow sales in these geographic regions. These or other similar risks could adversely affect our revenue and profitability.*If we fail to complydirectly compete with U.S. export control and economic sanctions, our business, financial condition and operating results may be adversely affected.We rely on a general license from the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) to sell our medicines for eventual use by hospital and clinic end-users in Iran. The use of this OFAC general license requires us to observe strict conditions with respect to products sold, end-user limitations and payment requirements. Although we believe we have maintained compliance with the general license requirements, there can be no assurance that the general license will not be revoked, be renewed in the future or that we will remain in compliance. Moreover, a violation of the OFAC general license could result in substantial fines, sanctions, civil or criminal penalties, competitive or reputational harm, litigation or regulatory action and other consequences that might adversely affect our results of operations, financial condition or strategic objectives.*Failure to comply with applicable anti-corruption legislation could result in fines, criminal penalties and materially adversely affect our business, financial condition and results of operations.We are required to comply with anti-corruption and anti-bribery laws in the jurisdictions inours, but which we operate, including the FCPA in the United States, the UK Bribery Act and other similar laws in other countries in which we do business. We operate in a number of countries that are recognized to have a reputation for corruption and pose an increased risk of corrupt practices. We also regularly interact with government regulators in many countries, including those that are considered higher risk for corruption, in order to secure regulatory approval to manufacture and distribute our products. The anti-corruption and anti-bribery laws to which we are subject generally prohibit companies and their intermediaries from making improper payments to foreign officials or other persons for the purposes of influencing official decisions or obtaining or retaining business and/or other benefits. These laws also require us to make and keep books and records that accurately and fairly reflect our transactions and to devise and maintain an adequate system of internal accounting controls. As part of our business, we deal with state-owned business enterprises, the employees and representatives of which may be considered foreign officials for purposes of applicable anti-corruption laws.Although we have adopted policies and procedures designed to ensure that the Company, our employees and third-party agents will comply with such laws, there can be no assurance that such policies or procedures will work effectively at all times or protect us against liability under these or other laws for actions taken by our employees, partners and other third parties with respect to our business. If we are not in compliance with anti-corruption laws and other laws governing the conduct of business with government entities and/or officials (including local laws), we may be subject to criminal and civil penalties and other remedial measures, which could harm our business, financial condition, results of operations, cash flows and prospects. Investigations of any actual or alleged violations of such laws or policies related to us could harm our business, financial condition, results of operations, cash flows and prospects.Our international operations pose currency risks, which may adversely affect our operating results and net income.A significant and growing portion of our revenues and earnings, as well as our substantial international net assets, are exposed to changes in foreign exchange rates. As we operate in multiple foreign currencies, including the euro, the Brazilian real, the U.K. pound, the Canadian dollar, the Swiss franc, the Japanese yen and several other currencies, changes in those currencies relative to the U.S. dollar will impact our revenues and expenses. If the U.S. dollar were to weaken against another currency, assuming all other variablesremained constant, our revenues would increase, having a positive impact on earnings, and our overall expenses would increase, having a negative impact on earnings. Conversely, if the U.S. dollar were to strengthen against another currency, assuming all other variables remained constant, our revenues would decrease, having a negative impact on earnings, and our overall expenses would decrease, having a positive impact on earnings. In addition, because our financial statements are reported in U.S. dollars, changes in currency exchange rates between the U.S. dollar and other currencies have had, and will continue to have, an impact on our results of operations. Therefore, significant changes in foreign exchange rates can impact our results and our financial guidance.We implement currency hedges intended to reduce our exposure to changes in foreign currency exchange rates. However, our hedging strategies may not be successful, and any of our unhedged foreign exchange exposures will continue to be subject to market fluctuations. These risks could cause a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.*If we are unable to protect our intellectual property, we may not be able to compete effectively.Where appropriate, we seek patent protection for certain aspects of our technology. Patent protection may not be available for some of the products we are developing. If we must spend significant time and money protecting or enforcing our patents, designing around patents held by others or licensing, potentially for large fees, patents or other proprietary rights held by others, our business and financial prospects may be harmed.The patent positions of biopharmaceutical products are complex and uncertain. The scope and extent of patent protection for some of our products and product candidates are particularly uncertain because key information on some of our product candidates has existed in the public domain for many years. The composition and genetic sequences of animal and/or human versions of Aldurazyme, Naglazyme and many of our product candidates have