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| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
March 31, 2023
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| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
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Delaware | 68-0397820 | |||||||||||
| (State or other jurisdiction of
| (I.R.S. Employer
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| 770 Lindaro Street | San Rafael | California | 94901 | |||||||||
(Address of principal executive offices) | (Zip Code) | |||||||||||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
| Common Stock, par value $0.001 | BMRN | The Nasdaq Global Select Market | ||||||||||||
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| Large Accelerated Filer | ☒ | Accelerated Filer | ☐ | ||||||||||||||||||||
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Non-accelerated Filer | ☐ | Smaller Reporting Company | ☐ | ||||||||||||||||||||
| Emerging | ☐ | ||||||||||||||||||||||
TABLE OF CONTENTS
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2
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| FINANCIAL INFORMATION | |||||||||||
| Financial Statements | |||||||||||
| Condensed Consolidated Balance Sheets as of March 31, 2023 (Unaudited) and December 31, 2022 | |||||||||||
| Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the three months ended March 31, 2023 and 2022 | |||||||||||
| Condensed Consolidated Statement of Stockholders’ Equity (Unaudited) for the three months ended March 31, 2023 and 2022 | |||||||||||
| Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2023 and 2022 | |||||||||||
| Notes to Condensed Consolidated Financial Statements (Unaudited) | |||||||||||
| Management’s Discussion and Analysis of Financial Condition and Results of Operations | |||||||||||
| Quantitative and Qualitative Disclosures about Market Risk | |||||||||||
| Controls and Procedures | |||||||||||
| OTHER INFORMATION | |||||||||||
| Legal Proceedings | |||||||||||
| Risk Factors | |||||||||||
| Unregistered Sales of Equity Securities and Use of Proceeds | |||||||||||
| Defaults Upon Senior Securities | |||||||||||
| Mine Safety Disclosures | |||||||||||
| Other Information | |||||||||||
| Exhibits | |||||||||||
| SIGNATURES | |||||||||||
September 30, 2017
2022
|
| September 30, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2016(1) |
| ||
ASSETS |
| (unaudited) |
|
|
|
|
| |
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 431,399 |
|
| $ | 408,330 |
|
Short-term investments |
|
| 825,700 |
|
|
| 381,347 |
|
Accounts receivable, net |
|
| 251,891 |
|
|
| 215,280 |
|
Inventory |
|
| 457,393 |
|
|
| 355,126 |
|
Other current assets |
|
| 83,646 |
|
|
| 61,708 |
|
Total current assets |
|
| 2,050,029 |
|
|
| 1,421,791 |
|
Noncurrent assets: |
|
|
|
|
|
|
|
|
Long-term investments |
|
| 416,304 |
|
|
| 572,711 |
|
Property, plant and equipment, net |
|
| 878,624 |
|
|
| 798,768 |
|
Intangible assets, net |
|
| 530,957 |
|
|
| 553,780 |
|
Goodwill |
|
| 197,039 |
|
|
| 197,039 |
|
Deferred tax assets |
|
| 484,759 |
|
|
| 446,786 |
|
Other assets |
|
| 22,985 |
|
|
| 32,815 |
|
Total assets |
| $ | 4,580,697 |
|
| $ | 4,023,690 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
| $ | 364,920 |
|
| $ | 370,505 |
|
Short-term convertible debt, net |
|
| — |
|
|
| 22,478 |
|
Short-term contingent acquisition consideration payable |
|
| 52,609 |
|
|
| 46,327 |
|
Total current liabilities |
|
| 417,529 |
|
|
| 439,310 |
|
Noncurrent liabilities: |
|
|
|
|
|
|
|
|
Long-term convertible debt, net |
|
| 1,166,036 |
|
|
| 660,761 |
|
Long-term contingent acquisition consideration payable |
|
| 126,790 |
|
|
| 115,310 |
|
Other long-term liabilities |
|
| 56,780 |
|
|
| 42,034 |
|
Total liabilities |
|
| 1,767,135 |
|
|
| 1,257,415 |
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
Common stock, $0.001 par value: 500,000,000 shares authorized; 175,495,350 and 172,647,588 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively. |
|
| 176 |
|
|
| 173 |
|
Additional paid-in capital |
|
| 4,435,449 |
|
|
| 4,288,113 |
|
Company common stock held by Nonqualified Deferred Compensation Plan (NQDC) |
|
| (14,473 | ) |
|
| (14,321 | ) |
Accumulated other comprehensive income (loss) |
|
| (21,434 | ) |
|
| 12,816 |
|
Accumulated deficit |
|
| (1,586,156 | ) |
|
| (1,520,506 | ) |
Total stockholders’ equity |
|
| 2,813,562 |
|
|
| 2,766,275 |
|
Total liabilities and stockholders’ equity |
| $ | 4,580,697 |
|
| $ | 4,023,690 |
|
|
|
| March 31, 2023 | December 31, 2022 ⁽¹⁾ | ||||||||||
| ASSETS | (unaudited) | ||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 580,074 | $ | 724,531 | |||||||
| Short-term investments | 572,017 | 567,006 | |||||||||
| Accounts receivable, net | 597,913 | 461,316 | |||||||||
| Inventory | 918,921 | 894,083 | |||||||||
| Other current assets | 173,180 | 104,521 | |||||||||
| Total current assets | 2,842,105 | 2,751,457 | |||||||||
| Noncurrent assets: | |||||||||||
| Long-term investments | 340,635 | 333,835 | |||||||||
| Property, plant and equipment, net | 1,068,142 | 1,073,366 | |||||||||
| Intangible assets, net | 325,989 | 338,569 | |||||||||
| Goodwill | 196,199 | 196,199 | |||||||||
| Deferred tax assets | 1,510,568 | 1,505,412 | |||||||||
| Other assets | 150,057 | 176,236 | |||||||||
| Total assets | $ | 6,433,695 | $ | 6,375,074 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable and accrued liabilities | $ | 598,231 | $ | 572,959 | |||||||
| Short-term contingent consideration | — | 15,925 | |||||||||
| Total current liabilities | 598,231 | 588,884 | |||||||||
| Noncurrent liabilities: | |||||||||||
| Long-term convertible debt, net | 1,084,006 | 1,083,019 | |||||||||
| Other long-term liabilities | 92,415 | 100,015 | |||||||||
| Total liabilities | 1,774,652 | 1,771,918 | |||||||||
| Stockholders’ equity: | |||||||||||
| Common stock, $0.001 par value: 500,000,000 shares authorized; 187,601,106 and 186,250,719 shares issued and outstanding, respectively | 188 | 186 | |||||||||
| Additional paid-in capital | 5,417,873 | 5,404,895 | |||||||||
| Company common stock held by the Nonqualified Deferred Compensation Plan | (9,949) | (8,859) | |||||||||
| Accumulated other comprehensive loss | (10,722) | (3,867) | |||||||||
| Accumulated deficit | (738,347) | (789,199) | |||||||||
| Total stockholders’ equity | 4,659,043 | 4,603,156 | |||||||||
| Total liabilities and stockholders’ equity | $ | 6,433,695 | $ | 6,375,074 | |||||||
INCOME
2022
(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 | ) |
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| REVENUES: | |||||||||||||||||||||||
| Net product revenues | $ | 586,426 | $ | 505,525 | |||||||||||||||||||
| Royalty and other revenues | 9,989 | 13,834 | |||||||||||||||||||||
| Total revenues | 596,415 | 519,359 | |||||||||||||||||||||
| OPERATING EXPENSES: | |||||||||||||||||||||||
| Cost of sales | 126,549 | 116,965 | |||||||||||||||||||||
| Research and development | 171,846 | 160,836 | |||||||||||||||||||||
| Selling, general and administrative | 223,003 | 194,619 | |||||||||||||||||||||
| Intangible asset amortization and contingent consideration | 15,670 | 17,612 | |||||||||||||||||||||
| Gain on sale of nonfinancial assets, net | — | (108,000) | |||||||||||||||||||||
| Total operating expenses | 537,068 | 382,032 | |||||||||||||||||||||
| INCOME FROM OPERATIONS | 59,347 | 137,327 | |||||||||||||||||||||
| Interest income | 11,943 | 1,820 | |||||||||||||||||||||
| Interest expense | (3,703) | (3,806) | |||||||||||||||||||||
| Other expense, net | (10,830) | (1,154) | |||||||||||||||||||||
| INCOME BEFORE INCOME TAXES | 56,757 | 134,187 | |||||||||||||||||||||
| Provision for income taxes | 5,905 | 13,389 | |||||||||||||||||||||
| NET INCOME | $ | 50,852 | $ | 120,798 | |||||||||||||||||||
| EARNINGS PER SHARE, BASIC | $ | 0.27 | $ | 0.66 | |||||||||||||||||||
| EARNINGS PER SHARE, DILUTED | $ | 0.27 | $ | 0.63 | |||||||||||||||||||
| Weighted average common shares outstanding, basic | 186,667 | 183,990 | |||||||||||||||||||||
| Weighted average common shares outstanding, diluted | 194,363 | 194,886 | |||||||||||||||||||||
| COMPREHENSIVE INCOME | $ | 43,997 | $ | 105,489 | |||||||||||||||||||
Nine
March 31, 2023 and 2022
(Unaudited)
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|
|
|
|
|
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|
|
|
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| Company |
|
| Accumulated |
|
|
|
|
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|
|
|
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|
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| Additional |
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| Common |
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| Other |
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| Total |
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| Common stock |
|
| Paid-in |
|
| Stock Held |
|
| Comprehensive |
|
| Accumulated |
|
| Stockholders' |
| ||||||||||
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| Shares |
|
| Amount |
|
| Capital |
|
| by NQDC |
|
| Income (Loss) |
|
| Deficit |
|
| Equity |
| |||||||
Balance at December 31, 2016 |
|
| 172,648 |
|
| $ | 173 |
|
| $ | 4,288,113 |
|
| $ | (14,321 | ) |
| $ | 12,816 |
|
| $ | (1,520,506 | ) |
| $ | 2,766,275 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (65,650 | ) |
|
| (65,650 | ) |
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (34,250 | ) |
|
| — |
|
|
| (34,250 | ) |
Issuances under equity incentive plans, net of tax |
|
| 1,648 |
|
|
| 2 |
|
|
| 7,550 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7,552 |
|
Issuances of common stock under the Employee Stock Purchase Plan (the ESPP) |
|
| 95 |
|
|
| — |
|
|
| 6,704 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,704 |
|
Conversion of convertible notes, net |
|
| 1,104 |
|
|
| 1 |
|
|
| 22,476 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 22,477 |
|
Common stock held by NQDC |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (152 | ) |
|
| — |
|
|
| — |
|
|
| (152 | ) |
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 110,606 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 110,606 |
|
Balance at September 30, 2017 |
|
| 175,495 |
|
| $ | 176 |
|
| $ | 4,435,449 |
|
| $ | (14,473 | ) |
| $ | (21,434 | ) |
| $ | (1,586,156 | ) |
| $ | 2,813,562 |
|
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
Shares of common stock, beginning balances (1) | 186,251 | 183,913 | |||||||||||||||||||||
| Issuances under equity incentive plans | 1,350 | 989 | |||||||||||||||||||||
| Shares of common stock, ending balances | 187,601 | 184,902 | |||||||||||||||||||||
Total stockholders' equity, beginning balances (1) | $ | 4,603,156 | $ | 4,265,669 | |||||||||||||||||||
| Common stock: | |||||||||||||||||||||||
Beginning balances (1) | 186 | 184 | |||||||||||||||||||||
| Issuances under equity incentive plans, net of tax | 2 | 1 | |||||||||||||||||||||
| Ending balances | 188 | 185 | |||||||||||||||||||||
| Additional paid-in capital: | |||||||||||||||||||||||
Beginning balances (1) | 5,404,895 | 5,191,502 | |||||||||||||||||||||
| Issuances under equity incentive plans, net of tax | (42,440) | (33,633) | |||||||||||||||||||||
| Stock-based compensation | 54,328 | 48,718 | |||||||||||||||||||||
| Common stock held by the Nonqualified Deferred Compensation Plan (the NQDC) | 1,090 | (300) | |||||||||||||||||||||
| Ending balances | 5,417,873 | 5,206,287 | |||||||||||||||||||||
| Company common stock held by the NQDC: | |||||||||||||||||||||||
Beginning balances (1) | (8,859) | (9,689) | |||||||||||||||||||||
| Common stock held by the NQDC | (1,090) | 300 | |||||||||||||||||||||
| Ending balances | (9,949) | (9,389) | |||||||||||||||||||||
| Accumulated other comprehensive income (loss): | |||||||||||||||||||||||
Beginning balances (1) | (3,867) | 14,432 | |||||||||||||||||||||
| Other comprehensive income (loss) | (6,855) | (15,309) | |||||||||||||||||||||
| Ending balances | (10,722) | (877) | |||||||||||||||||||||
| Accumulated Deficit: | |||||||||||||||||||||||
Beginning balances (1) | (789,199) | (930,760) | |||||||||||||||||||||
| Net income | 50,852 | 120,798 | |||||||||||||||||||||
| Ending balances | (738,347) | (809,962) | |||||||||||||||||||||
| Total stockholders' equity, ending balances | $ | 4,659,043 | $ | 4,386,244 | |||||||||||||||||||
Nine
2022
(Unaudited)
|
| 2017 |
|
| 2016 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net loss |
| $ | (65,650 | ) |
| $ | (539,490 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 59,197 |
|
|
| 76,805 |
|
Non-cash interest expense |
|
| 23,792 |
|
|
| 22,276 |
|
Accretion of discount on investments |
|
| 2,162 |
|
|
| 681 |
|
Stock-based compensation |
|
| 106,678 |
|
|
| 97,220 |
|
(Gain) loss on the sale of equity investments |
|
| (3,252 | ) |
|
| 2,020 |
|
Impairment of intangible assets |
|
| — |
|
|
| 599,118 |
|
Deferred income taxes |
|
| (36,150 | ) |
|
| (218,700 | ) |
Unrealized foreign exchange (gain) loss |
|
| 4,348 |
|
|
| (10,961 | ) |
Non-cash changes in the fair value of contingent acquisition consideration payable |
|
| 3,382 |
|
|
| (56,954 | ) |
Other |
|
| 4,657 |
|
|
| 1,044 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
| (21,598 | ) |
|
| (52,023 | ) |
Inventory |
|
| (80,885 | ) |
|
| (59,802 | ) |
Other current assets |
|
| (20,787 | ) |
|
| (1,556 | ) |
Other assets |
|
| (1,030 | ) |
|
| (5,002 | ) |
Accounts payable and accrued liabilities |
|
| (1,732 | ) |
|
| (77,852 | ) |
Other long-term liabilities |
|
| 3,497 |
|
|
| (4,451 | ) |
Net cash used in operating activities |
|
| (23,371 | ) |
|
| (227,627 | ) |
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
| (159,329 | ) |
|
| (96,806 | ) |
Funds held in escrow for the purchase of real property |
|
| — |
|
|
| (8,383 | ) |
Maturities and sales of investments |
|
| 325,678 |
|
|
| 302,801 |
|
Purchase of available-for-sale securities |
|
| (609,794 | ) |
|
| (370,393 | ) |
Business acquisitions, net of cash acquired |
|
| — |
|
|
| (1,467 | ) |
Other |
|
| (1,560 | ) |
|
| (150 | ) |
Net cash used in investing activities |
|
| (445,005 | ) |
|
| (174,398 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from exercises of stock options and the ESPP |
|
| 46,119 |
|
|
| 49,498 |
|
Taxes paid related to net share settlement of equity awards |
|
| (31,863 | ) |
|
| (55,241 | ) |
Proceeds from public offering of common stock, net |
|
| — |
|
|
| 712,938 |
|
Proceeds from convertible senior subordinated note offering, net |
|
| 481,713 |
|
|
| — |
|
