Washington, D.C. 20549

(Mark One)

☒
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2017~~

2022

☐
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 000-26727

______________________________________

BioMarin Pharmaceutical Inc.

(Exact name of registrant as specified in its charter)

______________________________________

~~Delaware~~

~~68-0397820~~

Delaware

68-0397820

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

770 Lindaro Street

San Rafael ~~California~~

California

94901

(Address of principal executive offices)

(Zip Code)

(415) 506-6700

(Registrant’s telephone number including area code)

Securities registered pursuant to Section 12(b) of the Act:

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

~~Large accelerated filer~~

☒

~~Accelerated filer~~

☐

Large Accelerated Filer

☒

Accelerated Filer

☐

~~Non-accelerated filer~~

☐ ~~(Do not check if a smaller reporting company)~~

~~Smaller reporting company~~

☐

Non-accelerated Filer

☐

Smaller Reporting Company

☐

Emerging ~~growth company~~

Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Table of Contents

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ☐ No ☒

Applicable only to corporate issuers:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: ~~175,621,277~~185,848,915 shares of common stock, par value $0.001, outstanding as of October 25, ~~2017.~~

~~BIOMARIN PHARMACEUTICAL INC.~~

~~TABLE OF CONTENTS~~

2022.

		~~Page~~
~~PART I.~~		~~FINANCIAL INFORMATION~~	3
~~Item 1.~~	~~Financial Statements~~	3
	~~Condensed Consolidated Balance Sheets as of September 30, 2017 (Unaudited) and December 31, 2016~~	3
	~~Condensed Consolidated Statements of Comprehensive Loss (Unaudited) for the three and nine months ended September 30, 2017 and 2016~~	4
	~~Condensed Consolidated Statement of Stockholders’ Equity (Unaudited) for the nine months ended September 30, 2017~~	5
	~~Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2017 and 2016~~	6
	~~Notes to Unaudited Condensed Consolidated Financial Statements~~	7
~~Item 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~	29
~~Item 3.~~	~~Quantitative and Qualitative Disclosures about Market Risk~~	42
~~Item 4.~~	~~Controls and Procedures~~	42
~~PART II.~~	~~OTHER INFORMATION~~	43
~~Item 1.~~	~~Legal Proceedings~~	43
~~Item 1A.~~	~~Risk Factors~~	44
~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	66
~~Item 3.~~	~~Defaults Upon Senior Securities~~	66
~~Item 4.~~	~~Mine Safety Disclosures~~	66
~~Item 5.~~	~~Other Information~~	66
~~Item 6.~~	~~Exhibits~~	67
~~SIGNATURES~~		69

Table of Contents

Unless the context suggests otherwise, references in this Quarterly Report on Form 10-Q to “BioMarin,” the “Company,” “we,” “us,” and “our” refer to BioMarin Pharmaceutical Inc. and, where appropriate, its wholly owned subsidiaries.

BioMarin®, ~~Brineura~~^BRINEURA®, ~~Vimizim~~^KUVAN®, ~~Naglazyme~~^NAGLAZYME®, ~~Kuvan~~^PALYNZIQ®,VIMIZIM® and ~~Firdapse~~^VOXZOGO®are our registered trademarks. ~~Kyndrisa~~^TM ~~is our trademark. Aldurazyme~~^ALDURAZYME® is a registered trademark of BioMarin/Genzyme LLC. ROCTAVIAN™ is a trademark of BioMarin Pharmaceutical Inc. All other brand names and service marks, trademarks and other trade names appearing in this report are the property of their respective owners.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” as defined under securities laws. Many of these statements can be identified by the use of terminology such as “believes,” “expects,” “intends,” “anticipates,” “plans,” “may,” “will,” ~~��projects,~~“could,” would,” “projects,” “continues,” “estimates,” “potential,” “opportunity” or the negative versions of these terms and other similar expressions. Our actual results or experience could differ significantly from the forward-looking statements. Factors that could cause or contribute to these differences include those discussed in “Risk Factors,” in Part II, Item 1A of this Quarterly Report on Form 10-Q as well as information provided elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2021, which was filed with the Securities and Exchange Commission (the SEC) on February ~~27, 2017.~~25, 2022. You should carefully consider that information before you make an investment decision.

You should not place undue reliance on these types of forward-looking statements, which speak only as of the date that they were made. These forward-looking statements are based on the beliefs and assumptions of the Company’s management based on information currently available to management and should be considered in connection with any written or oral forward-looking statements that the Company may issue in the future as well as other cautionary statements the Company has made and may make. Except as required by law, the Company does not undertake any obligation to release publicly any revisions to these forward-looking statements after completion of the filing of this Quarterly Report on Form 10-Q to reflect later events or circumstances or the occurrence of unanticipated events.

The discussion of the Company’s financial condition and results of operations should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and the related Notes thereto included in this Quarterly Report on Form 10-Q.

Risk Factors Summary

The following is a summary of the principal risks that could adversely affect our business, financial condition, operating results, cash flows or stock price. Discussion of the risks listed below, and other risks that we face, are discussed in the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Business and Operational Risks

•The COVID-19 pandemic could continue to materially adversely affect our business, results of operations, and financial condition.

•Because the target patient populations for our products are relatively 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 obtain and maintain an adequate level of coverage and reimbursement for our products by third-party payers, the sales of our products would be adversely affected or there may be no commercially viable markets for our products.

•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 revenues could be adversely affected.

•Changes in methods of treatment of disease could reduce demand for our products and adversely affect revenues.

•If we fail to develop new products and product candidates or compete successfully with respect to acquisitions, joint ventures, licenses or other collaboration opportunities, our ability to continue to expand our product pipeline and our growth and development would be impaired.

Table of Contents

•The sale of generic versions of KUVAN by generic manufacturers has adversely affected and will continue to adversely affect our revenues and may cause a decline in KUVAN revenues faster than expected.

•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.

Regulatory Risks

•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 revenues 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.

•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 Food and Drug Administration, the European Medicines Agency 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 revenues 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.

•To obtain regulatory approval to market our products, preclinical studies and costly and lengthy clinical trials are required and the results of the studies and trials are highly uncertain. Likewise, preliminary, initial or interim data from clinical trials should be considered carefully and with caution because the final data may be materially different from the preliminary, initial or interim data, particularly as more patient data become available.

•Government price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our current and future products, which would adversely affect our revenues and results of operations.

•Government healthcare reform could increase our costs and adversely affect our revenues and results of operations.

Risks Related to ROCTAVIAN

•Our ROCTAVIAN program is based on a gene therapy approach, which, as a novel technology, presents additional development and treatment risks in relation to our other, more traditional drug development programs.

•As compared to our other, more traditional products, ROCTAVIAN may present additional problems with respect to the pricing, coverage, and reimbursement and acceptance of the product.

Financial and Financing Risks

•If we continue to incur operating losses or are unable to sustain positive cash flows for a period longer than anticipated, we may be unable to continue our operations at planned levels and be forced to reduce our operations.

Manufacturing Risks

•If we fail to comply with manufacturing regulations, our financial results and financial condition will be adversely affected.

•If we are unable to successfully develop and maintain manufacturing processes for our product candidates to produce sufficient quantities at acceptable costs, we may be unable to support a clinical trial or be forced to

Table of Contents

terminate a program, or if we are unable to produce sufficient quantities of our products at acceptable costs, we may be unable to meet commercial demand, lose potential revenue, have reduced margins or be forced to terminate a program.

•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.

Risks Related to International Operations

•We conduct a significant amount of our sales and operations outside of the United States (U.S.), which subjects us to additional business risks that could adversely affect our revenues and results of operations.

•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 revenues in these countries.

Intellectual Property Risks

•If we are unable to protect our intellectual property, we may not be able to compete effectively or preserve our market shares.

•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.

Table of Contents~~PART I. FINANCIAL INFORMATION~~

~~Item 1.~~

~~Financial Statements~~

BIOMARIN PHARMACEUTICAL INC.

TABLE OF CONTENTS


		Page
PART I.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of September 30, 2022 (Unaudited) and December 31, 2021	3
	Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the three and nine months ended September 30, 2022 and 2021	4
	Condensed Consolidated Statement of Stockholders’ Equity (Unaudited) for the three and nine months ended September 30, 2022 and 2021	5
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2022 and 2021	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	32
Item 4.	Controls and Procedures	32

PART II.	OTHER INFORMATION	33
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61
Item 3.	Defaults Upon Senior Securities	61
Item 4.	Mine Safety Disclosures	61
Item 5.	Other Information	61
Item 6.	Exhibits	62

SIGNATURES		64

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BIOMARIN PHARMACEUTICAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, ~~2017~~2022 and December 31, ~~2016~~

2021

(In thousands, ~~of U.S. dollars,~~ except share amounts)

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

~~(1)~~

December 31, 2016 balances were derived from the audited Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on February 27, 2017.


	September 30, 2022		December 31, 2021 ⁽¹⁾
ASSETS	(unaudited)
Current assets:
Cash and cash equivalents	$	761,515	$	587,276
Short-term investments	512,253		426,599
Accounts receivable, net	419,622		373,399
Inventory	839,460		776,669
Other current assets	149,851		110,442
Total current assets	2,682,701		2,274,385
Noncurrent assets:
Long-term investments	372,302		507,793
Property, plant and equipment, net	1,051,821		1,035,461
Intangible assets, net	354,024		388,652
Goodwill	196,199		196,199
Deferred tax assets	1,455,205		1,450,161
Other assets	151,788		152,121
Total assets	$	6,264,040	$	6,004,772
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	492,717	$	498,265
Short-term contingent consideration	28,303		48,232
Total current liabilities	521,020		546,497
Noncurrent liabilities:
Long-term convertible debt, net	1,082,033		1,079,077
Long-term contingent consideration	—		15,167
Other long-term liabilities	92,473		98,361
Total liabilities	1,695,526		1,739,102
Stockholders’ equity:
Common stock, $0.001 par value: 500,000,000 shares authorized; 185,824,253 and 183,912,514 shares issued and outstanding, respectively	186		184
Additional paid-in capital	5,335,853		5,191,502
Company common stock held by the Nonqualified Deferred Compensation Plan	(9,325)		(9,689)
Accumulated other comprehensive income	30,749		14,432
Accumulated deficit	(788,949)		(930,759)
Total stockholders’ equity	4,568,514		4,265,670
Total liabilities and stockholders’ equity	$	6,264,040	$	6,004,772

(1)Certain December 31, 2021 balances have been corrected for an immaterial error identified in the third quarter of 2022. See Note 1 to these Condensed Consolidated Financial Statements for details.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

BIOMARIN PHARMACEUTICAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~LOSS~~

INCOME (LOSS)

Three and Nine Months Ended September 30, ~~2017~~2022 and ~~2016~~

2021

(In thousands, ~~of U.S. dollars,~~ except per share amounts)

~~(Unaudited)~~

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

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
)
(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
REVENUES:
Net product revenues	$	493,348	$	393,840	$	1,516,533	$	1,348,279
Royalty and other revenues	11,996		14,902		41,968		48,186
Total revenues	505,344		408,742		1,558,501		1,396,465
OPERATING EXPENSES:
Cost of sales	116,288		103,537		356,379		350,765
Research and development	157,829		157,869		476,855		467,701
Selling, general and administrative	216,816		183,333		608,270		541,812
Intangible asset amortization and contingent consideration	16,828		17,222		50,935		52,648
Gain on sale of nonfinancial assets, net	—		—		(108,000)		—
Total operating expenses	507,761		461,961		1,384,439		1,412,926
INCOME (LOSS) FROM OPERATIONS	(2,417)		(53,219)		174,062		(16,461)

Interest income	4,999		1,827		9,324		8,737
Interest expense	(4,679)		(3,870)		(12,344)		(11,491)
Other income (expense), net	193		9,102		(3,908)		10,439
INCOME (LOSS) BEFORE INCOME TAXES	(1,904)		(46,160)		167,134		(8,776)
Provision for (benefit from) income taxes	4,748		(9,666)		25,324		(2,594)
NET INCOME (LOSS)	$	(6,652)	$	(36,494)	$	141,810	$	(6,182)
NET INCOME (LOSS) PER SHARE, BASIC	$	(0.04)	$	(0.20)	$	0.77	$	(0.03)
NET INCOME (LOSS) PER SHARE, DILUTED	$	(0.04)	$	(0.20)	$	0.75	$	(0.03)
Weighted average common shares outstanding, basic	185,597		183,214		185,009		182,616
Weighted average common shares outstanding, diluted	185,597		183,214		192,252		182,616

COMPREHENSIVE INCOME (LOSS)	$	5,625	$	(25,316)	$	158,127	$	20,196

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

BIOMARIN PHARMACEUTICAL INC.

CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF STOCKHOLDERS’ EQUITY

Three and Nine Months Ended September 30, ~~2017~~

2022 and 2021

(In ~~thousands~~thousands)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021

Shares of common stock, beginning balances (1)	185,453		183,322		183,913		181,741
Issuances under equity incentive plans	372		246		1,912		1,827
Shares of common stock, ending balances	185,825		183,568		185,825		183,568

Total stockholders' equity, beginning balances (1)	$	4,504,808	$	4,241,571	$	4,270,741	$	4,106,002
Adjustment related to correction of immaterial error (Note 1)	(5,071)		(5,071)		(5,071)		(5,071)
Adjusted beginning balance (1)	4,499,737		4,236,500		4,265,670		4,100,931
Common stock:
Beginning balances (1)	186		183		184		182
Issuances under equity incentive plans, net of tax	—		1		2		2
Ending balance	186		184		186		184
Additional paid-in capital:
Beginning balance (1)	5,272,666		5,083,831		5,191,502		4,993,407
Issuances under equity incentive plans, net of tax	6,847		(460)		(8,306)		(11,551)
Stock-based compensation	56,305		50,353		153,021		151,500
Common stock held by the Nonqualified Deferred Compensation Plan (the NQDC)	35		18		(364)		386
Ending balance	5,335,853		5,133,742		5,335,853		5,133,742
Company common stock held by the NQDC:
Beginning balance (1)	(9,290)		(10,207)		(9,689)		(9,839)
Common stock held by the NQDC	(35)		(18)		364		(386)
Ending balance	(9,325)		(10,225)		(9,325)		(10,225)
Accumulated other comprehensive income (loss):
Beginning balance (1)	18,472		(939)		14,432		(16,139)
Other comprehensive income (loss)	12,277		11,178		16,317		26,378
Ending balance	30,749		10,239		30,749		10,239
Accumulated Deficit:
Beginning balance (1)	(777,226)		(831,297)		(925,688)		(861,609)
Adjustment related to correction of immaterial error (Note 1)	(5,071)		(5,071)		(5,071)		(5,071)
Adjusted beginning balance (1)	(782,297)		(836,368)		(930,759)		(866,680)
Net income (loss)	(6,652)		(36,494)		141,810		(6,182)
Ending balance	(788,949)		(872,862)		(788,949)		(872,862)
Total stockholders' equity, ending balances	$	4,568,514	$	4,261,078	$	4,568,514	$	4,261,078

(1)The beginning balances for the nine-month periods were derived from the audited Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 25, 2022, except for the beginning balances of ~~U.S. dollars)~~

~~(Unaudited)~~

Accumulated Deficit and Total Stockholders’ Equity for the three and nine-month periods which have been corrected for an immaterial error identified in the third quarter of 2022. See Note 1 to these Condensed Consolidated Financial Statements for details.

Company

Accumulated

Additional

Common

Other

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

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

BIOMARIN PHARMACEUTICAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30, ~~2017~~2022 and ~~2016~~

2021

(In ~~thousands of U.S. dollars)~~

~~(Unaudited)~~

thousands)

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

(unaudited)


	Nine Months Ended September 30,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	141,810	$	(6,182)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	77,416		82,053
Non-cash interest expense	3,089		3,114
Amortization of premium on investments	3,741		3,279
Stock-based compensation	149,574		153,372
Gain on sale of nonfinancial assets, net	(108,000)		—

Deferred income taxes	(743)		(12,020)
Unrealized foreign exchange gain	(16,075)		(1,347)
Non-cash changes in the fair value of contingent consideration	2,243		6,254
Other	(700)		(1,317)
Changes in operating assets and liabilities:
Accounts receivable, net	(53,752)		65,513
Inventory	(27,419)		(19,125)
Other current assets	(8,558)		27,029
Other assets	12,140		(407)
Accounts payable and other short-term liabilities	(2,398)		(7,129)
Other long-term liabilities	(3,252)		269
Net cash provided by operating activities	169,116		293,356
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment	(85,271)		(66,840)
Maturities and sales of investments	477,244		502,112
Purchases of investments	(457,382)		(737,144)
Proceeds from sale of nonfinancial assets	110,000		—
Purchase of intangible assets	(9,910)		(8,026)
Other	—		(994)
Net cash provided by (used in) investing activities	34,681		(310,892)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercises of awards under equity incentive plans	43,866		32,877
Taxes paid related to net share settlement of equity awards	(50,696)		(44,428)


Payment of contingent consideration	(21,054)		—

Principal repayments of financing leases	(1,635)		(2,492)
Other	—		(401)
Net cash used in financing activities	(29,519)		(14,444)
Effect of exchange rate changes on cash	(39)		(35)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	174,239		(32,015)
Cash and cash equivalents:
Beginning of period	$	587,276	$	649,158
End of period	$	761,515	$	617,143
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for income taxes	$	13,425	$	15,531
Cash paid for interest	$	6,575	$	6,673
SUPPLEMENTAL CASH FLOW DISCLOSURES FOR NON-CASH INVESTING AND FINANCING ACTIVITIES:
Decrease in accounts payable and accrued liabilities related to fixed assets	$	(5,240)	$	(7,690)
Increase (decrease) in accounts payable and accrued liabilities related to intangible assets	$	(224)	$	9,386

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Table of Contents

BIOMARIN PHARMACEUTICAL INC.

NOTES TO ~~UNAUDITED~~ CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. ~~dollars,~~Dollars, except per share amounts or as otherwise disclosed)

(1) ~~NATURE OF OPERATIONS~~BUSINESS OVERVIEW AND ~~BUSINESS RISKS~~

SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

BioMarin Pharmaceutical Inc. (the Company) is a global biotechnology company that develops and commercializes innovative therapies for people with serious and life-threatening rare diseases and medical conditions. The Company selects product candidates for diseases and conditions that represent a significant unmet medical need, have well-understood biology and provide an opportunity to be first-to-market or offer a significant benefit over existing products. The Company’s ~~therapy~~ portfolio consists of ~~six approved~~eight commercial products and multiple clinical and ~~pre-clinical~~preclinical product ~~candidates.~~

The Company expects to continue to finance future cash needs that exceed its operating activities primarily through its current cash, cash equivalents, short-term and long-term investments and through proceeds from debt or equity offerings, commercial borrowing, or through collaborative agreements with corporate partners. Ifcandidates for the ~~Company elects to increase its spending on development programs significantly above current long-term plans or enters into potential licenses and other acquisitions~~treatment of ~~complementary technologies, products or companies, the Company may need additional capital.~~

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 regulatoryvarious diseases. ROCTAVIAN (formerly known as valoctocogene roxaparvovec) was granted conditional marketing 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~~European Union (EU) on August 24, 2022.

Basis of ~~this Quarterly Report on Form 10-Q for a more detailed discussion of these risks.~~

~~(2) BASIS OF PRESENTATION~~

Presentation

The accompanying Condensed Consolidated Financial Statements have been prepared pursuant to United States generally accepted accounting principles (U.S. GAAP) and the rules and regulations of the ~~SEC~~Securities and Exchange Commission (the SEC) for Quarterly Reports on Form 10-Q and do not include all of the information and note disclosures required by U.S. GAAP for complete financial statements, although the Company believes that the disclosures herein are adequate to ensure that the information presented is not misleading. The Condensed Consolidated Financial Statements should therefore be read in conjunction with the Consolidated Financial Statements and Notes thereto for the fiscal year ended December 31, ~~2016~~2021 included in the Company’s Annual Report on Form 10-K.

The Condensed Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions have been eliminated. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022 or any other period.

Use of Estimates

U.S. GAAP requires management to make estimates and assumptions that affect amounts reported in the Condensed Consolidated Financial Statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may be different from those estimates. The Condensed Consolidated Financial Statements reflect all adjustments of a normal, recurring nature that are, in the opinion of management, necessary for a fair presentation of results for these interim periods. The full extent to which the COVID-19 pandemic could continue to directly or indirectly impact the Company’s business, results of operations ~~for~~and financial condition, including revenues, expenses, reserves and allowances, manufacturing, clinical trials and research and development costs, will depend on future developments that remain uncertain at this time, particularly as virus variants continue to spread. As events continue to evolve and additional information becomes available, the ~~three and nine months ended September 30, 2017 are not necessarily indicative of the results that~~Company’s estimates may ~~be expected for the fiscal year ending December 31, 2017 or any other period.~~

change materially in future periods.

Management performed an evaluation of the Company’s activities through the date of filing of this Quarterly Report on Form 10-Q, and has concluded that there were no subsequent events or transactions that occurred subsequent to the balance sheet date prior to filing this Quarterly Report on Form 10-Q that would require recognition or disclosure in the Condensed Consolidated Financial Statements except for the transaction disclosed in Note 12 to these Condensed Consolidated Financial Statements.

~~(3) SIGNIFICANT ACCOUNTING POLICIES~~

Correction of Immaterial Error

During the three months ended September 30, 2022, the Company became aware of an unrecorded amount due to a third party following the January 2020 sale of the worldwide rights of Firdapse, the Company's commercial product for the treatment of Lambert-Eaton myasthenic syndrome. The Company evaluated the materiality of the previously described error from a qualitative and quantitative perspective. Based on such evaluation, the Company concluded that the error was not material to any individual current or prior period, nor did it have an effect on the Company’s trend of financial results, taking into account the requirements of the SEC Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. Although the effect of the error was not material to the current or previously issued financial statements, the Company has corrected the accompanying Condensed Consolidated Balance Sheet and Statements of Stockholders Equity. The correction increased the fiscal year 2021 beginning balance of Accumulated Deficit and decreased Total Stockholders’ Equity by $5.1 million, and had the following impact on certain December 31, 2021 balances: an increase to Accounts Payable and Accrued Liabilities of $6.7 million, an increase to Deferred Tax Assets of $1.1 million, an increase to Other Assets of $0.4 million and a decrease to Other Long-term Liabilities of $0.1 million.

Table of Contents

BIOMARIN PHARMACEUTICAL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)

Significant Accounting Policies

There have been no material changes to the Company’s significant accounting policies during the nine months ended September 30, ~~2017,~~2022, as compared to the significant accounting policies disclosed in Note ~~3 of the Consolidated Financial Statements~~1 – Business Overview and Significant Accounting Policies included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

~~BIOMARIN PHARMACEUTICAL INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(In thousands of U.S. dollars, except per share amounts or as otherwise disclosed)~~

~~(4) RECENT ACCOUNTING PRONOUNCEMENTS~~

~~Except as described below, there~~2021.

Recent Accounting Pronouncements

There have been no new accounting pronouncements adopted by the Company or ~~changes to~~new accounting pronouncements issued by the Financial Accounting Standards Board during the nine months ended September 30, ~~2017,~~2022, as compared to the recent accounting pronouncements described in Note 41 of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2021, that the Company believes are of significance or potential significance to the Company.

~~Effective January, 1, 2018, the Company will adopt Accounting Standards Update (ASU) No. 2014-09 (ASU 2014-09),~~ ~~Revenue from Contracts with Customers~~,

(2) FINANCIAL INSTRUMENTS

All marketable securities were classified as amended (commonly referred to as ASC Topic 606), which provides principles for recognizing revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

~~As of~~available-for-sale at September 30, ~~2017, the Company has not elected to early adopt ASC Topic 606~~2022 and ~~plans to adopt the new standard using the modified retrospective method.~~ December 31, 2021.

The ~~Company has formed a task force that is in the process of analyzing~~following tables show the Company’s ~~customer contracts~~cash, cash equivalents and ~~the potential impacts the standard may have on previously reported revenues and future revenues. As the Company completes its analysis~~available-for-sale securities by significant investment category for each period presented:


	September 30, 2022
	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	$	358,325	$	—	$	—	$	358,325	$	358,325	$	—	$	—

Level 2:
Money market instruments	347,274		—		—		347,274		347,274		—		—
Corporate debt securities	522,723		10		(14,622)		508,111		978		273,333		233,800
U.S. government agency securities	354,810		4		(4,377)		350,437		54,938		209,469		86,030
Commercial paper	29,461		1		(22)		29,440		—		29,440		—
Asset-backed securities	53,182		—		(699)		52,483		—		11		52,472

Subtotal	1,307,450		15		(19,720)		1,287,745		403,190		512,253		372,302
Total	$	1,665,775	$	15	$	(19,720)	$	1,646,070	$	761,515	$	512,253	$	372,302

Table 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.