been published and are believed to be in the public domain. The chemical structure of 6R-BH4 (the active ingredient in Kuvan) and 3,4-DAP (the active ingredient in Firdapse) have also been published. Publication of this information may prevent us from obtaining or enforcing patents relating to our products and product candidates, including without limitation composition-of-matter patents, which are generally believed to offer the strongest patent protection.We own or have licensed patents and patent applications related to our products. However, these patents and patent applications do not ensure the protection of our intellectual property for a number of reasons, including without limitation the following:With respect to pending patent applications, unless and until actually issued, the protective value of these applications is impossible to determine. We do not know whether our patent applications will result in issued patents.Competitors may interfere with our patent process in a variety of ways. Competitors may claim that they invented the claimed invention prior to us or that they filed their application for a patent on a claimed invention before we did. Competitors may also claim that we are infringing on their patents and therefore we cannot practice our technology. Competitors may also contest our patents by showing the patent examiner or a court that the invention was not original, was not novel or was obvious, for example. In litigation, a competitor could claim that our issued patents are not valid or are unenforceable for a number of reasons. If a court agrees, we would not be able to enforce that patent. We have no meaningful experience with competitors interfering with or challenging the validity or enforceability of our patents or patent applications.Generic manufacturers may use litigation and regulatory means to obtain approval for generic versions of our products notwithstanding our filed patents or patent applications.Enforcing patents is expensive and may absorb significant time of our management. Management would spend less time and resources on developing products, which could increase our operating expenses and delay product programs.Receipt of a patent may not provide much, if any, practical protection. For example, if we receive a patent with a narrow scope, then it will be easier for competitors to design products that do not infringe on our patent.The Leahy-Smith America Invents Act of 2011, which reformed certain patent laws in the U.S., may create additional uncertainty. Among the significant changes are switching from a “first-to-invent” system to a “first-to-file” system, and the implementation of new procedures that permit competitors to challenge our patents in the U.S. Patent and Trademark Office after grant.It is also unclear whether our trade secrets are adequately protected. Our current and former employees, consultants or contractors may unintentionally or willfully disclose trade secrets to competitors. Enforcing a claim that someone else illegally obtained and is using our trade secrets, as with patent litigation, is expensive and time consuming, requires significant resources and has an unpredictable outcome. In addition, courts outside of the U.S. are sometimes less willing to protect trade secrets. Furthermore, our competitors may independently develop equivalent knowledge, methods and know-how, in which case we would not be able to enforce our trade secret rights against such competitors.Under policies recently adopted in the EU, clinical trial data submitted to the EMA in MAAs that were traditionally regarded as confidential commercial information are now subject to public disclosure. Subject to BioMarin’s ability to review and redact a narrow sub-set of confidential commercial information, the new EU policies will result in the EMA’s public disclosure of certain of our clinical study reports, clinical trial data summaries and clinical overviews for recently completed and future MAA submissions. The move toward public disclosure of development data could adversely affect our business in many ways, including, for example, resulting in the disclosure of our confidential methodologies for development of our products, preventing us from obtaining intellectual property right protection for innovations, requiring us to allocate significant resources to prevent other companies from violating our intellectual property rights, adding even more complexity to processing health data from clinical trials consistent with applicable data privacy regulations, and enabling competitors to use our data to gain approvals for their own products.If we are unable to protect our intellectual property, third parties could develop competing products, which could adversely affect our revenue and financial results generally.Competitors and other third parties may have developed intellectual property that could limit our ability to market and commercialize our products and product candidates, if approved.Similar to us, competitors continually seek intellectual property protection for their technology. Several of our development programs, such as valoctocogene roxaparvovec, focus on therapeutic areas that have been the subject of extensive research and development by third parties for many years. Due to the amount of intellectual property in our field of technology, we cannot be certain that we do not infringe intellectual property rights of competitors or that we will not infringe intellectual property rights of competitors granted or created in the future. For example, if a patent holder believes our product infringes its patent, the patent holder may sue us even if we have received patent protection for our technology. If someone else claims we infringe its intellectual property, we would face a number of issues, including the following:Defending a lawsuit takes significant executive resources and can be very expensive.If a court decides that our product infringes a competitor’s intellectual property, we may have to pay substantial damages.With respect to patents, in addition to requiring us to pay substantial damages, a court may prohibit us from making, selling, offering to sell, importing or using our product unless the patent holder licenses the patent to us. The patent holder is not