Payment of contingent acquisition consideration payable |
|
| (1,894 | ) |
|
| — |
|
Other |
|
| (26 | ) |
|
| — |
|
Net cash provided by financing activities |
|
| 494,049 |
|
|
| 707,195 |
|
Effect of exchange rate changes on cash |
|
| (2,604 | ) |
|
| 5,139 |
|
NET DECREASE IN CASH AND CASH EQUIVALENTS |
|
| 23,069 |
|
|
| 310,309 |
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
Beginning of period |
| $ | 408,330 |
|
| $ | 397,040 |
|
End of period |
| $ | 431,399 |
|
| $ | 707,349 |
|
SUPPLEMENTAL CASH FLOW DISCLOSURES: |
|
|
|
|
|
|
|
|
Cash paid for interest, net of interest capitalized into fixed assets |
|
| 4,287 |
|
|
| 4,564 |
|
Cash paid for income taxes |
|
| 21,744 |
|
|
| 95,163 |
|
Stock-based compensation capitalized into inventory |
|
| 12,077 |
|
|
| 8,960 |
|
Depreciation capitalized into inventory |
|
| 17,899 |
|
|
| 13,402 |
|
SUPPLEMENTAL CASH FLOW DISCLOSURES FOR NON CASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Decrease in accounts payable and accrued liabilities related to fixed assets |
|
| (25,047 | ) |
|
| (13,988 | ) |
Conversion of convertible debt |
|
| 22,477 |
|
|
| 8,924 |
|
Accrual for inventory purchases related to the acquisition of the Merck PKU Business |
|
| — |
|
|
| 1,322 |
|
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
| Net income | $ | 50,852 | $ | 120,798 | |||||||
| Adjustments to reconcile net income to net cash used in operating activities: | |||||||||||
| Depreciation and amortization | 26,421 | 27,343 | |||||||||
| Non-cash interest expense | 1,029 | 1,033 | |||||||||
| Amortization of premium (accretion of discount) on investments | (1,970) | 1,652 | |||||||||
| Stock-based compensation | 53,695 | 47,833 | |||||||||
| Gain on sale of nonfinancial assets, net | — | (108,000) | |||||||||
| Loss on equity investment | 12,650 | — | |||||||||
| Deferred income taxes | (6,360) | 4,800 | |||||||||
| Unrealized foreign exchange loss (gain) | 6,615 | (6,887) | |||||||||
| Non-cash changes in the fair value of contingent consideration | — | 1,989 | |||||||||
| Other | (222) | 700 | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable, net | (138,796) | (54,813) | |||||||||
| Inventory | (14,098) | 1,125 | |||||||||
| Other current assets | (36,001) | (8,011) | |||||||||
| Other assets | (323) | 1,440 | |||||||||
| Accounts payable and other short-term liabilities | (31,686) | (78,143) | |||||||||
| Other long-term liabilities | 4,262 | 1,710 | |||||||||
| Net cash used in operating activities | (73,932) | (45,431) | |||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
| Purchases of property, plant and equipment | (24,456) | (28,817) | |||||||||
| Maturities and sales of investments | 215,118 | 155,818 | |||||||||
| Purchases of investments | (220,364) | (147,361) | |||||||||
| Proceeds from sale of nonfinancial assets | — | 110,000 | |||||||||
| Purchase of intangible assets | (310) | (1,858) | |||||||||
| Net cash provided by (used in) investing activities | (30,012) | 87,782 | |||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
| Proceeds from exercises of awards under equity incentive plans | 21,169 | 8,235 | |||||||||
| Taxes paid related to net share settlement of equity awards | (51,422) | (32,949) | |||||||||
| Payments of contingent consideration | (9,475) | — | |||||||||
| Principal repayments of financing leases | (1,014) | (566) | |||||||||
| Net cash used in financing activities | (40,742) | (25,280) | |||||||||
| Effect of exchange rate changes on cash | 229 | 1,093 | |||||||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (144,457) | 18,164 | |||||||||
| Cash and cash equivalents: | |||||||||||
| Beginning of period | $ | 724,531 | $ | 587,276 | |||||||
| End of period | $ | 580,074 | $ | 605,440 | |||||||
| SUPPLEMENTAL CASH FLOW DISCLOSURES: | |||||||||||
| Cash paid for interest | $ | 1,437 | $ | 1,422 | |||||||
| Cash paid for income taxes | $ | 4,364 | $ | 1,316 | |||||||
| SUPPLEMENTAL CASH FLOW DISCLOSURES FOR NON-CASH INVESTING AND FINANCING ACTIVITIES: | |||||||||||
| Decrease in accounts payable and accrued liabilities related to fixed assets | $ | (8,430) | $ | (2,481) | |||||||
| Decrease in accounts payable and accrued liabilities related to intangible assets | $ | (1,478) | $ | (637) | |||||||
SIGNIFICANT ACCOUNTING POLICIES
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. If the Company elects to increase its spending on development programs significantly above current long-term plans or enters into potential licenses and other acquisitions 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 regulatory approval for new products; significant competition from larger organizations; reliance on the proprietary technology of others; dependence on key personnel; uncertain patent protection; dependence on corporate partners and collaborators; and possible restrictions on reimbursement from governmental agencies and healthcare organizations, as well as other changes in the health care industry. Please see “Risk Factors” included in Part II, Item 1A of this Quarterly Report on Form 10-Q for a more detailed discussion of these risks.
(2) BASIS OF PRESENTATION
The accompanyingPresentation
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 months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2023 or any other period.
(3) SIGNIFICANT ACCOUNTING POLICIES
7
BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands of U.S. dollars, except per share amounts or as otherwise disclosed)
(4) RECENT ACCOUNTING PRONOUNCEMENTS
Except as described below, there2022.
Effective January, 1, 2018, the Company will adopt Accounting Standards Update (ASU) No. 2014-09 (ASU 2014-09), Revenue from Contracts with Customers,
As of September 30, 2017, the Company has not elected to early adopt ASC Topic 606available-for-sale at March 31, 2023 and plans to adopt the new standard using the modified retrospective method. December 31, 2022.
In January 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-01 (ASU 2016-01), Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 changes accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. In addition, the update clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The guidance will become effective for the Company’s fiscal year beginning January 1, 2018 and must be adopted using a modified retrospective approach, with certain exceptions. Early adoption is permitted for certain provisions. The Company is currently evaluating the impact that the standard will have on its Consolidated Financial Statements. Management’s assessment indicates that the amendment will not have a significant impact as the Company currently has no significant equity investments, however, the update may have a significant impact in the future. As of September 30, 2017, the Company has not elected to early adopt the amendments of ASU 2016-01.
In February 2016, the FASB issued ASU No. 2016-02, Leases (ASU 2016-02). The amended guidance requires balance sheet recognition of lease right-of-use (ROU) assets and liabilities by lessees for leases classified as operating leases, with an option to not recognize lease ROU assets and lease liabilities for leases with a term of 12 months or less. The amendments also require new disclosures providing additional qualitative and quantitative information about the amounts recorded in the financial statements. Lessor accounting is largely unchanged. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted, but, as of September 30, 2017, the Company has not made the election to do so. ASU 2016-02 will be effective for the Company’s fiscal year beginning January 1, 2019. The amendments require a modified retrospective approach with optional practical expedients.
As of September 30, 2017, the Company has formed a task force that is in the process of analyzing the Company’s lease contracts and the potential impacts the standard may have on its Consolidated Financial Statements and related disclosures. After completing the analysis of the accounting for the Company’s lease contracts under the amendments, management will assess the required changes to the Company’s accounting policies, systems and internal control over financial reporting. Based on management’s preliminary analysis, the Company anticipates the amendments may have a material impact on the Company’s Consolidated Balance Sheets due to the requirement to recognize lease ROU assets and corresponding liabilities related to leases on the Company’s Consolidated Balance Sheets, but they are not anticipated to have a material impact on the Company’s other Consolidated Financial Statements.
ContentsIn May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting (ASU 2017-09). The amendment provides clarification about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years and early adoption is permitted. The Company has
8
- (continued)
elected to early adopt ASU 2017-09, which did not have a material impact on the
| March 31, 2023 | |||||||||||||||||||||||||||||||||||||||||
| 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 | $ | 279,268 | $ | — | $ | — | $ | 279,268 | $ | 279,268 | $ | — | $ | — | |||||||||||||||||||||||||||
| Level 2: | |||||||||||||||||||||||||||||||||||||||||
| Money market instruments | 300,806 | — | — | 300,806 | 300,806 | — | — | ||||||||||||||||||||||||||||||||||
| Corporate debt securities | 427,594 | 189 | (8,333) | 419,450 | — | 262,700 | 156,750 | ||||||||||||||||||||||||||||||||||
| U.S. government agency securities | 410,940 | 411 | (2,376) | 408,975 | — | 290,059 | 118,916 | ||||||||||||||||||||||||||||||||||
| Commercial paper | 15,325 | 2 | (9) | 15,318 | — | 15,318 | — | ||||||||||||||||||||||||||||||||||
| Asset-backed securities | 69,314 | 42 | (447) | 68,909 | — | 3,940 | 64,969 | ||||||||||||||||||||||||||||||||||
| Subtotal | 1,223,979 | 644 | (11,165) | 1,213,458 | 300,806 | 572,017 | 340,635 | ||||||||||||||||||||||||||||||||||
| Total | $ | 1,503,247 | $ | 644 | $ | (11,165) | $ | 1,492,726 | $ | 580,074 | $ | 572,017 | $ | 340,635 | |||||||||||||||||||||||||||
| December 31, 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 | $ | 463,248 | $ | — | $ | — | $ | 463,248 | $ | 463,248 | $ | — | $ | — | |||||||||||||||||||||||||||
| Level 2: | |||||||||||||||||||||||||||||||||||||||||
| Money market instruments | 248,933 | — | — | 248,933 | 248,933 | — | — | ||||||||||||||||||||||||||||||||||
| Corporate debt securities | 504,984 | 34 | (11,541) | 493,477 | 1,881 | 299,153 | 192,443 | ||||||||||||||||||||||||||||||||||
| U.S. government agency securities | 312,720 | 45 | (3,771) | 308,994 | — | 229,846 | 79,148 | ||||||||||||||||||||||||||||||||||
| Commercial paper | 48,103 | 11 | (22) | 48,092 | 10,469 | 37,623 | — | ||||||||||||||||||||||||||||||||||
| Asset-backed securities | 63,151 | 69 | (592) | 62,628 | — | 384 | 62,244 | ||||||||||||||||||||||||||||||||||
| Subtotal | 1,177,891 | 159 | (15,926) | 1,162,124 | 261,283 | 567,006 | 333,835 | ||||||||||||||||||||||||||||||||||
| Total | $ | 1,641,139 | $ | 159 | $ | (15,926) | $ | 1,625,372 | $ | 724,531 | $ | 567,006 | $ | 333,835 | |||||||||||||||||||||||||||
In August 2017, the FASB issued ASU No. 2017-12, Derivativeslong-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.
(5) ACQUISITIONS
On October 1, 2015, the Company entered into a Termination and Transition Agreement with Ares Trading S.A. (Merck Serono), as amended and restated on December 23, 2015 (the A&R Kuvan Agreement), to terminate the Development, License and Commercialization Agreement, dated May 13, 2005, as amended (the License Agreement), between the Company and Merck Serono, including the license to KuvanMarch 31, 2023, the Company had grantedthe ability and intent to Merck Serono underhold all investments that were in an unrealized loss position until maturity. The Company considered its intent and ability to hold the License Agreement. Also on October 1, 2015,securities until recovery of amortized cost basis, the Company and Merck Serono entered into a Termination Agreement (the Pegvaliase Agreement)extent to terminate the license to pegvaliase the Company had granted to Merck Serono under the License Agreement. On January 1, 2016, pursuantwhich fair value is less than amortized cost basis, conditions specifically related to the A&R Kuvan Agreementsecurity’s industry and 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.
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 estimate2022, the fair value of the contingent acquisition consideration payable asCompany’s strategic investments was $11.3 million and $23.9 million, respectively. These investments were recorded to Other Assets in the Company’s Condensed Consolidated Balance Sheets. In the first quarter of September 30, 2017. 2023, based on new developments, the Company concluded that factors existed indicating it would no longer realize a $12.6 million equity investment in its non-marketable securities. The loss on the equity investment due to impairment was recorded to Other Expense, Net on the Company’s Condensed Consolidated Statements Of Comprehensive Income. See Note 131 -
9
discussion regarding fair value measurements
| March 31, 2023 | December 31, 2022 | ||||||||||
| Raw materials | $ | 138,933 | $ | 131,071 | |||||||
| Work-in-process | 437,109 | 410,656 | |||||||||
| Finished goods | 342,879 | 352,356 | |||||||||
| Total inventory | $ | 918,921 | $ | 894,083 | |||||||
| March 31, 2023 | December 31, 2022 | ||||||||||
| Property, plant and equipment, gross | $ | 1,875,086 | $ | 1,875,511 | |||||||
| Accumulated depreciation | (806,944) | (802,145) | |||||||||
| Total property, plant and equipment, net | $ | 1,068,142 | $ | 1,073,366 | |||||||
| March 31, 2023 | December 31, 2022 | ||||||||||
| Finite-lived intangible assets | $ | 693,356 | $ | 690,871 | |||||||
| Accumulated amortization | (367,367) | (352,302) | |||||||||
| Net carrying value | $ | 325,989 | $ | 338,569 | |||||||
| March 31, 2023 | December 31, 2022 | ||||||||||
| Accounts payable and accrued operating expenses | $ | 264,778 | $ | 231,238 | |||||||
| Accrued compensation expense | 134,372 | 207,573 | |||||||||
| Accrued rebates payable | 87,761 | 72,654 | |||||||||
| Accrued short-term loss contingency | 39,000 | — | |||||||||
| Accrued income taxes | 22,387 | 16,213 | |||||||||
| Foreign currency exchange forward contracts | 15,956 | 12,601 | |||||||||
| Accrued royalties payable | 14,797 | 13,306 | |||||||||
| Lease liabilities | 9,251 | 10,375 | |||||||||
| Other | 9,929 | 8,999 | |||||||||
| Total accounts payable and accrued liabilities | $ | 598,231 | $ | 572,959 | |||||||
Sheet and is expected to be paid in 2023.