Contents~~In 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

BIOMARIN PHARMACEUTICAL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~– (Continued)~~

- (continued)

(In thousands of U.S. ~~dollars,~~Dollars, except per share amounts or as otherwise disclosed)

~~elected to early adopt ASU 2017-09, which did not have a material impact on the~~


	December 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	$	301,177	$	—	$	—	$	301,177	$	301,177	$	—	$	—

Level 2:
Money market instruments	285,099		—		—		285,099		285,099		—		—
Corporate debt securities	584,000		386		(2,086)		582,300		—		200,304		381,996
U.S. government agency securities	224,774		182		(325)		224,631		—		146,421		78,210
Commercial paper	68,384		—		—		68,384		1,000		67,384		—
Asset-backed securities	56,936		10		(95)		56,851		—		9,451		47,400
Foreign and other	3,097		141		(12)		3,226		—		3,039		187
Subtotal	1,222,290		719		(2,518)		1,220,491		286,099		426,599		507,793
Total	$	1,523,467	$	719	$	(2,518)	$	1,521,668	$	587,276	$	426,599	$	507,793

(1) The Company’s ~~Consolidated Financial Statements because the~~short-term marketable securities mature in one year or less.

(2) The Company’s ~~policies had already been in compliance.~~

~~In August 2017, the FASB issued ASU No. 2017-12,~~ ~~Derivatives~~long-term marketable securities mature between one and ~~Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities~~ (ASU 2017-12). The amendment changes the recognition and presentation requirements of hedge accounting, including eliminating the requirement to separately measure and report hedge ineffectiveness and presenting all items that affect earnings in the same income statement line as the hedged item. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted. Although the Company is currently evaluating the impact that the standard will have on its Consolidated Financial Statements, adoption of the amendment is not expected to have a material impact due to the nature of the Company’s hedging activity. five years.

As of September 30, ~~2017, the Company has not elected to early adopt the amendments of ASU 2017-12.~~

~~(5) ACQUISITIONS~~

~~The Merck PKU Business~~

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 Kuvan2022, the Company had ~~granted~~the ability and intent to ~~Merck Serono under~~hold 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, pursuant~~which fair value is less than amortized cost basis, conditions specifically related to the ~~A&R Kuvan Agreement~~security’s industry and geography, payment structure and history and changes to the ~~Pegvaliase Agreement,~~ratings (if any) in determining that the decline in fair value compared to carrying value is not related to a credit loss.

The Company ~~completed the acquisition from Merck Serono~~has certain investments in non-marketable equity securities, measured using unobservable valuation inputs and ~~its affiliates~~remeasured on a nonrecurring basis, which are collectively considered strategic investments. As of ~~certain rights~~September 30, 2022 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.~~

~~Pursuant to the A&R Kuvan Agreement, the Company paid Merck Serono~~ ~~$374.5 million, in cash, the majority of which was paid in January 2016, and is obligated to pay Merck Serono up to a maximum of~~ €~~60.0 million, in cash, if future sales milestones are met. Pursuant to the Pegvaliase Agreement, the Company is obligated to pay Merck Serono up to a maximum of~~ €125.0 million, in cash, if future development milestones are met. Merck Serono transferred certain inventory, regulatory materials and approvals, and intellectual property rights to the Company and will perform certain transition services for the Company. As of December 31, 2016, the inventory acquired from Merck Serono had been sold through to customers. The Company and Merck Serono have no further rights or obligations under the License Agreement with respect to Kuvan or pegvaliase.

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.

The 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 estimate2021, the fair value of the ~~contingent acquisition consideration payable as of~~ ~~September 30, 2017.~~ ~~See Note 13 to these~~Company’s strategic investments was $23.7 million and $16.5 million, respectively. These investments were recorded in Other Assets in the Company’s Condensed Consolidated ~~Financial Statements for additional~~

Balance Sheets.

(3) SUPPLEMENTAL FINANCIAL STATEMENTS INFORMATION

Supplemental Balance Sheet Information

Inventory consisted of the following:


	September 30, 2022		December 31, 2021
Raw materials	$	109,480	$	80,269
Work-in-process	425,505		415,261
Finished goods	304,475		281,139
Total inventory	$	839,460	$	776,669

Property, Plant and Equipment, Net consisted of the following:

Table of Contents

BIOMARIN PHARMACEUTICAL INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~– (Continued)~~

(In thousands of U.S. ~~dollars,~~Dollars, except per share amounts or as otherwise disclosed)

~~discussion regarding~~


	September 30, 2022		December 31, 2021
Property, plant and equipment, gross	$	1,834,220	$	1,756,035
Accumulated depreciation	(782,399)		(720,574)
Total property, plant and equipment, net	$	1,051,821	$	1,035,461

Depreciation expense, net of amounts capitalized into inventory, for the three and nine months ended September 30, 2022 was $8.7 million and $29.9 million, respectively. Depreciation expense, net of amounts capitalized into inventory, for the three and nine months ended September 30, 2021 was $11.4 million and $35.7 million, respectively.

Intangible Assets, Net consisted of the following:


	September 30, 2022		December 31, 2021
Finite-lived intangible assets	$	690,334	$	677,350
Accumulated amortization	(336,310)		(288,698)
Net carrying value	$	354,024	$	388,652

Accounts Payable and Accrued Liabilities consisted of the following:


	September 30, 2022		December 31, 2021
Accounts payable and accrued operating expenses	$	207,165	$	199,678
Accrued compensation expense	161,112		204,446
Accrued rebates payable	71,653		47,987
Accrued royalties payable	14,487		15,215
Foreign currency exchange forward contracts	13,075		6,263
Lease liabilities	9,226		10,464

Accrued income taxes	7,573		1,213
Deferred revenue	415		6,956
Other	8,011		6,043
Total accounts payable and accrued liabilities	$	492,717	$	498,265

Supplemental Statement of Comprehensive Income (Loss) Information

Gain on Sale of Nonfinancial Assets, Net for the nine months ended September 30, 2022 consisted of the completed sale of a Rare Pediatric Disease Priority Review Voucher (PRV) the Company received from the Food and Drug Administration (FDA) in connection with the U.S. approval of VOXZOGO. As a result of the PRV sale, the Company recognized a $108.0 million net gain on sale of nonfinancial assets in the first quarter of 2022 in the Company's Consolidated Statement of Comprehensive Income.

(4) FAIR VALUE MEASUREMENTS

The Company measures certain financial assets and liabilities at fair value ~~measurements of~~in accordance with the ~~contingent acquisition consideration payable~~policy described in Note 1 – Business Overview andSignificant Accounting Policies included onin the Company’s ~~Condensed~~ ~~Consolidated~~ ~~Balance Sheet.~~

Annual Report on Form 10-K for the year ended December 31, 2021.

The following ~~table presents~~tables present the ~~final allocation of the purchase consideration for the~~ ~~Merck PKU Business~~ acquisition, including the contingent acquisition consideration payable based on the acquisition date fair value. The allocation of the purchase price below reflects an inventory adjustment in the second quarter of 2016.

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 inclassification within the fair value hierarchy of ~~the IPR&D~~financial 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 toliabilities not disclosed elsewhere in these Condensed Consolidated Financial Statements that are remeasured on a recurring basis as of September 30, 2022 and December 31, 2021. Other than the Company’s fixed-rate convertible debt disclosed in Note 6 – Debt, there were no

Table of Contents

BIOMARIN PHARMACEUTICAL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)

financial assets or liabilities that were remeasured using a quoted price in active markets for ~~further~~identical assets (Level 1) as of September 30, 2022 or December 31, 2021.


	Fair Value Measurements as of September 30, 2022
		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Other current assets:
NQDC Plan assets		$	2,306	$	—	$	2,306
Other assets:
NQDC Plan assets		18,889		—		18,889
Restricted investments (1)		2,439		—		2,439
Total other assets		21,328		—		21,328
Total assets		$	23,634	$	—	$	23,634
Liabilities:
Current liabilities:
NQDC Plan liability		$	2,306	$	—	$	2,306
Contingent consideration		—		28,303		28,303
Total current liabilities		2,306		28,303		30,609
Other long-term liabilities:
NQDC Plan liability		18,889		—		18,889


Total liabilities		$	21,195	$	28,303	$	49,498


	Fair Value Measurements as of December 31, 2021
	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Other current assets:
NQDC Plan assets	$	2,043	$	—	$	2,043
Other assets:
NQDC Plan assets	23,929		—		23,929
Restricted investments (1)	2,940		—		2,940

Total other assets	26,869		—		26,869
Total assets	$	28,912	$	—	$	28,912
Liabilities:
Current liabilities:
NQDC Plan liability	$	2,043	$	—	$	2,043
Contingent consideration	—		48,232		48,232
Total current liabilities	2,043		48,232		50,275
Other long-term liabilities:
NQDC Plan liability	23,929		—		23,929
Contingent consideration	—		15,167		15,167
Total other long-term liabilities	23,929		15,167		39,096
Total liabilities	$	25,972	$	63,399	$	89,371

(1) The restricted investments at September 30, 2022 and December 31, 2021 secure the Company's irrevocable standby letters of credit obtained in connection with certain commercial agreements.

Table of Contents

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, 2022.

Liabilities measured at fair value using Level 3 inputs consisted of contingent consideration. The following table represents a roll-forward of contingent consideration.


Contingent consideration as of December 31, 2021	$	63,399
Milestone payments to Ares Trading S.A. (Merck Serono)	(33,293)
Realized foreign exchange gain on settlement of contingent consideration	(133)
Changes in fair value of contingent consideration	3,764
Foreign exchange remeasurement of Euro denominated contingent consideration	(5,434)
Contingent consideration as of September 30, 2022	$	28,303

(5) DERIVATIVE INSTRUMENTS AND HEDGING STRATEGIES

The Company uses foreign currency exchange forward contracts (forward contracts) to protect against the impact of changes in the value of forecasted foreign currency cash flows resulting from revenues and operating expenses denominated in currencies other than the U.S. Dollar (USD), primarily the Euro. Certain of these forward contracts are designated as cash flow hedges and have maturities of up to two years. The Company also enters into forward contracts to manage foreign exchange risk related to asset or liability positions denominated in currencies other than USD. Such forward contracts are considered to be economic hedges, are not designated as hedging instruments and have maturities of up to three months. The Company does not use derivative instruments for speculative trading purposes. The Company is exposed to counterparty credit risk on its derivatives. The Company has established and maintains strict counterparty credit guidelines and enters into hedging agreements with financial institutions that are investment grade or better to minimize the Company’s exposure to potential defaults. The Company is not required to pledge collateral under these agreements.

The following table summarizes the aggregate notional amounts for the Company’s derivatives outstanding as of the periods presented.


Forward Contracts	September 30, 2022		December 31, 2021
Derivatives designated as hedging instruments:
Sell	$	483,387	$	740,667
Purchase	$	99,212	$	183,256

Derivatives not designated as hedging instruments:
Sell	$	118,026	$	113,257
Purchase	$	5,812	$	31,068

Table of Contents

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 fair value carrying amounts of the Company’s derivatives, as classified within the fair value hierarchy, were as follows:


Balance Sheet Location	September 30, 2022		December 31, 2021
Derivatives designated as hedging instruments:
Asset Derivatives - Level 2 (1)
Other current assets	$	51,050	$	17,357
Other assets	10,012		4,991
Subtotal	$	61,062	$	22,348

Liability Derivatives - Level 2 (1)
Accounts payable and accrued liabilities	$	12,979	$	5,487
Other long-term liabilities	2,226		1,378
Subtotal	$	15,205	$	6,865

Derivatives not designated as hedging instruments:
Asset Derivatives - Level 2 (1)
Other current assets	$	81	$	427


Liability Derivatives - Level 2 (1)
Accounts payable and accrued liabilities	$	96	$	776



Total Derivatives Assets	$	61,143	$	22,775
Total Derivatives Liabilities	$	15,301	$	7,641

(1) For additional discussion of fair value measurements, see Note 1 – Business Overview and Significant Accounting Policies included in the ~~indefinite-lived intangible assets.~~

Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

The following tables summarize the impact of gains and losses from the Company's derivatives on its Condensed Consolidated Statements of Comprehensive Income for the periods presented.


	Three Months Ended September 30,
	2022				2021
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	$	493,348	$	15,280	$	393,840	$	401
Operating expenses as reported	$	507,761	$	(3,936)	$	461,961	$	(268)

Derivatives Not Designated as Hedging Instruments			Gains (Losses) Recognized in Earnings				Gains (Losses) Recognized in Earnings
Operating expenses			$	6,572			$	1,302

Table of Contents

BIOMARIN PHARMACEUTICAL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)


	Nine Months Ended September 30,
	2022				2021
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	$	1,516,533	$	26,779	$	1,348,279	$	(5,034)
Operating expenses as reported	$	1,384,439	$	(7,115)	$	1,412,926	$	81

Derivatives Not Designated as Hedging Instruments			Gains (Losses) Recognized in Earnings				Gains (Losses) Recognized in Earnings
Operating expenses			$	12,812			$	2,310

As of September 30, 2022, the Company expects to reclassify unrealized gains of $38.2 million from Accumulated Other Comprehensive Income (AOCI) to earnings as the forecasted revenues and operating expense transactions occur over the next twelve months. For additional discussion of balances in AOCI see Note 7 – Accumulated Other Comprehensive Income.

(6) DEBT

Convertible Notes

As of September 30, 2022, the Company had outstanding fixed-rate notes with varying maturities for an undiscounted aggregate principal amount of $1.1 billion (collectively the Notes). The Notes are senior subordinated convertible obligations, and interest is payable in arrears, semi-annually. The following table summarizes information regarding the Company’s convertible debt:


	September 30, 2022		December 31, 2021
1.25% senior subordinated convertible notes due in May 2027 (the 2027 Notes)	$	600,000	$	600,000
Unamortized discount net of deferred offering costs	(9,449)		(10,971)
2027 Notes, net	590,551		589,029

0.599% senior subordinated convertible notes due in August 2024 (the 2024 Notes)	495,000		495,000
Unamortized discount net of deferred offering costs	(3,518)		(4,952)
2024 Notes, net	491,482		490,048

Total convertible debt, net	$	1,082,033	$	1,079,077

Fair value of fixed-rate convertible debt (1):
2027 Notes	$	601,488	$	625,122
2024 Notes	491,213		521,082
Total fair value of fixed-rate convertible debt	$	1,092,701	$	1,146,204

(1) The fair value of the Company’s fixed-rate convertible debt is based on open-market trades and is classified as Level 1 in the fair value hierarchy. For additional discussion of fair value measurements, see Note 1 – Business Overview and Significant Accounting Policies included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Table of Contents

BIOMARIN PHARMACEUTICAL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)

Interest expense on the Company’s convertible debt consisted of the following:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Coupon interest expense	$	2,616	$	2,617	$	7,849	$	7,849
Accretion of discount on convertible notes	838		835		2,511		2,503
Amortization of debt issuance costs	148		148		445		445
Total interest expense on convertible debt	$	3,602	$	3,600	$	10,805	$	10,797

See Note 10 - Debt included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional information related to the Company’s convertible debt.

Revolving Credit Facility

In October 2018, the Company entered into an unsecured revolving credit facility of up to $200.0 million which includes a letter of credit subfacility and a swingline loan subfacility. The credit facility is intended to finance ongoing working capital needs and for other general corporate purposes. In May 2021, the Company entered into an amendment agreement in respect of the credit facility, extending the maturity date from October 19, 2021 to May 28, 2024, among other changes. The amended credit facility contains financial covenants including a maximum leverage ratio and a minimum interest coverage ratio. As of September 30, 2022, there were no amounts outstanding under the credit facility and the Company and certain of its subsidiaries that serve as guarantors were in compliance with all covenants.

(7) ACCUMULATED OTHER COMPREHENSIVE INCOME

The following tables summarize changes in the accumulated balances for each component of AOCI, including current-period other comprehensive income and reclassifications out of AOCI, for the periods presented.


	Three Months Ended September 30, 2022
	Unrealized Gains (Losses) on Cash Flow Hedges		Unrealized Gains (Losses) on Available for-Sale Debt Securities		Total
AOCI balance at June 30, 2022	$	30,515	$	(12,043)	$	18,472
Other comprehensive income (loss) before reclassifications	26,698		(4,011)		22,687
Less: gain (loss) reclassified from AOCI	11,344		—		11,344
Tax effect	—		934		934
Net current-period other comprehensive income (loss)	15,354		(3,077)		12,277
AOCI balance at September 30, 2022	$	45,869	$	(15,120)	$	30,749


	Three Months Ended September 30, 2021
	Unrealized Gains (Losses) on Cash Flow Hedges		Unrealized Gains (Losses) on Available for-Sale Debt Securities		Total
AOCI balance at June 30, 2021	$	(2,760)	$	1,821	$	(939)
Other comprehensive income (loss) before reclassifications	11,914		(786)		11,128
Less: gain (loss) reclassified from AOCI	133		—		133
Tax effect	—		183		183
Net current-period other comprehensive income (loss)	11,781		(603)		11,178
AOCI balance at September 30, 2021	$	9,021	$	1,218	$	10,239

Table of Contents

BIOMARIN PHARMACEUTICAL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)


	Nine Months Ended September 30, 2022
	Unrealized Gains (Losses) on Cash Flow Hedges		Unrealized Gains (Losses) on Available for-Sale Debt Securities		Total
AOCI balance at December 31, 2021	$	15,805	$	(1,373)	$	14,432
Other comprehensive income (loss) before reclassifications	49,728		(17,905)		31,823
Less: gain (loss) reclassified from AOCI	19,664		—		19,664
Tax effect	—		4,158		4,158
Net current-period other comprehensive income (loss)	30,064		(13,747)		16,317
AOCI balance at September 30, 2022	$	45,869	$	(15,120)	$	30,749


	Nine Months Ended September 30, 2021
	Unrealized Gains (Losses) on Cash Flow Hedges		Unrealized Gains (Losses) on Available for-Sale Debt Securities		Total
AOCI balance at December 31, 2020	$	(20,028)	$	3,889	$	(16,139)
Other comprehensive income (loss) before reclassifications	24,096		(3,470)		20,626
Less: gain (loss) reclassified from AOCI	(4,953)		—		(4,953)
Tax effect	—		799		799
Net current-period other comprehensive income (loss)	29,049		(2,671)		26,378
AOCI balance at September 30, 2021	$	9,021	$	1,218	$	10,239

For additional discussion of reclassifications from AOCI see Note 5 – Derivative Instruments and Hedging Strategies.

(8) REVENUE, CREDIT CONCENTRATIONS AND GEOGRAPHIC INFORMATION

The Company operates in one business segment, which primarily focuses on the development and commercialization of innovative therapies for people with serious and life-threatening rare diseases and medical conditions.

The following table disaggregates total Net Product Revenues by product.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net product revenues by product:
VIMIZIM	$	155,470	$	136,744	$	511,735	$	466,697
NAGLAZYME	99,506		71,172		343,320		297,321
PALYNZIQ	66,206		60,729		182,734		173,702
KUVAN	57,038		67,687		173,977		217,257
VOXZOGO	48,289		144		102,321		144
BRINEURA	37,793		32,984		111,691		90,641

Total net product revenues marketed by the Company	464,302		369,460		1,425,778		1,245,762
ALDURAZYME net product revenues marketed by Sanofi	29,046		24,380		90,755		102,517
Total net product revenues	493,348		393,840		1,516,533		1,348,279
Royalty and other revenues	11,996		14,902		41,968		48,186
Total revenues	$	505,344	$	408,742	$	1,558,501	$	1,396,465

Table of Contents

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 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 Net Product Revenues within the regions below may have a material adverse effect on the Company’s revenues and results of operations if sales in the respective regions experience difficulties. The table below disaggregates total Net Product Revenues by geographic region, which is based on patient location for Company's commercial products sold directly by the Company, except for ALDURAZYME, which is sold exclusively by Sanofi worldwide.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
United States	$	176,552	$	166,554	$	497,205	$	491,028
Europe	162,583		108,568		480,645		424,144
Latin America	60,791		38,958		213,246		140,911
Rest of world	64,376		55,380		234,682		189,679
Total net product revenues marketed by the Company	$	464,302	$	369,460	$	1,425,778	$	1,245,762
ALDURAZYME net product revenues marketed by Sanofi	29,046		24,380		90,755		102,517
Total net product revenues	$	493,348	$	393,840	$	1,516,533	$	1,348,279

The following table illustrates the percentage of the Company’s total Net Product Revenues attributed to the Company’s largest customers for the periods presented.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Customer A	15	%	20	%	16	%	17	%
Customer B	14	%	16	%	12	%	14	%
Customer C	10	%	11	%	9	%	10	%

Total	39	%	47	%	37	%	41	%

On a consolidated basis, two customers accounted for 23% and 15% of the Company’s September 30, 2022 accounts receivable balance, respectively, compared to December 31, 2021, when two customers accounted for 28% and 16% of the accounts receivable balance, respectively. As of September 30, 2022, and December 31, 2021, the accounts receivable balance for Sanofi included $65.3 million and $67.9 million, respectively, of unbilled accounts receivable, which becomes payable to the Company when the product is sold through by Sanofi. The Company does not require collateral from its customers, but does perform periodic credit evaluations of its customers’ financial condition and requires prepayments in certain circumstances.

The Company's global revenue sources and its business operations were impacted by the COVID-19 pandemic during the nine months ended September 30, 2022 and 2021, mostly in the form of demand interruptions such as missed patient infusions and delayed treatment starts for new patients, and the Company anticipates a continued impact due to COVID-19 on its financial results in 2022. The extent and duration of such effects remain uncertain and difficult to predict, particularly as virus variants continue to spread. The Company is actively monitoring and managing its response and assessing actual and potential impacts to its operating results and financial condition, as well as developments in its business, which could further impact developments, trends and expectations.

The Company is mindful that conditions in the current macroeconomic environment, such as inflation, supply chain disruptions and impacts of the ongoing COVID-19 pandemic, could affect the Company’s ability to achieve its goals. In addition, the Company sells its products in certain countries that face economic volatility and weakness. Although the Company has historically collected receivables from customers in certain countries, sustained weakness or further deterioration of the local economies and currencies may cause customers in those countries to delay payment or be unable to pay for the Company’s products. The Company believes that the allowances for doubtful accounts related to these countries, if any, are adequate based on its analysis of the specific business circumstances and expectations of collection for each of the underlying accounts in these countries. The Company will continue to monitor these conditions and will attempt to adjust its business processes, as appropriate, to mitigate macroeconomic risks to its business.

Table of Contents

BIOMARIN PHARMACEUTICAL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)

(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)

(9) STOCK-BASED COMPENSATION

The Company has stockholder-approved equity incentive plans that provide for the granting of service-based restricted stock units (RSUs), market-based RSUs, performance-based RSUs, stock options and common stock granted under the Company’s Employee Share Purchase Plan (ESPP) to its employees, officers and non-employee directors. Compensation expense included in the Company’s Condensed Consolidated Statements of Comprehensive Income for all stock-based compensation arrangements was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Cost of sales	$	4,361	$	4,339	$	13,449	$	16,907
Research and development	17,055		17,866		47,878		56,199
Selling, general and administrative (SG&A)	33,247		26,821		88,247		80,266
Total stock-based compensation expense	$	54,663	$	49,026	$	149,574	$	153,372

(10) NET ~~LOSS~~INCOME 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~~RSUs and contingent issuances of common stock related to the Company’s convertible debt.

The following table sets forth the computation of basic and diluted earnings per common share ~~(in thousands of common shares)~~(common shares in thousands):

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
)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Numerator:
Net Income (loss), basic	$	(6,652)	$	(36,494)	$	141,810	$	(6,182)
Add: Interest expense, net of tax, on the 2024 Notes	—		—		2,806		—
Net Income (loss), diluted	$	(6,652)	$	(36,494)	$	144,616	$	(6,182)
Denominator:
Weighted-average common shares outstanding, basic	185,597		183,214		185,009		182,616
Effect of dilutive securities:
Issuances under equity incentive plans	—		—		3,273		—
Common stock issuable under the 2024 Notes	—		—		3,970		—
Weighted-average common shares outstanding, diluted	185,597		183,214		192,252		182,616
Net income (loss) per common share, basic	$	(0.04)	$	(0.20)	$	0.77	$	(0.03)
Net income (loss) per common share, diluted	$	(0.04)	$	(0.20)	$	0.75	$	(0.03)

~~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~~addition to the equity instruments included in the table above, the table below presents potential shares of common stock that were excluded from the computation of basic and diluted ~~earnings~~income 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


	Three Months Ended September 30,		Nine Months Ended September 30,
	2022	2021	2022	2021
Issuances under equity incentive plans	12,221	12,720	8,948	12,720
Common stock issuable under the Company's convertible notes	8,335	8,335	4,365	8,335
Total number of potentially issuable shares	20,556	21,055	13,313	21,055

~~The potential effect~~

Table 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:

Contents

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 marketable equity securities, measured using quoted prices in its active market, which was considered a strategic investment. In the first quarter of 2017, the strategic investment was sold for a realized gain of $3.3 million. As of December 31, 2016, the fair value of the Company’s marketable equity securities was $4.1 million, which included an unrealized gain of $2.3 million, and was recorded in Other Assets in the Company’s Condensed Consolidated Balance Sheet.