required to grant us a license. If a license is available, it may not be available on commercially reasonable terms. For example, we may have to pay substantial royalties or grant cross licenses to our patents and patent applications.We may need to redesign our product so it does not infringe the intellectual property rights of others.Redesigning our product so it does not infringe the intellectual property rights of competitors may not be possible or could require substantial funds and time.We may also support and collaborate in research conducted by government organizations, hospitals, universities or other educational institutions. These research partners may be unwilling to grant us any exclusive rights to technology or products derived from these collaborations.If we do not obtain required licenses or rights, we could encounter delays in our product development efforts while we attempt to design around other patents or may be prohibited from making, using, importing, offering to sell or selling products requiring these licenses or rights. There is also a risk that disputes may arise as to the rights to technology or products developed in collaboration with other parties. If we are not able to resolve such disputes and obtain the licenses or rights we need, we may not be able to develop or market our products.If our Manufacturing, Marketing and Sales Agreement with Genzyme were terminated, we could be prevented from continuing to commercialize Aldurazyme or our ability to successfully commercialize Aldurazyme would be delayed or diminished.Either party may terminate the Manufacturing, Marketing and Sales Agreement (the MMS Agreement) between Genzyme and us related to Aldurazyme for specified reasons, including if the other party is in material breach of the MMS Agreement, has experienced a change of control, as such term is defined in the MMS Agreement, or has declared bankruptcy and also is in breach of the MMS Agreement. Although we are not currently in breach of the MMS Agreement, there is a risk that either party could breach the MMS Agreement in the future. Either party may also terminate the MMS Agreement upon one year prior written notice for any reason.If the MMS Agreement is terminated for breach, the breaching party will transfer its interest in the BioMarin/Genzyme LLC to the non-breaching party, and the non-breaching party will pay a specified buyout amount for the breaching party’s interest in Aldurazyme and in the BioMarin/Genzyme LLC. If we are the breaching party, we would lose our rights to Aldurazyme and the related intellectual property and regulatory approvals. If the MMS Agreement is terminated without cause, the non-terminating party would have the option, exercisable for one year,effect of changing how doctors decide to buy out the terminating party’s interest in Aldurazyme and in the BioMarin/Genzyme LLC attreat a specified buyout amount. If such option is not exercised, all rights to Aldurazyme will be sold and the BioMarin/Genzyme LLC will be dissolved. In the event of termination of the buyout option without exercise by the non-terminating party as described above, all right and title to Aldurazyme is to be sold to the highest bidder, with the proceeds to be split between Genzyme and us in accordance with our percentage interest in the BioMarin/Genzyme LLC.If the MMS Agreement is terminated by either party because the other party declared bankruptcy, the terminating party would be obligated to buy out the other party and would obtain all rights to Aldurazyme exclusively. If the MMS Agreement is terminated by a party because the other party experienced a change of control, the terminating party shall notify the other party, the offeree, of its intent to buy out the offeree’s interest in Aldurazyme and the BioMarin/Genzyme LLC for a stated amount set by the terminating party at its discretion. The offeree must then either accept this offer or agree to buy the terminating party’s interest in Aldurazyme and the BioMarin/Genzyme LLC on those same terms. The party who buys out the other party would then have exclusive worldwide rights to Aldurazyme. The Amended and Restated Collaboration Agreement between us and Genzyme will automatically terminate upon the effective date of the termination of the MMS Agreement and may not be terminated independently from the MMS Agreement.If we were obligated or given the option to buy out Genzyme’s interest in Aldurazyme and the BioMarin/Genzyme LLC, and thereby gain exclusive rights to Aldurazyme, we may not have sufficient funds to do so and we may not be able to obtain the financing to do so. If we fail to buy out Genzyme’s interest, we may be held in breach of the agreement and may lose any claim to the rights to Aldurazyme and the related intellectual property and regulatory approvals. We would then effectively be prohibited from developing and commercializing Aldurazyme. If this happened, not only would our product revenues decrease, but our share price would also decline.dependsdepend in part on our ability to successfully develop new products from our research and development activities. The development of biopharmaceutical products is very expensive and time intensive and involves a great degree of risk. The outcomes of research and development programs, especially for innovative biopharmaceuticals, are inherently uncertain and may not result in the commercialization of any products. Firdapse, Kuvan and Naglazyme. These collaborations include licensing proprietary technology from, and other relationships with, academic research institutions. Our future success will depend, in part, on our ability to identify additional opportunities and to successfully enter into partnering or acquisition agreements for those opportunities. If our competitors successfully enter into partnering arrangements or license agreements with academic research institutions, we will then be precluded from pursuing those specific opportunities. Because each of these opportunities is unique, we may not be able to find a substitute. Several pharmaceutical and biotechnology companies have already established themselves in the field of genetic diseases. These companies have already begun many drug development programs, some of which may target diseases that we are also