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&Dfinancial 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 March 31, 2023 and December 31, 2022. Other than the Company’s fixed-rate convertible debt disclosed in Note
| Fair Value Measurements as of March 31, 2023 | ||||||||||||||||||||
| Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||||||||
| Assets: | ||||||||||||||||||||
| Other current assets: | ||||||||||||||||||||
| NQDC Plan assets | $ | 1,948 | $ | — | $ | 1,948 | ||||||||||||||
| Other assets: | ||||||||||||||||||||
| NQDC Plan assets | 23,958 | — | 23,958 | |||||||||||||||||
Restricted investments (1) | 2,366 | — | 2,366 | |||||||||||||||||
| Total other assets | 26,324 | — | 26,324 | |||||||||||||||||
| Total assets | $ | 28,272 | $ | — | $ | 28,272 | ||||||||||||||
| Liabilities: | ||||||||||||||||||||
| Current liabilities: | ||||||||||||||||||||
| NQDC Plan liability | $ | 1,948 | $ | — | $ | 1,948 | ||||||||||||||
| Other long-term liabilities: | ||||||||||||||||||||
| NQDC Plan liability | 23,958 | — | 23,958 | |||||||||||||||||
| Total liabilities | $ | 25,906 | $ | — | $ | 25,906 | ||||||||||||||
| Fair Value Measurements as of December 31, 2022 | |||||||||||||||||||||||
| Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | |||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Other current assets: | |||||||||||||||||||||||
| NQDC Plan assets | $ | 2,654 | $ | — | $ | 2,654 | |||||||||||||||||
| Other assets: | |||||||||||||||||||||||
| NQDC Plan assets | 19,867 | — | 19,867 | ||||||||||||||||||||
Restricted investments (1) | 2,429 | — | 2,429 | ||||||||||||||||||||
| Total other assets | 22,296 | — | 22,296 | ||||||||||||||||||||
| Total assets | $ | 24,950 | $ | — | $ | 24,950 | |||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Current liabilities: | |||||||||||||||||||||||
| NQDC Plan liability | $ | 2,654 | $ | — | $ | 2,654 | |||||||||||||||||
| Contingent consideration | — | 15,925 | 15,925 | ||||||||||||||||||||
| Total current liabilities | 2,654 | 15,925 | 18,579 | ||||||||||||||||||||
| Other long-term liabilities: | |||||||||||||||||||||||
| NQDC Plan liability | 19,867 | — | 19,867 | ||||||||||||||||||||
| Total liabilities | $ | 22,521 | $ | 15,925 | $ | 38,446 | |||||||||||||||||
| Contingent consideration as of December 31, 2022 | $ | 15,925 | |||
| Milestone payments to Ares Trading S.A. (Merck Serono) | (16,255) | ||||
| Realized foreign exchange loss on settlement of contingent consideration | 330 | ||||
| Contingent consideration as of March 31, 2023 | $ | — | |||
| Forward Contracts | March 31, 2023 | December 31, 2022 | |||||||||
| Derivatives designated as hedging instruments: | |||||||||||
| Sell | $ | 781,346 | $ | 808,635 | |||||||
| Purchase | $ | 172,819 | $ | 177,393 | |||||||
| Derivatives not designated as hedging instruments: | |||||||||||
| Sell | $ | 266,645 | $ | 218,903 | |||||||
| Purchase | $ | 4,317 | $ | 6,785 | |||||||
| Balance Sheet Location | March 31, 2023 | December 31, 2022 | |||||||||
| Derivatives designated as hedging instruments: | |||||||||||
| Asset Derivatives | |||||||||||
| Other current assets | $ | 14,329 | $ | 19,464 | |||||||
| Other assets | 1,149 | 2,059 | |||||||||
| Subtotal | $ | 15,478 | $ | 21,523 | |||||||
| Liability Derivatives | |||||||||||
| Accounts payable and accrued liabilities | $ | 15,805 | $ | 12,130 | |||||||
| Other long-term liabilities | 2,144 | 1,074 | |||||||||
| Subtotal | $ | 17,949 | $ | 13,204 | |||||||
| Derivatives not designated as hedging instruments: | |||||||||||
| Asset Derivatives | |||||||||||
| Other current assets | $ | 116 | $ | 1,472 | |||||||
| Liability Derivatives | |||||||||||
| Accounts payable and accrued liabilities | $ | 151 | $ | 471 | |||||||
| Total Derivatives Assets | $ | 15,594 | $ | 22,995 | |||||||
| Total Derivatives Liabilities | $ | 18,100 | $ | 13,675 | |||||||
Company’s Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
| Three Months Ended March 31, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| 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 | $ | 3,470 | $ | 5,572 | ||||||||||
| Operating expenses | $ | (456) | $ | (1,379) | ||||||||||
| Derivatives Not Designated as Hedging Instruments | Gains (Losses) Recognized in Earnings | Gains (Losses) Recognized in Earnings | ||||||||||||
| Operating expenses | $ | (4,163) | $ | 1,292 | ||||||||||
| March 31, 2023 | December 31, 2022 | ||||||||||
| 1.25% senior subordinated convertible notes due in May 2027 (the 2027 Notes) | $ | 600,000 | $ | 600,000 | |||||||
| Unamortized discount net of deferred offering costs | (8,433) | (8,941) | |||||||||
| 2027 Notes, net | 591,567 | 591,059 | |||||||||
| 0.599% senior subordinated convertible notes due in August 2024 (the 2024 Notes) | 495,000 | 495,000 | |||||||||
| Unamortized discount net of deferred offering costs | (2,561) | (3,040) | |||||||||
| 2024 Notes, net | 492,439 | 491,960 | |||||||||
| Total convertible debt, net | $ | 1,084,006 | $ | 1,083,019 | |||||||
Fair value of fixed-rate convertible debt (1): | |||||||||||
| 2027 Notes | $ | 623,616 | $ | 647,370 | |||||||
| 2024 Notes | 507,355 | 526,230 | |||||||||
| Total fair value of fixed-rate convertible debt | $ | 1,130,971 | $ | 1,173,600 | |||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Coupon interest expense | $ | 2,616 | $ | 2,616 | |||||||||||||||||||
| Accretion of discount on convertible notes | 839 | 836 | |||||||||||||||||||||
| Amortization of debt issuance costs | 148 | 148 | |||||||||||||||||||||
| Total interest expense on convertible debt | $ | 3,603 | $ | 3,600 | |||||||||||||||||||
| Three Months Ended March 31, 2023 | |||||||||||||||||||||||
| Unrealized Gains (Losses) on Cash Flow Hedges | Unrealized Gains (Losses) on Available for-Sale Debt Securities | Total | |||||||||||||||||||||
| AOCI balance at December 31, 2022 | $ | 8,226 | $ | (12,093) | $ | (3,867) | |||||||||||||||||
| Other comprehensive income (loss) before reclassifications | (7,859) | 5,247 | (2,612) | ||||||||||||||||||||
| Less: gain (loss) reclassified from AOCI | 3,014 | — | 3,014 | ||||||||||||||||||||
| Tax effect | — | (1,229) | (1,229) | ||||||||||||||||||||
| Net current-period other comprehensive income (loss) | (10,873) | 4,018 | (6,855) | ||||||||||||||||||||
| AOCI balance at March 31, 2023 | $ | (2,647) | $ | (8,075) | $ | (10,722) | |||||||||||||||||
| Three Months Ended March 31, 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 | (3,225) | (10,274) | (13,499) | ||||||||||||||||||||
| Less: gain (loss) reclassified from AOCI | 4,193 | — | 4,193 | ||||||||||||||||||||
| Tax effect | — | 2,383 | 2,383 | ||||||||||||||||||||
| Net current-period other comprehensive income (loss) | (7,418) | (7,891) | (15,309) | ||||||||||||||||||||
| AOCI balance at March 31, 2022 | $ | 8,387 | $ | (9,264) | $ | (877) | |||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Enzyme product revenues: | |||||||||||||||||||||||
| VIMIZIM | $ | 189,192 | $ | 183,059 | |||||||||||||||||||
| NAGLAZYME | 123,021 | 128,031 | |||||||||||||||||||||
| PALYNZIQ | 62,352 | 54,885 | |||||||||||||||||||||
| BRINEURA | 39,144 | 36,173 | |||||||||||||||||||||
| ALDURAZYME | 34,403 | 24,382 | |||||||||||||||||||||
| Total enzyme product revenues | 448,112 | 426,530 | |||||||||||||||||||||
| VOXZOGO | 87,836 | 19,658 | |||||||||||||||||||||
| KUVAN | 50,478 | 59,337 | |||||||||||||||||||||
| Total net product revenues | 586,426 | 505,525 | |||||||||||||||||||||
| Royalty and other revenues | 9,989 | 13,834 | |||||||||||||||||||||
| Total revenues | $ | 596,415 | $ | 519,359 | |||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| United States | $ | 166,784 | $ | 150,815 | |||||||||||||||||||
| Europe | 160,692 | 156,832 | |||||||||||||||||||||
| Middle East | 91,642 | 65,607 | |||||||||||||||||||||
| Latin America | 67,748 | 62,544 | |||||||||||||||||||||
| Rest of world | 65,157 | 45,345 | |||||||||||||||||||||
| Total net product revenues marketed by the Company | $ | 552,023 | $ | 481,143 | |||||||||||||||||||
| ALDURAZYME net product revenues marketed by Sanofi | 34,403 | 24,382 | |||||||||||||||||||||
| Total net product revenues | $ | 586,426 | $ | 505,525 | |||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Customer A | 14 | % | 17 | % | |||||||||||||||||||
| Customer B | 10 | % | 11 | % | |||||||||||||||||||
| Total | 24 | % | 28 | % | |||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Cost of sales | $ | 4,331 | $ | 4,326 | |||||||||||||||||||
| Research and development | 19,828 | 17,190 | |||||||||||||||||||||
| Selling, general and administrative | 29,536 | 26,317 | |||||||||||||||||||||
| Total stock-based compensation expense | $ | 53,695 | $ | 47,833 | |||||||||||||||||||
|
| 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 March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net Income, basic | $ | 50,852 | $ | 120,798 | |||||||||||||||||||
| Add: Interest expense, net of tax, on the Notes | 937 | 2,763 | |||||||||||||||||||||
| Net Income, diluted | $ | 51,789 | $ | 123,561 | |||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted-average common shares outstanding, basic | 186,667 | 183,990 | |||||||||||||||||||||
| Effect of dilutive securities: | |||||||||||||||||||||||
| Issuances under equity incentive plans | 3,726 | 2,561 | |||||||||||||||||||||
| Common stock issuable under the Notes | 3,970 | 8,335 | |||||||||||||||||||||
| Weighted-average common shares outstanding, diluted | 194,363 | 194,886 | |||||||||||||||||||||
| Earnings per common share, basic | $ | 0.27 | $ | 0.66 | |||||||||||||||||||
| Earnings per common share, diluted | $ | 0.27 | $ | 0.63 | |||||||||||||||||||
10
BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(
Theaddition 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 per common share as they were anti-dilutive using the if-converted or treasury stock method (in thousands):
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Options to purchase common stock |
|
| 8,328 |
|
|
| 9,610 |
|
|
| 8,328 |
|
|
| 9,610 |
|
Common stock issuable under the 2017 Notes |
|
| — |
|
|
| 1,105 |
|
|
| — |
|
|
| 1,105 |
|
Common stock issuable under the 2018 and 2020 Notes |
|
| 7,966 |
|
|
| 7,966 |
|
|
| 7,966 |
|
|
| 7,966 |
|
Common stock issuable under the 2024 Notes |
|
| 3,970 |
|
|
| — |
|
|
| 3,970 |
|
|
| — |
|
Unvested restricted stock units |
|
| 2,923 |
|
|
| 2,728 |
|
|
| 2,923 |
|
|
| 2,728 |
|
Common stock potentially issuable for ESPP purchases |
|
| 365 |
|
|
| 330 |
|
|
| 365 |
|
|
| 330 |
|
Common stock held by the NQDC |
|
| 224 |
|
|
| 253 |
|
|
| 224 |
|
|
| — |
|
Total number of potentially issuable shares |
|
| 23,776 |
|
|
| 21,992 |
|
|
| 23,776 |
|
|
| 21,739 |
|
The potential effect of the capped call transactions with respect to the Company’s 0.75% senior subordinated convertible notes due in 2018 (the 2018 Notes) and the Company’s 1.50% senior subordinated convertible notes due in 2020 (the 2020 Notes) was excluded from the diluted net income/loss per share as the Company’s closing stock price on September 30, 2017 and 2016 did not exceed the conversion price of $94.15 per share for the 2018 Notes and the 2020 Notes. There is no similar capped call transaction associated with the Company’s 0.599% senior subordinated convertible notes due in 2024 (the 2024 Notes). See Note 11 to these Condense Consolidated Financial Statements for information on the Company’s debt.
(7) AVAILABLE-FOR-SALE SECURITIES
All investments were classified as available-for-sale at September 30, 2017 and December 31, 2016. The amortized cost, gross unrealized holding gains or losses, and fair value of the Company’s available-for-sale securities by major security type at September 30, 2017 and December 31, 2016 are summarized in the tables below:
|
| Amortized Cost |
|
| Gross Unrealized Holding Gains |
|
| Gross Unrealized Holding Losses |
|
| Aggregate Fair Value at September 30, 2017 |
| ||||
Corporate debt securities |
| $ | 762,462 |
|
| $ | 413 |
|
| $ | (1,091 | ) |
| $ | 761,784 |
|
Commercial paper |
|
| 28,039 |
|
|
| — |
|
|
| — |
|
|
| 28,039 |
|
U.S. government agency securities |
|
| 434,533 |
|
|
| 2 |
|
|
| (980 | ) |
|
| 433,555 |
|
Foreign and other |
|
| 18,525 |
|
|
| 123 |
|
|
| (22 | ) |
|
| 18,626 |
|
Total |
| $ | 1,243,559 |
|
| $ | 538 |
|
| $ | (2,093 | ) |
| $ | 1,242,004 |
|
|
| Amortized Cost |
|
| Gross Unrealized Holding Gains |
|
| Gross Unrealized Holding Losses |
|
| Aggregate Fair Value at December 31, 2016 |
| ||||
Certificates of deposit |
| $ | 2,800 |
|
| $ | — |
|
| $ | — |
|
| $ | 2,800 |
|
Corporate debt securities |
|
| 641,670 |
|
|
| 329 |
|
|
| (2,282 | ) |
|
| 639,717 |
|
Commercial paper |
|
| 16,075 |
|
|
| — |
|
|
| — |
|
|
| 16,075 |
|
U.S. government agency securities |
|
| 310,635 |
|
|
| 37 |
|
|
| (747 | ) |
|
| 309,925 |
|
Foreign and other |
|
| 48 |
|
|
| 86 |
|
|
| — |
|
|
| 134 |
|
Total |
| $ | 971,228 |
|
| $ | 452 |
|
| $ | (3,029 | ) |
| $ | 968,651 |
|
As of December 31, 2016, the Company had one investment in 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.
11
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 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
12
BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands of U.S. dollars, except per share amounts or as otherwise disclosed)
the use of EXONDYS 51 and all future exon-skipping 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.
13
BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands of U.S. dollars, except per share amounts or as otherwise disclosed)
Accounts Payable and Accrued Liabilities consisted of the following:
|
| September 30, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
Accounts payable and accrued operating expenses |
| $ | 157,024 |
|
| $ | 191,353 |
|
Accrued compensation expense |
|
| 100,481 |
|
|
| 109,038 |
|
Accrued rebates payable |
|
| 38,321 |
|
|
| 34,737 |
|
Accrued royalties payable |
|
| 16,419 |
|
|
| 15,151 |
|
Value added taxes payable |
|
| 10,577 |
|
|
| 7,848 |
|
Forward foreign currency exchange contracts |
|
| 14,428 |
|
|
| 5,201 |
|
Deferred Revenue |
|
| 17,430 |
|
|
| 985 |
|
Other |
|
| 10,240 |
|
|
| 6,192 |
|
Total accounts payable and accrued liabilities |
| $ | 364,920 |
|
| $ | 370,505 |
|
(11) DEBT
Convertible Notes
In August 2017, the Company issued $495.0 million in aggregate principal amount of senior subordinated convertible notes with a maturity date of August 1, 2024. The 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 into 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.
14
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 |
|
|
|
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.
15
BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands of U.S. dollars, except per share amounts or as otherwise disclosed)
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.
16
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 |
|
17
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 | ) |
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Issuances under equity incentive plans | 8,610 | 10,927 | |||||||||||||||||||||
| Common stock issuable under the Notes | 4,365 | — | |||||||||||||||||||||
| Total number of potentially issuable shares | 12,975 | 10,927 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
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.
18
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 |
|
19
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 |
|
|
|
|
|
20
BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands of U.S. dollars, except per share amounts or as otherwise disclosed)
There were no transfers between levels during the three and nine months ended September 30, 2017.
The Company’s Level 2 securities are valued using third-party pricing sources. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities, prepayment/default projections based on historical data and other observable inputs.