BIOMARIN PHARMACEUTICAL INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~– (Continued)~~

(In thousands of U.S. ~~dollars,~~Dollars, except per share amounts or as otherwise disclosed)

~~The fair values of available-for-sale securities by contractual maturity were as follows:~~

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 assets consisted of the following:~~

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

~~Indefinite-Lived Intangible Assets~~

Intangible assets related to IPR&D assets are considered to be indefinite-lived until the completion or abandonment of the associated R&D 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 a reduction in the fair value of the IPR&D assets below their respective carrying amounts. If and 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 in time.

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

~~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 products for the treatment of DMD. Pursuant to the Agreements, Sarepta paid the Company a one-time upfront fee of $35.0 million, which was recognized 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 products to the Company if certain development 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.

See Note 7 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 for additional information related to the Company’s intangible assets.

~~(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 related 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.

~~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 of senior subordinated convertible notes with a maturity date of August 1, 2024. T~~he ~~2024 Notes~~ ~~were issued to the public at 98% of face value and bear interest at the rate of 0.599% per annum. Interest is payable semi-annually in cash~~ ~~on February 1 and August 1 of each year, beginning February 1, 2018. The 2024 Notes are convertible, at the option of the holder i~~nto shares of the Company’s common stock. The initial conversion rate for the 2024 Notes is 8.0212 shares per $1,000 principal amount of the 2024 Notes, which represents a conversion price of approximately $124.67 per share, subject to adjustment under certain conditions. Following certain corporate transactions, the Company will, in certain circumstances, increase the conversion rate for a holder that elects to convert its 2024 Notes in connection with such corporate transactions by a number of additional shares of the Company’s common stock. A holder may convert fewer than all of such holder’s 2024 Notes so long as the amount of the 2024 Notes converted is an integral multiple of $1,000 principal amount. Net proceeds from the offering were $481.7 million.

The 2024 Notes are senior subordinated, unsecured obligations, and rank (i) subordinated in right of payment to the prior payment in full of any of the Company’s existing and future senior debt, (ii) equal in right of payment to any of the Company’s existing and future senior subordinated debt, (iii) senior in right of payment to any of the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the 2024 Notes, and (iii) effectively subordinated to any of the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness and structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of the Company’s subsidiaries. Upon the occurrence of a “fundamental change,” as defined in the indenture governing the 2024 Notes, the holders may require the Company to repurchase all or a portion of such holder’s 2024 Notes for cash at 100% of the principal amount of the 2024 Notes being purchased, plus any accrued and unpaid interest.

In connection with the issuance of the 2024 Notes, the Company recorded a discount on the 2024 Notes of $9.9 million, which will be accreted and recorded as additional interest expense over the life of the 2024 Notes. During each of the three and nine months ended September 30, 2017, the Company recognized $0.2 million of debt discount accretion. The Company also incurred $3.4 million of issuance costs. These costs were deferred and are being amortized over the life of the 2024 Notes and recorded as additional interest expense. During each of the three and nine months ended September 30, 2017, the Company recognized $0.1 million of amortization of deferred issuance costs related to the 2024 Notes.

~~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 information regarding the Company’s convertible debt:~~

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

~~(1)~~

~~The fair value of the Company’s fixed rate convertible debt is based on open market trades and is classified as Level 1 in the fair value hierarchy.~~

~~Interest expense on the Company’s convertible debt consisted of the following:~~

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 Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 for additional information related to the Company’s convertible debt.

~~BIOMARIN PHARMACEUTICAL INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(In thousands of U.S. dollars, except per share amounts or as otherwise disclosed)~~

~~Revolving Credit Facility~~

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. The Credit Agreement provides for up to $100.0 million in revolving loans (the Revolving Credit Facility), a $10.0 million letter of credit subfacility and a $15.0 million swing line loan subfacility. The maturity date of the Revolving Credit Facility will occur on November 29, 2018. Interest on any outstanding balance of the Revolving Credit Facility is payable quarterly and draws may be voluntary prepaid at any time without penalty. In connection with entering into the Credit Agreement, $0.6 million in financing costs were incurred and will be amortized as Interest Expense over the term of the Credit Agreement. As of September 30, 2017 and December 31, 2016, there were no outstanding amounts due under the Revolving Credit Facility.

In connection with the Revolving Credit Facility, the Company and certain of its subsidiaries are required to comply with covenants, including, among other things, restrictions on the Company’s and such subsidiaries’ ability to incur additional indebtedness, dispose of its assets, incur liens, make investments, and pay dividends or other distributions, in each case subject to specified exceptions. The Credit Agreement also contains customary indemnification obligations and customary events of default. If the Company’s Global Liquidity, which is defined as the sum of the market value of unrestricted cash, marketable securities and other assets to the extent constituting “cash and cash equivalents,” “short-term investments” or “long-term investments” as reflected in the Company’s Condensed Consolidated Balance Sheet, in each case, held by the Company or certain of the Company’s subsidiaries at such time, regardless of where such assets are domiciled, falls below $225.0 million at the end of any month or at the time of any borrowing or issuance of a letter of credit under the Revolving Credit Facility, then the Company’s obligations under the Credit Agreement will also be secured by the assets held by the Company in the custody account, which was established in the first quarter of 2017. As of September 30, 2017, the Company and certain of its subsidiaries that serve as guarantors were in compliance with all covenants.

~~(12) DERIVATIVE INSTRUMENTS AND HEDGING STRATEGIES~~

The Company uses forward foreign currency exchange contracts to hedge certain operational exposures resulting from potential changes in foreign currency exchange rates. Such exposures result from portions of the Company’s forecasted revenues and operating expenses being denominated in currencies other than the U.S. dollar, primarily the Euro.

The Company designates certain of these forward foreign currency exchange contracts as hedging instruments and enters into some forward foreign currency exchange contracts that are considered to be economic hedges that are not designated as hedging instruments. 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 values of forward foreign currency exchange contracts are estimated using current exchange rates and interest rates, and take into consideration the current creditworthiness of the counterparties or the Company, as applicable. Information regarding the specific instruments used by the Company to hedge its exposure to foreign currency exchange rate fluctuations is provided below. See Note 13 to these Condensed Consolidated Financial Statements for additional discussion regarding the fair value of forward foreign currency exchange contracts.

The Company enters into forward foreign currency exchange contracts in order to protect against the fluctuations in revenue and operating expenses associated with foreign currency-denominated cash flows. The Company has formally designated these forward foreign currency exchange contracts as cash flow hedges and expects them to be highly effective in offsetting fluctuations in operating expenses denominated in Euros and revenues denominated in currencies other than the U.S. dollar related to changes in foreign currency exchange rates.

~~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 the Company’s 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 – 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 exposure 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.

The Company also enters into forward foreign currency exchange contracts that are 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’s 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

~~BIOMARIN PHARMACEUTICAL INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(In thousands of U.S. dollars, except per share amounts 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
)

~~(1)~~

~~Net change in the fair value of the effective portion classified as accumulated other comprehensive income (loss).~~

~~(2)~~

~~Effective portion classified as Net Product Revenues and SG&A expense.~~

~~(3)~~

~~Ineffective portion and amount excluded from effectiveness testing classified as SG&A expense.~~

~~(4)~~

~~Classified as SG&A expense.~~

The Company is exposed to counterparty credit risk on all of its derivative financial instruments. The Company has established and maintains strict counterparty credit guidelines and enters into hedges only with financial institutions that are investment grade or better to minimize the Company’s exposure to potential defaults. The Company does not require collateral to be pledged under these agreements.

~~BIOMARIN PHARMACEUTICAL INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(In thousands of U.S. dollars, except per share amounts or as otherwise disclosed)~~

~~(13) FAIR VALUE MEASUREMENTS~~

The Company measures certain financial assets and liabilities at fair value on a recurring basis, including available-for-sale fixed income securities and foreign currency derivatives. The tables below present the fair value of these financial assets and liabilities determined using the following input levels.

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

~~BIOMARIN PHARMACEUTICAL INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(In thousands of U.S. dollars, except per share amounts or as otherwise disclosed)~~

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

~~(1)~~

~~See Note 12 to these Condensed Consolidated Financial Statements for further information regarding the derivative instruments.~~

~~(2)~~

~~The restricted investments at September 30, 2017 and December 31, 2016 secure the Company’s irrevocable standby letter of credit obtained in connection with certain commercial agreements.~~

~~BIOMARIN PHARMACEUTICAL INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(In thousands of U.S. dollars, except per share amounts or as otherwise disclosed)~~

~~(3)~~

The Company had investments in marketable equity securities measured using quoted prices in an active market that were considered strategic investments. See Note 7 to these Condensed Consolidated Financial Statements for additional discussion regarding the Company’s strategic investment.

~~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 interest 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

~~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 term 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%

~~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.

~~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 included in the Company’s Condensed Consolidated Statements of Comprehensive Loss for all stock-based compensation arrangements was as follows:~~

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 forfeitures on quarterly reporting was not significant.~~

Stock-based compensation expense of $4.5 million and $12.1 million was capitalized into inventory for the three and nine months ended September 30, 2017, respectively, compared to stock-based compensation expense of $3.5 million and $9.0 million that was capitalized into inventory for the three and nine months ended September 30, 2016, respectively. Capitalized stock-based compensation is recognized as cost of sales when the related product is sold.

~~BIOMARIN PHARMACEUTICAL INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(In thousands of U.S. dollars, except per share amounts or as otherwise disclosed)~~

~~(15) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)~~

The following table summarizes amounts reclassified out of Accumulated Other Comprehensive Income (Loss) (AOCI) and their effect on the Company’s Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2017 and 2016.

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

The following tables summarize changes in the accumulated balances for each component of AOCI, including current period other comprehensive income (loss) and reclassifications out of AOCI for the three and nine months ended September 30, 2017 and 2016.

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

AOCI balance at June 30, 2017

$
(13,569
)

$
(1,080
)

$
(9
)

$
(14,658
)
Other comprehensive income (loss) before
reclassifications

(10,569
)

147

2

(10,420
)
Less: net loss reclassified from AOCI

(3,700
)

—

—

(3,700
)
Tax effect

—

(56
)

—

(56
)
Net current-period other comprehensive income (loss)

(6,869
)

91

2

(6,776
)
AOCI balance at September 30, 2017

$
(20,438
)

$
(989
)

$
(7
)

$
(21,434
)

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

~~BIOMARIN PHARMACEUTICAL INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(In thousands of U.S. dollars, except per share amounts or as otherwise disclosed)~~

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

AOCI balance at December 31, 2016

$
13,006

$
(178
)

$
(12
)

$
12,816

Other comprehensive income (loss) before
reclassifications

(33,933
)

1,981

5

(31,947
)
Less: gain (loss) reclassified from AOCI

(489
)

3,252

—

2,763

Tax effect

—

460

—

460

Net current-period other comprehensive income (loss)

(33,444
)

(811
)

5

(34,250
)
AOCI balance at September 30, 2017

$
(20,438
)

$
(989
)

$
(7
)

$
(21,434
)

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) REVENUE AND CREDIT CONCENTRATIONS~~

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
%

~~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 one business segment, which focuses on the development and commercialization of innovative therapies for people with serious and life threatening rare diseases and medical conditions. All products are included in one segment because all of the Company’s products have similar economic and other characteristics, including 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

~~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 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. Although Genzyme sells Aldurazyme worldwide, the 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 are located in the U.S.

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Total revenues by geographic region:

United States

$
151,010

$
130,356

$
425,107

$
365,674

Europe

97,825

62,821

228,775

187,328

Latin America

26,356

38,789

121,824

106,803

Rest of world

58,957

47,930

179,635

156,958

Total revenues

$
334,148

$
279,896

$
955,341

$
816,763

~~(18)~~(11) COMMITMENTS AND CONTINGENCIES

Contingencies

From time to time the Company is involved in legal actions arising in the normal course of its business. ~~The most significant of these actions are described below.~~

The process of resolving matters through litigation or other means is inherently uncertain and it is possible that an unfavorable resolution of these matters could adversely affect the Company, its results of operations, financial condition ~~and~~or cash flows. The Company’s general practice is to expense legal fees as services are rendered in connection with legal matters, and to accrue for liabilities when losses are probable and reasonably estimable.

~~Paragraph IV Notices~~

The Company 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 it 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 the Company’s patents listed in the FDA's Approved Drug Products with Therapeutic Equivalence Evaluations (the Orange Book). The Company filed a lawsuit alleging patent infringement against DRL. In August 2017, the Company 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, the Company granted DRL a non-exclusive license to its 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.

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.

The 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

~~BIOMARIN PHARMACEUTICAL INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~(In thousands of U.S. dollars, except per share amounts or as otherwise disclosed)~~

listed in the FDA’s Orange Book. The Company, together with Merck & Cie, filed a lawsuit alleging patent infringement against DRL. In September 2015, the Company 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, the Company granted DRL a non-exclusive license to its 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.

Contingent Payments

As of September 30, ~~2017,~~2022, the Company iswas subject to contingent payments ~~totaling approximately $600.2~~considered reasonably possible of $777.6 million, ~~upon achievement of certain~~including $381.5 million related to an early-stage development ~~and regulatory activities and commercial sales and licensing milestones if they occur before certain dates~~program licensed from a third party in the ~~future. Of this amount, $218.3~~fourth quarter of 2021 and $225.0 million ~~(or €185 million based on the exchange rate of 1.18 USD per Euro in effect on September 30, 2017) relates~~related to the Merck PKU Business acquisition and $53.3 million relates to programs that are no longer being developed. See Note 13 to these Condensed Consolidated Financial Statements for further information regarding the Company’s contingent acquisition consideration payable.

~~As of September 30, 2017, the Company has recorded~~an early-stage development program licensed from a ~~total of $179.4 million of short-term and long-term contingent acquisition consideration payable on its Condensed Consolidated Balances Sheet, of which $52.6 million is expected to be paid~~third party in the ~~next twelve months.~~

second quarter of 2020.

Other Commitments

The Company uses experts and laboratories at universities and other institutions to 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~~procure active pharmaceutical ingredients, certain inventory-related items and ~~post-marketing~~certain third-party R&D services, production services and facility construction services. As of September 30, 2022, such commitments ~~related to the Company’s approved products.~~

~~(19) BENEFIT FROM INCOME TAXES~~

were estimated at approximately $171.5 million. The Company has ~~historically computed its interim period benefit~~also licensed technology from ~~income taxes by applying its forecasted effective tax rate~~third parties, for which it is required to ~~year-to-date earnings. However, due~~pay royalties upon future sales, subject 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,certain annual minimums.

(1 2) SUBSEQUENT EVENT

On October 6, 2022, the Company ~~has computed the U.S. component~~announced a plan to simplify its organizational design, which included a reduction in force of approximately 120 employees (representing approximately 4% of the ~~consolidated benefit~~ ~~from income taxes~~Company’s global workforce). The reduction in force primarily impacts U.S. employees and is expected to be substantially completed by December 31, 2022. As a result of the reduction in force, the Company expects to incur total estimated pre-tax charges of approximately $20.0 million to $25.0 million representing cash expenditures for severance and employee termination benefits. The Company accrued $4.8 million in SG&A in the ~~three~~third quarter of 2022 and ~~nine months ended September 30, 2017~~the remainder of the estimated charges are expected to be recorded in the fourth quarter of 2022.

Table of Contents

Item 2. Management’s Discussion and ~~2016 using an actual year-to-date tax calculation. Foreign tax expense was computed using a forecasted annual effective tax rate for the three~~Analysis of Financial Condition and ~~nine months ended September 30, 2017 and 2016.~~

Results of Operations

~~Item 2.~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

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 ~~risks~~risk factor related to the impact of the coronavirus pandemic, “The COVID-19 pandemic could continue to materially adversely affect our business, results of operations and ~~uncertainties~~financial 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).

Table of Contents

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

(In millions, except as otherwise disclosed)

Overview

We are a global biotechnology company that develops and commercializes innovative therapies for people with serious

and life-threatening rare diseases and medical conditions. We select product candidates for diseases and conditions that represent

a significant unmet medical need, have well-understood biology and provide an opportunity to be first-to-market or offer a

significant benefit over existing products.

Our ~~therapy~~ portfolio consists of ~~six products~~eight commercial therapies and multiple clinical and ~~pre-clinical~~preclinical product candidates. ~~Our~~A summary of our commercial products, ~~are Aldurazyme (laronidase) for~~as of September 30, 2022, is provided below:

Commercial Products

Indication

Products marketed by BioMarin:

VIMIZIM (elosulfase alpha)

MPS IVA (1)

NAGLAZYME (galsulfase)

MPS VI (2)

PALYNZIQ (pegvaliase-pqpz)

PKU (3)

KUVAN (sapropterin dihydrochloride)

PKU (4)

BRINEURA (cerliponase alfa)

CLN2 (5)

VOXZOGO (vosoritide)

Achondroplasia (6)

ROCTAVIAN (valoctocogene roxaparvovec) (7)

Severe Hemophilia A

Products not marketed by BioMarin:

ALDURAZYME (laronidase)

MPS I (8)

(1)For the treatment of Mucopolysaccharidosis ~~I (MPS I), Brineura (cerliponase alfa) for~~IV Type A

(2)For the treatment of Mucopolysaccharidosis VI

(3)For adult patients with PKU

(4)For the treatment of phenylketonuria

(5)For the treatment of late infantile neuronal ceroid lipofuscinosis type 2 ~~(CLN2)~~

(6)For the treatment of achondroplasia in children aged five years and older for the United States (U.S.), ~~Firdapse (amifampridine phosphate)~~aged two years and older for ~~Lambert Eaton Myasthenic Syndrome (LEMS), Kuvan (sapropterin dihydrochloride)~~the European Union (EU) and for ~~phenylketonuria (PKU), Naglazyme (galsulfase)~~various age ranges for other markets

(7)ROCTAVIAN (formerly known as valoctocogene roxaparvovec) for the treatment of adults with severe hemophilia A was conditionally approved by the European Commission (EC) in August 2022

(8)For the treatment of Mucopolysaccharidosis ~~VI (MPS VI)~~I

A summary of our on-going clinical development programs, as of September 30, 2022, is provided below:

Clinical Development Programs

Target
Indication

Stage

ROCTAVIAN (1)

Severe Hemophilia A

Clinical Phase 3

BMN 255

Primary Hyperoxaluria

Clinical Phase 1/2

BMN 331

Hereditary Angioedema

Clinical Phase 1/2

(1)In August 2022, the EC granted marketing approval for ROCTAVIAN in the EU; In October 2022, the U.S. Food and ~~Vimizim (elosulfase alpha)~~Drug Administration (FDA) accepted our resubmission of the Biologics License Application (BLA) for ~~Mucopolysaccharidosis IV Type A (MPS IV A).~~

review

Table of Contents

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

(In millions, except as otherwise disclosed)

Financial Highlights

Key components of our results of operations include the following:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Total revenues	$	505.3	$	408.7	$	1,558.5	$	1,396.5
Cost of sales	$	116.3	$	103.5	$	356.4	$	350.8
Research and development (R&D) expense	$	157.8	$	157.9	$	476.9	$	467.7
Selling, general and administrative (SG&A) expense	$	216.8	$	183.3	$	608.3	$	541.8

Gain on sale of nonfinancial assets, net	$	—	$	—	$	(108.0)	$	—

Provision for (benefit from) income taxes	$	4.7	$	(9.7)	$	25.3	$	(2.6)
Net income (loss)	$	(6.7)	$	(36.5)	$	141.8	$	(6.2)

See “Results of Operations” below for discussion of our results for the periods presented.

Uncertainty Relating to the COVID-19 Pandemic

The COVID-19 pandemic continues to affect economies and business around the world. Our global revenue sources, mostly in the form of demand interruptions such as missed patient infusions and delayed treatment starts for new patients, and our overall business operations were impacted by COVID-19 during the nine months ended September 30, 2022 and 2021, and we anticipate a continued impact on our financial results in 2022. The extent and duration of such effects remain uncertain and difficult to predict, particularly as virus variants continue to spread. We are actively monitoring and managing our response and assessing actual and potential impacts to our operating results and financial condition, as well as developments in our business, which could further impact the developments, trends and expectations described below. See the risk factor related to the impact of the coronavirus pandemic, “The COVID-19 pandemic could continue to materially adversely affect our business, results of operations and financial condition.” described in “Risk Factors” in Part II, Item 1A of this Quarterly Report, for additional details on the impact of the COVID-19 pandemic.

Business Developments

We continued to grow our commercial business and advance our product candidate pipeline during ~~2017.~~2022. We believe that the combination of our internal research programs, acquisitions and partnerships will allow us to continue to develop and commercialize innovative therapies for people with serious and life-threatening rare diseases and medical conditions. Below is a summary of key business ~~developments~~developments:

Continued Emphasis on Research and Development

New Product Launches, Approvals and Mid-stage Product Life Cycle Expansion Opportunities

•VOXZOGO: The global expansion of VOXZOGO is actively underway, with market access and reimbursement activities progressing as anticipated. As of September 30, 2022, we have seen worldwide increases in ~~2017~~the number of children being treated with commercial VOXZOGO and in the number of active markets contributing to ~~date~~:

VOXZOGO sales.

During the third quarter, Voxzogo became commercially available in Japan resulting in meaningful contributions from the early launch.

~~In October 2017,~~During the third quarter, we ~~announced that~~held discussions with global regulatory health authorities regarding the FDA had completed its review of the Investigational New Drug (IND) application for valoctocogene roxaparvovec (formerly referred to as BMN 270), an investigational gene therapy treatment for severe hemophilia A, and concluded that we could proceed with its clinical development. The IND application included 52-week data at the 6e13 vg/kg dose and the protocol for the Phase 3 study using the 6e13 vg/kg dose. We expect to file for approval of valoctocogene roxaparvovec with 52-week datafavorable results from the Phase ~~3 studies. The protocol for the second Phase 3~~2 randomized, double-blind, placebo-controlled VOXZOGO study ~~using the 4e13 vg/kg dose has also been submitted~~in infants and young children up to ~~the FDA. The FDA granted valoctocogene roxaparvovec Breakthrough Therapy Designation in October 2017. The FDA’s Breakthrough Therapy Designation is intended~~five years of age with achondroplasia. Based on these interactions, we intend to ~~facilitate and expedite development and review of new drugs to address unmet medical need~~submit supplemental marketing applications in the ~~treatment of a serious condition. We also announced that the Phase 3 Clinical Trial Application was approved~~U.S. and EU by the ~~United Kingdom Medicines and Healthcare Products Regulatory Agency (MHRA). In July 2017, we announced that median and mean Factor VIII levels from week 20 through 52~~end of 2022 to expand access to VOXZOGO treatment for ~~the 6e13 vg/kg dose cohort have been consistently within the normal levels post treatment. We expect to initiate the global Phase 3 program~~this younger age group.

•ROCTAVIAN: Following EMA approval in the ~~fourth~~third quarter of ~~2017.~~

~~In October 2017, we announced~~2022, the ~~selection~~commercial launch of ~~our next drug development candidate, BMN 290,~~ROCTAVIAN is now underway. To determine eligibility for ROCTAVIAN, treating physicians in countries covered by the EMA approval can use a ~~selective chromatin modulation therapy intended~~companion diagnostic (CDx) test to ensure that patients do not have pre-existing antibodies to AAV5. The CDx test is CE-marked and designed to ensure the highest safety standards for use in determining patient eligibility for treatment with ROCTAVIAN.

Table of ~~Friedreich's Ataxia (FA), a rare autosomal recessive disorder that results in disabling neurologic~~Contents

Management’s Discussion 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 systemAnalysis of Financial Condition and ~~cardiac target tissues, and its preservation~~Results of ~~the selectivity of the original Repligen compound. We expect to submit the IND application in the second half of 2018.~~

Operations (continued)

(In millions, except as otherwise disclosed)

•

In October 2017, updated results on the open-label Phase 2 study of vosoritide demonstrated a sustained increase in annualized growth velocity that was accompanied by sustained improvements over time in height compared to age- and gender-matched unaffected children as measure by z-scores. In addition, continued improvement over time in proportionality as measured by a ratio of the upper and lower body measurements, or U/L ratio, was demonstrated. Our on-going Phase 3 trial for vosoritide for the treatment of children with achondroplasia is a randomized, placebo-controlled study of vosoritide in approximately 110 children with achondroplasia ages 5-14 for 52 weeks. This study will be

followed by a subsequent open-label extension. In April 2017, following discussions with global health authorities, we announced plans to augment the growth velocity data in the Phase 3 study with assessments of proportionality, functionality and cumulative growth observed in that study and the ongoing Phase 2 study, as well as safety and efficacy in infants.