targeting, and have already entered into partnering and licensing arrangements with academic research institutions, reducing the pool of available opportunities.If generic manufacturers are successful in their useThe sale of litigation or regulatory means to obtain approval for generic versions of Kuvan by generic manufacturers has adversely affected and will continue to adversely affect our revenue and results of operations would be adversely affected.FDAFood and Drug Administration (FDA) to approve ANDAsabbreviated new drug applications (ANDAs) for generic versions of branded drugs. We refer to this process as the ANDA process. The ANDA process permits competitor companies to obtain marketing approval for a drug with the same active ingredient as a branded drug, but does not generally require the conduct and submission of clinical efficacy studies for the generic product. In place of such clinical studies, an ANDA applicant usually needs only to submit data demonstrating that its product is bioequivalent to the branded product. In addition to our patent protection,have received three-year Hatch-Waxman exclusivity for a New Patient Population for Kuvanparagraph IV notice letters from two pharmaceutical companies notifying us that expires in October 2017, including pediatric exclusivity. Thus, depending on theeach had filed ANDAs seeking approval of proposed labeling of a generic product, generic versions of Kuvan may be prohibited until October 2017, though it is possible that an ANDA applicant could propose to carve out information in the Kuvan labeling protected by the New Patient Population exclusivity and obtain approval earlier.We received a paragraph IV notice letter, dated December 23, 2016, from Dr. Reddy’s Laboratories, Inc. and Dr. Reddy’s Laboratories, Ltd. (collectively, DRL), notifying us that DRL had filed an abbreviated new drug application (ANDA) seeking approval of a proposed generic version of Kuvan (sapropterin dihydrochloride) 100 mg oral powder prior to the expiration of our patents listed in the FDA's Approved Drug Products with Therapeutic Equivalence Evaluations (the Orange Book).Kuvan. We filed a lawsuitlawsuits alleging patent infringement against DRL. In Augusteach company, and between 2015 and 2017 we entered into a settlement agreementagreements with DRL (the DRL Powder Settlement Agreement)the companies that resolved the patent litigation with DRL in the U.S. related to Kuvan 100 mg oral powder. UnderThe settlement agreements granted the terms of the DRL Powder Settlement Agreement, we granted DRL acompanies non-exclusive licenselicenses to our Kuvan-related patents to allow DRLthem to market a generic versionversions of sapropterin dihydrochloride in oral powder form in 100 mg and 500 mg packet formulations in the U.S. for the indications approved for Kuvan beginning on October 1, 2020, or earlier under certain circumstances.We also received two separate paragraph IV notice letters, dated January 14, 2016 and January 22, 2015, from Par notifying us that Par had filed an ANDA seeking approval of proposed generic Generic versions of Kuvan 100 mg oral powder and Kuvan 100 mg oral tablets, respectively, prior to the expiration of our patents listedfirst became available in the FDA’s Orange Book. We filed two lawsuits alleging patent infringement against Par (the lawsuit against Par pertaining to the proposed generic versionU.S. in October 2020, and as expected, our U.S. sales of Kuvan 100 mg oral tablets was filed together with Merck & Cie), andin the two Par cases were consolidated. In April 2017, we and Merck & Cie entered into a settlement agreement with Par (the Par Settlement Agreement)fourth quarter of 2020 significantly declined as compared to prior periods. We expect that resolved both cases against Par. Under the Par Settlement Agreement, we granted Par a non-exclusive license to our Kuvan-related patents to allow Par to market acontinued availability of generic versionversions of sapropterin dihydrochloride in 100 mg oral tablets and oral powder in 100 mg and 500 mg packet formulations in the U.S. for the indications approved for Kuvan beginning on: April 1, 2021 if Par is not entitledwill continue to the statutory 180-day first filer exclusivity period; October 1, 2020 if Par is entitled to the statutory 180-day first filer exclusivity period; or earlier under certain circumstances.We also received a paragraph IV notice letter, dated October 3, 2014, from DRL notifying us that DRL had filed an ANDA seeking approvaladversely affect our U.S. sales of a proposed generic version of Kuvan 100 mg oral tablets prior to the expiration of our patents listed in the FDA’s Orange Book. We, together with Merck & Cie, filed a lawsuit alleging patent infringement against DRL. In September 2015, we and Merck & Cie entered into a settlement agreement with DRL (the DRL Tablet Settlement Agreement) that resolved the patent litigation with DRL in the U.S. related to Kuvan 100 mg oral tablets. Under the terms of the DRL Tablet Settlement Agreement, we granted DRL a non-exclusive license to our Kuvan-related patents to allow DRL to market a generic version of sapropterin dihydrochloride 100 mg oral tablets in the U.S. for the indications approved for Kuvan beginning on October 1, 2020, or earlier under certain circumstances. For more information regarding these matters, see “Legal Proceedings” in Part II, Item 1 of this Interim Report on Form 10-Q.The DRL Powder Settlement Agreement, the Par Settlement Agreement, and the DRL Tablet Settlement Agreement, as well as anyAny future ANDA or related legal proceeding could have an adverse impact on our stock price, and litigation to enforce our patents has, and is likely to continue to, cost a substantial amount and require significant management attention. If the patents covering Kuvan and its use are not upheld in litigation, or if DRLany ANDA filer we bring suit against is found to not infringe our asserted patents, the resulting generic competition following the expiration of regulatory exclusivity would have a material adverse effect on our revenue and results of operations. Moreover, generic competition from DRL (relating to Kuvan tablets) and Par (relating to Kuvan tablets and powder) following the settlements described above could have a