The Company validates the prices provided by its third-party pricing services by understanding the models used, obtaining market values from other pricing sources, analyzing pricing data in certain instances and confirming those securities traded in active markets. See Note 6 to these Condensed Consolidated Financial Statements for further information regarding the Company’s financial instruments.
Liabilities measured at fair value using Level 3 inputs consisted of contingent acquisition consideration payable and asset retirement obligations.
The Company’s contingent acquisition consideration payable is estimated using a probability-based income approach utilizing an appropriate discount rate. Key assumptions used by management to estimate the fair value of contingent acquisition consideration payable include estimated probabilities, the estimated timing of when a milestone may be attained and assumed discount periods and rates. Subsequent changes in the fair value of the contingent acquisition consideration payable, resulting from management’s revision of key assumptions, will be recorded in Intangible Asset Amortization and Contingent Consideration in the Company’s Condensed Consolidated Statements of Comprehensive Loss. The probability-based income approach used by management to estimate the fair value of the contingent acquisition consideration is most sensitive to changes in the estimated probabilities.
Contingent acquisition consideration payable at December 31, 2016 |
| $ | 161,637 |
|
Milestone payments to former Huxley Pharmaceuticals, Inc. shareholders |
|
| (3,500 | ) |
Reversal of contingent liability related to revised estimate of Firdapse FDA acceptance and approval milestones |
|
| (4,245 | ) |
Changes in the fair value of other contingent acquisition consideration payable |
|
| 7,627 |
|
Foreign exchange remeasurement of Euro denominated contingent acquisition consideration payable |
|
| 17,880 |
|
Contingent acquisition consideration payable at September 30, 2017 |
| $ | 179,399 |
|
Under certain of the Company’s lease agreements, the Company is contractually obligated to return leased space to its original condition upon termination of the lease agreement. The Company records an asset retirement obligation liability and a corresponding capital asset in an amount equal to the estimated fair value of the obligation, when estimable. In subsequent periods, for each such lease, the Company records 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
21
BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands of U.S. dollars, except per share amounts or as otherwise disclosed)
generally vest in full one year after the grant date. Shares formerly reserved for future issuance under the 2006 Share Incentive Plan were transferred to the 2017 Equity Incentive Plan, from which future shares shall be issued. The Company’s stock-based compensation plans are administered by the Company’s Board of Directors, or designated Committee thereof, which selects persons to receive awards and determines the number of shares subject to each award and the terms, conditions, performance measures and other provisions of the awards.
Determining the Fair Value of Stock Options and Stock Purchase Rights
The fair value of each option award is estimated on the date of grant using the Black-Scholes valuation model and the assumptions noted in the tables below. The expected life of options is based on observed historical exercise patterns. Groups of employees that have similar historical exercise patterns are considered separately for valuation purposes. The Company has identified two groups with distinctly different exercise patterns. The two groups identified are executive and non-executive employees. The executive employee group has a history of holding options for longer periods than non-executive employees. The expected volatility of stock options is based upon the weighted-average of the historical volatility of the Company’s common stock and the implied volatility of traded options on the Company’s common stock for fiscal periods in which there is sufficient trading volume in options on the Company’s common stock. The risk-free interest rate is based on the implied yield on a U.S. Treasury zero-coupon issue with a remaining term equal to the expected 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.
22
BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands of U.S. dollars, except per share amounts or as otherwise disclosed)
On March 15, 2016, pursuant to Board approval, the Company granted 130,310 RSUs with performance-vesting conditions (the 2016 Base RSUs) and a three-year service period, under the 2006 Share Incentive Plan, to certain executive officers. Based on the Company’s performance against the 2016 revenue target, the Company applied a multiplier of 103% and issued 134,219 RSUs with a grant date fair value of $83.43 per RSU. The Company recognized $0.9 million and $3.2 million of compensation expense related to these awards during the three and nine months ended September 30, 2017, respectively. The Company recognized $1.0 million and $2.1 million of compensation expense related to these awards during the three and nine months ended September 30, 2016, respectively.
On March 3, 2015, pursuant to Board approval, the Company granted 58,300 RSUs with performance-vesting conditions (the 2015 Base RSUs) and a three-year service period, under the 2006 Share Incentive Plan, to certain executive officers. Based on the Company’s performance against the 2015 revenue target, the Company applied a multiplier of 111% and issued 64,713 RSUs with a grant date fair value of $108.36 per RSU. The Company recognized $0.5 million and $1.7 million of compensation expense related to these awards during the three and nine months ended September 30, 2017, respectively. The Company recognized $0.6 million and $1.8 million of compensation expense related to these awards during the three and nine months ended September 30, 2016, respectively.
Compensation expense 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.
23
BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands of U.S. dollars, except per share amounts or as otherwise disclosed)
(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 |
|
24
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 | % |
25
BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands of U.S. dollars, except per share amounts or as otherwise disclosed)
The following table illustrates the percentage of the Company’s consolidated net product revenues attributed to the Company’s largest customers for the three and nine months ended September 30, 2017 and 2016.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Customer A |
|
| 20 | % |
|
| 19 | % |
|
| 18 | % |
|
| 19 | % |
Customer B |
|
| 16 | % |
|
| 13 | % |
|
| 14 | % |
|
| 13 | % |
Customer C |
|
| 11 | % |
|
| 10 | % |
|
| 10 | % |
|
| 10 | % |
Total |
|
| 47 | % |
|
| 42 | % |
|
| 42 | % |
|
| 42 | % |
On a consolidated basis, the Company’s two largest customer accounts receivable balances accounted for 20% and 17% of the September 30, 2017 total accounts receivable balance, respectively, compared to December 31, 2016, when the two largest customer accounts receivable balances accounted for 26% and 20% of the total accounts receivable balance, respectively. As of September 30, 2017, and December 31, 2016, the accounts receivable balance for Genzyme included $17.8 million and $30.7 million, respectively, of unbilled accounts receivable related to net incremental Aldurazyme product transfers to Genzyme. The Company does not require collateral from its customers, but does perform periodic credit evaluations of its customers’ financial condition and requires immediate payment in certain circumstances.
The Company sells its products in countries, including Southern European countries, Russia, Chile and Brazil, which face economic crises and local currency devaluation. Although the Company has historically collected receivables from customers in those countries, sustained weakness or further deterioration of the local economies and currencies may cause customers in those countries to be unable to pay for the Company’s products. The Company has not historically experienced a significant level of uncollected receivables and has received continued payments from its more aged accounts in these countries. The Company believes that the allowances for doubtful accounts related to these countries, if any, is adequate based on its analysis of the specific business circumstances and expectations of collection for each of the underlying accounts in these countries.
(17) SEGMENT INFORMATION
The Company operates in 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 |
|
26
BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands of U.S. dollars, except per share amounts or as otherwise disclosed)
The following table summarizes total 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
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 andor 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
estimable based on existing information. 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 approvalaccrues for the best estimate of a proposed generic version of Kuvan (sapropterin dihydrochloride) 100 mg oral powder prior toloss within a range; however, if no estimate in the expirationrange is better than any other, then the minimum amount in the range is accrued. Liabilities are evaluated and refined each reporting period as additional information is known. Any receivables for insurance recoveries for these liability claims are recorded as assets when it is probable that a recovery will be realized.
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 approvalfirst quarter of proposed generic versions2023.
ContentsThe Company also received a paragraph IV notice letter, dated October 3, 2014, from DRL notifying it that DRL had filed an ANDA seeking approval of a proposed generic version of Kuvan 100 mg oral tablets prior to the expiration of the Company’s patents
27
listed in the FDA’s Orange Book. The Company, together with Merck & Cie, filed a lawsuit alleging patent infringement against DRL. In September 2015,
Contingent Payments
As of September 30, 2017, the Company iswas subject to contingent payments totaling approximately $600.2considered reasonably possible of $762.5 million, upon achievement of certainincluding $381.5 million related to an early-stage development and regulatory activities and commercial sales and licensing milestones if they occur before certain datesprogram licensed from a third party in the future. Of this amount, $218.3fourth quarter of 2021 and $210.0 million (or €185 million based on the exchange rate of 1.18 USD per Euro in effect on September 30, 2017) relatesrelated 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 recordedan 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 paidthird party in the next twelve months.
second quarter of 2020.
(19) BENEFIT FROM INCOME TAXES
be paid in 2023. The Company has historically computed its interim period benefitalso licensed technology from income taxes by applying its forecasted effective tax ratethird parties, for which it is required to year-to-date earnings. However, duepay royalties upon future sales, subject to a significant amountcertain annual minimums.
The following discussion of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and the related Notes thereto included in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that could impact our business. In particular, we encourage you to review the risks and uncertainties described in “Risk Factors” in Part II, Item 1A in this Quarterly Report on Form 10-Q. 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).
We
Our therapy portfolio consiststreatment options. A summary of six products and multiple clinical and pre-clinical product candidates. Ourour commercial products, are Aldurazymeas of March 31, 2023, is provided below:
| Commercial Products | Indication | |||||||||||||||||||||||||
| Enzyme products: | ||||||||||||||||||||||||||
| VIMIZIM (elosulfase alpha) | MPS (1) IVA | |||||||||||||||||||||||||
| NAGLAZYME (galsulfase) | MPS VI (2) | |||||||||||||||||||||||||
| PALYNZIQ (pegvaliase-pqpz) | PKU (3) | |||||||||||||||||||||||||
| BRINEURA (cerliponase alfa) | CLN2 (4) | |||||||||||||||||||||||||
| ALDURAZYME (laronidase) | MPS I (5) | |||||||||||||||||||||||||
| Other products: | ||||||||||||||||||||||||||
| VOXZOGO (vosoritide) | Achondroplasia (6) | |||||||||||||||||||||||||
ROCTAVIAN (valoctocogene roxaparvovec) (7) | Severe Hemophilia A | |||||||||||||||||||||||||
| KUVAN (sapropterin dihydrochloride) | PKU | |||||||||||||||||||||||||
| Clinical Development Programs | Target Indication | Stage | ||||||||||||||||||||||||
| ROCTAVIAN | Severe Hemophilia A | FDA (1) regulatory review | ||||||||||||||||||||||||
| BMN 255 | Hyperoxaluria | Clinical Phase 1/2 | ||||||||||||||||||||||||
| BMN 331 | Hereditary Angioedema (HAE) | Clinical Phase 1/2 | ||||||||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Total revenues | $ | 596.4 | $ | 519.4 | |||||||||||||||||||
| Cost of sales | $ | 126.5 | $ | 117.0 | |||||||||||||||||||
| Research and development (R&D) expense | $ | 171.8 | $ | 160.8 | |||||||||||||||||||
| Selling, general and administrative (SG&A) expense | $ | 223.0 | $ | 194.6 | |||||||||||||||||||
| Gain on sale of nonfinancial assets, net | $ | — | $ | (108.0) | |||||||||||||||||||
| Net income | $ | 50.9 | $ | 120.8 | |||||||||||||||||||
foreign currency exchange rates, banking crises, natural disasters, the continuing effects of the COVID-19 pandemic, and supply chain disruptions, could impact our global revenue sources and our overall business operations. The extent and duration of such effects remain uncertain and difficult to predict. 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, “Our business is affected by macroeconomic conditions.” described in “
Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q.In October 2017, we announced that 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 forGermany with severe hemophilia A, and concludedwho are eligible for treatment, can access treatment under either Named Patient authorizations or previously secured Outcomes Based Agreements.
In October 2017, we announced the selection of our next drug development candidate, BMN 290, a selective chromatin modulation therapy intended for treatment of Friedreich's Ataxia (FA), a rare autosomal recessive disorder that results in disabling neurologic and cardiac progressive decline. Currently, there are no approved disease modifying therapies for FA. BMN 290 is a second-generation compound derived from a compound acquired from Repligen Corporation (Repligen) that had human clinical data demonstrating increases in frataxin in FA patients. BMN 290 was selected for its favorable penetration into the central nervous system and cardiac target tissues, and its preservation of the selectivity of the original Repligen compound. We expect to submit the IND application in the second half of 2018.
|
In August 2017, the FDA accepted for Priority Review the Biologics License Application (BLA) for pegvaliase,ROCTAVIAN gene therapy for adults with severe hemophilia A, due to the substantial amount of additional data and set a PEGylated phenylanine-metabolizing enzyme product, to reduce blood phenylalanine (Phe) levels in adult patients with PKU who have uncontrolled blood Phe levels on existing management. The FDA is not currently planning to hold an advisory committee meeting to discuss the BLA. Thenew Prescription Drug User Fee Act (PDUFA) action dateTarget Action Date of June 30, 2023.
In August 2017,the coming months, we entered intoexpect to learn the outcome of our request to expand VOXZOGO access to younger age groups based on favorable results from a settlement agreement with Dr. Reddy's Laboratories, Inc.Phase 2 study in infants and Dr. Reddy's Laboratories, Ltd. (collectively, DRL) that resolvesyoung children. If age expansions are accepted, this will increase the patent litigation with DRLnumber of children eligible for VOXZOGO treatment in the U.S. relatedand Europe. We are also engaged in discussions with health authorities concerning the opportunity to Kuvan 100 mg oral powder. Underleverage VOXZOGO, a natural regulator of bone growth, in other conditions characterized by impaired bone growth.
In July 2017, we executed a license agreement and a settlement agreement (the Agreements) with Sarepta Therapeutics (Sarepta) that provide Sarepta with global exclusive rightsPhase 1/2 HAERMONY study 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 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 our patents exist. We retained the right to convert the license to a co-exclusive right in the event we decide to proceed withevaluate BMN 331, an exon-skippinginvestigational AAV5-mediated gene therapy for DMD.
people living with HAE. In July 2017,January 2023, we commissioned our commercial gene therapy manufacturing facility, located in Novato, California, and began Good Manufacturing Practices (GMP) production of valoctocogene roxaparvovec to support clinical development activities and anticipated commercial demand. This facility is capable of supporting the manufacturing of product for approximately 2,000 patients per year, and the production process was developed in accordance with International Conference on Harmonisation guidance for Pharmaceuticals for Human Use facilitating worldwide registration with health authorities.
In June 2017, the European Commission granted marketing authorization for Brineura in the European Union (EU) to treat children with CLN2 disease. The marketing authorization for Brineura includes all 28 countries of the EU, Norway, Iceland and Liechtenstein. Brineura isshared that 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 Brineura in the U.S., and began shipping the product within the U.S. in June 2017.
In April 2017, we entered into a settlement agreement with Par Pharmaceutical (Par) that resolves patent litigation in the U.S. with Par related to our Kuvan (sapropterin dihydrochloride) 100 mg oral tablets and powder for oral solution in 100 mg packets. Under the terms of the settlement, we granted Par a non-exclusive license to our patents related to Kuvan to allow Par to market a generic version of sapropterin dihydrochloride 100 mg tablets and powder for oral solution in 100 mg and 500 mg sachets in the U.S. for the indications approved for Kuvan beginning on: April 1, 2021 if Par is not entitled to the statutory 180-day first filer exclusivity period; October 1, 2020 if Par is entitled to the statutory 180-day first filer exclusivity period; or earlier under certain circumstances.
|
We reported total revenues of $334.1 million $955.3 million for the three and nine months ended September 30, 2017, respectively, compared to $279.9 million and $816.8 million for the three and nine months ended September 30, 2016, respectively.