~~In August 2017,~~On October 12, 2022, the FDA accepted our resubmission of the BLA for ~~Priority Review~~ROCTAVIAN with a current Prescription Drug User Fee Act (PDUFA) target action date of March 31, 2023. However, we anticipate three additional months of review may be necessary based on 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.number of data read-outs that will emerge during the procedure. The FDA ~~is not currently planning~~recently communicated plans to hold an advisory committee meeting, but has yet to discuss the BLA. The Prescription Drug User Fee Act (PDUFA) action date is February 28, 2018. However, the FDA has requested additional Chemistry, Manufacturing, and Controls (CMC) information, which we expect, when submitted, willprovide a date. If approved, ROCTAVIAN would be ~~classified as a major amendment and result in a three month extension of the PDUFA date. We also intend to submit a Marketing Authorization Application to the EMA in~~ the first ~~quarter of 2018.~~

In August 2017, we entered into a settlement agreement with Dr. Reddy's Laboratories, Inc. and Dr. Reddy's Laboratories, Ltd. (collectively, DRL) that resolves the patent litigation with DRL in the U.S. related to Kuvan 100 mg oral powder. Under the terms of the agreement, we granted DRL a non-exclusive license to our patents related to Kuvan to allow DRL to market a generic version of sapropterin dihydrochloride in oral powder form in 100 mg and 500 mg packet formulationsgene therapy in the U.S. for the ~~indications approved for Kuvan beginning on October 1, 2020, or earlier under certain circumstances.~~

In July 2017, we 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 the use of EXONDYS 51 and all future exon-skipping products for the treatment of DMD. Pursuant to the Agreements, Sarepta paid us a one-time upfront fee of $35.0 million, which we recognized 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 products to us if certain development and sales milestones are achieved. Additionally, Sarepta will pay us royalties based on 5% of net salessevere hemophilia A.

At present, in the U.S. ~~through~~ the ~~end~~Premarket Approval (PMA) application is under review at the Center for Devices and Radiological Health to support contemporaneous approval of ~~2023~~a CDx test along with the ROCTAVIAN BLA.

Product expansion opportunities with ROCTAVIAN are supported by a number of clinical studies currently underway. The Phase 3b study to evaluate ROCTAVIAN with prophylactic corticosteroids has completed enrollment and 8%is expected to read-out in early 2023. There are two additional studies: one investigating ROCTAVIAN treatment in those with active or prior inhibitors, as well as one study investigating ROCTAVIAN in people with pre-existing antibodies against AAV5.

Select Earlier-stage Development Portfolio

▪BMN 255 for primary hyperoxaluria type 1, a subset of ~~net sales through September 30, 2024~~chronic renal disease: We are proceeding with the multi-ascending dose phase of the First-in-Human study with BMN 255. We believe the availability of a potent, orally bioavailable, small molecule like BMN 255 may be able to significantly reduce disease and treatment burden in certain people with chronic renal disease.

▪BMN 331 gene therapy product candidate for Hereditary Angioedema (HAE): Dosing continues in the ~~EU and in other countries where certain of our patents exist. We retained the right~~Phase 1/2 HAERMONY study to ~~convert the license to a co-exclusive right in the event we decide to proceed with~~evaluate BMN 331, an ~~exon-skipping~~investigational AAV5-mediated gene therapy for ~~DMD.~~

people living with HAE, including dose escalation to the 6e13vg/kg dose, which our non-clinical studies project to provide therapeutic levels of C1-inhibitor.

Reorganization Plan

~~In July 2017,~~On October 6, 2022, we ~~commissioned~~announced our decision to redesign and simplify the organization to better focus investments that advance our Research and Development pipeline, maximize recent commercial ~~gene therapy manufacturing facility, located in Novato, California, and began Good Manufacturing Practices (GMP) production~~launch success, prepare for a potential launch 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 EU for the treatment of CLN2 disease. We immediately began marketing Brineura in the EU and began shipping the product within the EU in July 2017.

In April 2017, the United States (U.S.) Food and Drug Administration (FDA) approved Brineura to treat children with CLN2 disease. Brineura is the first treatment approved in the U.S. to slow the progression of loss of ambulation in children with CLN2 disease. We immediately began marketing BrineuraROCTAVIAN in the U.S., and ~~began shipping the product within the U.S.~~drive core infrastructure optimization. As a result, there will be a reduction 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 termsforce 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.

•

In January 2017, we announced preliminary results from a Phase 1/2 trial of BMN 250, an investigational enzyme replacement therapy using a novel fusion of recombinant human NAGLU with a peptide derived from insulin-like growth factor 2 (IGF2), for the treatment of Sanfilippo B syndrome, or MPS IIIB, which began enrolling patients in April 2016. In September 2017, we announced interim data from the dose escalation portion of a Phase 1/2 trial of BMN 250. We

continued to observe that BMN 250 reduced heparan sulfate levels to normal range in cerebral spinal fluid of MPS IIIB patients and observed liver size decreases and Development Quotient stabilization or improvement.

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~~

~~Key components~~approximately 120 employees (representing approximately 4% of our ~~results~~global workforce), most of ~~operations include the following (in millions):~~

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Total revenues

$
334.1

$
279.9

$
955.3

$
816.8

Cost of sales

59.5

50.7

165.8

145.5

Research and development (R&D) expense

154.1

160.8

442.1

486.7

Selling, general and administrative (SG&A) expense

130.5

118.8

394.1

333.6

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

~~See~~ ~~“Results of Operations”~~ ~~below for a discussion of the detailed components and analysis of the amounts above.~~

~~Total Revenues include net product revenues and royalty and other revenues. Net Product Revenues~~whom 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 costs 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.

~~Our cash, cash equivalents, short-term investments and long-term investments totaled approximately $1.7 billion as of~~ ~~September 30, 2017, compared to $1.4 billion as of December 31, 2016.~~ ~~We have historically financed our operations primarily through our cash flows from operating activities and the issuance of common stock and convertible debt.~~ We expect to ~~fund our operations~~incur pre-tax severance and employee termination benefit charges of approximately $20.0 million to $25.0 million, of which $4.8 million was recorded in the third quarter of 2022 with our net product revenues from our commercial products, cash, cash equivalents, and short-term and long-term investments, supplemented by proceeds from equity or debt financings and loans, or collaborative agreements with corporate partners. The timing and mixthe remainder expected to be recorded in the fourth quarter of our funding options could change depending on many factors, including how much we elect to spend on our development programs, potential licenses and acquisitions of complementary technologies, products and companies or if we elect to settle all or a portion of our convertible debt in cash. See “~~Financial Position, Liquidity and Capital Resources” below for a further discussion of our liquidity and capital resources.~~

2022.

Critical Accounting ~~Policies and~~ Estimates

In preparing our Condensed Consolidated Financial Statements in accordance with U.S. ~~generally 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~~revenues and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and discuss our critical accounting estimates with the Audit Committee of our Board of Directors. We base our ~~assumptions, judgments and~~ estimates on historical experience and various other ~~factors~~assumptions 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 evaluate our assumptions, judgments and estimates. We also discuss our critical accounting policies and estimates with the Audit Committee of our Board of Directors. We believe that the assumptions, judgments and estimates involved 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~~estimates have not differed materially from actual results.

The full extent to which the ongoing COVID-19 pandemic could continue to directly or indirectly impact our business, results.

of operations and financial 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, particularly as virus variants continue to spread. As events continue to evolve and additional information becomes available, our estimates may change materially in future periods.

There have been no significant changes to our critical accounting ~~policies and~~ estimates during the nine months ended September 30, ~~2017,~~2022, compared to ~~the critical accounting policies and estimates~~those 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.~~

2021, filed with the Securities and Exchange Commission on February 25, 2022.

Recent Accounting Pronouncements

See Note 41 to our accompanying Condensed Consolidated Financial Statements for a description of recent accounting pronouncements, if any, and our expectation of their impact ~~if any,~~ on our results of operations and financial condition.

Table of Contents

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(continued)

(In millions of U.S. dollars, except as otherwise disclosed)

Results of Operations

Net ~~Loss~~

~~Our net loss~~Product Revenues

Net Product Revenues consisted of the following:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022		2021		Change		2022		2021		Change
Net product revenues by product:
VIMIZIM	$	155.5	$	136.9	$	18.6	$	511.7	$	466.8	$	44.9
NAGLAZYME	99.5		71.2		28.3		343.3		297.3		46.0
PALYNZIQ	66.2		60.7		5.5		182.7		173.7		9.0
KUVAN	57.0		67.7		(10.7)		174.0		217.3		(43.3)
VOXZOGO	48.3		0.1		48.2		102.3		0.1		102.2
BRINEURA	37.8		32.9		4.9		111.7		90.6		21.1

Total net product revenues marketed by BioMarin	$	464.3	$	369.5	$	94.8	$	1,425.7	$	1,245.8	$	179.9
ALDURAZYME net product revenues marketed by Sanofi	29.0		24.4		4.6		90.8		102.5		(11.7)
Total net product revenues	$	493.3	$	393.9	$	99.4	$	1,516.5	$	1,348.3	$	168.2

Net Product Revenues include revenues generated from our approved products. In the U.S., our commercial products, except for PALYNZIQ and ALDURAZYME, are generally sold to specialty pharmacies or end-users, such as hospitals, which act as retailers. PALYNZIQ is distributed in the ~~three months ended~~ ~~September 30, 2017~~ ~~was $12.5 million, compared~~U.S. through certain certified specialty pharmacies under the PALYNZIQ Risk Evaluation and Mitigation Strategy (REMS) program, and ALDURAZYME is marketed worldwide by Sanofi. Outside the U.S., our commercial products are sold to ~~a net loss of $37.4 million~~authorized distributors or directly to government purchasers or hospitals, which act as the end-users.

The increase in Net Product Revenues for the three months ended September 30, ~~2016. Our net loss for~~2022 as compared to the ~~nine~~three months ended September 30, ~~2017~~,2021 was ~~$65.7 million, compared~~primarily attributed to the following:

•VOXZOGO: ramp up of commercial sales due to new patients initiating therapy globally following regulatory approvals in late 2021 and 2022; and

•VIMIZIM and NAGLAZYME: higher product sales primarily attributed to the timing of orders in countries that place large government orders, particularly in Europe and Latin America and new patients initiating therapy in Europe and the Middle East; partially offset by

•KUVAN: lower sales primarily attributed to increasing generic competition as a ~~net~~result of the loss of ~~$539.5 million~~exclusivity in the U.S. that occurred in October 2020. We anticipated and prepared for this loss of exclusivity and the reduction in our market share, as well as the adverse effect on our revenues and results of operations. We expect to continue to experience adverse effects on our market share and revenues in the future due to the loss of exclusivity in the U.S., patent challenges in the EU, and the contracting sapropterin dihydrochloride market.

The increase in Net Product Revenues for the nine months ended September 30, ~~2016. The decrease in net loss was primarily a result of the following (in millions):~~

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

~~(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~~2022 as compared to ~~the same periods in 2016. Additionally, during~~ the nine months ended September 30, ~~2016 we recorded an impairment charge~~2021 was primarily attributed to the following:

•VOXZOGO: ramp up of ~~$599.1 million~~commercial sales due to new patients initiating therapy globally;

•VIMIZIM and NAGLAZYME: higher product sales primarily attributed to timing of orders in countries that place large government orders, particularly in Latin America, the Middle East and Europe and new patients initiating therapy; and

•BRINEURA: higher sales primarily due to ~~the termination~~new patients initiating therapy in Europe and U.S.; partially offset by

•KUVAN: lower sales primarily attributed to increasing generic competition as a result of the ~~Kyndrisa program, which was partially offset by~~loss of exclusivity in the ~~reversal of the deferred tax liability~~U.S. 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.

~~Net Product Revenues~~

~~A summary of our various commercial products, including key metrics as of September 30, 2017, is provided below:~~

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
occurred in October 2020.

~~(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.

~~Net product revenues consisted of the following (in millions):~~

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

Our Brineura, Firdapse, Kuvan, Naglazyme and Vimizim customers include a limited number of specialty pharmacies and 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 us and end-users and generally do not stock significant quantities of our products. However, inIn certain countries, ~~particularly in Latin America,~~ governments place large periodic orders for ~~Naglazyme and Vimizim. The~~our products. We expect that the timing of these large government orders ~~can~~will continue to be inconsistent, ~~and can~~which may create significant ~~quarter~~period to ~~quarter~~period variation in our revenues. ~~Genzyme Corporation (Genzyme)~~ isWe anticipate the COVID-19 pandemic will have a continued impact on the remainder of 2022 Net Product Revenues as many of our ~~sole customer~~

Table of Contents

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

(In millions of U.S. dollars, except as otherwise disclosed)

products are administered via infusions in a clinic or hospital setting and/or by a healthcare professional. Although we continue to work 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 ~~Aldurazyme~~new patients will never be recouped.

See the risk factors “The sale of generic versions of KUVAN by generic manufacturers has adversely affected and ~~is responsible~~will continue to adversely affect our revenues and may cause a decline in KUVAN revenues faster than expected” and “The COVID-19 pandemic could continue to materially adversely affect our business, results of operations and financial condition” in “Risk Factors” included in Part II, Item 1A of this Quarterly Report for ~~marketing and selling Aldurazyme to third parties.~~

additional information on risks we face.

We face exposure to movements in foreign currency exchange rates, primarily the Euro. We use foreign currency exchange forward contracts to hedge a percentage of our foreign currency exposure. The following table shows our ~~net product revenues~~Net Product Revenues denominated in ~~U.S. dollar (USD)~~USD and foreign ~~currencies (in millions):~~

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

currencies:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022		2021		Change		2022		2021		Change
Sales denominated in USD	$	239.2	$	220.5	$	18.7	$	739.8	$	732.5	$	7.3
Sales denominated in foreign currencies	254.1		173.4		80.7		776.7		615.8		160.9
Total net product revenues	$	493.3	$	393.9	$	99.4	$	1,516.5	$	1,348.3	$	168.2


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022		2021		Change		2022		2021		Change
Favorable (unfavorable) impact of foreign currency exchange rates on product sales denominated in currencies other than USD	$	(18.1)	$	(0.7)	$	(17.4)	$	(40.6)	$	1.8	$	(42.4)

The ~~net~~unfavorable impact ~~of foreign currency exchange rates on product sales denominated in currencies other than USD during the~~ ~~three and nine~~ ~~months ended~~ ~~September 30, 2017~~ ~~was positive by $0.2 million and $1.6 million, respectively, compared to a positive impact of $0.5 million and a negative impact of $3.0 million, respectively, during the~~ ~~three and nine~~ ~~months ended~~ ~~September 30, 2016~~.

~~The following is additional discussion of our revenue results by product:~~

~~Aldurazyme: The Aldurazyme net product revenues~~ for the three and nine months ended September 30, ~~2017~~,2022 as compared to the three and nine months ended September 30, ~~2016, remained relatively flat~~. ~~The modest changes were~~2021 was primarily ~~attributable~~driven by weakness relative 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 markets~~USD associated with the ~~first commercial shipments in the U.S.~~Euro, currencies from certain Latin American markets, Japanese Yen and ~~EU occurring in June 2017 and July 2017, respectively.~~

Turkish Lira.

~~Kuvan: The increase in Kuvan 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 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, compared to~~ ~~the three months ended September 30, 2016, was mainly due to timing of government orders in Latin America, partially offset by new patients initiating therapy. The increase 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 Revenues

Royalty and Other Revenues include royalties earned on net sales of products sold by third parties, up-front licensing fees, milestones achieved by licensees or sublicensees and rental income associated with the tenants in our facilities.


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022		2021		Change		2022		2021		Change
Royalty and other revenues	$	12.0	$	14.9	$	(2.9)	$	42.0	$	48.2	$	(6.2)

The decrease in Royalty and Other Revenues for the three and nine months ended September 30, ~~2017 included recognition of~~2022 as compared to the ~~$31.5 million net upfront~~three and nine months ended September 30, 2021 was primarily due to lower license ~~revenue~~revenues earned from ~~Sarepta and $1.4 million in royalty revenue earned on Sarepta net sales during the~~ third ~~quarter of 2017.~~ parties.

We expect to continue to earn royalties from ~~Sarepta’s net sales under~~third parties in the ~~terms of the Agreements in future quarters.~~

future.

Cost of Sales and ~~Product~~ Gross Margin

Cost of Sales includes raw materials, personnel and facility and other costs associated with manufacturing our commercial products. These costs include production materials, production costs at our manufacturing facilities, third-party manufacturing

Table of Contents

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

(In millions of U.S. dollars, except as otherwise disclosed)

costs, and internal and external final formulation and packaging costs. Cost of Sales also includes royalties payable to third parties based on sales of our products and charges for inventory valuation reserves.

The following table summarizes our ~~cost~~Cost of ~~goods sold~~Sales and ~~product~~ gross ~~margin (in millions, except percentages):~~

margin:

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
%


	Three Months Ended September 30,									Nine Months Ended September 30,
	2022			2021			Change			2022			2021			Change
Total revenues	$	505.3		$	408.7		$	96.6		$	1,558.5		$	1,396.5		$	162.0
Cost of sales	$	116.3		$	103.5		$	12.8		$	356.4		$	350.8		$	5.6
Gross margin	77.0		%	74.7		%	2.3		%	77.1		%	74.9		%	2.2		%

~~Product gross margin (defined as net product revenues less cost~~Cost of ~~sales, expressed as a percentage of net product revenues)~~Sales increased for the three ~~months ended~~ ~~September 30, 2017~~ ~~compared to 2016 decreased modestly. The decrease in product gross margin for the three~~and nine months ended September 30, ~~2017 was primarily attributed~~2022 as compared to ~~increased Naglazyme~~the three and ~~Vimizim manufacturing costs. Product gross margin for the~~ nine months ended September 30, ~~2017~~2021 primarily due to increased sales volumes. Gross margin increased for the three and nine months ended September 30, 2022 as compared to the ~~comparable period in 2016 remained flat.~~ three and nine months ended September 30, 2021 primarily due to lower per unit manufacturing costs, lower inventory reserves, and higher sales volume of products with higher margins.

We expect ~~product~~ gross margin to ~~remain in the low 80 percent~~ range ~~over the next twelve months.~~

between approximately 75.5% and 77.5% through 2022.

Research and Development

~~A summary~~

R&D expense includes costs associated with the research and development of product candidates and post-marketing research commitments related to our ~~on-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. Orphan~~	~~EU Orphan~~
~~Major Products in Development~~	~~Target Indication~~	~~Designation~~	~~Designation~~	~~Stage~~
~~BMN 250~~	~~MPS IIIB~~	~~Yes~~	~~Yes~~	~~Clinical Phase 1/2~~
~~Pegvaliase~~	~~PKU~~	~~Yes~~	~~Yes~~	~~Marketing authorization~~ ~~regulatory review~~
~~Valoctocogene roxaparvovec~~	~~Hemophilia A~~	~~Yes~~	~~Yes~~	~~Clinical Phase 1/2~~
~~Vosoritide~~	~~Achondroplasia~~	~~Yes~~	~~Yes~~	~~Clinical Phase 3~~

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 ~~business~~.

business.

R&D ~~Expense decreased to $154.1 million and $442.1 million~~expense consisted of the following:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022		2021		Change		2022		2021		Change
Research and early development	$	62.6	$	61.7	$	0.9	$	188.3	$	158.0	$	30.3
ROCTAVIAN	29.0		29.1		(0.1)		90.7		84.0		6.7
Other approved products	29.4		25.8		3.6		86.4		80.5		5.9
VOXZOGO	22.5		26.1		(3.6)		76.9		99.0		(22.1)
BMN 331	8.4		9.1		(0.7)		21.9		28.3		(6.4)

BMN 255	2.3		2.9		(0.6)		6.8		7.1		(0.3)
Other	3.6		3.2		0.4		5.9		10.8		(4.9)
Total R&D expense	$	157.8	$	157.9	$	(0.1)	$	476.9	$	467.7	$	9.2

R&D expense for the three ~~and~~months ended September 30, 2022 as compared to the three months ended September 30, 2021 was flat.

The increase in R&D expense for the nine months ended September 30, ~~2017, respectively, from $160.8 million and $486.7 million for~~2022 as compared to the ~~three and~~ nine months ended September 30, ~~2016, respectively. R&D~~ ~~expense consisted~~2021 was primarily due to the following:

•higher spend in research and early development programs due to increased pre-clinical activities and IND-enabling studies for planned IND filings; partially offset by

•a decrease in VOXZOGO related expenses due to capitalization of ~~the~~manufacturing costs and lower costs related to regulatory activities following ~~(in millions):~~

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
)

~~For~~ the ~~three~~regulatory approvals in the third and ~~nine months ended September 30, 2017,~~fourth quarters of 2021.

Table of Contents

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

(In millions of U.S. dollars, except as otherwise disclosed)

We expect R&D expense ~~decreased by $6.7 million and $44.6 million, respectively, compared~~ to ~~the same~~increase in future 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; and

~~a 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 by~~

~~an increase in clinical trial activities related to BMN 250, pegvaliase,~~ ~~valoctocogene roxaparvovec and vosoritide~~ ~~product candidates; and~~

~~an 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 research and early development programs while we continue to develop our later 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 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. 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.

Selling, General and Administrative

~~SG&A Expense increased to $130.5 million~~

Sales and $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):

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

~~S&M~~marketing (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 three~~General and ~~nine months ended September 30, 2017, the increase of $5.7 million and $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 expansion of commercial activities as a result of acquiring the worldwide rights to Kuvan, except for Japan, on January 1, 2016;~~

~~an increase in Brineura S&M expense primarily due to commercial marketing expense related to the launch of Brineura; and~~

~~an increase in Vimizim S&M expense due to continued expansion of our worldwide commercial activities; offset by~~

~~a 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&A~~administrative (G&A) expense primarily consisted of corporate support and other administrative expenses, including employee-related expenses.

SG&A expenses ~~which increased~~consisted of the following:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022		2021		Change		2022		2021		Change
S&M expense	$	111.3	$	97.0	$	14.3	$	325.7	$	292.0	$	33.7
G&A expense	105.5		86.3		19.2		282.6		249.8		32.8
Total SG&A expense	$	216.8	$	183.3	$	33.5	$	608.3	$	541.8	$	66.5

S&M expenses by product were as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022		2021		Change		2022		2021		Change
PKU Products (KUVAN and PALYNZIQ)	$	30.8	$	29.9	$	0.9	$	91.5	$	91.9	$	(0.4)
VOXZOGO	26.5		18.5		8.0		72.5		52.9		19.6
MPS Products (ALDURAZYME, NAGLAZYME and VIMIZIM)	23.6		23.9		(0.3)		75.0		76.0		(1.0)
ROCTAVIAN	18.4		13.1		5.3		52.6		37.6		15.0
BRINEURA	7.9		8.9		(1.0)		23.0		26.1		(3.1)
Other	4.1		2.7		1.4		11.1		7.5		3.6
Total S&M expense	$	111.3	$	97.0	$	14.3	$	325.7	$	292.0	$	33.7

The increase in S&M expense for the three and nine months ended September 30, ~~2017,~~2022 as compared to the three and nine months ended September 30, ~~2016,~~2021 was primarily a result of increased activities in support of the VOXZOGO commercial launch following EU and U.S. regulatory approvals in the latter half of 2021 and an increase in ROCTAVIAN commercial launch preparation activities.

The increase in G&A expense for the three and nine months ended September 30, 2022 as compared to the three and nine months ended September 30, 2021 was primarily due to increased ~~personnel~~severance, employee termination benefits and external costs related ~~costs mainly due~~ to ~~increased headcount.~~

our reorganization plan, the impact from the revaluation of non-USD denominated assets and liabilities and legal expenses, partially offset by lower idle plant time related to maintaining our gene therapy manufacturing facility.

We expect SG&A expense to increase in future periods as a result of ~~the continued commercial~~preparing to launch new products and support of ~~Brineura, pre-commercialization efforts related to product candidates, the continued international expansion~~our global business as it grows.