material adverse effect on our revenue and results of operations. potential generic competition for Kuvan in certain foreignnon-U.S. countries, and ourthere is a process equivalent to the ANDA process under Article 10 of Directive 2001/83/EC in the EU. Our ability to successfully market and sell Kuvan in many countries in which we operate is based upon patent rights or certain regulatory forms of exclusivity, or both. The scope of our patent rights and regulatory exclusivity for Kuvan vary from country to country and are dependent on the availability of meaningful legal remedies inmethods of treatment of diseasetax laws or regulations that are applied adversely to us or our customers may have a material adverse effect on our business and financial condition.reduce demand forbe enacted at any time, and existing tax laws or regulations could be interpreted, modified or applied in a manner that is adverse to us or our products andcustomers, which could adversely affect revenues.Evenour business and financial condition. For example, legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act (TCJA), enacted many significant changes to the U.S. tax laws, including changes in corporate tax rates, the application of certain tax credits (including a reduction of tax credits under the Orphan Drug Act), the deductibility of expenses, the utilization of net operating losses (NOLs) and other deferred tax assets, and the taxation of non-U.S. earnings. Future guidance from the Internal Revenue Service and other tax authorities with respect to the TCJA may affect us, and certain aspects of the TCJA could be repealed or modified in future legislation. For example, the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, enacted on March 27, 2020, modified certain provisions of the TCJA, including provisions relating to NOL utilization. In addition, it is uncertain if and to what extent various states will conform to the TCJA, the CARES Act, or any newly enacted federal tax legislation. The impact of changes under the TCJA, the CARES Act, or future reform legislation could increase our product candidatesfuture U.S. tax expense and could have a material adverse impact on our business and financial condition.approved,taxed where economic activities generating the profits are performed and where value is created. These changes, as adopted by countries, may increase tax uncertainty and may adversely affect our provision for income taxes, results of operations and cash flows. It is not uncommon for taxing authorities in different countries to have conflicting views, for instance, with respect to, among other things, the manner in which the arm's length standard is applied for transfer pricing purposes, or with respect to the valuation of intellectual property. If tax authorities successfully challenge our transfer prices as not reflecting arm's length transactions, they could require us to adjust our transfer prices and thereby reallocate our income to reflect these revised transfer prices, resulting in a higher tax liability. In addition, if doctors elect a course of treatmentcountry from which income is reallocated does not includeagree with the reallocation, both that country and the other country to which the income was allocated could tax the same income, potentially resulting in double taxation. If tax authorities were to allocate income to a higher tax jurisdiction, subject our products, this decisionincome to double taxation or assess interest and penalties, it would reduce demand forincrease our products andconsolidated tax liability, which could adversely affect revenues.our business, financial condition, results of operations and cash flows.if gene therapy becomes widely usedthe PPACA, among other things, amends the intent requirement of the federal Anti-Kickback Statute and criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of these statutes or specific intent to violate them in order to commit a violation. Moreover, the PPACA provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act.treatment private right of genetic diseases,action for data breaches that is expected to increase data breach litigation. The CCPA will be expanded substantially on January 1, 2023 when the California Privacy Rights Act of 2020 (CPRA), becomes fully operative. The CPRA will, among other things, give consumers the ability to limit use of enzyme replacement therapy,information deemed to be sensitive, increase the maximum penalties for violations concerning consumers under age 16, expand an individual’s private right of action and establish the California Privacy Protection Agency to implement and enforce the new law and impose administrative fines. Aspects of the CCPA and CPRA and their interpretation and enforcement remain uncertain. The potential effects of the CCPA and CPRA are far-reaching and may require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply.Aldurazyme, Naglazyme,the United States, which are not considered by the European Commission to provide an adequate level of data protection. Switzerland has adopted similar restrictions. Potential pecuniary fines forVimizimliability in MPS diseases,relation to personal data that we process and has increased our compliance costs.greatly reduced. Moreover,subject to challenge under one or more of such laws. If we are found in violation of one of these laws, we may be subject to significant criminal, civil or administrative sanctions, including damages, fines, disgorgement, imprisonment, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements and oversight if we obtain regulatory approval for valoctocogene roxaparvovec, the commercial successbecome subject to a corporate integrity agreement or similar agreement to resolve allegations of valoctocogene roxaparvovec will still depend,non-compliance with these laws, curtailment of our operations, and debarment, suspension or exclusion from participation in part, on the acceptancegovernment healthcare programs, any of physicians, patientswhich could adversely affect our business, financial condition and health care payorsresults of gene therapy products in general, and our product candidate in particular, as medically necessary, cost-effective and safe. Changes in treatment method can be caused by the introduction of other