Financial Highlights
Key components of our results 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 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 associatedparticipant treated 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 Vimizim6e13vg/kg dose demonstrated C1-Inhibitor levels that were approaching the therapeutically relevant range. In March 2023, the second sentinel participant was dosed 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 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 mix 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.
results. 2022, filed with the SEC on February 27, 2023. (continued) 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 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 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 Results of Operations (continued) 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 Royalty and Other Revenues future. For the Three Months Ended September 30, For the Nine Months Ended September 30, 2017 2016 Change 2017 2016 Change Total net product sales $ 298.8 $ 278.3 $ 20.5 $ 916.9 $ 812.2 $ 104.7 Cost of sales 59.5 50.7 8.8 165.8 145.5 20.3 Product gross margin 80 % 82 % (2.0 )% 82 % 82 % 0 % between approximately 77.5% and 79.0% through 2023. 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.Policies and Estimatesgenerally 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, revenuerevenues and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and discuss our critical accounting policies and estimates with the Audit Committee of our Board of Directors. We base our assumptions, judgments and estimates on historical experience and various other factorsassumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions.On a regular basis, we 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 policiesestimates have not differed materially from actual results.policies and estimates during the ninethree months ended September 30, 2017,March 31, 2023, compared to the critical accounting policies and estimatesthose 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, 2016.41 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.LossOur net lossProduct RevenuesThree Months Ended
March 31,2023 2022 Change Enzyme product revenues: VIMIZIM $ 189.2 $ 183.0 $ 6.2 NAGLAZYME 123.0 128.0 (5.0) PALYNZIQ 62.4 54.9 7.5 BRINEURA 39.1 36.2 2.9 ALDURAZYME 34.4 24.4 10.0 Total enzyme product revenues $ 448.1 $ 426.5 $ 21.6 VOXZOGO 87.8 19.7 68.1 KUVAN 50.5 59.3 (8.8) Total net product revenues $ 586.4 $ 505.5 $ 80.9 September 30, 2017 was $12.5 million,March 31, 2023 as compared to a net loss of $37.4 million for the three months ended September 30, 2016. Our net loss for the nine months ended September 30, 2017, was $65.7 million, compared to a net loss of $539.5 million for the nine months ended September 30, 2016. The decrease in net loss was primarily a result of the following (in millions):(1)Includes Equity in the loss of BioMarin/Genzyme LLC, interest income, interest expense and other income, net.The decrease in net loss for the three and nine months ended September 30, 2017March 31, 2022 was primarily attributed to an increasethe following:total revenues mainlyJapan and Europe;a $31.5 million net upfront license payment from Sarepta and patients initiating therapy. The increase in revenues was partially offset by a decrease in the benefit from income taxes for the three and nine months ended September 30, 2017 compared to the same periods in 2016. Additionally, during the nine months ended September 30, 2016 we recorded an impairment charge of $599.1 million primarily due to the termination of the Kyndrisa program, which was partially offset by the reversal of the deferred tax liability that had been established for the future amortization of those intangible assets. There was no similar charge during the nine months ended September 30, 2017. See below for additional information related to the net loss fluctuations presented above, including details of our operating expense fluctuations and the aforementioned impairment charge.Net Product RevenuesA summary of our various commercial products, including key metrics as of September 30, 2017, is provided below:(1)Firdapse has not received marketing approval in the U.S. We have licensed the North American rights to develop and market Firdapse to a third party.(2)Kuvan has been granted orphan drug status in the EU, which together with pediatric exclusivity, confers 12 years of market exclusivity in the EU that expires in 2020. Furthermore, Merck Serono marketed Kuvan in the EU until January 1, 2016. See Note 5 to our accompanying Condensed Consolidated Financial for further discussion.Net product revenues consisted of the following (in millions):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. Theour products. We expect that the timing of these large government orders canwill continue to be inconsistent, and canwhich may create significant quarterperiod to quarterperiod variation in our revenues.Genzyme Corporation (Genzyme) issole customerrevenues and may cause a decline in KUVAN revenues faster than expected” included in Part II, Item 1A of this Quarterly Report for Aldurazymeadditional information on risks we face.is responsible for marketingAnalysis of Financial Condition and selling Aldurazyme to third parties.Euro.Euro, which we expect to continue in future periods. We use foreign currency exchange forward contracts to hedge a percentage of our foreign currency exposure. The following table shows our net product revenuesNet Product Revenues denominated in U.S. dollar (USD)USD and foreign currencies (in millions):Three Months Ended
March 31,2023 2022 Change Sales denominated in USD $ 297.6 $ 259.3 $ 38.3 Sales denominated in foreign currencies 288.8 246.2 42.6 Total net product revenues $ 586.4 $ 505.5 $ 80.9 Three Months Ended
March 31,2023 2022 Change Unfavorable impact of foreign currency exchange rates on product sales denominated in currencies other than USD $ (28.3) $ (9.0) $ (19.3) netunfavorable 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, compared to the three and nine months ended September 30, 2016, remained relatively flat. The modest changes were primarily attributable to the timing of Aldurazyme revenues reported by Genzyme, offset in part by the timing of shipments to Genzyme. Aldurazyme revenues reported by Genzyme totaled $58.4 million and $176.3 million for the three and nine months ended September 30, 2017, respectively, compared to $58.9 million and $168.5 million for the three and nine months ended September 30, 2016, respectively. Although Genzyme sells Aldurazyme worldwide, the net product revenues earned by us on Genzyme’s net sales are denominated in USD.Brineura: The FDA and European Commission granted marketing approval for Brineura in April 2017 and June 2017, respectively. We began marking the product following approval in each of these markets with the first commercial shipments in the U.S. and EU occurring in June 2017 and July 2017, respectively.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,March 31, 2023 as 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,March 31, 2022 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.Three Months Ended
March 31,2023 2022 Change Royalty and other revenues $ 10.0 $ 13.8 $ (3.8) and nine months ended September 30, 2017 included recognition ofMarch 31, 2023 as compared to the $31.5 million net upfront license revenuethree months ended March 31, 2022 was primarily due to lower royalty revenues earned from Sarepta and $1.4 million in royalty revenue earned on Sarepta net sales during the third quarter of 2017. parties.Sarepta’s net sales underthird parties in the terms of the Agreements in future quarters.Product Gross MargincostCost of goods soldSales and product gross margin (in millions, except percentages):margin:Three Months Ended
March 31,2023 2022 Change Total revenues $ 596.4 $ 519.4 $ 77.0 Cost of sales $ 126.5 $ 117.0 $ 9.5 Gross margin 78.8 % 77.5 % 1.3 % Product gross margin (defined as net product revenues less costCost of sales, expressed as a percentage of net product revenues) for the three months ended September 30, 2017 compared to 2016 decreased modestly. The decrease in product gross marginSales increased for the three months ended September 30, 2017 was primarily attributed to increased Naglazyme and Vimizim manufacturing costs. Product gross margin for the nine months ended September 30, 2017March 31, 2023 as compared to the comparable period in 2016 remained flat. three months ended March 31, 2022 primarily due to increased sales volumes as noted above. Gross margin increased for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 primarily due to lower royalties owed to a third-party licensor on product sales and lower per unit manufacturing costs for our enzyme products. product gross margin to remain in the low 80 percent range over the next twelve months.A summaryon-going major development programs, including key metrics as of September 30, 2017, is provided below:approved products. R&D expense primarily includes preclinical and clinical studies, personnel and raw materials costs associated with manufacturing clinical product, quality control and assurance, other R&D activities, facilities and regulatory costs.U.S. OrphanEU OrphanMajor Products in DevelopmentTarget IndicationDesignationDesignationStageBMN 250MPS IIIBYesYesClinical Phase 1/2PegvaliasePKUYesYesMarketing authorizationregulatory reviewValoctocogene roxaparvovecHemophilia AYesYesClinical Phase 1/2VosoritideAchondroplasiaYesYesClinical Phase 3business.
|
| 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 | ) |
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | |||||||||||||||||||||||||||||||||
| Research and early development | $ | 69.0 | $ | 61.7 | $ | 7.3 | |||||||||||||||||||||||||||||
| ROCTAVIAN | 30.7 | 30.7 | — | ||||||||||||||||||||||||||||||||
| Other approved products | 29.8 | 28.3 | 1.5 | ||||||||||||||||||||||||||||||||
| VOXZOGO | 25.1 | 29.1 | (4.0) | ||||||||||||||||||||||||||||||||
| BMN 331 | 8.6 | 7.0 | 1.6 | ||||||||||||||||||||||||||||||||
| BMN 255 | 2.0 | 2.2 | (0.2) | ||||||||||||||||||||||||||||||||
| Other | 6.6 | 1.8 | 4.8 | ||||||||||||||||||||||||||||||||
| Total R&D expense | $ | 171.8 | $ | 160.8 | $ | 11.0 | |||||||||||||||||||||||||||||
For the three and nine months ended September 30, 2017, R&D expense decreased by $6.7 million and $44.6 million, respectively, compared to the same periods in 2016.
a decreaseincrease in R&D expense for otherthe three months ended March 31, 2023 as compared to the three months ended March 31, 2022 was primarily due to higher spend in research and non-allocated programs is primarily related to R&D spending in 2016 on the Kyndrisa, other exon-skipping, and reveglucosidase alfaearly development programs all of which were terminated in 2016;due to increased pre-clinical activities and
a decrease inWe expect R&D expense related to Brineuraincrease in future periods, primarily 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 stageprograms and clinical 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.
SG&A Expense increased to $130.5 million
|
| 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&Mmarketing (S&M) expense primarily consisted of employee-related expenses for our sales group, brand marketing, patient support groups and pre-commercialization expenses related to our product candidates. For the threeGeneral and nine months ended September 30, 2017, the increase 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&Aadministrative (G&A) expense primarily consisted of corporate support and other administrative expenses, including employee-related expenses.
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | |||||||||||||||||||||||||||||||||
| S&M expense | $ | 117.7 | $ | 104.9 | $ | 12.8 | |||||||||||||||||||||||||||||
| G&A expense | 105.3 | 89.7 | 15.6 | ||||||||||||||||||||||||||||||||
| Total SG&A expense | $ | 223.0 | $ | 194.6 | $ | 28.4 | |||||||||||||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | |||||||||||||||||||||||||||||||||
| Enzyme Products | $ | 59.0 | $ | 55.9 | $ | 3.1 | |||||||||||||||||||||||||||||
| VOXZOGO | 24.7 | 22.1 | 2.6 | ||||||||||||||||||||||||||||||||
| ROCTAVIAN | 23.5 | 15.7 | 7.8 | ||||||||||||||||||||||||||||||||
| Other | 10.5 | 11.2 | (0.7) | ||||||||||||||||||||||||||||||||
| Total S&M expense | $ | 117.7 | $ | 104.9 | $ | 12.8 | |||||||||||||||||||||||||||||
higher employee-related costs.
Intangible Asset Amortization and Contingent Consideration
and Gain on Sale of Nonfinancial Assets, Net
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | |||||||||||||||||||||||||||||||||
| Amortization of intangible assets | $ | 15.7 | $ | 15.6 | $ | 0.1 | |||||||||||||||||||||||||||||
| Changes in the fair value of contingent consideration | — | 2.0 | (2.0) | ||||||||||||||||||||||||||||||||
| Total intangible asset amortization and contingent consideration | $ | 15.7 | $ | 17.6 | $ | (1.9) | |||||||||||||||||||||||||||||
| Gain on sale of nonfinancial assets, net | $ | — | $ | 108.0 | $ | (108.0) | |||||||||||||||||||||||||||||
|
| 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 reducedMarch 31, 2023 as compared to the estimated probabilitythree months ended March 31, 2022 was attributable to attainment of achieving the Firdapse FDA approvalfinal commercial milestone priorin the fourth quarter of 2022.
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | |||||||||||||||||||||||||||||||||
| Interest income | $ | 11.9 | $ | 1.8 | $ | 10.1 | |||||||||||||||||||||||||||||
during the ninethree months ended September 30, 2017,March 31, 2022 was primarily due to higher yields on our investment portfolio. We expect Interest Income to increase over the continued progress ofnext 12 months due to anticipated higher interest rates and yields on our cash equivalents and investments.
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | |||||||||||||||||||||||||||||||||
| Interest expense | $ | 3.7 | $ | 3.8 | $ | (0.1) | |||||||||||||||||||||||||||||
during the ninethree 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 payableMarch 31, 2023 as compared 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.March 31, 2022 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
Interest Income
We invest our cash, short-term and long-term investmentsdebt.
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | |||||||||||||||||||||||||||||||||
| Other expense, net | $ | (10.8) | $ | (1.2) | $ | (9.6) | |||||||||||||||||||||||||||||
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 expenseimpairment in the three and nine months ended September 30, 2017, compared to the three and nine months ended September 30, 2016 increased due to the issuancefirst quarter 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.2023. See
Benefit fromProvision for Income Taxes:
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | |||||||||||||||||||||||||||||||||
| Provision for income taxes | $ | 5.9 | $ | 13.4 | $ | (7.5) | |||||||||||||||||||||||||||||
For 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,March 31, 2023 as compared to the three and nine months ended September 30, 2016 when weMarch 31, 2022 was primarily due to taxes on lower taxable income in the first quarter of 2023. Taxable income recognized anin the first quarter of 2022 included 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 reversalsale of the deferred tax liability associated with the write-offPRV.
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 dollars, except as otherwise disclosed)
Financial Position,Condition, Liquidity and Capital Resources
As of September 30, 2017, we had approximately $1.7 billion in
| March 31, 2023 | December 31, 2022 | Change | |||||||||||||||
| Cash and cash equivalents | $ | 580.1 | $ | 724.5 | $ | (144.4) | |||||||||||
| Short-term investments | 572.0 | 567.0 | 5.0 | ||||||||||||||
| Long-term investments | 340.6 | 333.9 | 6.7 | ||||||||||||||
| Cash, cash equivalents and investments | $ | 1,492.7 | $ | 1,625.4 | $ | (132.7) | |||||||||||
In managing our liquidity needs 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 fund 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.
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):
|
| 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 |
|
Cash Used in Operating Activities
Cash used in operating activities decreased by $204.2 million from $227.6 million during the nine months ended September 30, 2016 to $23.4 million during the nine months ended September 30, 2017. Cash used in operating activities primarily consisted of net loss of $65.7 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 the sale of strategic investments. Cash used in operating activities in the comparable period in 2016 was adjusted for the non-cash impairment of intangible assets of $599.1 million. Changes in operating assets and liabilities during the nine months ended September 30, 2017 resulted in a net cash outflow of $122.5 million that consisted primarily of increased cash outflow for increased inventory spending for all commercial products to meet anticipated future sales demand.
Cash Used 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. 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 the nine months ended September 30, 2016 to $494.0 million during the nine months ended September 30, 2017. The decrease in net cash provided by financing activities for the nine months ended September 30, 2017 was primarily attributable to a decrease of $712.9 million in proceeds from public offerings of common stock and a $3.4 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.
Our indebtedness consists primarily of the Company’s 0.75% senior subordinated convertible notes due in 2018 (the 2018 Notes), the Company’s 1.50% senior subordinated convertible notes due in 2020 (the 2020 Notes) and the 2024 Notes, which, if not converted, will be required to be repaid in cash at maturity in 2018, 2020 and 2024, respectively. The 2018 Notes, 2020 Notes and 2024 Notes are referred to collectively herein as the Notes. Our senior subordinated convertible notes due in 2017 matured on April 23, 2017, with conversion of all principal amounts except for a final cash settlement of $26,000. In August 2017, we completed an offering of $495.0 million in aggregate 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. See Note 11 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 to the semi-annual cash interest payments and will further impact our liquidity if we elect to settle all or portions of the 2018 Notes or the 2020 Notes in cash upon conversion. In addition, in the event the conditional conversion feature of the 2018 Notes or 2020 Notes is triggered, holders of such 2018 Notes and 2020 Notes will be entitled to convert the 2018 Notes and 2020 Notes at any time during specified periods at their option. Our liquidity could be adversely affected if we do not elect to settle conversions of the 2018 Notes and 2020 Notes solely in shares of our common stock. Even if holders of the 2018 Notes or 2020 Notes do not elect to convert their 2018 Notes and 2020 Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of such Notes as a current rather than long-term liability (for example, if there are 12 months or less remaining until maturity), which would result in a material reduction of our net working capital. Moreover, if holders of the Notes do not elect to convert their Notes and we are unable to refinance the Notes, we must repay the Notes. We may seek to refinance or repay these obligations through funds raised from third-party financing, or equity or debt financings, none of which may be available 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 accounting for the underwriting discount and offering costs.