Table of ~~Kuvan~~Contents

Management’s Discussion and ~~Vimizim,~~Analysis of Financial Condition and ~~the increase in administrative support required for our expanding operations.~~

Results of Operations (continued)

(In millions of U.S. dollars, except as otherwise disclosed)

Intangible Asset Amortization and Contingent Consideration

and Gain on Sale of Nonfinancial Assets, Net

Changes during the periods presented for Intangible Asset Amortization and Contingent Consideration and Gain on Sale of Nonfinancial Assets, Net were as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022		2021		Change		2022		2021		Change
Changes in the fair value of contingent consideration	$	0.9	$	1.8	$	(0.9)	$	3.8	$	6.3	$	(2.5)
Amortization of intangible assets	15.9		15.4		0.5		47.1		46.3		0.8
Total intangible asset amortization and contingent consideration	$	16.8	$	17.2	$	(0.4)	$	50.9	$	52.6	$	(1.7)

Gain on sale of nonfinancial assets, net	$	—	$	—	$	—	$	108.0	$	—	$	108.0

Fair value of contingent consideration – the decrease in the fair value of contingent ~~acquisition~~ consideration payable result from updates 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):

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

The changes in the fair value of the contingent acquisition consideration payable were primarily attributable to changes in the estimated probability of achieving development milestones based on the 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 payable for ~~each period presented was attributed to the following:~~

during the three months ended September 30, 2017, we reduced the estimated probability of achieving the Firdapse FDA approval milestone prior to its expiration date to zero, which resulted in a decrease of $4.2 million due to the reversal of the fair value of a portion 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; and

during 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 Assets~~

In the second quarter of 2016, we recorded an impairment charge of $599.1 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.~~2022 as compared to September 30, 2021 was attributable to the attainment of a €30 million milestone in the first quarter of 2022.

Amortization of intangible assets – the expense for the three and nine months ended September 30, 2022 as compared to the three and nine months ended September 30, 2021 was relatively flat.

Gain on Sale of Nonfinancial Assets, Net – the increase in the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 was due to the sale in the first quarter of 2022 of the Priority Review Voucher (PRV) that we received in connection with the FDA approval of VOXZOGO in 2021. In exchange for the PRV, we received lump sum payment of $110.0 million, which was recognized as a gain on the sale of intangible assets, net of broker fees.

Interest Income

We invest our cash equivalents and investments in U.S. government securities and other high credit quality debt securities in order to limit default and market risk.


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022		2021		Change		2022		2021		Change
Interest income	$	5.0	$	1.8	$	3.2	$	9.3	$	8.7	$	0.6

The increase in Interest Income for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 was primarily due to higher interest rates and total portfolio returns. Interest Income for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 was relatively flat. We expect Interest Income to increase over the next 12 months due to anticipated higher interest rates and yields on our cash equivalents and investments.

Interest Expense

We incur interest expense primarily on our convertible debt. Interest Expense for the periods presented was as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022		2021		Change		2022		2021		Change
Interest expense	$	4.7	$	3.9	$	0.8	$	12.3	$	11.5	$	0.8

Interest Expense for the three and nine months ended September 30, 2022 as compared to the three and nine months ended September 30, 2021 was relatively flat. We do not expect Interest Expense to fluctuate significantly over the next 12 months as the rates on our convertible debt are fixed. See Note 86 to our accompanying Condensed Consolidated Financial Statements for additional information regarding our ~~Intangible Assets.~~

~~Interest~~debt.

Table of Contents

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

(In millions of U.S. dollars, except as otherwise disclosed)

Other Income

~~We invest our cash, short-term and long-term investments~~ (Expense), Net

Other Income (Expense), Net for the periods presented was as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022		2021		Change		2022		2021		Change
Other income (expense), net	$	0.2	$	9.1	$	(8.9)	$	(3.9)	$	10.4	$	(14.3)

The decrease in ~~U.S. government securities and other high credit quality securities in order to limit default and market risk. Interest income totaled $4.0 million and $10.0 million~~Other Income (Expense), Net for the three and nine months ended September 30, 2017, respectively, 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, 2017,2022 compared to the three and nine months ended September 30, ~~2016~~2021 was primarily due to ~~higher investment balances, which increased due~~the absence of insurance proceeds received in the third quarter of 2021 that were in excess of direct costs incurred. The decrease for the nine months ended September 30, 2022 compared to the ~~investment~~nine months ended September 30, 2021 was also attributed to the loss on the fair value of ~~the net proceeds of $481.7 million from the August 2017 issuance of $495.0 million~~assets held 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, over the next 12 months we expect anour nonqualified deferred compensation plan.

Provision for (Benefit from) Income Taxes

The following table summarizes our Provision for Income Taxes:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022		2021		Change		2022		2021		Change
Provision for (benefit from) income taxes	$	4.7	$	(9.7)	$	14.4	$	25.3	$	(2.6)	$	27.9

The increase in ~~interest~~the income ~~from present levels.~~

~~Interest Expense~~

~~We incur interest expense on our convertible debt. Interest expense consisted of the following (in millions):~~

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

~~Interest expense primarily consisted of amounts related to our senior subordinated convertible notes. Interest expense in~~tax provision for the three and nine months ended September 30, ~~2017,~~2022 as compared to the three and nine months ended September 30, ~~2016~~ ~~increased~~2021 was primarily due to taxes on higher income recognized and projected for 2022, which includes income recognized in the ~~issuance~~first quarter of 2022 from the sale of the ~~2024 Notes. We expect interest expense to increase over the next 12 months due to the coupon interest and amortization of issuance costs related to the 2024 Notes. See Note 11 to our accompanying Condensed Consolidated~~ PRV.

Financial ~~Statements for additional information regarding our debt.~~

~~Benefit from Income Taxes~~

~~For 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 an income tax benefit 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 tax expense was computed using a forecasted annual effective tax rate for the~~ ~~three and nine~~ ~~months ended~~ ~~September 30, 2017 and 2016~~.

~~The benefit from income taxes for the~~ ~~three and nine~~ ~~months ended~~ ~~September 30, 2017~~ and 2016 also consisted of state, federal and foreign current tax expense that was offset by deferred tax benefits from federal orphan drug 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.

~~Financial Position,~~Condition, Liquidity and Capital Resources

~~As of September 30, 2017, we had approximately $1.7 billion in~~

Our cash, cash equivalents, and ~~short-term~~investments as of September 30, 2022 and ~~long-term investments.~~ December 31, 2021 were as follows:


	September 30, 2022		December 31, 2021		Change
Cash and cash equivalents	$	761.5	$	587.3	$	174.2
Short-term investments	512.3		426.6		85.7
Long-term investments	372.3		507.8		(135.5)
Cash, cash equivalents and investments	$	1,646.1	$	1,521.7	$	124.4

We ~~expect to fund~~believe our ~~operations with our net product revenues~~cash generated from sales of our commercial products, in addition to our cash, cash equivalents and ~~short-term~~investments will be sufficient to satisfy our liquidity requirements for at least the next 12 months. We believe we will meet longer-term expected future cash requirements and ~~long-term~~obligations through a combination of cash flows from operating activities, available cash and investments ~~supplemented by proceeds~~balances and available revolving loan balances. We will need to raise additional funds from equity or debt ~~financings and~~securities, loans or collaborative agreements ~~with corporate partners. We~~if we are unable to satisfy our liquidity requirements. For example, 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~~alternatives could change depending on many factors, including how much we elect to spend on our development programs, potential licenses and acquisitions of complementary technologies, products and companies or if we ~~elect to~~ settle ~~all or a portion of~~ our convertible debt in cash.

~~In managing our liquidity needs~~ 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.~~, we do not rely on unrepatriated earnings as a source of funds~~ and we have not provided for U.S. federal or state income taxes on these undistributed foreign earnings. As of September 30, 2017, $87.3 million of our $1.7 billion balance of cash, cash equivalents, and investments was held in foreign subsidiaries, a significant portion of which is required to fundworldwide resulting from the ~~liquidity needs of these foreign subsidiaries. For additional discussion regarding income taxes, see Note 15 to our~~ ~~Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2016~~.

ongoing COVID-19 pandemic.

We are mindful that conditions in the current macroeconomic environment, such as inflation, supply chain disruptions and impacts of the ongoing COVID-19 pandemic, could affect our ability to achieve our goals. ~~Some~~In addition, we sell our products in certain 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 affect~~local economies and currencies may cause customers in those

Table of Contents

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

(In millions of U.S. dollars, except as otherwise disclosed)

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 ~~these~~macroeconomic risks to our business.

~~Our liquidity and capital resources as of September 30, 2017 and December 31, 2016 were as follows (in millions):~~

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

Our cash flows ~~for the nine months ended~~ ~~September 30, 2017~~ ~~and 2016~~ are summarized as ~~follows (in millions):~~

follows:

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


	Nine Months Ended September 30,
	2022		2021		Change

Net cash provided by operating activities	$	169.1	$	293.4	$	(124.3)
Net cash provided by (used in) investing activities	$	34.7	$	(310.9)	$	345.6
Net cash used in financing activities	$	(29.5)	$	(14.4)	$	(15.1)

The decrease in ~~Operating Activities~~

~~Cash used in~~net cash provided by operating activities ~~decreased by $204.2 million from $227.6 million during~~in the nine months ended September 30, ~~2016~~2022 compared to ~~$23.4 million during~~September 30, 2021 was primarily attributed to the timing of cash receipts from our customers and the absence of a tax refund received in 2021.

The increase in net cash provided by investing activities in the nine months ended September 30, ~~2017.~~ ~~Cash used in operating activities~~2022 compared to September 30, 2021 was primarily ~~consisted~~attributable to lower net purchases of ~~net loss of $65.7~~investments and the $110.0 million ~~adjusted for non-cash items such as $106.7 million for stock-based compensation expenses, $59.2 million for depreciation and amortization~~ ~~expense, $23.8 million of non-cash interest expense, partially offset by $36.2 million for deferred income taxes and $3.3 million gain on~~proceeds from the sale of ~~strategic investments. Cash used in operating activities~~PRV in the ~~comparable period in 2016 was~~ ~~adjusted for the non-cash~~ ~~impairment~~first quarter 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 in Investing Activities~~

Net cash used in investing activities increased by $270.6 million from $174.4 million during the nine months ended September 30, 2016 to $445.0 million during the nine months ended September 30, 2017. 2022.

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~~ ~~was primarily~~ ~~attributable to~~ ~~a $216.5~~ ~~million increase in net purchases of available-for-sale 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 Activities~~

~~Net cash provided by~~ financing activities ~~decreased by $213.2 million from $707.2 million for~~in the nine months ended September 30, ~~2016~~2022 compared to ~~$494.0 million during the nine months ended~~ September 30, ~~2017. The decrease~~2021 was primarily attributed to the payment in ~~net cash provided by financing activities for the nine months ended~~2022 to a third party related to our achievement of a PKU sales milestone.

Our $1.1 billion (undiscounted) of total convertible debt as of September 30, ~~2017 was primarily attributable~~2022 will impact our liquidity due to ~~a decrease of $712.9 million in~~ ~~proceeds from public~~ ~~offerings~~ ~~of common stock and a~~ ~~$3.4 million decrease in proceeds from employee equity transactions~~, ~~partially offset by~~ ~~$481.7 million of net proceeds from~~ the ~~2024 Notes issued in August 2017~~ ~~and a $23.4 million decrease in taxes paid related to net share settlement of employee equity awards.~~

~~Other Information~~

~~Our indebtedness consists primarily~~semi-annual cash interest payments as well as the repayment of the ~~Company’s 0.75%~~principal amount, if not converted. As of September 30, 2022, our indebtedness consisted of our 0.599% senior subordinated convertible notes due in ~~2018 (the 2018 Notes), the Company’s 1.50%~~2024 and our 1.25% senior subordinated convertible notes due in ~~2020 (the 2020 Notes) and the 2024 Notes,~~2027, which, if not converted, will be required to be repaid in cash at maturity in ~~2018, 2020~~August 2024 and ~~2024,~~May 2027, respectively. ~~The 2018 Notes, 2020 Notes and 2024 Notes are referred~~For additional information related to ~~collectively herein as the Notes. Our senior subordinated~~our 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 principal amount of the 2024 Notes, which resulted in net proceeds of $481.7 million, after deducting commissions and offering expenses. The 2024 Notes bear interest at the stated annual rates, which is payable semiannually in arrears on February 1 and August 1 of each year beginning on February 1, 2018. Seedebt see, Note 116 to our accompanying Condensed Consolidated Financial Statements ~~for additional discussion.~~

~~Our $1.2 billion (undiscounted) of total convertible debt as of September 30, 2017 will impact our liquidity due~~and Note 10 - Debt to the ~~semi-annual cash interest payments and will further impact~~Consolidated Financial Statements accompanying 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.~~

year ended December 31, 2021.

In ~~November 2016~~October 2018, we entered into aan unsecured revolving credit ~~agreement (the Credit Agreement) providing for~~facility of up to ~~$100.0~~$200.0 million ~~in revolving loans (the Revolving Credit Facility). We expect to use the proceeds~~which includes a letter of ~~the Revolving Credit Facility~~credit subfacility and a swingline loan subfacility. The credit facility is intended to finance ongoing working capital needs ~~(including timing differences resulting from the strategic management of short-term investments)~~ and for other general corporate purposes. In May 2021, we amended the credit facility agreement, extending the maturity date from October 19, 2021 to May 28, 2024, among other changes. The amended credit facility contains financial covenants including a

Table of Contents

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

(In millions of U.S. dollars, except as otherwise disclosed)

maximum leverage ratio and a minimum interest coverage ratio. As of September 30, ~~2017,~~2022, there were no amounts outstanding under the credit facility and we ~~had not drawn~~and certain of our subsidiaries that serve as guarantors were in compliance with all covenants.

Our investment in our research and early development of product candidates and continued development of our existing commercial products has a major impact 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 payoperating performance. R&D expenses for our ~~products.~~

~~Funding Commitments~~

commercial products and certain product candidates for the period since inception as of September 30, 2022 were as follows:


	Since Program Inception

ROCTAVIAN	$	915.8
VOXZOGO	$	776.9

BMN 331	$	101.9
BMN 255	$	32.7
Other approved products	$	2,459.6

We cannot estimate with certainty the cost to complete any of our product development programs. We may need or elect to increase our spending above our current long-term plans to be able to achieve our long-term goals. This may increase our capital requirements, including: costs associated with the commercialization of our products; additional clinical trials; investments in the manufacturing of our commercial products; preclinical studies and clinical trials for our product candidates; potential licenses and other acquisitions of complementary technologies, products and companies; and general corporate purposes. Additionally, we cannot precisely estimate the time to complete any of our product development programs or when we expect to receive net cash inflows from any of our product development programs. Please see “~~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:~~

information.

IfAs of September 30, 2022, we ~~fail~~had obligations of approximately$171.5 million, which primarily related 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 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; and

~~If we do not achieve our projected development goals~~firm purchase commitments entered into in the ~~timeframes~~normal course of business to procure active pharmaceutical ingredients, certain inventory-related items, certain third-party R&D services, production services and facility construction services. Of this amount, $99.7 million is expected to be paid in 2023.

Contingent Consideration

As of September 30, 2022, we ~~announce and expect, the commercialization~~had $28.3 million 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.~~

As of September 30, ~~2017 were as follows (in millions):~~

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

~~We may elect~~2022, we expect to ~~increase our spending above our current long-term plans~~pay severance and ~~consequently we may be unable~~employee termination benefits of approximately $20.0 million to ~~achieve our long-term goals. This may increase our capital requirements, including: costs associated with~~$25.0 million during the ~~commercialization~~fourth quarter of our products; additional clinical trials; investments in the manufacturing of our commercial products; pre-clinical studies and clinical trials for our other product candidates; potential licenses and other acquisitions of complementary technologies, products and companies; and general corporate purposes.

~~Our future capital requirements will depend on many factors, including, but not limited to:~~

~~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 of clinical trials, announcements of technological innovations or new products by us or our competitors;~~

~~generic competition to Kuvan relating~~2022 related to our ~~settlements with DRL (related to Kuvan tablets~~reorganization plan announced on October 6, 2022.

Our lease, contingent obligations 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; and~~

~~sales of our shares of stock by us, our significant stockholders, or members of our management or Board of Directors.~~

~~Off-Balance Sheet Arrangements~~

~~We do not have any off-balance sheet arrangements that are currently material or reasonably likely to be material to our consolidated financial position or results of operations.~~

~~Contractual and Commercial Obligations~~

We have contractual and commercial obligations under our debt, operating leases and other obligations related to R&D activities, purchase commitments, licenses and sales royalties with annual minimums. ~~Our contractual obligations as of~~ ~~September 30, 2017~~ ~~are presented in the table below (in millions).~~

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

~~We are also subject to contingent payments related to certain development and regulatory activities and commercial sales and licensing milestones totaling approximately $600.2 million~~unrecognized tax benefits as of September 30, ~~2017, which are due upon achievement~~2022 have not materially changed from those discussed in “Financial Condition, Liquidity and Capital Resources” in Part II, Item 7 of ~~certain development~~our Annual Report on Form 10-K for the year ended December 31, 2021.

Item 3. Quantitative and commercial milestones, and if they occur before certain dates in the future. Of this amount, $218.3 million (USD equivalent of 185 million Euros translated at 1.18 USD per Euro) relates to the Merck PKU Business acquisition and $53.3 million relates to programs that are no longer being developed. See Note 18 to our accompanying Condensed Consolidated Financial Statements for additional discussion.

Qualitative Disclosures About Market Risk

I~~tem 3.~~

~~Quantitative and Qualitative Disclosures About Market Risk~~

I~~tem 4.~~

~~Controls and Procedures~~

Item 4. Controls and Procedures

(a) Controls and Procedures

An evaluation was carried out, under the supervision of and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), as of the end of the period covered by this report.

Based on the evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective, at the reasonable assurance level, as of September 30, ~~2017.~~

2022.

In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management must apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure controls system are met.

There were no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. We ~~are utilizing~~continue to utilize the Committee of Sponsoring Organizations of the Treadway Commission (COSO) 2013 Framework on internal control.

PART II. OTHER INFORMATION

I~~tem 1.~~

~~Legal Proceedings.~~

Item 1. Legal Proceedings

On September 25, 2020, a ~~paragraph IV notice letter, dated December 23, 2016, from Dr. Reddy’s Laboratories, Inc.~~purported shareholder class action lawsuit was filed against us, our Chief Executive Officer, our President of Worldwide Research and ~~Dr. Reddy’s Laboratories, Ltd. (collectively, DRL), notifying us~~Development and our 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 as amended (the Exchange Act). The complaint alleges that ~~DRL had~~we made materially false or misleading statements regarding the clinical trials and Biologics License Application (BLA) for ROCTAVIAN (formerly known as 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 ROCTAVIAN’s durability of effect and, as a result, that it was foreseeable that the Food and Drug Administration (FDA) would not approve the BLA without additional data. The complaint seeks an unspecified amount of damages, prejudgment and post-judgment interest, attorneys’ fees, expert fees, and other costs. The lead plaintiff filed an ~~abbreviated new drug application (ANDA) seeking approval~~amended 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 ~~expiration~~FDA's review of our ~~patents listed~~BLA for ROCTAVIAN. On April 22, 2021, we moved to dismiss the amended complaint. On January 6, 2022, the court denied our motion to dismiss. We answered the amended complaint on February 15, 2022. Plaintiff filed a motion for class certification on October 17, 2022. Trial is scheduled to begin on April 15, 2024. We believe that the claims have no merit and we intend to vigorously defend this action.

On October 22, 2021, a purported securities class action lawsuit was filed against us, our Chief Executive Officer, our current and prior Chief Financial Officers, and our President of Worldwide Research & Development in the ~~FDA's Approved Drug Products with Therapeutic Equivalence Evaluations (the Orange Book).~~United States District Court for the Northern District of California, alleging violations under Sections 10(b) and 20(a) of the Exchange Act. The complaint alleges that we made materially false or misleading statements regarding BMN 307 by purportedly failing to disclose information about BMN 307’s safety profile, and by purportedly overstating BMN 307’s clinical and commercial prospects. The complaint seeks an unspecified amount of damages, pre-judgment and post-judgment interest, attorneys’ fees, expert fees, and other costs. The Court appointed lead plaintiffs and lead counsel on January 10, 2022. Lead plaintiffs filed an amended complaint on March 25, 2022. We filed a ~~lawsuit alleging patent infringement against DRL. In August 2017,~~motion to dismiss the amended complaint on May 25, 2022, which is fully briefed. The Court has taken the motion under submission. We believe that the claims have no merit and 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~~intend 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 tablets was filed together with Merck & Cie), 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 license 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.

I~~tem 1A.~~

~~Risk Factors~~

Item 1A. Risk Factors

An investment in our securities involves a high degree of risk. We operate in a dynamic and rapidly changing industry that involves numerous risks and uncertainties. The risks and uncertainties described below are not the only ones we face. Other risks and uncertainties, including those that we do not currently consider material, may impair our business. If any of the risks discussed below actually occur, our business, financial condition, operating results or cash flows could be materially adversely affected. This could cause the value of our securities to decline, and you may lose all or part of your ~~investment~~.

investment.

We have marked with an asterisk (*) those risk factors below that include a substantive change from or update to the risk factors included in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2021, which was filed with the SEC on February ~~27, 2017.~~

25, 2022.

Business and Operational Risks ~~Related~~

*The COVID-19 pandemic could continue to materially adversely affect our business, results of operations, and financial condition.

The COVID-19 pandemic has resulted in travel restrictions, quarantines, “work-from-home” and “shelter-in-place” orders and extended shutdown of certain businesses around the world, including in many countries in which we operate. Our ~~Business~~

global revenue sources, mostly in the form of demand interruptions such as missed patient infusions and delayed treatment starts for new patients, and our overall business operations have been impacted by the COVID-19 pandemic, and we expect that the pandemic will continue to adversely impact our financial results and our business generally in 2022. Ongoing and future effects of the COVID-19 pandemic (or any future pandemic) on all aspects of our business and operations, including revenues, expenses, reserves and allowances, manufacturing, clinical trials and research and development costs, and the duration of such effects, are highly uncertain and difficult to predict.

The COVID-19 pandemic has adversely affected and will likely continue to adversely impact our product development programs, including preclinical study and clinical trial operations. We have been, and will likely continue to be, unable to initiate or continue conducting clinical trials as originally planned in certain countries and regions due to the prioritization of hospital resources toward the pandemic, 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 experienced delays in certain clinical trials due to COVID-19 related complications and have had to reevaluate expected timelines for those trials. In addition, we

Table of Contents

rely on independent clinical investigators, contract research organizations (CROs) and other third-party service providers to assist us in managing, monitoring and otherwise carrying out our preclinical studies and clinical trials, and the pandemic has impacted, may continue to affect their ability to devote sufficient time and resources to our programs or to travel to sites to perform work for us. Additionally, the COVID-19 pandemic has delayed, and may continue to postpone, necessary regulatory inspections and other interactions with regulators regarding our product candidates, which could delay review or approval of our regulatory submissions.

COVID-19 has adversely affected and will likely continue to affect our ability to source materials and supplies and could adversely impact our ability to manufacture and distribute our product candidates and products. The pandemic has resulted and may continue to result in reduced operations of third-party suppliers of raw materials and supplies upon whom we rely or otherwise limit our ability to obtain sufficient materials and supplies necessary for production of our therapies. Our manufacturing facilities and those 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 third party in our supply or distribution chain are adversely 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 clinical trials and research and development operations and our products for commercial sales.

Our commercial operations have also been, and will likely continue to be, adversely impacted by the COVID-19 pandemic. Many of our products are administered via infusions in a clinic or hospital setting and/or by a healthcare professional. Treating COVID-19 patients has become the priority for many healthcare facilities and workers, so it has become, and may continue to be, 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 revenue from doses of our products that are missed by patients and the lost revenues 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 ability to find new patients and start treating these patients, and it has limited our sales force’s ability to promote our products to distributors, hospitals, clinics, doctors and pharmacies, which could adversely affect our revenues and results of operations.

In addition, the COVID-19 pandemic could adversely affect our workforce and the employees of companies with which we do business, thereby disrupting our business operations. Recently, we have implemented a policy of hybrid onsite and remote work for most of our employees who were previously fully remote during the first two years of the COVID-19 pandemic and whose jobs did not require them to be onsite. Continued reliance by us and the companies with which we do business on personnel working fully or partially remotely 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.

While the long-term economic impact and the duration of the COVID-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 depression resulting from the COVID-19 pandemic could materially adversely affect our business and the value of our common stock and convertible notes.

To the extent the COVID-19 pandemic continues to adversely affect our business and financial results, it may also have the effect of heightening many of the other risks described in this Risk Factors section, such as those relating to our conducting a significant amount of our sales and operations outside of the U.S., exposure to changes in foreign exchange rates, our substantial indebtedness, our need to generate sufficient cash flows to service our indebtedness and finance our operations, our ability to comply with the covenants contained in the agreements that govern our indebtedness and the volatility of our stock price.