companies’ products or the development of new technologies or surgical procedures which may not directly compete with ours, but which have the effect of changing how doctors decide to treat a disease.effectively.and manufacturing infrastructuresystems to effectively manage and maintain our operations, inventory and internal reports, to manufacture and ship products to customers and to timely invoice them. Any failure, inadequacy or interruption of that infrastructure or security lapse of that technology, including cybersecurity incidents or attacks, could harm our ability to operate our business effectively. Our ability to manage and maintain our operations, inventory and internal reports, to manufacture and ship our products to customers and timely invoice them depends significantly on our enterprise resource planning, production management and other information systems. Our technology systems, including our cloud technologies, continue to increase in multitude and complexity, making them potentially vulnerable to breakdown, cyberattack and other disruptions. Potential problems and interruptions associated with the implementation of new or upgraded technology systems or with maintenance or adequate support of existing systems could disrupt or reduce the efficiency of our operations and expose us to greater risk of security breaches. Cybersecurity incidents, including phishing attacks in particular are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in systems, misappropriation of ourmisappropriate or compromise confidential or otherwise protectedproprietary information or sabotage enterprise IT systems are becoming increasingly frequent and corruption of data.more sophisticated. Cybersecurity incidents resulting in the failure of our enterprise resource planning system, production management or other systems to operate effectively or to integrate with other systems, or a breach in security or other unauthorized access or unavailability of these systems, have occurred in the past and may affect our ability in the future to manage and maintain our operations, inventory and internal reports, and result in delays in product fulfillment and reduced efficiency of our operations. A breachsecurity,our technology systems, and those of our research collaborators, CROs, contract manufacturers, suppliers, distributors, or other third parties for which we depend to operate our business, may be vulnerable to loss, damage, denial-of-service, unauthorized access resultingor misappropriation. Data security breaches may be the result of unauthorized or unintended activity (or lack of activity) by our employees or contractors or malware, hacking, business email compromise, phishing or other cyberattacks directed by third parties. These third parties for which we depend on to operate our business have experienced and may continue to experience cybersecurity incidents. While we have implemented measures to protect our information and data stored in misappropriation, theft, or sabotage with respectour technology systems and those of the third parties that we rely on, our efforts may not be successful.confidential information,others and result in demands for ransom or other forms of blackmail. Such attacks are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives (including industrial espionage) and expertise, including research orby organized criminal groups, “hacktivists”, nation states and others. Moreover, the costs to us to investigate and mitigate cybersecurity incidents could be significant. For example, the loss of clinical trial data could result in delays in our product development or regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Any security breach that results in the unauthorized access, use or disclosure of personal data may require significant capital investmentsus to remediatenotify individuals, governmental authorities, credit reporting agencies, or other parties pursuant to privacy and security laws and regulations or other obligations. Such a security compromise could harm our reputation, erode confidence in our information security measures, and lead to regulatory scrutiny. To the extent that any disruption or security breach resulted in a loss of, or damage to, our data or systems, or inappropriate disclosure of confidential, proprietary or personal information, we could be exposed to a risk of loss, enforcement measures, penalties, fines, indemnification claims, litigation and potential civil or criminal liability, which could materially adversely affect our business, financial condition and results of operations.*or terrorist or criminal activity or other unforeseen event caused significant damage to our facilities or the facilitiesthose of our third-party manufacturers and suppliers or significantly disrupted our operations or those of ourWe manufacture Aldurazyme, Brineura, Naglazyme and a portion of Vimizim in a manufacturing facility located near known earthquake fault zones, and theourthe ability to manufacture Aldurazyme, Brineura, Naglazyme and Vimizimfor us or our third-party manufacturers’ abilitymanufacturers to manufacture Firdapse or Kuvan.NaglazymePalynziq and is one of two manufacturing facilities for Brineura and Vimizim. ItOur gene therapy manufacturing facility is also located in Novato, California, and it is currently our only manufacturing facility to support valoctocogene roxaparvovec clinical development activities and the anticipated commercial demand for valoctocogene roxaparvovec, if approved. These facilities are located in the San Francisco Bay Area near known earthquake fault zones and isare vulnerable to significant damage from earthquakes. We, the third-party manufacturers with whom we contract and our single-source suppliers of raw materials, which include many of our critical raw materials, are also vulnerable to damage from other types of disasters, including fires, explosions, floods, power loss and similar events. If any disaster were to occur, or any terrorist or criminal activity caused significant damage to our facilities or the facilities of our third-party manufacturers and suppliers, our ability to manufacture Aldurazyme, Brineura, Naglazyme and Vimizim,our products, or to have Firdapse or Kuvanour products manufactured, could be seriously, or potentially completely, impaired, and our commercialization efforts and revenue could be seriously impaired.