In November 2016 we entered into a credit agreement (the Credit Agreement) providing for up to $100.0 million in revolving loans (the Revolving Credit Facility). We expect to use the proceeds of the Revolving Credit Facility to finance ongoing working capital needs (including timing differences resulting from the strategic management of short-term investments) and for other general corporate purposes. As of September 30, 2017, we had not drawn on the Revolving Credit Facility. Although quarterly interest payments will be due on any outstanding balance due, we anticipate any balance due to be short-term in nature. See Note 11 to our accompanying Condensed Consolidated Financial Statements for additional discussion.
We sell our products in othercertain countries, including Southern European countries, Russia, Chile and Brazil, which that face economic volatility and weakness. Although we have historically collected receivables from customers in thosesuch 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.
We will continue to monitor these conditions and will attempt to adjust our business processes, as appropriate, to mitigate macroeconomic risks to our business.
| Three Months Ended March 31, | |||||||||||||||||
| 2023 | 2022 | Change | |||||||||||||||
| Net cash used in operating activities | $ | (73.9) | $ | (45.4) | $ | (28.5) | |||||||||||
| Net cash provided by (used in) investing activities | $ | (30.0) | $ | 87.8 | $ | (117.8) | |||||||||||
| Net cash used in financing activities | $ | (40.7) | $ | (25.3) | $ | (15.4) | |||||||||||
| Since Program Inception | |||||
| ROCTAVIAN | $ | 974.8 | |||
| VOXZOGO | $ | 826.1 | |||
| BMN 331 | $ | 118.5 | |||
| BMN 255 | $ | 36.9 | |||
| Other approved products | $ | 2,518.8 | |||
IfAs of March 31, 2023, we failhad obligations of approximately$251.7 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 do not achieve our projected development goalsfirm purchase commitments entered into in the timeframes we announcenormal course of business to procure active pharmaceutical ingredients, certain inventory-related items, certain third-party R&D services, production services and expect, the commercialization of our product candidates may be delayed and the credibility of our management may be adversely affected and, as a result, our stock price may decline.
Our investment in our product development programs and continued development of our existing commercial products has a major impact on our operating performance. Our R&D expenses of our major development programs from inception to 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 to increase our spending above our current long-term plans and consequently we may be unable 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; 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 to our settlements with DRL (related to Kuvan tablets and powder) and Par (related to Kuvan tablets and powder) or potential generic competition from future competitors;
government regulatory action affecting our product candidates, our products or our competitors’ product candidates and products in both the U.S. and non-U.S. countries;
developments or disputes concerning patent or proprietary rights;
general market conditions and fluctuations for the emerging growth and pharmaceutical market sectors;
economic conditions in the U.S. or abroad;
negative publicity about our company or the pharmaceutical industry;
broad market fluctuations in the U.S., the EU or in other parts of the world;
actual or anticipated fluctuations in our operating results, including due to timing of large order for our products, in particular in Latin America, where governments place large periodic orders for Naglazyme and Vimizim;
changes in company assessments or financial estimates by securities analysts;
acquisitions of products, businesses, or other assets; 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 as of September 30, 2017, which are due upon achievement of certain development and commercial milestones, and if they occur before certain dates in the future.facility construction services. Of this amount, $218.3$205.9 million (USD equivalentis expected to be paid in the next twelve months.
March 31, 2023.
Paragraph IV Notices
We received
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,vigorously defend this action.
investment.
2023.
two newest products, VOXZOGO and ROCTAVIAN, address potentially larger patient populations than most of our other products; however, their market sizes are considerably smaller than many drugs marketed by other pharmaceutical and biotechnology companies. 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.
Althoughone 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 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.
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
All of our products
Promotionalrecord keeping.
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.
•restrictions on our ability to conduct clinical trials, including full or partial clinical holds on ongoing or planned trials;
•restrictions on product manufacturing processes;
•restrictions on the marketing of a product;
•restrictions on product distribution;
•requirements to conduct post-marketing clinical trials;
•untitled or warning letters or other adverse publicity;
•withdrawal of the products from the market;
•refusal to approve pending applications or supplements to approved applications that we submit;
•recall of products;
•refusal to permit the import or export of our products;
•product seizure;
•fines, restitution or disgorgement of profits or revenue;
•imposition of civil or criminal penalties.
If 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.
*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.
•slow or insufficient patient enrollment;
•slow recruitment of, and completion of necessary institutional approvals at, clinical sites;
•budgetary constraints or prohibitively high clinical trial costs;
•longer treatment time required to demonstrate efficacy;
•lack of sufficient supplies of the product candidate;
•adverse medical events or side effects in treated patients, including immune reactions;
•lack of effectiveness of the product candidate being tested;
•availability of competitive therapies to treat the same indication as our product candidates;
•regulatory requests for additional clinical trials or pre-clinicalpreclinical studies;
•deviations in standards for Good Clinical Practice (GCP); and
•disputes with or disruptions in our relationships with clinical trial partners, including CROs, clinical laboratories, clinical sites, and principal investigators
Moreover, principal investigators
*Our valoctocogene roxaparvovec (formerly referred to as BMN 270) program isproduct candidates are based on a gene therapy approach, which, as a novel technology, which presents additional treatment,development, manufacturing, regulatory manufacturing, and commercialtreatment risks in relation to our other, more traditional drug development programs.
We may experience development problems related to our gene therapy program that cause significant delays or unanticipated costs, or that cannot be solved. Although numerous companies are currently advancing gene therapy product candidates through clinical trials, the FDA has only approved cell-based gene therapy treatments thus far and is only currently reviewing a vector-based gene therapy, with a decision expected in January 2018.
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 atWe invested a contract manufacturer or atconsiderable 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 gene therapy 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 or commercializing valoctocogene roxaparvovecin a timely manner, if at all, or commercializing our gene therapy products on a profitable basis, if at all.
revenues and financial results could be adversely affected if our assumptions underlying our refund reserves differ from actual experience or otherwise underestimate refund obligations. Additionally, the increased complexity of reimbursement with outcomes-based arrangements heightens the risk that our price reporting may be inaccurate or delayed, which may result in fines and liability.
term, but also to repay the principal amount of the Notes if not converted. •our ability to successfully market and sell our products; 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 progress of research programs carried out by us; •whether our convertible debt is converted to common stock in the future. •additional licenses and collaborative agreements; •additional contracts for product manufacturing; and •additional financing facilities or arrangements. •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. financing to pay for any amounts due in cash upon For example, demand for VOXZOGO in certain markets has outpaced our projections in recent quarters, and if the trend continues, we could face challenges meeting demand, we may need to postpone planned entry into additional markets until VOXZOGO inventory levels increase or we could be required to delay certain VOXZOGO development activities. If we face such inventory constraints, we could lose potential VOXZOGO revenues that may never be recouped and our VOXZOGO development program could be adversely impacted. Even a developed manufacturing process can encounter difficulties. Problems may arise during manufacturing for a variety of reasons, including human error, mechanical breakdowns, problems with raw materials and cell banks, malfunctions of internal information technology systems, and other events that cannot always be prevented or anticipated. Many of the processes include biological systems, which add significant complexity, as compared to chemical synthesis. We expect that, from time to time, consistent with biotechnology industry expectations, certain production lots will fail to produce product that meets our quality control release acceptance criteria. To date, our historical failure rates for all of our product programs •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 demand and adversely affect our financial results and financial condition. •the increased complexity and costs inherent in managing international operations; •diverse regulatory and compliance requirements, and changes in those requirements that could restrict our ability to manufacture, market and sell our products; •political and economic •diminished protection of intellectual property in some countries outside of the U.S.; •trade protection measures and import or export licensing requirements; •difficulty in staffing and managing international operations; •potentially negative consequences from changes in or interpretations of tax laws; •changes in international medical reimbursement policies and programs; •financial risks such as longer payment cycles, difficulty collecting accounts receivable, exposure to fluctuations in foreign currency exchange rates and potential currency controls imposed by •regulatory and compliance risks that relate to maintaining accurate information and control over sales and distributors’ and service providers’ activities that may fall within the purview of the Foreign Corrupt Practices Act (the FCPA); and •rapidly evolving global laws and regulations relating to data 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 and Belarus 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 and Belarus. effectively or preserve our market shares. •With respect to pending patent applications, unless and until actually issued, the protective value of these applications is impossible to determine. We do not know whether our patent applications will result in issued patents. Competitors may interfere with our patent process in a variety of ways. Competitors may claim that they invented the claimed invention prior to us or that they filed their application for a patent on a claimed invention before we did. Competitors may also claim that we are infringing on their patents and therefore we cannot practice our technology. Competitors may also contest our patents by showing the patent examiner or a court that the invention was not original, was not novel or was obvious, for example. In litigation, a competitor could claim that our issued patents are not valid or are unenforceable for a number of reasons. If a court agrees, we would not be able to enforce that patent. If we are unable to protect our intellectual property, third parties could develop competing products, which could adversely affect our •Defending a lawsuit takes significant executive resources and can be very expensive. •If a court decides that our product infringes a •With respect to patents, in addition to requiring us to pay substantial damages, a court may prohibit us from making, selling, offering to sell, importing or using our product unless the patent holder licenses the patent to us. The patent holder is not required to grant us a license. If a license is available, it may not be available on commercially reasonable terms. For example, we may have to pay substantial royalties or grant cross licenses to our patents and patent applications. •We may need to redesign our product so it does not infringe the intellectual property rights of others. •Redesigning our product so it does not infringe the intellectual property rights of competitors may not be possible or could require substantial funds and time. our business, financial condition, and results of operations. Many other states are considering proposed comprehensive data privacy legislation and all 50 states have passed some form of legislation relating to privacy or cybersecurity. operations. effectively and have a material adverse effect on our business, reputation, financial condition, and results of operations. our products and product candidates. Our Galli Drive facility, located in Novato, California, is currently our only manufacturing facility for *Our business is affected by macroeconomic conditions. 3.1 31.2* 32.1*+ XBRL Instance Document 101.SCH* Inline XBRL Taxonomy Extension Schema Document 101.CAL* Inline XBRL Taxonomy Extension Calculation Document Inline XBRL Taxonomy Extension Definition Linkbase 101.LAB* Inline XBRL Taxonomy Extension Labels Linkbase Document 101.PRE* Inline XBRL Taxonomy Extension Presentation Link Document Dated: By /S/ continue to incur operating losses and experience netor are unable to sustain positive cash outflowsflows for a period longer than anticipated, we may be unable to continue our operations at planned levels and may be forced to reduce our operations.exceptionexceptions of 2008, 2010, 2020 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.2022. 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.September 30, 2017,March 31, 2023, we had cash, cash equivalents and short and long-term investments totaling $1.7$1.49 billion and long-term debt obligations of $1.2$1.1 billion (undiscounted). In January 2016 we terminated our License and Commercialization Agreement with Ares Trading, S.A. (Merck Serono). Pursuant to the Termination and Transition Agreement related to Kuvan and the Termination Agreement related to pegvaliase, we made cash payments on this transaction totaling $374.5 million in the nine months ended September 30, 2017, and may pay Merck Serono up to a maximum of €60 million, in cash, if future sales milestones are met with respect to Kuvan and up to a maximum of €125 million, in cash, if future development milestones are met with respect to pegvaliase. In October 2013, we completed an offering of senior subordinated convertible notes and received net proceeds of approximately $696.4 million, after deducting commissions, estimated offering expenses payable by us and the purchase of the related capped calls. In August 2017, we completed an offering of senior subordinated convertible notes and received net proceeds of approximately $481.7 million, after deducting commissions and estimated offering expenses payable by us. We will need cash to not only repay the principal amount, which consisted 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,Notes) and together with the 2018our 1.25% senior subordinated convertible notes due in 2027 (the 2027 Notes). The 2024 Notes and the 20202027 Notes (collectively, the Notes) but also, 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. ourthe 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.Genzyme’s ability•the time and cost necessary to continuedevelop commercial manufacturing processes, including quality systems, and to successfully commercialize Aldurazyme;the time and cost necessary to develop commercial manufacturing processes, including quality systems, and to build or acquire manufacturing capabilities;our possible achievement of milestones identified•any changes made to, or new developments in, our purchase agreements with the former stockholders of LEAD Therapeutics, Inc., ZyStor Therapeutics, Inc., Huxley Pharmaceuticals, Inc.,existing collaborative, licensing and Zacharon Pharmaceuticals Inc.,other commercial relationships or any new collaborative, licensing and under the termination agreements with Merck Serono relatedother commercial relationships that we may establish;Kuvancontinue to successfully commercialize ALDURAZYME; and pegvaliase milestones;*September 30, 2017,March 31, 2023, 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 20202024 Notes and $495.0$600.0 million (undiscounted) principal amount of indebtedness under the 20242027 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 lineswingline 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 19, 2021 to May 28, 2024. Our indebtedness may: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 AgreementFacility 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 ourthe Notes. If we default under any series of the Notes, such notesseries 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.2018 Notes, 20202024 Notes and 20242027 Notes, which, if not converted, will be required to be repaid in cash at maturity in 2018, 2020August 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-partysuch 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. 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.Aldurazyme, Brineura, NaglazymeALDURAZYME, 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.productsproduct candidates to produce sufficient quantities at acceptable costs, we may be unable to meet demand forsupport a clinical trial or be forced to terminate a program, or if we are unable to produce sufficient quantities of our products andat acceptable costs, we may be unable to meet commercial demand, lose potential revenue, have reduced margins or be forced to terminate a program.including Aldurazyme, Brineura, Naglazyme and Vimizim, have been within our expectations, which are based on industry norms. If the failure rate increased substantially, we could experience increased costs, lost revenue, damage to customer relations, time and expense investigating the cause and, depending upon the cause, similar losses with respect to other lots or products. If problems are not discovered before the product is released to the market, recall and product liability costs may also be incurred.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. have contracts for the production of final product for Firdapse and Kuvan. We alsocurrently rely on third parties for portions of the manufacture of Aldurazyme, Brineura, Naglazyme and Vimizim.each of our 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.materials.demand.