*Because the target patient populations for our products are relatively small, we must achieve significant market share and maintain high per-patient prices for our products to achieve and maintain profitability.

All of our products target diseases with relatively small patient populations. As a result, our per-patient prices must be relatively high in order to recover our development and manufacturing costs and achieve and maintain profitability. For BRINEURA, NAGLAZYME and VIMIZIM in particular, we must market worldwide to achieve significant market penetration of the product. In addition, because the number of potential patients in each disease population is small, it is not only important to find patients who begin therapy to achieve significant market penetration of the product, but we also need to be able to maintain these patients on therapy for an extended period of time. Due to the expected costs of treatment for our products, we may be unable to maintain or obtain sufficient market share at a price high enough to justify our product development efforts and manufacturing expenses.

If we fail to obtain and maintain an adequate level of coverage and reimbursement for our products by third-party payers, the sales of our products would be adversely affected or there may be no commercially viable markets for our products.

Table of Contents

The course of treatment for patients using our products is expensive. We expect patients to need treatment for extended periods, and for some products throughout the lifetimes of the patients. We expect that most families of patients will not be capable of paying for this treatment themselves. There will be no commercially viable market for our products without coverage and reimbursement from third-party payers. Additionally, even if there is a commercially viable market, if the level of reimbursement is below our expectations, our revenues and gross margin will be adversely affected.

Third-party payers, such as government or private healthcare insurers, carefully review and increasingly challenge the prices charged for drugs. Reimbursement rates from private companies vary depending on the third-party 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.

Government authorities and other third-party payers 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 payers 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 payers in the U.S. Therefore, coverage and reimbursement for drug products can differ significantly from payer to 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 payer separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.

We cannot be sure that coverage and reimbursement will be available for any product that we commercialize or will continue to be available for any product that we have commercialized and, if reimbursement is available, what the level of reimbursement will be. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future. Coverage and reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. If coverage and reimbursement are not available or reimbursement is available only to limited levels, we may not successfully commercialize any product candidate for which we obtain marketing approval or continue to market any product that has already been commercialized.

Reimbursement in the European 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 pricing and/or 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.

For our future products, we will not know what the reimbursement rates will be until we are ready to market the product and we actually negotiate the rates. If we are unable to obtain sufficiently high reimbursement rates for our products, they may not be commercially viable or our future revenues and gross margin may be adversely affected.

*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 revenues could be adversely affected.

Our competitors may develop, manufacture and market products that are more effective or less expensive than ours. They may also obtain regulatory approvals for their products faster than we can obtain them (including those products with orphan drug designation, which may prevent us from marketing our product entirely) or commercialize their products before we do. With respect to ROCTAVIAN, which has been conditionally approved in the EU and may be approved in the U.S. and other markets in the future, we face a highly developed and competitive market for hemophilia A treatments. As we commercialize ROCTAVIAN, we may face intense competition from large pharmaceutical companies with extensive resources and established relationships in the hemophilia A community. If we do not compete successfully, our revenues would be adversely affected, and 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.

*Changes in methods of treatment of disease could reduce demand for our products and adversely affect revenues.

Even if our product candidates are approved, if doctors elect a course of treatment which does not include our products, this decision would reduce demand for our products and adversely affect revenues. For example, if gene therapy becomes widely used as a treatment of genetic diseases, the use of enzyme replacement therapy, such as ALDURAZYME, NAGLAZYME, and VIMIZIM in MPS diseases, could be greatly reduced. Moreover, even with the regulatory approval we recently received in the EU and regardless of whether we obtain additional regulatory approvals for ROCTAVIAN in the U.S. or other markets, the commercial

Table of Contents

success of ROCTAVIAN will still depend, in part, on the acceptance of physicians, patients and healthcare 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 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.

If we fail to develop new products and product candidates or compete successfully with respect to acquisitions, joint ventures, licenses or other collaboration opportunities, our ability to continue to expand our product pipeline and our growth and development would be impaired.

Our future growth and development depend 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.

Our competitors compete with us to attract organizations for acquisitions, joint ventures, licensing arrangements or other collaborations. To date, several of our former and current product programs have been acquired through acquisitions and several of our former and current product programs have been developed through licensing or collaborative arrangements, such as ALDURAZYME, 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.

Universities and public and private research institutions also compete with us. While these organizations primarily have educational or basic research objectives, they may develop proprietary technology and acquire patents that we may need for the development of our product candidates. We will attempt to license this proprietary technology, if available. These licenses may not be available to us on acceptable terms, if at all. If we are unable to compete successfully with respect to acquisitions, joint venture and other collaboration opportunities, we may be limited in our ability to develop new products and to continue to expand our product pipeline.

*The sale of generic versions of KUVAN by generic manufacturers has adversely affected and will continue to adversely affect our revenues and may cause a decline in KUVAN revenues faster than expected.

Generic versions of KUVAN are available in several countries around the world, including multiple generic versions in the U.S. This generic competition has adversely affected and will continue to adversely affect our revenues from KUVAN, and we cannot accurately predict the rate of decline of KUVAN revenues in these countries. We are also aware that manufacturers are challenging our patent portfolio related to KUVAN in several jurisdictions, and one generic version of KUVAN has been approved by the European Medicines Agency (EMA), although it is not yet commercially available in the EU. If these patent challenges are successful, or if a manufacturer chooses to offer a generic version of KUVAN, notwithstanding our existing patents, our revenues may decline faster than expected.

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.

For planning purposes, we estimate the timing of the accomplishment of various scientific, clinical, regulatory and other product development goals, which we sometimes refer to as milestones. These milestones may include the commencement or completion of scientific studies and clinical trials and the submission of regulatory filings. From time to time, we publicly announce the expected timing of some of these milestones. All of these milestones are based on a variety of assumptions. The actual timing of these milestones can vary dramatically compared to our estimates, in many cases for reasons beyond our control. If we do not meet these milestones as publicly announced, the commercialization of our products may be delayed and the credibility of our management may be adversely affected and, as a result, our stock price may decline.

We have in the past and may in the future enter into licensing arrangements, and we may not realize the benefits of such licensing arrangements.

We have in the past and may in the future enter into licensing arrangements with third parties. It is possible that we may not achieve financial or strategic benefits that justify a specific license, or we may otherwise not realize the benefits of such licensing arrangement. Further, licensing arrangements impose various diligence, milestone and royalty payment and other obligations on us. If we fail to comply with our obligations under any current or future licenses, our licensors may have the right to

Table of Contents

terminate these license agreements, which could harm our business prospects, financial condition and results of operations. Further, counterparties to our license agreements have in the past alleged and may in the future allege that we have breached a license agreement, which can result in litigation or other disputes that can divert management’s attention away from our business and require us to expend resources, as well as potentially having to negotiate new or reinstated licenses with less favorable terms. Any such situation could adversely affect our business, financial condition, and results of operations.

Regulatory Risks

*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~~revenues 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, in the U.S., we must obtain Food and Drug Administration (FDA) approval for each product candidate that we intend to commercialize, and in ~~Europe~~the EU, we must obtain approval from the European ~~Medicines Agency (EMA).~~Commission (EC), based on the opinion of the Committee for Medicinal Products for Human Use (CHMP) of the EMA. The FDA and ~~EMA~~EC approval processes are typically lengthy and expensive, and approval is never certain. To obtain regulatory approval, we must first show that our product candidates are safe and effective for target indications through preclinical studies and clinical trials. Preclinical studies and clinical development are long, expensive and uncertain processes. Completion of clinical trials may take several years, and failure may occur at any stage of development. The length of time required varies substantially according to the type, complexity, novelty and intended use of a product candidate. Interim results of a preclinical test or clinical trial do not necessarily predict final results, and acceptable results in early clinical trials may not be repeated in later clinical trials. 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, butcandidates. Furthermore, there iscan be no assurance that approval of one of our product candidates by one regulatory authority will mean that other authorities will also approve the same product candidate. For example, the EC’s conditional approval of ROCTAVIAN in August 2022 does not guarantee that the FDA will approve the same drug. Similarly, in the EU, a ~~reduction~~positive CHMP opinion for approval of a product candidate does not guarantee that the EC will approve a drug. Moreover, regulatory authorities may approve a product candidate for fewer or more limited indications than requested. In addition, regulatory authorities may not approve the labeling claims that are necessary or desirable for the successful commercialization of our product candidates.

We have had fewer interactions with regulatory authorities outside the U.S. and the EU as compared to our interactions with the FDA and EMA. The approval procedures vary among countries and can involve additional clinical testing, and the time required to obtain approval may differ from that required to obtain FDA or EC approval. Moreover, clinical trials conducted in ~~blood Phe alone will~~one country may not be ~~sufficient to support~~accepted by regulatory authorities in other countries. Approval by the ~~FDA’s full~~FDA or EC does not ensure approval by regulatory authorities in other countries, and approval by one or more non-U.S. regulatory authorities does not ensure approval by regulatory authorities in other non-U.S. countries or by the FDA or EC. However, a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others. The non-U.S. regulatory approval process may include all of ~~pegvaliase.~~

the risks associated with obtaining FDA or EC approval. We may not obtain non-U.S. regulatory approvals on a timely basis, if at all. We may not be able to file for regulatory approvals and even if we file, we may not receive necessary approvals to commercialize our product candidates in any market.

We also rely on independent third-party CROs to file some of our non-U.S. marketing applications, and while we keep a close oversight on the activities we delegate to CROs, important 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.

Although the FDA and the EMA have programs to facilitate expedited development and accelerated approval processes, the timelines agreed under legislative goals or mandated by regulations are subject to the possibility of substantial delays. Accordingly, even if any of our applications receives a designation to facilitate expedited development and accelerated approval processes, these designations may not result in faster review or approval for our product candidates compared to product candidates considered for approval under conventional procedures and, in any event, do not assure ultimate approval of our product candidates by regulatory authorities. In addition, the FDA, the EMA and other comparable 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. Because~~candidates, which would have a negative effect on our business and financial condition.

We may experience challenges specific to gene therapy 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 a very small number of vector-based gene therapy products thus far. 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 gene therapy product candidates in any jurisdiction. Regulatory requirements governing gene and cell therapy products are still evolving and may continue to change in the future. For example, in October 2020, it was reported that the Director of the Center for Biologics Evaluation and Research, the center of the FDA responsible for reviewing marketing

Table of Contents

applications for gene therapies, stated that the FDA will assess the importance of durability of effect differently for a gene therapy that treats a disease that has no other available therapies versus a condition for which there are multiple approved treatments. Additionally, in September 2021, the FDA held a Cellular, Tissue, and Gene Therapies Advisory Committee (CTGTAC) to discuss toxicity risks of adeno-associated virus (AAV) vectors for gene therapy and ~~uncertainties~~to seek the CTGTAC’s insight into strategies to evaluate and mitigate risks in ~~pharmaceutical~~the context of AAV vector-based product design and quality, preclinical studies, and clinical trials. ROCTAVIAN and BMN 307 are AAV vector-based product candidates.

Regulatory 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. For example, on August 18, 2020, the FDA issued a Complete Response Letter (CRL) to our BLA for ROCTAVIAN for the treatment of adults with severe hemophilia A. In the CRL, the FDA introduced a new request for two-year follow-up safety and efficacy data on all study participants from our ongoing Phase 3 study of ROCTAVIAN. In January 2022, we announced results from the requested two-year data analysis from our Phase 3 study. In the third quarter of 2022, we resubmitted our BLA, and the FDA subsequently accepted our submission with a Prescription Drug User Fee Act (PDUFA) target action date of March 31, 2022. Typically, BLA resubmissions are followed by a six-month review procedure. However, we anticipate three additional months of review may be necessary based on the number of data read-outs that will emerge during the procedure. With respect to BMN 307, in September 2021, the FDA placed a clinical hold on our PHEarless study. The hold was based on pre-clinical study findings from a model designed to understand the durability of BMN 307 activity in mice bearing two germline mutations, one rendering the mice immunodeficient. Of 63 animals treated, six of seven animals administered BMN 307 at the highest dose group (2e14 Vg/kg) had tumors on liver necropsy 52 weeks after dosing with evidence for integration of portions of AAV vector into the genome. No lesions were observed in any mice at 24 weeks. The clinical significance of these findings is being evaluated to assure safe and appropriate use of BMN 307. To date, we have seen no evidence from our studies or scientific literature indicating these findings are translatable to humans, species other than mice or other gene therapy vectors. The durability study was one of multiple pre-clinical studies we conducted and was not designed to test safety. However, we promptly notified the FDA upon availability of the integration site analysis results. The FDA initiated a clinical hold shortly after being notified, and we announced the hold before the next business day after we were informed of the FDA’s decision. In February 2022, the FDA requested data from additional non-clinical studies to assess the theoretical oncogenic risk to human study participants, which is expected to take several quarters. We will communicate next steps for the program when available. Continued delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring our gene therapy product candidates to market could ~~take~~have a ~~significantly longer time to gain~~negative effect on our business and financial condition. Even if we do obtain regulatory approval, ~~than we expect~~ethical, social and legal concerns about gene therapy arising in the future could result in additional regulations restricting or ~~may never gain approval. We also rely on independent third-party contract research organizations (CROs) to file some~~prohibiting sale of our foreign marketing applications and important 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.

products.

In addition, some of our product candidates are intended to be used in combination with a ~~delivery~~medical device, such as an injector or other delivery ~~system. Medical~~system or companion diagnostic. Such 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~~and the EU, which are generally is defined as ~~a product~~products consisting of components from two or more regulatory categories (e.g., drug/device, device/biologic, drug/biologic). ~~Each~~In the U.S., 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. In the EU, if a device intended to administer a medicinal product is sold together with such medicinal product in such a way that they form a single integral product which is intended exclusively for use in the given combination and which is not reusable, that single integral product is regulated as a medicinal product. In addition, the relevant general safety and performance requirements established for medical devices by EU medical devices legislation apply to the device component of such combination products. Our product candidates intended for use with ~~such~~separately regulated 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 isare not a well-established ~~area,~~areas, 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 development and regulatory approval process for our products and product candidates, we engage in discussions with the FDA, the EMA and other 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,~~Moreover, 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

Table of Contents

effectively and efficiently resolve and comply with the inquiries and requests of the FDA, the EMA and other ~~non-U.S.~~comparable international 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~~revenues 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~~

ALDURAZYME, BRINEURA, KUVAN, NAGLAZYME and VIMIZIM 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~~PALYNZIQ has received regulatory approval to be commercially marketed ~~only~~in the U.S., the EU, and Australia. VOXZOGO has received regulatory approval to be commercially marketed in the U.S., the EU, and Brazil. ROCTAVIAN has received conditional approval to be commercially marketed 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~~record keeping.

An example of the ongoing regulatory requirements our products are subject to is the PALYNZIQ Risk Evaluation and Mitigation Strategy (REMS) program. In the U.S., PALYNZIQ is only available through the REMS program, which is required by the FDA to mitigate the risk of anaphylaxis while using the product. Notable requirements of our REMS program include the following:

•prescribers must be certified by enrolling in the REMS program and completing training;

•prescribers must prescribe auto-injectable epinephrine with PALYNZIQ;

•pharmacies must be certified with the REMS program and must dispense PALYNZIQ only to patients who are authorized to receive it;

•patients must enroll in the REMS program and be educated about the risk of anaphylaxis by a certified prescriber to ensure they understand the risks and benefits of treatment with PALYNZIQ; and

•patients must have auto-injectable epinephrine available at all times while taking PALYNZIQ.

Failure of prescribers, pharmacies or patients to enroll in our REMS program or to successfully complete and comply with its requirements may result in regulatory action from the FDA or decreased sales of PALYNZIQ. The restrictions and requirements under our REMS program, as well as potential changes to these restrictions and requirements in the future, subject us to increased risks and uncertainties, any of which could harm our business. The requirement for a REMS program can materially affect the potential market for and profitability of a drug. We cannot predict whether the FDA will request, seek to require or ultimately require modifications to, or impose additional requirements on, the PALYNZIQ REMS program, or whether the FDA will permit modifications to the PALYNZIQ REMS program that we consider warranted. Any modifications required or rejected by the FDA could make it more difficult or expensive for us to distribute PALYNZIQ in the U.S., impair the safety profile of PALYNZIQ, disrupt continuity of care for PALYNZIQ patients and/or negatively affect sales of PALYNZIQ.

Moreover, 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~~product’s approved labeling. In particular, a product may not be promoted for uses that are not approved by the FDA or the EC as reflected in the product’s approved labeling. Although the FDA and other comparable international regulatory authorities do not regulate a physician’s choice of drug treatment made in the physician’s independent medical judgment, they do restrict promotional communications from companies or their sales force with respect to off-label uses of products for which marketing clearance has not been issued. The FDA and other national competent authorities or international regulatory agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant civil, criminal and administrative penalties. Thus, we will not be able to promote any products we develop for indications or uses for which they are not approved.

Additionally, in the EU, it is prohibited to promote prescription drugs to the general public and we are therefore limited to promote our products exclusively to healthcare professionals.

Moreover, if original FDA approval for one of our product candidates is granted via the accelerated approval pathway, we will be required to conduct a post-marketing confirmatory trial to verify and describe the clinical benefit in support of full approval. An unsuccessful post-marketing study or failure to complete such a study with due diligence could result in the withdrawal of the FDA’s marketing approval for a product candidate. For example, VOXZOGO is approved in the U.S. under accelerated approval based on an improvement in annualized growth velocity. Continued approval for this indication may be contingent upon verification

Table of Contents

and description of clinical benefit in confirmatory studies. To fulfill this post-marketing requirement, we intend to use our ongoing open-label extension studies compared to available natural history. In addition, the FDA and the EC often ~~requires~~require 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;~~

trials;

If such regulatory actions are taken, ~~the~~our 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~~authorities withdraws its approval of a product, we will be unable to generate ~~revenue~~revenues 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 FDA 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.

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~~The number of preclinical studies and clinical trials that ~~the~~ regulatory authorities ~~will~~ require ~~will vary~~varies 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~~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. From time to time, we have and may in the future publish or report preliminary, initial or interim data from our clinical trials. Preliminary, initial or interim data from our clinical trials may not be indicative of the final results of the trial and are

subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and/or more patient data become available. In this regard, such data may show initial evidence of clinical benefit, but as patients continue to be followed and more patient data become available, there is a risk that any therapeutic effects will not be durable in patients and/or will decrease over time or cease entirely. Preliminary, initial or interim data also remain subject to audit and verification procedures that may result in the final data being materially different from such preliminary, initial or interim data. As a result, preliminary, initial or interim data should be considered carefully and with caution until the final data are available.

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:

Moreover, 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.

Similar rules governing clinical trials to those in place in the U.S. apply in the EU. Since January 31, 2022, a new Clinical Trials Regulation (CTR) is in force in the EU. The CTR was adopted with a view to introducing a more uniform set of the rules across the EU for the authorization of clinical trials. The relevant procedures have now been streamlined with a view to facilitating a swifter and more seamless authorization and deployment of multi-center trials occurring in more than one EU Member State. However, such authorization still involves the national regulatory authorities and Ethics Committees of each of the EU Member States where the trial is to be conducted. The CTD will continue to apply in parallel to the CTR for a transitional period. This means that clinical trials in the EU can currently be conducted in accordance with the requirements of the CTD, as implemented in national law by each EU Member State, or the CTR, as applicable, as well as applicable good clinical practice standards.

We expect that coverage and reimbursement may be increasingly restricted in all the markets in which we sell our products. The escalating cost of healthcare has led to increased pressure on the healthcare 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 payers have proposed healthcare reforms

and cost reductions. A number of federal and state proposals to control the cost of healthcare, 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 and enacted legislation 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. Further, Congress and the executive branch have each indicated that they will continue to seek new legislative and/or administrative measures to control drug costs. In some international markets, the government controls the pricing, which can affect the profitability of drugs. Current government regulations and possible future legislation regarding healthcare may affect coverage and reimbursement for medical treatment by third-party payers, 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 and continue to propose revenue caps limiting the annual volume of sales of our products. Some of these caps are significantly below the actual demand in certain countries, and if the trend regarding revenue caps continues, our future revenues and gross margins may be adversely affected. For example, in the EU, governments influence the price of medicinal products through their pricing and reimbursement rules and control of national healthcare systems that fund a large part of the cost of those products to consumers. EU Member States are free to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement price has been agreed to by the government. An EU Member State may approve a specific price for the medicinal product, or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market, including volume-based arrangements, caps and reference pricing mechanisms. Other EU Member States allow companies to fix their own prices for medicines but monitor and control company profits. The downward pressure on healthcare costs in general, particularly prescription medicines, has become very intense. Pharmaceutical products may face competition from lower-priced products in foreign countries that have placed price controls on pharmaceutical products and may also compete with imported foreign products. Furthermore, there is no assurance that a product will be considered medically reasonable and necessary for a specific indication, will be considered cost-effective by third-party payors, that an adequate level of reimbursement will be established even if coverage is available or that the third-party payors’ reimbursement policies will not adversely affect our business.

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 revenues and results of operations.

Our ~~valoctocogene roxaparvovec (formerly referred~~industry is highly regulated and changes in law may adversely impact our business, operations or financial results. In the U.S., there have been and continue to be a number of legislative initiatives to contain healthcare costs. For example, the Patient Protection and Affordable Care Act of 2010, as ~~BMN 270)~~amended by the Health Care and Education Reconciliation Act of 2010 (collectively, 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 executive, judicial and congressional challenges to certain aspects of the PPACA. Although the PPACA has generally been upheld thus far, it is unclear how continued challenges to the law may impact the PPACA and our business. 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 in the U.S. or abroad, may result in more rigorous coverage criteria and an additional downward pressure on the reimbursement our customers may receive for our products. Recently there has been heightened governmental scrutiny in countries worldwide over the manner in which manufacturers set prices for their marketed products.

In the U.S., there have been several recent congressional inquiries, proposed and enacted federal and state legislation, and executive action designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the cost 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 payers. In addition, individual states in the U.S. have also increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, price disclosure and reporting requirements, 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. Moreover, 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. Further, it is possible that additional governmental action is taken in response to the COVID-19 pandemic.

Likewise, in many EU Member States, legislators and other policymakers continue to propose and implement healthcare cost-containing measures in response to the increased attention being paid to healthcare costs in the EU. Certain of these changes could impose limitations on the prices we will be able to charge for our products and any approved product candidates or the amounts of reimbursement available for these products from governmental and private third-party payers, may increase the tax obligations on pharmaceutical companies or may facilitate the introduction of generic competition with respect to our products. Further, an increasing number of EU Member States and other non-U.S. countries use prices for medicinal products established in other countries as “reference prices” to help determine the price of the product in their own territory. If the price of one of our products decreases substantially in a reference price country, it could impact the price for that product in other countries. Consequently, a downward trend in prices of our products in some countries could contribute to similar downward trends elsewhere, which would have a material adverse effect on our revenues and results of operations. Moreover, in order to obtain reimbursement for our products in some countries, we may be required to conduct clinical trials that compare the cost-effectiveness of our products to other available therapies.

Legally mandated price controls on payment amounts by governmental and private third-party payers or other restrictions could harm our business, results of operations, financial condition and prospects. 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.

As part of our business strategy, we have developed and may in the future develop some drugs that may be eligible for FDA 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, pursuant to the Orphan Regulation, orphan drug designation is available if a sponsor can establish that: (1) the medicine is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting no more than five in 10,000 people in the EU at the time the application is made, or, (2) that it is intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition in the EU and that without incentives derived from the orphan status, it is unlikely that the marketing of the medicine in the EU would generate sufficient return to justify the necessary investment. In both cases, the applicant must demonstrate that there exists no satisfactory method of diagnosis, prevention or treatment of the condition in question that has been authorized in the EU or, if such method exists, the medicine will be of significant benefit to those affected by that condition.

In the U.S., 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. In addition, the FDA may approve another drug during a period of orphan drug exclusivity if the second drug is found to be clinically superior to the first drug. In the EU, a ten-year period of market exclusivity (extendable to twelve years for orphan drugs that have complied with an agreed Pediatric Investigation Plan (PIP) pursuant to Regulation 1901/2006), during which similar medicines for the same indication cannot be placed on the market, is granted. MAs may also be granted to a similar medicinal product with the same orphan indication if: (i) the applicant can establish that the second medicinal product, although similar to the orphan medicinal product already authorized is safer, more effective or otherwise clinically superior to the orphan medicinal product already authorized; (ii) the MA holder for the first orphan medicinal product grants its consent; or (iii) if the MA holder of the orphan medicinal product is unable to supply sufficient quantities. The period of market exclusivity may, in addition, be reduced to six years if, at the end of the fifth year, it can be demonstrated on the basis of available evidence that the criteria for its designation as an orphan medicine are no longer satisfied, for example if the original orphan medicinal product has become sufficiently profitable not to justify maintenance 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 and/or the Orphan Regulation, as applicable, 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.

of whether a drug is the same drug or a different drug will be based on the principal molecular structural features of the products. For gene therapy products, the FDA has stated in guidance that it generally intends to consider certain key features such as transgenes and vectors used in gene therapy products to be principal molecular structural features. 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.