*Our business is affected by macroeconomic conditions.health carehealthcare providers are reimbursed for our products by the government. Interest rates, the liquidity of the credit markets and the volatility of the capital markets could also affect the value of our investments and our ability to liquidate our investments in order to fund our operations. We purchase or enter into a variety of financial instruments and transactions, including investments in commercial paper, the extension of credit to corporations, institutions and governments and hedging contracts. If any of the issuers or counter parties to these instruments were to default on their obligations, it could materially reduce the value of the transaction and adversely affect our cash flows.weakness, including Southern European countries, Russia, Chile and Brazil.weakness. Although we have historically collected receivables from customers in those countries, sustained weakness or further deterioration of the local economies and currencies may cause customers in those countries to be unable to pay for our products. Additionally, if one or more of these countries were unable to purchase our products, our revenue would be adversely affected.Risks Related to OwnershipOurEquity Securities*Our stock price may be volatile, and an investment in our stock could suffer a decline in value.Our valuation and stock price have no meaningful relationship to current or historical earnings, asset values, book value or many other criteria based on conventional measuresUse of stock value. The market price of our common stock will fluctuate due to factors including:product sales and profitability of our products;manufacturing, supply or distributionprogressNot applicable.results of clinical trials, announcements of technological innovations or new products by us or our competitors;generic competition to Kuvan relating to our settlements with DRL (related to Kuvan tablets and powder) and Par (related to Kuvan tablets and powder) or potential generic competition from future competitors;government regulatory action affecting our product candidates, our products or our competitors’ product candidates and products in both the U.S. and non-U.S. countries;developments or disputes concerning patent or proprietary rights;general market conditions and fluctuations for the emerging growth and pharmaceutical market sectors;economic conditions in the U.S. or abroad;negative publicity about our company or the pharmaceutical industry;broad market fluctuations in the U.S., the EU or in other parts of the world;actual or anticipated fluctuations in our operating results, including due to timing of large order for our products, in particular in Latin America, where governments place large periodic orders for Naglazyme and Vimizim;changes in company assessments or financial estimates by securities analysts;acquisitions of products, businesses, or other assets; andsales of our shares of stock by us, our significant stockholders, or members of our management or Board of Directors.In the past, following periods of large price declines in the public market price of a company’s securities, securities class action litigation has often been initiated against that company. Litigation of this type could result in substantial costs and diversion of management’s attention and resources, which would hurt our business. Any adverse determination in litigation could also subject us to significant liabilities. In addition, our stock price can be materially adversely affected by factors beyond our control, such as disruptions in global financial markets or negative trends in the biotechnology sector of the economy, even if our business is operating well.Conversion of the Notes will dilute the ownership interest of existing stockholders, including holders who had previously converted their Notes, or may otherwise depress the price of our common stock.The conversion of some or all of the Notes will dilute the ownership interests of existing stockholders to the extent we deliver shares upon conversion of any of the Notes. The Notes may become in the future convertible at the option of their holders prior to their scheduled terms under certain circumstances. Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existence of the Notes may encourage short selling by market participants because the conversion of the Notes could be used to satisfy short positions, or anticipated conversion of the Notes into shares of our common stock could depress the price of our common stock.The capped call transactions may affect the value of the Notes and our common stock.In connection with the issuance of the 2018 Notes and 2020 Notes, we entered into capped call transactions with respect to 50% of the principal amount of the 2018 Notes and 50% of the principal amount of the 2020 Notes with certain hedge counterparties. The capped call transactions will cover, subject to customary anti-dilution adjustments, the aggregate number of shares of common stock underlying 50% of the principal amount of the relevant Notes and are expected generally to reduce potential dilution to the common stock upon conversion of the relevant Notes in excess of the principal amount of such converted Notes. In connection with establishing their initial hedges of the capped call transactions, the hedge counterparties (or their affiliates) entered into various derivative transactions with respect to the common stock concurrently with, and/or purchased the common stock shortly after, the pricing of the relevant notes. The hedge counterparties (or their affiliates) are likely to modify their hedge positions by entering into or unwinding various derivative transactions with respect to the common stock and/or by purchasing or selling the common stock or other securities of ours in secondary market transactions prior to the maturity of the relevant Notes (and are likely to do so during the settlement averaging period under the relevant capped call transactions, which precedes the maturity date of the relevant Notes, and on or around any earlier conversion date related to a conversion of the relevant Notes).The effect, if any, of any of these transactions and activities on the market price of our common stock or the Notes will depend in part on market conditions and cannot be ascertained at this time, but any of these activities could adversely affect the value of our common stock, which could affect the value of the Notes and the value of our common stock, if any, that Note holders receive upon any conversion of the Notes.