If our Manufacturing, Marketing and Sales Agreement with Sanofi were terminated, we could be prevented from continuing to commercialize ALDURAZYME or our ability to successfully commercialize ALDURAZYME would be delayed or diminished.*Becausetarget patient populationsManufacturing, 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 highspecified 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, becauseMMS Agreement, has experienced a change of control, as such term is defined in the number of potential patientsMMS 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 penetrationbreach of the product, butMMS 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 lifetimesare 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, ifrisk that either party could breach the level of reimbursementMMS Agreement in the future. Either party may also terminate the MMS Agreement upon one-year prior written notice for any reason.belowterminated 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 revenuerights to ALDURAZYME and gross marginsthe 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 coveragesold and the amountBioMarin/Genzyme LLC will be dissolved. In the event of reimbursement for particular medications. Increasingly, third-party payors are requiring that drug companies provide themtermination 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 formulariesthe proceeds to be split between Sanofi and preferred drug lists to leverage greater discountsus 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, coverageBioMarin/Genzyme LLC.reimbursementwould 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 significantlya 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 payorthe MMS Agreement.payor. As a result,buy out Sanofi’s interest in ALDURAZYME and the coverage determination process is often a time-consumingBioMarin/Genzyme LLC, and costly process that will require usthereby 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.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 margins may be adversely affected.*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 undertakendo 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.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.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. If we do not compete successfully, our revenue 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.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.International operations are also generally subject to extensive price and market regulations, and there are many proposals for additional cost-containment measures, including proposals that would directly or indirectly impose additional price controls or mandatory price cuts or reduce the value of our intellectual property portfolio. As part of these cost containment measures, some countries have imposed or threatened to impose revenue caps limiting the annual volume of sales of our products. To the extent that these caps are significantly below actual demand, our future revenues and gross margins may be adversely affected.We cannot predict the extent to which our business may be affected by these or other potential future legislative or regulatory developments. However, future price controls or other changes in pricing regulation or negative publicity related to our product pricing or the pricing of pharmaceutical drugs generally could restrict the amount that we are able to charge for our current and future products or our sales volume, which would adversely affect our revenue and results of operations.*Government health care reform could increase our costs and adversely affect 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 additionalchallenges and amendments to the PPACA in the future. Since January 2017, President Trump has signed two Executive Orders designed to delay the implementation of certain provisions of the PPACA or otherwise circumvent some of the requirements for health insurance mandated by the PPACA. The Trump administration has also announced that it will discontinue the payment of cost-sharing reduction (CSR) payments to insurance companies until Congress approves the appropriation of funds for such CSR payments. The loss of the CSR payments is expected to increase premiums on certain policies issued by qualified health plans under the PPACA. A bipartisan bill to appropriate funds for CSR payments has been introduced in the Senate, but the future of that bill is uncertain. Further, each chamber of Congress has put forth multiple bills designed to repeal or repeal and replace portions of the PPACA. Although none of these measures has been enacted by Congress to date, Congress may consider other legislation to repeal and replace elements of the PPACA. It is uncertain the extent to which any such changes may impact our business or financial condition. In addition, other legislative changes have been adopted since the PPACA was enacted. Some of these changes have resulted in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on our customers and, accordingly, our financial operations.We anticipate that the PPACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and an additional downward pressure on the reimbursement our customers may 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 dueobtain 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 participationheld 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 similaragreement and may lose any claim to the federal Anti-Kickback Statute, some of which applyrights to referral of patients for health care services reimbursed by any source, not just governmental payors.FederalALDURAZYME and state false claims laws, including the civil False Claims Act, prohibit any person from knowingly presenting, or causing torelated 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 falsestatement to have a false claim paid, or knowingly making, using, or causing to be made or used, a false record or statement to avoid, decrease or conceal an obligation to pay money to the federal government. In addition, certain marketing practices, including off-label promotion, may also violate false claims laws. Under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), we also are prohibited from knowinglydeveloping and willfully executing a schemecommercializing ALDURAZYME. If this happened, not only would our product revenues decrease, but our share price would also decline.defraud any health care benefit program, including private payors, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for health care benefits, items or services.HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes obligations, including mandatory contractual terms, on certain types of individuals and entities, with respect to safeguarding the privacy, security and transmission of individually identifiable health information. Many state and foreign laws also govern the privacy and security of health information. They often differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.Substantial new provisions affecting compliance have also been adopted, which may require us to modify our business practices with health care practitioners. The PPACA, through the Physician Payments Sunshine Act, requires drug manufacturers to collect and report to CMS information on payments or transfers of value to physicians and teaching hospitals, as well as investment and ownership interests held by physicians and their immediate family members during the preceding calendar year. Failure to submit required information may result in civil monetary penalties.In addition, there has been a recent trend of increased state regulation of payments made to physicians. Certain states mandate implementation of compliance programs, compliance with the Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers and the Pharmaceutical Research and Manufacturers of America (PhRMA) Code on Interactions with Healthcare Professionals, and/or the tracking and reporting of gifts, compensation and other remuneration to physicians. The shifting compliance environment and the need to implement systems to comply with multiple jurisdictions with different compliance and/or reporting requirements increases the possibility that a pharmaceutical manufacturer may violate one or more of the requirements.Due to the breadth of these laws, the narrowness of available statutory and regulatory exceptions and the increased focus by law enforcement agencies in enforcing such laws, our business activities could be subject to challenge under one or more of such laws.In addition, recent health care reform legislation has strengthened these laws. For example, the PPACA, among other things, amends the intent requirement of the federal Anti-Kickback Statute and criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of these statutes or specific intent to violate them in order to commit a violation. Moreover, the PPACA provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act. If we are found in violation of one of these laws, we may be subject to criminal, civil or administrative sanctions, including damages, fines, disgorgement, imprisonment, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, curtailment of our operations, debarment, suspension or exclusion from participation in federal or state health care programs, any of which could adversely affect our business, financial condition and results of operations.*International Operationsrevenuerevenues and results of operations.Aldurazyme, Kuvan, Naglazyme and Vimizim, and all of the sales of Firdapseour products are generated from countries other than the U.S. Similarly,, and we expect a significant portion ofinternational markets will continue to be important for the sales of Brineura to be generated from countries other thanany products approved in the U.S.future. 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:instability;foreignnon-U.S. governments;securityprotection and the unauthorized useprivacy and security of or access to, commercial and personal information.revenuerevenues and profitability.*failwould 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.resultsresults. Moreover, compliance with such regulatory requirements may be adversely affected.We rely on a general licenseincrease our costs and negatively impact our ability to sell our products and collect cash from customers.that we will remain in compliance. Moreover, acompliance 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.*United States, the UK Bribery ActU.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 foreignnon-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 foreignnon-U.S. government officials for purposes of applicable anti-corruption laws.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.Our international operations pose currencywhichfrom government-owned or sponsored customers outside of the U.S. that may adversely affect our operating results of operations.net income.A significantreimbursement practices. This has resulted and growing portion of our revenues and earnings, as well as our substantial international net assets, are exposedmay continue to changesresult in foreign exchange rates. As we operatean increase in multiple foreign currencies, including the euro, the Brazilian real, the U.K. pound, the Canadian dollar, the Swiss franc, the Japanese yen and several other currencies, changes in those currencies relativedays sales outstanding due to the U.S. dollar will impact our revenues and expenses.average length of time that we have accounts receivable outstanding. If the U.S. dollarsignificant changes were to weaken against another currency, assuming all other variablesremained constant, our revenues would increase, having a positive impactoccur in the reimbursement practices of these governments or if government funding becomes unavailable, we may not be able to collect on earnings,amounts due to us from these customers and our overall expenses would increase, having a negative impact on earnings. Conversely, if the U.S. dollar were to strengthen against another currency, assuming all other variables remained constant, our revenues would decrease, having a negative impact on earnings, and our overall expenses would decrease, having a positive impact on earnings. In addition, because our financial statements are reported in U.S. dollars, changes in currency exchange rates between the U.S. dollar and other currencies have had, and will continue to have, an impact on our results of operations. Therefore, significant changes in foreign exchange rates can impact our results and our financial guidance.We implement currency hedges intended to reduce our exposure to changes in foreign currency exchange rates. However, our hedging strategies may notoperations would 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.*adversely affected.effectively.Aldurazyme, NaglazymeALDURAZYME, 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) haveKUVAN) 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 have no meaningful experience with competitors interfering with or challenging the validity or enforceability of our patents or patent applications.GenericMoreover, generic manufacturers may use litigation and regulatory means to obtain approval for generic versions of our products notwithstanding our filed patents or patent applications.Enforcing patents is expensive and may absorb significant time of our management. Management would spend less time and resources on developing products, which could increase our operating expenses and delay product programs.Receipt of a patent may not provide much, if any, practical protection. For example, if we receive a patent with a narrow scope, then it will be easier for competitors to design products that do not infringe on our patent.The Leahy-Smith America Invents Act of 2011, which reformed certain patent laws in the U.S., may create additional uncertainty. Among the significant changes are switching from a “first-to-invent” system to a “first-to-file” system, and the implementation of new procedures that permit competitors to challenge our patents in the U.S. Patent and Trademark Office after grant.It is also unclear whether our trade secrets are adequately protected. Our current and former employees, consultants or contractors may unintentionally or willfully disclose trade secrets to competitors. Enforcing a claim that someone else illegally obtained and is using our trade secrets, as with patent litigation, is expensive and time consuming, requires significant resources and has an unpredictable outcome. In addition, courts outside of the U.S. are sometimes less willing to protect trade secrets. Furthermore, our competitors may independently develop equivalent knowledge, methods and know-how, in which case we would not be able to enforce our trade secret rights against such competitors.Under policies recently adopted in the EU, clinical trial data submitted to the EMA in MAAs that were traditionally regarded as confidential commercial information are now subject to public disclosure. Subject to BioMarin’s ability to review and redact a narrow sub-set of confidential commercial information, the new EU policies will result in the EMA’s public disclosure of certain of our clinical study reports, clinical trial data summaries and clinical overviews for recently completed and future MAA submissions. The move toward public disclosure of development data could adversely affect our business in many ways, including, for example, resulting in the disclosure of our confidential methodologies for development of our products, preventing us from obtaining intellectual property right protection for innovations, requiring us to allocate significant resources to prevent other companies from violating our intellectual property rights, adding even more complexity to processing health data from clinical trials consistent with applicable data privacy regulations, and enabling competitors to use our data to gain approvals for their own products.revenuerevenues and financial results generally.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 itstheir intellectual property, we would face a number of issues, including the following:competitor’scompetitor’s intellectual property, we may have to pay substantial damages.IfManufacturing, Marketingstock could suffer a decline in value.Sales Agreement with Genzyme were terminated, we couldmay in the future be prevented from continuingvolatile. Our valuation and stock price may have no meaningful relationship to commercialize Aldurazymecurrent 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:Aldurazyme would be delayedany such products that receive regulatory approval;diminished.Either party may terminatenew products by us or our competitors;Manufacturing, MarketingU.S. and Sales Agreement (the MMS Agreement) between Genzymenon-U.S. countries;related to Aldurazyme for specified reasons, including ifor the pharmaceutical industry;party is in material breachparts of the MMS Agreement, hasworld;a changeextreme price and volume fluctuations that have affected and continue to affect the market prices of control, as such term is definedequity 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 MMS Agreement, or has declared bankruptcymarket 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 also iscertain of our officers were sued in breacha putative class action lawsuit alleging violations of the MMS Agreement. Althoughfederal 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 are not currentlyand certain of our current and former officers were sued in breacha putative class action lawsuit alleging violations of the MMS Agreement, there is a risk that either party could breachfederal securities laws for allegedly making materially false or misleading statements. We may be the MMS Agreementtarget of additional litigation of this type in the future. Either party may also terminate the MMS Agreement upon one year prior written notice for any reason.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.If the MMS Agreement is terminated for breach, the breaching party will transfer its interestIn 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 BioMarin/Genzyme LLC tobiotechnology sector of the non-breaching party, andeconomy, even if our business is operating well.non-breaching partyNotes will pay a specified buyout amount fordilute the breaching party’sownership interest in Aldurazyme andof existing stockholders, including holders who had previously converted their Notes, or may otherwise depress the price of our common stock.BioMarin/Genzyme LLC. If we arepublic market of the breaching party, we would losecommon stock issuable upon such conversion could adversely affect prevailing market prices of our rightscommon 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 Aldurazyme andsatisfy short positions, or anticipated conversion of the related intellectual property and regulatory approvals. IfNotes into shares of our common stock could depress the MMS Agreement is terminated without cause,price of our common stock.non-terminating party would haveNotes may delay or prevent an otherwise beneficial attempt to take us over.option, exercisable for one year,Notes require us to buy outoffer to repurchase the terminating party’s interestNotes 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 terminationa fundamental change (as defined in each indenture governing the Notes). A takeover of us would trigger options by the respective holders of the buyout option without exerciseapplicable Notes tonon-terminating party as described above, all rightlead independent director or the majority of our Board of Directors and titlethat the stockholders may not take action by written consent and requiring that stockholders that desire to Aldurazyme isnominate any person for election to our Board of Directors or to make any proposal with respect to business to be soldconducted 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 highest bidder, withauthority to issue shares of preferred stock and to determine the proceeds to be split between Genzyme and us in accordance withterms of those shares of stock without any further action by 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 allstockholders. The 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,holders of its intent to buy out the offeree’s interest in Aldurazyme and the BioMarin/Genzyme LLC for a stated amount set by the terminating party at its discretion. The offeree must then either accept this offer or agree to buy the terminating party’s interest in Aldurazyme and the BioMarin/Genzyme LLC on those same terms. The party who buys out the other party would then have exclusive worldwide rights to Aldurazyme. The Amended and Restated Collaboration Agreement between us and Genzyme will automatically terminate upon the effective date of the termination of the MMS Agreement and may not be terminated independently from the MMS Agreement.If we were obligated or given the option to buy out Genzyme’s interest in Aldurazyme and the BioMarin/Genzyme LLC, and thereby gain exclusive rights to Aldurazyme, we may not have sufficient funds to do so and we may not be able to obtain the financing to do so. If we fail to buy out Genzyme’s interest, we may be held in breach of the agreement and may lose any claimour common stock are subject to the rights of the holders of any preferred stock that may be issued. The issuance of preferred stock could make it more difficult for a third party to Aldurazymeacquire a majority of our outstanding voting stock. Delaware law also prohibits corporations from engaging in a business combination with any holders of 15% or more of their capital stock until the holder has held the stock for three years unless, among other possibilities, our Board of Directors approves the transaction. Our Board of Directors may use these provisions to prevent changes in the management and control of us. Also, under applicable Delaware law, our Board of Directors may adopt additional anti-takeover measures in the future.related intellectual propertyfederal district courts of the U.S. as the exclusive forums for the adjudication of certain disputes, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.regulatory approvals. We would then effectively be prohibited from developingrestated bylaws provide that the Court of Chancery of the State of Delaware is the sole and commercializing Aldurazyme. If this happened, not only wouldexclusive forum for the following types of actions or proceedings under Delaware statutory or common law:product revenues decrease, but our share price would also decline.If we fail to develop new products and product candidatesbehalf;compete successfully with respect to acquisitions, joint ventures, licensescause of action for breach of a fiduciary duty owed by any director, officer or other collaboration opportunities,employee of BioMarin to us or our ability to continue to expandstockholders;product pipeline and our growth and development would be impaired.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 arrangementsdirectors, officers or other collaborations. To date, severalemployees arising pursuant to any provision of the General Corporation Law of the State of Delaware, our restated certificate of incorporation or our amended and restated bylaws; any claim or cause of action seeking to interpret, apply, enforce or determine the validity of our formerrestated certificate of incorporation or our amended and current product programs have been acquired through acquisitionsrestated bylaws; severalformer and current product programs have been developed through licensingdirectors, officers 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 abilityemployees that is governed by the internal affairs doctrine.identify additional opportunities andsuits brought to successfully enter into partneringenforce a duty 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 inliability created by 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.*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 RestorationSecurities Act of 1984, known1933, as amended, the Hatch-WaxmanExchange 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 ator 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 notifyrestated 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.certification (a paragraph IV notice). Upon receiptprovisions.