Our ALDURAZYME, BRINEURA, NAGLAZYME, PALYNZIQ and VIMIZIM products are regulated by the FDA as biologics under the Federal Food, Drug, and Cosmetic 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. 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. A similar abridged MA process is available to biosimilar products in the EU. In particular, applicants for MAs of biosimilars are required to demonstrate through comprehensive comparability studies with the reference biological medicine that: a) their biological medicine is highly similar to the reference medicine, notwithstanding natural variability inherent to all biological medicines; and b) there are no clinically meaningful differences between the biosimilar and the reference medicine in terms of safety, quality and efficacy.

In the U.S., 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. The BPCIA establishes a period of 12 years of exclusivity for reference products. In the EU, a medicinal product containing a new active substance benefits from eight years of data exclusivity, during which biosimilar applications referring to the data of that product may not be accepted by the regulatory authorities, and a further two years of market exclusivity, during which such biosimilar products may not be placed on the market. The two-year period may be extended to three years if during the first eight years a new therapeutic indication with significant clinical benefit over existing therapies is approved. Our products approved under BLAs in the U.S. or as a result of Marketing Authorization Applications (MAAs) in the EU, as well as our product candidates that may be approved in the future, could be reference products for biosimilar marketing applications.

Changes in funding levels of government agencies can affect their ability to hire and retain key personnel and carry out their normal functions that support our business. For example, the ability of the FDA or the EMA to timely review and approve INDs or MAAs for our product candidates may be hindered by a lack of resources and qualified personnel. In addition, funding of other government agencies on which our operations rely, including those that fund research and development activities, is subject to the political budget process, which is inherently fluid and unpredictable.

Government shutdowns could also impact the ability of government agencies to function normally and support our operations. For example, the U.S. federal government has shut down repeatedly since 1980, including for a period of 35 days beginning on December 22, 2018. During a shutdown, certain regulatory agencies, such as the FDA, have had to furlough key personnel and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

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 development and treatment risks associated with gene therapy products like our product candidate ~~valoctocogene roxaparvovec.~~ROCTAVIAN. 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~~little or too ~~little~~much of the desired protein or RNA. ~~There~~Although administration of a gene therapy product like our product candidate ROCTAVIAN is ~~also~~intended to correct an inborn genetic defect for at least several years, there is a risk that the therapeutic effect will not be durable and production of the desired

protein or RNA will ~~increase~~decrease more quickly or ~~decrease over time. Because~~cease entirely earlier than expected. If the therapeutic effect decreases significantly or ceases entirely, it is uncertain whether redosing is possible or would be effective. Furthermore, because gene therapy treatment is irreversible, there may be challenges in managing side effects, particularly those caused by ~~overproduction.~~potential overproduction of the desired protein. 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~~

In addition to the risks set forth in this Risk Factors section associated with ~~a decision expected in January 2018. Moreover,~~commercializing more traditional pharmaceutical drugs, there are ~~very few approved~~additional, unique commercial risks associated with 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~~like 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.~~

ROCTAVIAN. 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~~,ROCTAVIAN in the EU, and expect to face the same uncertainties in the U.S. and other countries, if ~~approved.~~approved in such markets. In order to recover our research and development costs and commercialize this one-time treatment on a profitable basis, we expect the cost of a single administration of ~~valoctocogene roxaparvovec~~ROCTAVIAN to be substantial. Therefore, we expect that coverage and reimbursement by governments and other third-party ~~payors~~payers will be essential for the vast majority of patients to be able to afford ~~valoctocogene roxaparvovec~~.ROCTAVIAN. Accordingly, sales of ~~valoctocogene roxaparvovec, if approved,~~ROCTAVIAN, will depend substantially ~~both domestically and internationally,~~ on the extent to which its cost will be paid by third-party ~~payors.~~payers. Even if coverage is provided, the reimbursement amounts approved by third-party ~~payors~~payers may not be high enough to allow us to realize a sufficient ~~return on~~revenues from our ~~investment.~~

investment in the development of ROCTAVIAN.

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~~The commercial success of ~~valoctocogene roxaparvovec~~ROCTAVIAN will depend, in part, on the acceptance of physicians, patients and ~~health care payors~~third-party payers 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~~Moreover, physicians and ~~safety profile in clinical trials and is ultimately approved, market~~patients may delay acceptance of ~~valoctocogene roxaparvovec~~ ~~will not be fully known~~ROCTAVIAN until ~~after it is launched.~~the product candidate has been on the market for a certain amount of time. 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~~successful commercialization of, and demand for, ~~valoctocogene roxaparvovec~~.

ROCTAVIAN.

In order to preserve the scientific integrity of our main ROCTAVIAN clinical trials and to allow us to only report on data at intervals that we believe will be meaningful to investors, we have implemented data access plans related to these ongoing open-label trials, which plans are designed to significantly mirror blinded trials. Pursuant to the plans, the ongoing emerging data for key endpoints are generally not accessed by us, with the exception that certain specific data points are reviewed by a small group of medical personnel monitoring and managing the trials, and then, only to the extent necessary to allow them to perform their monitoring responsibilities. As we disclose and publicly discuss prior data from one of these trials, such discussions do not incorporate any of the currently emerging data that are being collected and reviewed by personnel monitoring the trial and, accordingly, this prior data may differ significantly from more recent data that are only available to such personnel. Further, because our management does not have access to any of the ongoing key efficacy data and does not have the ability to adjust the trials based on such emerging data, the data access plans could adversely impact the ultimate outcome of the trials.

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, 2010 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.2020. 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.

As of September 30, ~~2017,~~2022, we had cash, cash equivalents and ~~short and long-term~~ investments totaling ~~$1.7~~$1.65 billion and ~~long-term~~ debt obligations of ~~$1.2~~$1.1 billion (undiscounted), which consisted of our 0.599% senior subordinated convertible notes due in 2024 (the 2024 Notes) and our 1.25% senior subordinated convertible notes due in 2027 (the 2027 Notes). The 2024 Notes and the 2027 Notes (collectively, the Notes), if not converted, will be required to be repaid in cash at maturity in August 2024 and May 2027, respectively. We will need cash not only to pay the ongoing interest due on the Notes during their term, but also to repay the principal amount of the Notes if not converted.

In January 2016, we terminated our License and Commercialization Agreement with Ares Trading, S.A. (~~Merck Serono~~)(Merck Serono). Pursuant to the Termination and Transition Agreement related to ~~Kuvan~~KUVAN and the Termination Agreement related to ~~pegvaliase,~~PALYNZIQ, we ~~made cash~~are obligated to make certain payments ~~on this transaction totaling $374.5 million in the nine months ended~~to Merck Serono if sales and development milestones are achieved. As of September 30, ~~2017, and~~2022, the remaining milestone payments that may ~~pay~~ ~~Merck Serono~~become payable include up to a maximum of ~~€60~~€30 million, in cash, if future sales milestones are met with respect to ~~Kuvan~~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.

PALYNZIQ.

We may require additional financing to fund the repayment of ~~our~~the 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 licenses and acquisitions. We may be unable to raise additional financing due to a variety of factors, including our financial condition, the status 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 be adversely 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:

•our ability to successfully market and sell our products;

~~Genzyme’s ability~~•the time and cost necessary to ~~continue~~develop commercial manufacturing processes, including quality systems, and to ~~successfully commercialize Aldurazyme;~~

build or acquire manufacturing capabilities the progress 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 development and commercial milestones ~~identified in our purchase~~under agreements with third parties, such as the ~~former stockholders of LEAD Therapeutics, Inc., ZyStor Therapeutics, Inc., Huxley Pharmaceuticals, Inc.,~~KUVAN and ~~Zacharon Pharmaceuticals Inc., and~~PALYNZIQ milestones under the termination agreements with Merck ~~Serono related~~Serono;

•any changes made to, ~~Kuvan~~or new developments in, our existing collaborative, licensing and ~~pegvaliase milestones;~~

other commercial relationships or any new collaborative, licensing and other commercial relationships that we may establish;

•Sanofi’s ability to continue to successfully commercialize ALDURAZYME; and

•

any changes made to, or new developments in, our existing collaborative, licensing and other commercial relationships or any new collaborative, licensing and other commercial relationships that we may establish; and

•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; and

•additional 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. The sale of additional equity and/or equity-linked 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. This could result in the delay, reduction or termination of our research, which could harm our business.

As of September 30, ~~2017,~~2022, we had ~~$1.2~~$1.1 billion (undiscounted) principal amount of indebtedness, including ~~$375.0 million (undiscounted) of indebtedness under the 2018 Notes, $375.0~~$495.0 million (undiscounted) principal amount of indebtedness under the ~~2020~~2024 Notes and ~~$495.0~~$600.0 million (undiscounted) principal amount of indebtedness under the ~~2024~~2027 Notes. In ~~November 2016,~~October 2018, we also entered into aan unsecured credit agreement (the 2018 Credit Agreement) with Bank of America, N.A., as the administrative agent, ~~swing line~~swingline lender and a lender, Citibank, N.A. as letter of credit issuer and each of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citibank, N.A. and Wells Fargo Securities, LLC as joint lead arrangers and joint bookrunners, providing ~~for~~ up to ~~$100.0~~$200.0 million in revolving ~~loans.~~loan commitments (the 2018 Credit Facility). In May 2021, we amended the 2018 Credit Facility to, among other things, extend the maturity date of the 2018 Credit Facility from October 18, 2021 to May 28, 2024. Our indebtedness may:

•limit our ability to borrow additional funds 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 portion 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; and

•increase our vulnerability to the impact of adverse economic and industry conditions.

In addition, the 2018 Credit ~~Agreement does,~~Facility contains, 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 2018 Credit ~~Agreement,~~Facility, the outstanding borrowings thereunder could become immediately due and payable, the 2018 Credit ~~Agreement~~Facility 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~~the Notes. If we default under any series of the Notes, such ~~notes~~series of Notes could become immediately due and payable and it could lead to defaults under the other series of Notes and/or the 2018 Credit ~~Agreement.~~

*Facility.

Our outstanding indebtedness consists primarily of the ~~2018 Notes, 2020~~2024 Notes and ~~2024~~2027 Notes, which, if not converted, will be required to be repaid in cash at maturity in ~~2018, 2020~~August 2024 and ~~2024,~~May 2027, 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 additional third-party

financing to pay for any amounts due in cash upon ~~such events,~~maturity of the Notes, 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~~$200.0 million in revolving loans under the 2018 Credit ~~Agreement,~~Facility, which would be required to be repaid in cash at maturity ~~in 2018~~.

on May 28, 2024.

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 other comparable EU and other 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 received a good manufacturing practice certificate from the EMA for the manufacture and distribution of ROCTAVIAN in the EU, been approved by the FDA and the EC for the manufacture of PALYNZIQ, and been approved by the FDA, the EC, and health agencies in other countries for the manufacture of ~~Aldurazyme, Brineura, Naglazyme~~ALDURAZYME, BRINEURA, NAGLAZYME, VIMIZIM and ~~Vimizim.~~ VOXZOGO.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.~~VIMIZIM and BRINEURA. 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 operations of our contract manufacturers, we are ultimately responsible for ensuring that our products are manufactured in accordance with cGMP regulations.

Due to the complexity of the processes used to manufacture our products and product candidates, we may be unable to continue to pass or initially pass federal or international regulatory inspections in a cost-effective manner. For the same reason, any potential third-party manufacturer of our products or our product candidates may be unable to comply with cGMP regulations in a cost-effective manner and may be unable 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 of our products, total or partial suspension of production and/or enforcement actions, including injunctions, and criminal or civil prosecution. These possible sanctions would adversely affect our financial results and financial condition.

Due to the complexity of manufacturing our product candidates and products, we may not be able to manufacture sufficient quantities. Our inability to produce enough of our product candidate at acceptable costs may result in the delay or termination of development programs. With respect to our commercial portfolio, we may not be able to manufacture our 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.

With respect to ROCTAVIAN, gene therapy products are relatively novel and complex 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. We invested a considerable amount of capital building our own commercial gene therapy manufacturing facility, which may be subject to significant impairment if our gene therapy programs are unsuccessful. As we develop, seek to optimize and operate the ROCTAVIAN manufacturing process, we will likely face technical and scientific challenges, considerable capital costs, and potential difficulty in recruiting and hiring experienced, qualified personnel. There may also be unexpected technical or operational issues during clinical or commercial manufacturing campaigns. As a result, we could experience manufacturing delays that prevent us from completing our clinical studies in a timely manner, if at all, or commercializing ROCTAVIAN on a profitable basis, if at all.

Also, we may be required to demonstrate product comparability between a biological product made after a manufacturing change and the product made before implementation of the 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.

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, it may be difficult or impossible for us to determine the cause of any particular lot failure and we must effectively take corrective action in response to any failure in a timely manner.

Although we have 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 production of final product for Firdapse and Kuvan. We also~~currently rely on third parties for portions of the manufacture of ~~Aldurazyme, Brineura, Naglazyme and Vimizim.~~each of our commercial products. If those manufacturers are unwilling or unable 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.

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; and

•conditions affecting the cost and availability of raw ~~materials.~~

materials, including inflation.

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 take a significant amount of time and expense to qualify a new supplier or manufacturer. We may not be able to obtain active ingredients or finished products from new suppliers or manufacturers on acceptable terms and at reasonable prices, or at all.

Any interruption in the supply of finished products could hinder our ability to distribute finished products to meet commercial ~~demand.~~

demand and adversely affect our financial results and financial condition.

With respect to our product candidates, production 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.

Either party may terminate the ~~target patient populations~~Manufacturing, Marketing and Sales Agreement (the MMS Agreement) between Sanofi and us related to ALDURAZYME for ~~our products are small, we must achieve significant market share and maintain high per-patient prices for our products to achieve profitability.~~

~~All of our products target diseases with small patient populations. As a result, our per-patient prices must be relatively high~~specified reasons, including if the other party is in order to recover our development and manufacturing costs and achieve profitability. For Brineura, Naglazyme and Vimizim in particular, we must market worldwide to achieve significant market penetrationmaterial breach of the ~~product. In addition, because~~MMS Agreement, has experienced a change of control, as such term is defined in the ~~number of potential patients~~MMS Agreement, or has declared bankruptcy and also is in ~~each disease population is small, it is not only important to find patients who begin therapy to achieve significant market penetration~~breach of the ~~product, but~~MMS Agreement. Although we also need to be able to maintain these patients on therapy for an extended period of time. Due to the expected costs of treatment for our products, we may be unable to maintain or obtain sufficient market share at a price high enough to justify our product development efforts and manufacturing expenses.

If we fail to obtain an adequate level of coverage and reimbursement for our products by third-party payors, the sales of our products would be adversely affected or there may be no commercially viable markets for our products.

~~The course of treatment for patients using our products is expensive. We expect patients to need treatment for extended periods, and for some products throughout the lifetimes~~are not currently in breach of the patients. We expect that most families of patients will not be capable of paying for this treatment themselves. There will be no commercially viable market for our products without coverage and reimbursement from third-party payors. Additionally, even ifMMS Agreement, there is a ~~commercially viable market, if~~risk that either party could breach the ~~level of reimbursement~~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 ~~below~~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 ~~expectations, our revenue~~rights to ALDURAZYME and ~~gross margins~~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, to buy out the terminating party’s interest in ALDURAZYME and in the BioMarin/Genzyme LLC at a specified buyout amount. If such option is not exercised, all rights to ALDURAZYME will be ~~adversely affected.~~

Third-party payors, such as government or private health care insurers, carefully review and increasingly challenge the prices charged for drugs. Reimbursement rates from private companies vary depending on the third-party payor, the insurance plan and other factors. Reimbursement systems in international markets vary significantly by country and by region, and reimbursement approvals must be obtained on a country-by-country basis.

~~Government authorities and other third-party payors are developing increasingly sophisticated methods of controlling healthcare costs, such as by limiting coverage~~sold and the ~~amount~~BioMarin/Genzyme LLC will be dissolved. In the event of ~~reimbursement for particular medications. Increasingly, third-party payors are requiring that drug companies provide them~~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 ~~predetermined discounts from list prices as a condition of coverage, are using restrictive formularies~~the proceeds to be split between Sanofi and ~~preferred drug lists to leverage greater discounts~~us 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 payorsaccordance with our percentage interest in the ~~U.S. Therefore, coverage~~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 ~~reimbursement~~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 ~~drug products can differ significantly~~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 Sanofi will automatically terminate upon the effective date of the termination of the MMS Agreement and may not be terminated independently from ~~payor~~the MMS Agreement.

If we were obligated or given the option to ~~payor. As a result,~~buy out Sanofi’s interest in ALDURAZYME and the ~~coverage determination process is often a time-consuming~~BioMarin/Genzyme LLC, and ~~costly process that will require us~~thereby gain exclusive rights to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.

We cannot be sure that coverage and reimbursement will be available for any product that we commercialize or will continue to be available for any product that we have commercialized and, if reimbursement is available, what the level of reimbursement will be. Coverage and reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. If coverage and reimbursement are not available or reimbursement is available only to limited levels,ALDURAZYME, we may not ~~successfully commercialize any product candidate for which we obtain marketing approval or continue to market any product that has already been commercialized.~~

Reimbursement in the 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 insufficienthave sufficient funds to ~~pay for all patients. Further, governments have in the past undertaken~~do so 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 changes in pricing regulation could restrict the amount that we are able to charge 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.

*Government health care reform could increase our costs and adversely affect our revenue and results of operations.

Our industry is highly regulated and changes in law may adversely impact 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 additional

challenges 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 receive for our products. Recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products. 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, review the relationship between pricing and manufacturer patient programs, reduce the cost 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~~obtain the financing to ~~us from these customers and our results of operations would be adversely affected.~~

*do so. If we ~~are found in violation of federal or state health care laws,~~fail to buy out Sanofi’s interest, we may be ~~required to pay a penalty or be suspended from participation~~held 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, 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 allbreach 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~~agreement and may lose any claim to the ~~federal Anti-Kickback Statute, some of which apply~~rights to ~~referral of patients for health care services reimbursed by any source, not just governmental payors.~~

~~Federal~~ALDURAZYME and ~~state false claims laws, including~~ the ~~civil False Claims Act, prohibit any person from knowingly presenting, or causing to~~related intellectual property and regulatory approvals. We would then effectively be ~~presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false~~

statement 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~~developing and ~~willfully executing a scheme~~commercializing ALDURAZYME. If this happened, not only would our product revenues decrease, but our share price would also decline.

A significant portion of the sales of ~~Aldurazyme, Kuvan, Naglazyme~~ALDURAZYME, BRINEURA, KUVAN, NAGLAZYME, PALYNZIQ and ~~Vimizim, and all of the sales of Firdapse~~VIMIZIM are generated from countries other than the U.S. Similarly, we expect a significant portion of the sales of ~~Brineura~~ROCTAVIAN and VOXZOGO 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:

Any of these factors may, individually or as a group, have a material adverse effect on our business and results of operations.

For example, Russia’s invasion of Ukraine and the related impacts to Ukraine’s infrastructure and healthcare system has significantly impacted our ability to provide our therapies to patients in Ukraine. Sanctions issued by the U.S. and other countries against Russia in response to the attack on Ukraine and related counter-sanctions issued by Russia have made it very difficult for us to operate in Russia and may have a material adverse impact on our ability to sell our products and/or collect receivables from customers in Russia.

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, we

may not be able to grow sales in these geographic regions. These or other similar risks could adversely affect our ~~revenue~~revenues and profitability.

We make a significant portion of our international sales of BRINEURA, NAGLAZYME and VIMIZIM through early access, special access or “named patient sales” programs in markets where we are not required to obtain regulatory approval, and we expect a significant portion of our international sales of VOXZOGO will also be through such programs. The specifics of the programs vary from country to country. Generally, special approval must be obtained to initiate such programs, and in some cases, special approval must be obtained for each patient. The approval normally requires an application or a lawsuit accompanied by evidence of medical need.

These programs are not well defined in some countries and are subject to changes in requirements, funding levels, unmet medical need and classification of the disease treated by our product. 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 and may continue to undertake unofficial measures to limit purchases of our products, including initially denying coverage for purchasers, delaying orders, requiring additional in-country testing 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 ~~fail~~would need to ~~comply with~~ seek full product approval or official reimbursement 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, obtain and maintain a full product approval or official reimbursement, 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.

Our products are subject to U.S. export control laws and regulations, including the U.S. Export Administration Regulations and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC). Exports of our products and solutions must be made in compliance with these laws and regulations. Changes to these laws and regulations, or to the countries, governments, persons or activities targeted by such laws, could result in decreased use of our products, or hinder our ability to export or sell our products to existing or potential customers, which would likely adversely affect our results of operations, financial condition or strategic objectives. For example, sanctions issued by the U.S. against Russia in response to the invasion of Ukraine have made it very difficult for us to operate in Russia and may have a material adverse impact on our ability to sell our products and/or collect receivables from customers in Russia. Moreover, if we fail to comply with these laws and regulations, we could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges and fines.

We rely on a general license from 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, the general license will be renewed in the future or ~~that~~ we will remain in ~~compliance. Moreover, a~~compliance with the general license. 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.

Moreover, U.S. export control and economic sanctions may make operating in certain countries more difficult and expensive. For example, we may be unable to find distributors or financial institutions willing to facilitate the sale of our products and collection of cash from such sales in a cost-effective manner, if at all.

We are required to comply with anti-corruption and anti-bribery laws in the jurisdictions in which we operate, including the FCPA in the ~~United States, the UK Bribery Act~~U.S. 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~~non-U.S. government 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~~non-U.S. government officials for purposes of applicable anti-corruption laws.

Although we have adopted policies and procedures designed to ensure that ~~the Company,~~we, 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.

Moreover, there has been enhanced scrutiny of company-sponsored patient assistance programs, including insurance premium and co-pay assistance programs and donations to third-party independent charities that provide such assistance. There has also been enhanced scrutiny by governments on reimbursement support offerings, clinical education programs and promotional speaker programs. If we, our third-party agents or donation recipients are deemed to have failed to comply with laws, regulations or government guidance in any of these areas, we could be subject to criminal or civil sanctions. Any similar violations by our competitors could also negatively impact our industry reputation and increase scrutiny over our business and our products.

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,~~Euro, the Brazilian ~~real,~~Real, the ~~U.K. pound,~~Great British Pound, the Canadian ~~dollar, the Swiss franc, the Japanese yen~~Dollar and several other currencies, changes in those currencies relative to the U.S. ~~dollar~~Dollar (USD) will impact our revenues and expenses. If the ~~U.S. dollar~~USD were to weaken against another currency, assuming all other variables

remained 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~~USD 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,~~USD, changes in currency exchange rates between the ~~U.S. dollar~~USD 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 certain 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.

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.

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~~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~~KUVAN) has 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:

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.

In the EU, materials we submit to the EMA in connection with our clinical trials that were traditionally regarded as confidential, proprietary information, such as study protocols, information regarding manufacturing methods and controls, and intermediate data analyses, are now subject to public disclosure. Moreover, clinical trial data submitted to the EMA in our MAAs are also available to the public. We are only permitted to redact from public disclosures commercially confidential information, a standard which is construed narrowly and subject to the interpretation and final decision of the EU regulatory authorities. EU regulations have resulted and will continue to result in the EMA’s public disclosure of certain of our proprietary information related to recently completed and future clinical trials and MAA submissions. The move toward public disclosure of such development information 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, increasing scrutiny of our product candidates and products, and enabling competitors to use our clinical trial information and data to gain approvals for their own products.

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~~Moreover, 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.~~

Similar to us, competitors continually seek intellectual property protection for their technology. Several of our development programs, such as ~~valoctocogene roxaparvovec~~,ROCTAVIAN, 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~~their intellectual property, we would face a number of issues, including the following:

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.

Our stock price has been and ~~Sales Agreement with Genzyme were terminated, we could~~may in the future be ~~prevented from continuing~~volatile. Our valuation and stock price may have no meaningful relationship to ~~commercialize Aldurazyme~~current or historical earnings, asset values, book value or many other criteria based on conventional measures of stock value. The market price of our common stock will fluctuate due to factors including:

Furthermore, the stock markets have recently experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. In some cases, these fluctuations have been unrelated or disproportionate to the operating performance of those companies. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. For example, in September 2020, after a substantial drop in our stock price that followed an announcement providing a regulatory update regarding ROCTAVIAN, we and certain of our officers were sued in a putative class action lawsuit alleging violations of the federal securities laws for allegedly making materially false or misleading statements. In addition, in October 2021, after a drop in our stock price that followed an announcement providing a regulatory update regarding BMN 307, we and certain of our current and former officers were sued in a putative class action lawsuit alleging violations of the federal securities laws for allegedly making materially false or misleading statements. We may be the target of additional litigation of this type in the future as well. Securities litigation against us could result in substantial costs and divert our management’s time and attention from other business concerns, which could harm our business.