*Anti-takeover provisions in our charter documents and under Delaware law may make an acquisition of us, which may be beneficial to our stockholders, more difficult.We are incorporated in Delaware. Certain anti-takeover provisions of Delaware law and our charter documents as currently in effect may make a change in control of our company more difficult, even if a change in control would be beneficial to the stockholders. Our anti-takeover provisions include provisions in our restated certificate of incorporation and amended and restated bylaws, as amended, providing that stockholders’ meetings may only be called by our Chairman, the lead independent director or the majority of our Board of Directors and that the stockholders may not take action by written consent and requiring that stockholders that desire to nominate any person for election to our Board of Directors or to make any proposal with respect to business to be conducted at a meeting of our stockholders be submitted in appropriate form to our Secretary within a specified period of time in advance of any such meeting. . Additionally, our Board of Directors has the authority to issue shares of preferred stock and to determine the terms of those shares of stock without any further action by our stockholders. The rights of holders of our common stock are subject to the rights of the holders of any preferred stock that may be issued. The issuance of preferred stock could make it more difficult for a third party to acquire a majority of our outstanding voting stock. Delaware law also prohibits corporations from engaging in a business combination with any holders of 15% or more of their capital stock until the holder has held the stock for three years unless, among other possibilities, our Board of Directors approves the transaction. Our Board of Directors may use these provisions to prevent changes in the management and control of our company. Also, under applicable Delaware law, our Board of Directors may adopt additional anti-takeover measures in the future.The fundamental change repurchase feature of the Notes may delay or prevent an otherwise beneficial attempt to take over our company.The terms of the Notes require us to repurchase the Notes in the event of a fundamental change. A takeover of our company would trigger options by the respective holders of the applicable Notes to require us to repurchase such Notes. This may have the effect of delaying or preventing a takeover of our company that would otherwise be beneficial to our stockholders or investors in the Notes.*Our amended and restated bylaws, as amended, provide that the Court of Chancery of the State of Delaware will be the exclusive forum for the adjudication of certain disputes, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.Our amended and restated bylaws, as amended, provide that the Court of Chancery of the State of Delaware is the sole and exclusive forum for:any derivative action or proceeding brought on our behalf;any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of BioMarin to us or our stockholders;any action asserting a claim against us or any of our directors, officers or other employees arising pursuant to any provision of the General Corporation Law of the State of Delaware, our restated certificate of incorporation or our amended and restated bylaws, as amended; andany action asserting a claim against us or any of our directors, officers or other employees that is governed by the internal affairs doctrine.This exclusive-forum provision further provides that any person or entity that acquires any interest in shares of our capital stock will be deemed to have notice of and consented to the provisions of such provision, including consent to the personal jurisdiction of the Court of Chancery of the State of Delaware related to any action covered by such provision.This exclusive-forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees. If a court were to find this exclusive-forum provision to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could seriously harm our business.None.None.Not applicable.None.
Item 6. ExhibitsExhibit NumberDescriptionExhibit Number Description 2.12.1 2.2 2.3 2.4 2.5 3.2* 4.1Base Indenture, dated August 11, 2017, between the Company and Wilmington Trust, National Association, as Trustee, previously filed with the SEC on August 11, 2017December 18, 2020 as Exhibit 4.13.1 to the Company’s Current Report on Form 8-K (File No. 000-26727), which is incorporated herein by reference. 4.2 10.1*BioMarin Pharmaceutical Inc. Summary of Independent Director Compensation. 31.1*101.INS*101.SCH*101.CAL*Exhibit NumberDescription101.DEF 101.LAB*101.PRE**Filed herewith+The certifications attached as Exhibit 32.1 accompany thisXBRL tags for the cover page from the Company’s Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 offor the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” byquarter ended March 31, 2021, are embedded within the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any of the Registrant’s filings under the Securities Act of 1933, as amended, irrespective of any general incorporation language contained in any such filing.September 30, 2017March 31, 2021 and December 31, 2016,2020, (ii) Condensed Consolidated Statements of Comprehensive LossIncome for the three and nine months ended September 30, 2017March 31, 2021 and 2016,2020, (iii) Condensed Consolidated Statement of Stockholders’ Equity for the ninethree months ended September 30, 2017,March 31, 2021 and 2020, (iv) Condensed Consolidated Statements of Cash Flows for the ninethree months ended September 30, 2017March 31, 2021 and 2016,2020, and (v) Notes to Condensed Consolidated Financial Statements.BIOMARIN PHARMACEUTICAL INC. October 31, 2017DANIEL SPIEGELMANDaniel Spiegelman,
Executive Vice President, and
Chief Financial Officer(On behalf of the registrant and as principal financial officer)69