General Risk FactorsThe DRL Powder Settlement Agreement, the Par Settlement Agreement, and the DRL Tablet Settlement Agreement, as well as any future ANDA or related legal proceeding, could have an adverse impact on our stock price, and litigation to enforce our patents has, and is likely to continue to, cost a substantial amount and require significant management attention. If the patents covering Kuvan and its use are not upheld in litigation, or if DRL is found to not infringe our asserted patents, the resulting generic competition following the expiration of regulatory exclusivity would have a material adverse effect on our revenue and results of operations. Moreover, generic competition from DRL (relating to Kuvan tablets) and Par (relating to Kuvan tablets and powder) following the settlements described above could have a material adverse effect on our revenue and results of operations.We also face potential generic competition for Kuvan in certain foreign countries, and our ability to successfully market and sell Kuvan in many countries in which we operate is based upon patent rights or certain regulatory forms of exclusivity, or both. The scope of our patent rights and regulatory exclusivity for Kuvan vary from country to country and are dependent on the availability of meaningful legal remedies in each country. If our patent rights and regulatory exclusivity for Kuvan are successfully challenged, expire, or otherwise terminate in a particular country, the resulting generic competition could have a material adverse effect on our revenue and results of operations.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.experienced managementqualified personnel could adversely affect our ability to execute our business plan and harm our operating results. 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.thisthe 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.Productthat 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 expandcontinue 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.Changesmethodsa manner that is adverse to us or our customers, which could adversely affect 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 treatmentsuch 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 U.S. tax expense and could have a material adverse impact on our business and financial condition.diseasejurisdictions in which we conduct business could reduce demandarise, 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 implemented, would make important changes to the international tax system. These proposals are based on two “pillars”, Pillar One focuses on the allocation of taxing rights in respect of certain profits of multinational enterprises with annual global revenue above 20 billion euros and profitability above 10% to the jurisdictions within which they carry on business (based on the thresholds, we currently expect to be outside the scope of the Pillar One proposals) and Pillar Two imposes a minimum effective tax rate of 15% on certain multinational enterprises that have consolidated revenues of at least 750 million euros in at least two out of the last four years (based on the thresholds, we currently expect that we could fall within the scope of the Pillar Two proposals). The EU has adopted a Council Directive requiring aspects of the Pillar Two proposal to be transposed into the national laws of EU Member States by December 31, 2023, and a number of other countries in which we conduct business are also planning to enact such rules. The implementation of such rules may increase the amount of tax we have to pay, increase tax uncertainty and may adversely affect our productsprovision 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. Ifrevenues.our product candidates are approved, if doctors elect a courseany, 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 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 atreatment of genetic diseases,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.as Aldurazyme, Naglazyme,physicians and Vimizimtheir 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. 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.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,obtain regulatory approval for valoctocogene roxaparvovec, the commercial successbecome subject to a corporate integrity agreement or similar agreement to resolve allegations of valoctocogene roxaparvovec will still depend,non-compliance with these laws, curtailment of our operations, and debarment, suspension or exclusion from participation in part, on the acceptancegovernment healthcare programs, any of physicians, patientswhich could adversely affect our business, financial condition and health care payorsresults of gene therapy products in general, and our product candidate in particular, as medically necessary, cost-effective and safe. Changes in treatment method can be caused by the introduction of other companies’ products or the development of new technologies or surgical procedures which may not directly compete with ours, but which have the effect of changing how doctors decide to treat a disease.effectively.and manufacturing infrastructuresystems to effectively manage and maintain our operations, inventory and internal reports, to manufacture and ship products to customers and to timely invoice them. Any failure, inadequacy or interruption of that infrastructure or security lapse (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. Cybersecurity attacksOur technology systems, including our cloud technologies, continue to increase in particular are evolvingmultitude and include, but are not limitedcomplexity, making them potentially vulnerable to malicious software, attempts to gain unauthorized access to databreakdown, cyberattack and other electronic security breaches thatdisruptions. Potential problems and interruptions associated with the implementation of new or upgraded technology systems or with maintenance or adequate support of existing systems could lead to disruptions in systems, misappropriationdisrupt or reduce the efficiency of our confidential or otherwise protected informationoperations and corruptionexpose us to greater risk of data.security breaches. 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 or on whom we otherwise depend, have occurred in the past and may affect our ability in the future to manage and maintain our operations, inventory and internal reports, and result in delays in product fulfillment and reduced efficiency of our operations. A breachsecurity,our technology systems, and those of our research collaborators, CROs, contract manufacturers, suppliers, distributors, or other third parties on whom we depend to operate our business, may be vulnerable to loss, damage, denial-of-service, unauthorized access resultingor misappropriation. Data security breaches may be the result of unauthorized or unintended activity (or lack of activity) by our employees, contractors, or others with authorized access to our network or malware, hacking, business email compromise, phishing, ransomware or other cyberattacks directed by third parties. While we have implemented measures to protect our information and data stored in misappropriation, theft,our technology systems and those of the third parties that we rely on, our efforts may not be successful.respecta wide range of motives (including industrial espionage) and expertise, including 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 us to 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 orconfidential information, including researchpotential civil or clinical data,criminal liability, which could require significant capital investments to remediate and couldmaterially adversely affect our business, financial condition and results of operations.*or terrorist or criminal activity or other unforeseen event caused significant damage to our facilities or the facilitiesthose of our third-party manufacturers and suppliers or significantly disrupted our operations or those of our third-party manufacturers and suppliers, we may be unable to meet demand for our products and lose potential revenue, have reduced margins, or be forced to terminate a program.We manufacture Aldurazyme, Brineura, Naglazyme and a portion of Vimizim in a manufacturing facility located near known earthquake fault zones, and theourthe ability to manufacture Aldurazyme, Brineura, Naglazyme and Vimizimfor us or our third-party manufacturers’ abilitymanufacturers to manufacture Firdapse or Kuvan.AldurazymeALDURAZYME, NAGLAZYME, VOXZOGO and NaglazymePALYNZIQ and is one of two manufacturing facilities for BrineuraBRINEURA and Vimizim. ItVIMIZIM. 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, commercial demand for ROCTAVIAN in the EU, and anticipated commercial demand for ROCTAVIAN 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 Kuvanour products manufactured, could be seriously, or potentially completely, impaired, and our commercialization efforts and revenuerevenues could be seriously impaired.andor foreign currency exchange rates, banking crises, natural disasters, lasting effects of the COVID-19 pandemic or other global public health threats 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, ifCOVID-19 previously adversely affected our ability to source materials and supplies. 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 carehealthcare providers are reimbursed for our products by the government. Interest rates, the liquidity of the credit markets and the volatility of the capital markets could also affect the value of our investments and our ability to liquidate our investments in order to fund our operations. We purchase or enter into a variety of financial instruments and transactions, including investments in commercial paper, the extension of credit to corporations, institutions and governments and hedging contracts. If any of the issuers or counter partiescounterparties to these instruments were to default on their obligations, it could materially reduce the value of the transaction and adversely affect our cash flows.weakness, including Southern European countries, Russia, Chile and Brazil.weakness. Although we have historically collected receivables from customers in those countries, sustained weakness or further deterioration of the local economies and currencies may cause customers in those countries to be unable to pay for our products. Additionally, if one or more of these countries were unable to purchase our products, our revenuerevenues would be adversely affected.products.products, which could limit our ability to obtain sufficient materials and supplies necessary for production of our therapies. Similarly, these macroeconomic factors could affect the ability of our contractRisks RelatedOwnershipadversely affect our business, results of Our Securities*Our stock priceour operations, and financial condition. The COVID-19 pandemic impacted our global revenue sources and overall business operations by, for example, presenting challenges to our ability to find adequate resources to staff clinical trials, impacting patients’ ability to participate in trials, affecting our ability to source materials and supplies for trials and otherwise delaying trials, and the pandemic could continue to adversely impact our financial results and our business generally in 2023. Ongoing and future effects of the COVID-19 pandemic (or any future pandemic or other global public health threat) on all aspects of our business and operations and the duration of such effects are highly uncertain and difficult to predict. Moreover, while the long-term economic impact and the duration of the COVID-19 pandemic may be volatile,difficult to predict, the pandemic has resulted in, and an investmentmay continue to result in, significant disruption of global financial markets, which could reduce our stockability to access capital and could suffer a decline in value.Our valuationnegatively affect our liquidity and stock price have no meaningful relationship to current or historical earnings, asset values, book value or many other criteria based on conventional measuresthe liquidity and stability of stock value. The market price ofmarkets for our common stock will fluctuate due to factors including:product sales and profitability of our products;manufacturing, supplyNotes. In addition, a recession, further market correction or distribution of our product candidates and commercial products;progress of our product candidates throughdepression resulting from 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 to our settlements with DRL (related to Kuvan tablets and powder) and Par (related to Kuvan tablets and powder) or potential generic competition from future competitors;government regulatory action affecting our product candidates, our products or our competitors’ product candidates and products in both the U.S. and non-U.S. countries;developments or disputes concerning patent or proprietary rights;general market conditions and fluctuations for the emerging growth and pharmaceutical market sectors;economic conditions in the U.S. or abroad;negative publicity about our company or the pharmaceutical industry;broad market fluctuations in the U.S., the EU or in other parts of the world;actual or anticipated fluctuations in our operating results, including due to timing of large order for our products, in particular in Latin America, where governments place large periodic orders for Naglazyme and Vimizim;changes in company assessments or financial estimates by securities analysts;acquisitions of products, businesses,COVID-19 pandemic or other assets; andsales of our shares of stock by us, our significant stockholders, or members of our management or Board of Directors.In the past, following periods of large price declines in theglobal public market price of a company’s securities, securities class action litigation has often been initiated against that company. Litigation of this typehealth threat could result in substantial costs and diversion of management’s attention and resources, which would hurt our business. Any adverse determination in litigation could also subject us to significant liabilities. In addition, our stock price can be materially adversely affected by factors beyondaffect our control, such as disruptions in global financial markets or negative trends in the biotechnology sector of the economy, even if our business is operating well.Conversion of the Notes will dilute the ownership interest of existing stockholders, including holders who had previously converted their Notes, or may otherwise depress the price of our common stock.The conversion of some or all of the Notes will dilute the ownership interests of existing stockholders to the extent we deliver shares upon conversion of any of the Notes. The Notes may become in the future convertible at the option of their holders prior to their scheduled terms under certain circumstances. Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existence of the Notes may encourage short selling by market participants because the conversion of the Notes could be used to satisfy short positions, or anticipated conversion of the Notes into shares of our common stock could depress the price of our common stock.The capped call transactions may affect the value of the Notes and our common stock.In connection with the issuance of the 2018 Notes and 2020 Notes, we entered into capped call transactions with respect to 50% of the principal amount of the 2018 Notes and 50% of the principal amount of the 2020 Notes with certain hedge counterparties. The capped call transactions will cover, subject to customary anti-dilution adjustments, the aggregate number of shares of common stock underlying 50% of the principal amount of the relevant Notes and are expected generally to reduce potential dilution to the common stock upon conversion of the relevant Notes in excess of the principal amount of such converted Notes. In connection with establishing their initial hedges of the capped call transactions, the hedge counterparties (or their affiliates) entered into various derivative transactions with respect to the common stock concurrently with, and/or purchased the common stock shortly after, the pricing of the relevant notes. The hedge counterparties (or their affiliates) are likely to modify their hedge positions by entering into or unwinding various derivative transactions with respect to the common stock and/or by purchasing or selling the common stock or other securities of ours in secondary market transactions prior to the maturity of the relevant Notes (and are likely to do so during the settlement averaging period under the relevant capped call transactions, which precedes the maturity date of the relevant Notes, and on or around any earlier conversion date related to a conversion of the relevant Notes).The effect, if any, of any of these transactions and activities on the market price of our common stock or the Notes will depend in part on market conditions and cannot be ascertained at this time, but any of these activities could adversely affect the value of our common stock, which could affect the value of the Notes and the value of our common stock if any, that Note holders receive upon any conversion ofand Notes.Notes.*Anti-takeover provisions inextent macroeconomic conditions continue to adversely affect our charter documentsbusiness and under Delaware lawfinancial results, they may make an acquisition of us, which may be beneficial to our stockholders, more difficult.We are incorporated in Delaware. Certain anti-takeover provisions of Delaware law and our charter documents as currently in effect may make a change in control of our company more difficult, even if a change in control would be beneficial to the stockholders. Our anti-takeover provisions include provisions in our restated certificate of incorporation and amended and restated bylaws, as amended, providing that stockholders’ meetings may only be called by our Chairman, the lead independent director or the majority of our Board of Directors and that the stockholders may not take action by written consent and requiring that stockholders that desire to nominate any person for election to our Board of Directors or to make any proposal with respect to business to be conducted at a meeting of our stockholders be submitted in appropriate form to our Secretary within a specified period of time in advance of any such meeting. . Additionally, our Board of Directors has the authority to issue shares of preferred stock and to determine the terms of those shares of stock without any further action by our stockholders. The rights of holders of our common stock are subject to the rights of the holders of any preferred stock that may be issued. The issuance of preferred stock could make it more difficult for a third party to acquire a majority of our outstanding voting stock. Delaware law also prohibits corporations from engaging in a business combination with any holders of 15% or more of their capital stock until the holder has held the stock for three years unless, among other possibilities, our Board of Directors approves the transaction. Our Board of Directors may use these provisions to prevent changes in the management and control of our company. Also, under applicable Delaware law, our Board of Directors may adopt additional anti-takeover measures in the future.The fundamental change repurchase feature of the Notes may delay or prevent an otherwise beneficial attempt to take over our company.The terms of the Notes require us to repurchase the Notes in the event of a fundamental change. A takeover of our company would trigger options by the respective holders of the applicable Notes to require us to repurchase such Notes. This may have the effect of delaying or preventingheightening many of the other risks described in this Risk Factors section, such as those relating to our conducting a takeoversignificant amount of our company that would otherwise be beneficial to our stockholders or investors in the Notes.*Our amendedsales and restated bylaws, as amended, provide that the Court of Chanceryoperations outside of the State of Delaware will beU.S., exposure to changes in foreign exchange rates, our need to generate sufficient cash flows to service our indebtedness and finance our operations and the exclusive forum for the adjudication of certain disputes, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.Our amended and restated bylaws, as amended, provide that the Court of Chancery of the State of Delaware is the sole and exclusive forum for:any derivative action or proceeding brought on our behalf;any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of BioMarin to us or our stockholders;any action asserting a claim against us or anyvolatility of our directors, officers or other employees arising pursuant to any provisionstock price.the General Corporation LawEquity Securities and Use of the StateProceedsany action asserting a claim against us or any of our directors, officers or other employees that is governed by the internal affairs doctrine.This exclusive-forum provision further provides that any person or entity that acquires any interest in shares of our capital stock will be deemed to have notice of and consented to the provisions of such provision, including consent to the personal jurisdiction of the Court of Chancery of the State of Delaware related to any action covered by such provision.This exclusive-forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees. If a court were to find this exclusive-forum provision to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could seriously harm our business.None.None.Not applicable.None.Exhibit NumberDescriptionExhibit Number Description 2.12.1 2.2 2.3 2.4 2.5 3.2* 4.1Base Indenture, dated August 11, 2017, between the Company and Wilmington Trust, National Association, as Trustee, previously filed with the SEC on August 11, 2017December 21, 2022 as Exhibit 4.13.1 to the Company’s Current Report on Form 8-K (File No. 000-26727), which is incorporated herein by reference. 4.2 10.1*BioMarin Pharmaceutical Inc. Summary of Independent Director Compensation. 31.1*101.INS*Exhibit NumberDescription101.DEF* *Filed herewith+The certifications attached as Exhibit 32.1 accompany thisXBRL tags for the cover page from the Company’s Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 offor the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” byquarter ended March 31, 2023, are embedded within the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any of the Registrant’s filings under the Securities Act of 1933, as amended, irrespective of any general incorporation language contained in any such filing.September 30, 2017March 31, 2023 and December 31, 2016,2022, (ii) Condensed Consolidated Statements of Comprehensive LossIncome for the three and nine months ended September 30, 2017March 31, 2023 and 2016,2022, (iii) Condensed Consolidated Statement of Stockholders’ Equity for the ninethree months ended September 30, 2017,March 31, 2023 and 2022, (iv) Condensed Consolidated Statements of Cash Flows for the ninethree months ended September 30, 2017March 31, 2023 and 2016,2022, and (v) Notes to Condensed Consolidated Financial Statements.BIOMARIN PHARMACEUTICAL INC. October 31, 2017DANIEL SPIEGELMANDaniel Spiegelman,andFinance & Chief Financial OfficerOn behalf of the registrant and as principal financial officer)Principal Financial Officer)69