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.

The conversion of some or all of the Notes will dilute the ownership interests of existing stockholders. 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.

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 us more difficult, even if a change in control would be ~~delayed~~beneficial to the stockholders. Our anti-takeover provisions include provisions in our restated certificate of incorporation and amended and restated bylaws providing that stockholders’ meetings may only be called by our Chairman, the lead independent director or ~~diminished.~~

~~Either party~~the majority of our Board of Directors and that the stockholders may ~~terminate~~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 ~~Manufacturing, Marketing~~authority to issue shares of preferred stock and ~~Sales Agreement (the MMS Agreement) between Genzyme and us related~~ to ~~Aldurazyme for specified reasons, including if~~determine the ~~other party is in material breach~~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 ~~MMS Agreement,~~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 ~~experienced a change~~held the stock for three years unless, among other possibilities, our Board of ~~control, as such term is defined~~Directors approves the transaction. Our Board of Directors may use these provisions to prevent changes in the ~~MMS Agreement, or has declared bankruptcy~~management and ~~also is~~control of us. Also, under applicable Delaware law, our Board of Directors may adopt additional anti-takeover measures in ~~breach~~the future.

The terms of the ~~MMS Agreement, there is a risk that either party could breach~~Notes require us to repurchase the ~~MMS Agreement~~Notes 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, to buy out the terminating party’s interest in Aldurazyme and in the BioMarin/Genzyme LLC at 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~~a fundamental change. A takeover of us would trigger options by the respective holders of the ~~buyout option without exercise~~applicable Notes to require us to repurchase such Notes. This may have the effect of delaying or preventing a takeover of us that would otherwise be beneficial to our stockholders or investors in the Notes.

Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware is the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law:

This exclusive-forum provision would not apply to ~~Aldurazyme is~~suits brought 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 byenforce 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 setduty or liability created 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.

Our future growth and development depends 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.

Our competitors compete with us to attract organizations for acquisitions, joint ventures, licensing arrangements or other collaborations. To date, several of our former and current product programs have been acquired through acquisitions and several of our former and current product programs have been developed through licensing or collaborative arrangements, such as Aldurazyme, 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 use of litigation or regulatory means to obtain approval for generic versions of Kuvan, our revenue and results of operations would be adversely affected.

~~The Drug Price Competition and Patent Term Restoration~~Securities Act of ~~1984, known~~1933, as amended, the ~~Hatch-Waxman~~Exchange Act permits the FDA to approve 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.

~~Pursuant to the Hatch-Waxman Act, companies were permitted to file ANDA applications for proposed generic versions of Kuvan at~~or any time after December 2011. We own several patents that cover Kuvan, and we have listed those patents in conjunction with that product in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations (the Orange Book). The Hatch-Waxman Act requires an ANDA applicant seeking FDA approval of its proposed generic product prior to the expiration of our Orange Book-listed patents to certify that the applicant believes that our patents are invalid or will not be infringed by the manufacture, use or sale of the drugother claim for which the ~~application has been submitted (a paragraph IV certification)~~U.S. federal courts have exclusive jurisdiction. In addition, our amended and ~~notify~~restated bylaws provide that the federal district courts of the U.S. of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.

While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated bylaws. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.

These exclusive forum provisions 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 either of our exclusive forum provisions to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could seriously harm our business. Our amended and restated bylaws further provide 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 certification (a paragraph IV notice). Upon receipt of a paragraph IV notice, the Hatch-Waxman Act allows us, with proper basis, to bring an action for patent infringement against the ANDA filer, asking that the proposed generic product not be approved until after our patents expire. If we commence a lawsuit within 45 days from receipt of the paragraph IV notice, the Hatch-Waxman Act provides a 30-month stay, during which time the FDA cannot finally approve the generic’s application. If the litigation is resolved in favor of the ANDA applicant during the 30-month stay period, the stay is lifted and the FDA may approve the ANDA if it is otherwise ready for approval. The discovery, trial and appeals process in such a lawsuit is costly, time consuming, and may result in generic competition if the ANDA applicant prevails. In addition to our patent protection, we have received three-year Hatch-Waxman exclusivity for a New Patient Population for Kuvan that expires in October 2017, including pediatric exclusivity. Thus, depending on the 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). 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 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 tablets was filed together with Merck & Cie), 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 license 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.

~~For more information regarding these matters, see “Legal Proceedings” in Part II, Item 1 of this Interim Report on Form 10-Q.~~

provisions.

Our future growth and success will depend in large part on our continued ability to attract, retain, manage and motivate our employees. The loss of the services of a significant portion of our workforce or any member of our senior management or the inability to hire or retain ~~experienced management~~qualified personnel could adversely affect our ability to execute our business plan and harm our operating results.

Because of the specialized ~~scientific and managerial~~ nature of our business, we rely heavily on our ability to attract and retain qualified scientific, technical and managerial personnel. In particular, the loss of one or more of our senior executive officers could be detrimental to us if we do not have an adequate succession plan or if we cannot recruit suitable replacements in a timely manner. While our senior executive officers are parties to employment agreements with us, these agreements do not guarantee that they will remain employed with us in the future. In addition, in many cases, these agreements do not restrict our senior executive officers’ ability to compete with us after their employment is terminated.

The competition for qualified personnel in the pharmaceutical field is intense, and there is a limited pool of qualified potential employees to recruit. This competition has been exacerbated during the COVID-19 pandemic, and we have recently experienced increased employee turnover like many other employers in the U.S. during the “great resignation.” Due to ~~this~~the intense competition for talent, we may be unable to continue to attract and retain qualified personnel necessary for the development of our business or to recruit suitable replacement personnel. If we are unsuccessful in our recruitment and retention efforts, our business may be harmed.

Our two newest products, VOXZOGO and ROCTAVIAN, address potentially larger patient populations than most of our other products, and product candidates that we are currently developing or may license or acquire in the future may be intended for similarly larger patient populations ~~that are significantly larger~~ than ~~any of the patient populations~~ we ~~currently target.~~have historically targeted. In order to continue development of such product candidates and marketing of ~~these~~ products ~~if approved,~~with larger markets, we will need to ~~significantly expand~~continue expanding our operations. To manage expansion effectively, we need to continue to develop and improve our research and development capabilities, manufacturing and quality capacities, sales and marketing capabilities, financial and administrative systems and standard processes for global operations. Our staff, financial resources, systems, procedures or controls may be inadequate to support our operations and may increase our exposure to regulatory, competitive, and corruption risks and our management may be unable to manage successfully current or future market opportunities or our relationships with customers and other third parties.

~~Changes~~

New tax laws or regulations could be enacted at any time, and existing tax laws or regulations could be interpreted, modified or applied in ~~methods of treatment of disease~~a manner that is adverse to us or our customers, which could ~~reduce demand for our products and~~ adversely affect ~~revenues.~~

~~Even~~our business and financial condition. For example, the Tax Cuts and Jobs Act, the Coronavirus Aid, Relief, and Economic Security Act and the Inflation Reduction Act enacted many significant changes to the U.S. tax laws. Future guidance from the Internal Revenue Service and other tax authorities with respect to such legislation may affect us, and certain aspects of such legislation could be repealed or modified in future legislation. In addition, it is uncertain if and to what extent various states will conform to federal tax laws. Any future tax legislation could increase our ~~product candidates are approved,~~U.S. tax expense and could have a material adverse impact on our business and financial condition.

Moreover, changes in the tax laws of jurisdictions in which we conduct business could arise, including as a result of the base erosion and profit shifting (BEPS) project that is being led by the Organization for Economic Co-operation and Development (OECD), and other initiatives led by the OECD or the EC. For example, the OECD, which represents a coalition of member countries including the U.S. and other countries in which we have operations, is working on proposals, commonly referred to as “BEPS 2.0”, which, if ~~doctors elect~~implemented, would make important changes to the international tax system, by allocating taxing rights in respect of certain profits of multinational enterprises above a ~~course~~fixed profit margin to the jurisdictions within which they carry on business (subject to threshold rules) and imposing a minimum effective tax rate on certain multinational enterprises. The implementation of ~~treatment~~any such rules would fundamentally change the international tax system. 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 a country from which income is reallocated does not ~~include~~agree 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 decision~~income to double taxation or assess interest and penalties, it would ~~reduce demand for~~increase our ~~products and~~consolidated tax liability, which could adversely affect ~~revenues.~~our business, financial condition, results of operations and cash flows.

We are subject to various healthcare laws and regulations in the U.S. and internationally, including anti-kickback laws, false claims laws, data privacy and security laws, and laws related to ensuring compliance. In the U.S., 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 healthcare programs, such as Medicare and Medicaid. Under the federal Anti-Kickback Statute and related regulations, certain arrangements are deemed not to violate the federal Anti-Kickback Statute if they fit within a statutory exception or regulatory safe harbor. However, the exceptions 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 exception 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 healthcare services reimbursed by any source, not just governmental payers.

Federal and state false claims laws, including the civil False Claims Act and the Civil Monetary Penalties Law, prohibit any person or entity 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 false statement 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, among other things, knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private payers, 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 healthcare benefits, items or services.

In addition, recent healthcare reform legislation has strengthened these laws in the U.S. For example, ~~if gene therapy becomes widely used~~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 civil False Claims Act.

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, integrity, availability, security and transmission of individually identifiable health information. Many state and non-U.S. 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. The global data protection landscape is rapidly evolving, and implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future. In the U.S., California recently enacted the California Consumer Privacy Act (CCPA), which took effect on January 1, 2020. The CCPA gives California consumers expanded rights to access and delete their personal information, opt out of certain personal information sales, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a

~~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 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.

In addition to California, other U.S. states have recently adopted consumer data protection and privacy laws, and more U.S. states may do so in the future. Aspects of the CCPA, CPRA and similar laws in other states and their interpretation and enforcement remain uncertain. The potential effects of these laws 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. Complying with these or other similar laws, regulations, amendments to or re-interpretations of existing laws and regulations, and contractual or other obligations relating to privacy, data protection, data transfers, data localization, or information security may require us to make changes to our services to enable us or our customers to meet new legal requirements, incur substantial operational costs, modify our data practices and policies, and restrict our business operations. Any actual or perceived failure by us to comply with these laws, regulations, or other obligations may lead to significant fines, penalties, regulatory investigations, lawsuits, significant costs for remediation, damage to our reputation, or other liabilities.

The European Regulation 2016/679, known as the General Data Protection Regulation (GDPR), as well as EEA Member State legislations supplementing such regulation, apply to the processing of personal data of individuals located in the EEA, including health-related information, by companies located in the EEA, or in certain circumstances, by companies located outside of the EEA. These laws impose strict obligations on the ability to collect, record, store, disclose, use and transmit personal data, including health-related information. These include several requirements relating to (i) obtaining, in some situations, the informed consent of the individuals to whom the personal data relates, (ii) the information provided to the individuals about how their personal information is used, (iii) ensuring the security and confidentiality of the personal data, (iv) the obligation to notify regulatory authorities and affected individuals of personal data breaches, (v) extensive internal privacy governance obligations, and (vi) obligations to honor rights of individuals in relation to their personal data (for example, the right to access, correct and delete their data). Switzerland has adopted similar restrictions.

The GDPR and other European data protection laws generally restrict the transfer of personal information from Europe, including the EEA and Switzerland, to the U.S. and most other countries unless the parties to the transfer have implemented specific safeguards to protect the transferred personal information. One of the primary safeguards allowing U.S. companies to import personal information from the EEA has been the EC’s Standard Contractual Clauses (SCCs). However, the Court of Justice of the EU (CJEU) issued a decision that called into question whether the SCCs can lawfully be used for transfers of personal information from Europe to the United States or most other countries. At present, there are few, if any, viable alternatives to the SCCs, on which we have relied for personal information transfers from Europe to the United States and other “third countries.” After the mentioned CJEU judgment, new sets of SCCs were published on June 4, 2021. Most importantly, the use of ~~enzyme replacement therapy,~~SCCs does not any longer automatically ensure compliance with the GDPR. Instead, companies remain required to conduct a data transfer impact assessment for each transfer, which adds a compliance burden.

Potential pecuniary fines for noncompliance with the GDPR may be up to the greater of €20 million or 4% of annual global revenue. The GDPR has increased our responsibility and liability in relation to personal data that we process and has

increased our compliance costs. The EU regulations that make certain materials we submit to the EMA in connection with our clinical trials subject to public disclosure has increased the risk that we may unintentionally disclose personal information protected under the GDPR and thereby incur associated penalties and suffer reputational damage.

Substantial new laws and regulations affecting compliance have also been adopted in the U.S. and certain non-U.S. countries, which may require us to modify our business practices with healthcare practitioners. For example, in the U.S., the PPACA, through the Physician Payments Sunshine Act, requires certain drug, biologicals and medical supply manufacturers to collect and report to CMS information on payments or transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other health care professionals (such as physicians assistants and nurse practitioners), and teaching hospitals, as well as investment and ownership interests held by such ~~as Aldurazyme, Naglazyme,~~physicians and ~~Vimizim~~their immediate family members during the preceding calendar year. In addition, there has been a recent trend of increased state regulation of payments made to physicians. Certain states and/or local jurisdictions 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, the registration of pharmaceutical sales representatives and/or the tracking and reporting of gifts, compensation and other remuneration to physicians, marketing expenditures, and drug pricing. Likewise, in ~~MPS diseases,~~many non-U.S. countries there is an increasing focus on the relationship between drug companies and healthcare practitioners. Recently enacted non-U.S. legislation creates reporting obligations on payments, gifts and benefits made to these professionals; however, implementing regulations enacting such laws are still pending and subject to varying interpretations by courts and government agencies. The shifting regulatory environment and the need to implement systems to comply with multiple jurisdictions with different compliance and/or reporting requirements increases the costs of maintaining compliance and the possibility that we may violate one or more of the requirements and be subject to fines or sanctions.

Due to the breadth of the healthcare and privacy and data protection laws described above, the narrowness of available statutory and regulatory exceptions and safe harbors and the increased focus by law enforcement agencies in enforcing such laws, our business activities could be ~~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 success~~become 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 acceptance~~government healthcare programs, any of ~~physicians, patients~~which could adversely affect our business, financial condition and ~~health care payors~~results 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.

operations.

We are exposed to the potential product liability risks inherent in the testing, manufacturing and marketing of human pharmaceuticals. We currently maintain insurance against product liability lawsuits for the commercial sale of our products and for the clinical trials of our product candidates. Pharmaceutical companies must balance the cost of insurance with the level of coverage based on estimates of potential liability. Historically, the potential liability associated with product liability lawsuits for pharmaceutical products has been unpredictable. Although we believe that our current insurance is a reasonable estimate of our potential liability and represents a commercially reasonable balancing of the level of coverage as compared to the cost of the insurance, we may be subject to claims in connection with our clinical trials and commercial use of our products and product candidates for which our insurance coverage may not be adequate and we may be unable to avoid significant liability if any product liability lawsuit is brought against us. If we are the subject of a successful product liability claim that exceeds the limits of any insurance coverage we obtain, we may incur substantial charges that would adversely affect our earnings and require the commitment of capital resources that might otherwise be available for the development and commercialization of our product programs.

We rely significantly on our information technology ~~and manufacturing infrastructure~~systems 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 (whether intentional or inadvertent) 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 our~~misappropriate or compromise confidential or ~~otherwise protected~~proprietary 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 or those of any third parties in our supply chain, 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 breach~~

As part of our business, we collect, store and transmit large amounts of confidential information, proprietary data, intellectual property and personal data. The information and data processed and stored in ~~security,~~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 ~~resulting~~or 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, ransomware or other cyberattacks directed by third parties. 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 respect~~our technology systems and those of the third parties that we rely on, our efforts may not be successful.

We have experienced and may continue to experience cybersecurity incidents. Although to our knowledge we have not experienced any material incident or interruption to date, if such an event were to occur it could result in a material disruption of our development programs and commercial operations, including due to a loss, corruption or unauthorized disclosure of our trade secrets, personal data or other proprietary or sensitive information. Further, these cybersecurity incidents can lead to the public disclosure of personal information (including sensitive personal information) of our employees, clinical trial patients and ~~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 or~~by 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 investments~~us to ~~remediate~~notify 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.

The occurrence of an earthquake or other catastrophic disaster could cause damage to our facility and equipment, or that of our third-party manufacturers or single-source suppliers, which could materially impair ~~our~~the ability ~~to manufacture Aldurazyme, Brineura, Naglazyme and Vimizim~~for us or our third-party ~~manufacturers’ ability~~manufacturers to manufacture ~~Firdapse or Kuvan.~~

our products and product candidates. Our Galli Drive facility, located in Novato, California, is currently our only manufacturing facility for ~~Aldurazyme~~ALDURAZYME, NAGLAZYME, VOXZOGO and ~~Naglazyme~~PALYNZIQ and is one of two manufacturing facilities for ~~Brineura~~BRINEURA and ~~Vimizim. It~~VIMIZIM. Our gene therapy manufacturing facility is also located in Novato, California, and it is currently our only manufacturing facility to support ROCTAVIAN clinical development activities and the anticipated commercial demand for ROCTAVIAN following its recent approval by EC and to the extent it receives approval by the FDA or other regulatory authorities. 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 Kuvan~~our products manufactured, could be seriously, or potentially completely, impaired, and our commercialization efforts and ~~revenue~~revenues could be seriously impaired.

Moreover, other unforeseen events, such as power outages, could significantly disrupt our operations or those of our third-party manufacturers and suppliers, which could result in significant delays in the manufacture of our products and adversely impact our commercial operations and revenues. Pacific Gas and Electric Company, the electric utility in the San Francisco Bay Area where many of our facilities are located, commenced widespread blackouts during the fall of 2019 to avoid and contain wildfires sparked during strong wind events by downed power lines or equipment failures. While we have not experienced damage to our facilities or material disruption to our operations as a result of these power outages, ongoing blackouts, particularly if prolonged or frequent, could impact our business going forward. The insurance that we carry, the inventory that we maintain and our risk mitigation plans may not be adequate to cover our losses resulting from disasters or other business interruptions.

Various macroeconomic factors could adversely affect our business and the results of our operations and financial condition, including changes in inflation, interest rates and foreign currency exchange rates and overall economic conditions and uncertainties, including those resulting from the current and future conditions in the global financial markets and volatility and disruptions in the equity and debt markets. For instance, if inflation (such as that recently observed in the U.S. and elsewhere) or other factors were to significantly increase our business costs, it may not be feasible to pass price increases on to our customers due to the process by which ~~health care~~healthcare 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.

We sell our products in countries that face economic volatility and ~~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~~revenues would be adversely affected.

Interest rates and the ability to access credit markets could also adversely affect the ability of our customers/distributors to purchase, pay for and effectively distribute our products. Similarly, these macroeconomic factors could affect the ability of our contract manufacturers, sole-source or single-source suppliers to remain in business or otherwise manufacture or supply product. Failure by any of them to remain a going concern could affect our ability to manufacture products.

~~Risks Related to Ownership~~

~~product sales and profitability of our products;~~

~~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;~~

~~changes in company assessments or financial estimates by securities analysts;~~

	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

							Company			Accumulated
					Additional		Common			Other						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

	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

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

	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

			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

	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

	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

	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

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

	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

	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
AOCI balance at June 30, 2017	$	(13,569	)	$	(1,080	)	$	(9	)	$	(14,658	)
Other comprehensive income (loss) before reclassifications		(10,569	)		147			2			(10,420	)
Less: net loss reclassified from AOCI		(3,700	)		—			—			(3,700	)
Tax effect		—			(56	)		—			(56	)
Net current-period other comprehensive income (loss)		(6,869	)		91			2			(6,776	)
AOCI balance at September 30, 2017	$	(20,438	)	$	(989	)	$	(7	)	$	(21,434	)

	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

	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
AOCI balance at December 31, 2016	$	13,006		$	(178	)	$	(12	)	$	12,816
Other comprehensive income (loss) before reclassifications		(33,933	)		1,981			5			(31,947	)
Less: gain (loss) reclassified from AOCI		(489	)		3,252			—			2,763
Tax effect		—			460			—			460
Net current-period other comprehensive income (loss)		(33,444	)		(811	)		5			(34,250	)
AOCI balance at September 30, 2017	$	(20,438	)	$	(989	)	$	(7	)	$	(21,434	)

	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

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

	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

	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

	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

~~Exhibit Number~~	~~Description~~
Exhibit Number		Description
~~2.1~~		Purchase Agreement, dated as of November 23, 2014, among BioMarin Falcons B.V., BioMarin Pharmaceutical Inc. and Prosensa Holding N.V., previously filed with the SEC on November 26, 2014 as Exhibit 2.01 to the Company’s Current Report on Form 8-K (File No. 000-26727), which is incorporated by reference herein.
2.1
~~2.2~~	Amended and Restated Termination and Transition Agreement, dated as of December 23, 2015, between BioMarin Pharmaceutical Inc. and Ares Trading S.A., previously filed with the SEC on January 7, 2016 as Exhibit 2.1 to the Company’s Current Report on Form 8-K (File No. 000-26727), which is incorporated herein by reference. Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment. Omitted portions have been filed separately with the SEC.

~~2.3~~ 2.2		Termination Agreement, dated as of October 1, 2015, between BioMarin Pharmaceutical Inc. and Ares Trading S.A., previously filed with the SEC on January 7, 2016 as Exhibit 2.2 to the Company’s Current Report on Form 8-K (File No. 000-26727), which is incorporated herein by reference. Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment. Omitted portions have been filed separately with the SEC.

~~2.4~~	Termination and Transition Agreement, dated as of October 1, 2015, between BioMarin Pharmaceutical Inc. and Ares Trading S.A., previously filed with the SEC on January 7, 2016 as Exhibit 2.3 to the Company’s Current Report on Form 8-K (File No. 000-26727), which is incorporated herein by reference. Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment. Omitted portions have been filed separately with the SEC.

~~2.5~~ 2.3		First Amendment, dated as of December 12, 2016, to the Amended and Restated Termination and Transition Agreement, dated as of December 23, 2015 and effective as of October 1, 2015, between BioMarin Pharmaceutical Inc. and Ares Trading S.A., previously filed with the SEC on February 27, 2017 as Exhibit 2.6 to the Company’s Annual Report on Form 10-K (File No. 000-26727), which is incorporated herein by reference. Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment. Omitted portions have been filed separately with the SEC.

3.1		Restated Certificate of Incorporation of BioMarin Pharmaceutical Inc., previously filed with the SEC on June 12, 2017 as Exhibit 3.2 to the Company’s Current Report on Form 8-K (File No. 000-26727), which is incorporated herein by reference.

3.2* 3.2		Amended and Restated Bylaws of BioMarin Pharmaceutical Inc., ~~as amended.~~

~~4.1~~	~~Base Indenture, dated August 11, 2017, between the Company and Wilmington Trust, National Association, as Trustee,~~ previously filed with the SEC on ~~August 11, 2017~~December 18, 2020 as Exhibit ~~4.1~~3.1 to the Company’s Current Report on Form 8-K (File No. 000-26727), which is incorporated herein by reference.

~~4.2~~ 10.1*		First Supplemental Indenture, dated August 11, 2017, between the Company and Wilmington Trust, National Association, as Trustee (including the form of 0.599% Senior Subordinated Convertible Note due 2024), previously filed with the SEC on August 11, 2017 as Exhibit 4.2Second Amendment to the ~~Company’s Current Report on Form 8-K (File No. 000-26727), which is incorporated herein by reference.~~Amended and Restated BioMarin Pharmaceutical Inc. Nonqualified Deferred Compensation Plan, as adopted October 4, 2022

10.1* 10.2*		BioMarin Pharmaceutical Inc. Summary of Independent Director ~~Compensation.~~Compensation

31.1*		Certification of Chief Executive Officer pursuant to Rules 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.

31.2*		Certification of Chief Financial Officer pursuant to Rules 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.

32.1*+		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This Certification accompanies this report and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed for purposes of §18 of the Securities Exchange Act of 1934, as amended.

101.INS* 101.INS		XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH*		Inline XBRL Taxonomy Extension Schema Document

101.CAL*		Inline XBRL Taxonomy Extension Calculation Document

~~Exhibit Number~~	~~Description~~
101.DEF*
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB*		Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE*		Inline XBRL Taxonomy Extension Presentation Link Document