BIOMARIN PHARMACEUTICAL INC. 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 risk factor related to the impact of the coronavirus pandemic, "The COVID-19 pandemic could continue to materially adversely affect our business, results of operations and financial condition." described in "Risk Factors" in Part II, Item 1A in this Quarterly Report on Form 10-Q, amongst the other risk factors. These risks and uncertainties could cause actual results to differ significantly from those projected in forward-looking statements contained in this report or implied by past results and trends. Forward-looking statements are statements that attempt to forecast or anticipate future developments in our business, financial condition or results of operations. See the section titled "Forward-Looking Statements" that appears at the beginning of this Quarterly Report on Form 10-Q. These statements, like all statements in this report, speak only as of the date of this Quarterly Report on Form 10-Q (unless another date is indicated), and, except as required by law, we undertake no obligation to update or revise these statements in light of future developments. Our Condensed Consolidated Financial Statements have been prepared in accordance withUnited States (U.S. ) generally accepted accounting principles (U.S. GAAP) and are presented inU.S. Dollars (USD). 21
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Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
(In millions, except as otherwise disclosed)
Overview
We are a global biotechnology company that develops and commercializes
innovative therapies for people with serious
and life-threatening rare diseases and medical conditions. We select product
candidates for diseases and conditions that represent
a significant unmet medical need, have well-understood biology and provide an
opportunity to be first-to-market or offer a
significant benefit over existing products.
Our portfolio consists of seven commercial therapies and multiple clinical and
preclinical product candidates. A summary of our commercial products, as of
Commercial Products Indication Products marketed byBioMarin : Vimizim (elosulfase alpha) MPS IVA (1) Naglazyme (galsulfase) MPS VI (2) Palynziq (pegvaliase-pqpz) PKU (3) Kuvan (sapropterin dihydrochloride) PKU (4) Brineura (cerliponase alfa) CLN2 (5) Voxzogo (vosoritide) Achondroplasia (6) Products not marketed byBioMarin : Aldurazyme (laronidase) MPS I (7)
(1)For the treatment of Mucopolysaccharidosis IV Type A
(2)For the treatment of Mucopolysaccharidosis VI
(3)For adult patients with PKU
(4)For the treatment of phenylketonuria
(5)For the treatment of late infantile neuronal ceroid lipofuscinosis type 2
(6)For the treatment of achondroplasia in children aged five years and older forthe United States (U.S. ), aged two years and older for theEuropean Union and for various age ranges for other markets.
(7)For the treatment of Mucopolysaccharidosis I
A summary of our on-going clinical development programs, as ofJune 30, 2022 , is provided below: Target Clinical Development Programs Indication Stage Valoctocogene roxaparvovec Severe Hemophilia A Clinical Phase 3 BMN 255 Primary Hyperoxaluria Clinical Phase 1/2 BMN 331 Hereditary Angioedema Clinical Phase 1/2 22
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Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
(In millions, except as otherwise disclosed)Financial Highlights
Key components of our results of operations include the following:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Total revenues $ 533.8 $ 501.7 $ 1,053.2 $ 987.7
Cost of sales $ 123.1 $ 127.1 $ 240.1 $ 247.2
Research and development (R&D) expense $ 158.2 $ 161.1 $ 319.0 $ 309.8
Selling, general and administrative (SG&A)
expense $ 196.8 $
184.2
Gain on sale of nonfinancial assets, net $ - $ -$ (108.0) $ - Provision for income taxes$ 7.2 $ 1.2 $ 20.6 $ 7.1 Net income$ 27.7 $ 12.9 $ 148.5 $ 30.3
See "Results of Operations" below for discussion of our results for the periods presented.
Uncertainty Relating to the COVID-19 Pandemic
The COVID-19 pandemic continues to affect economies and business around the world. Our global revenue sources, mostly in the form of demand interruptions such as missed patient infusions and delayed treatment starts for new patients, and our overall business operations were impacted by COVID-19 during the six months endedJune 30, 2022 and 2021, and we anticipate a continued impact on our financial results in 2022. The extent and duration of such effects remain uncertain and difficult to predict, particularly as virus variants continue to spread. We are actively monitoring and managing our response and assessing actual and potential impacts to our operating results and financial condition, as well as developments in our business, which could further impact the developments, trends and expectations described below. See the risk factor related to the impact of the coronavirus pandemic, "The COVID-19 pandemic could continue to materially adversely affect our business, results of operations and financial condition." described in "Risk Factors" in Part II, Item 1A of this Quarterly Report, for additional details on the impact of the COVID-19 pandemic.
Business Developments
We continued to grow our commercial business and advance our product candidate pipeline during 2022. We believe that the combination of our internal research programs, acquisitions and partnerships will allow us to continue to develop and commercialize innovative therapies for people with serious and life-threatening rare diseases and medical conditions. Below is a summary of key business developments:
Continued Emphasis on Research and Development
New Product Launches and Mid-stage Product Life Cycle Expansion Opportunities
?Voxzogo: The global launch of Voxzogo is actively underway, with market access and reimbursement progressing as anticipated. As ofJune 30, 2022 , we have seen worldwide increases in the number of children being treated with commercial Voxzogo and in the number of active markets contributing to Voxzogo sales. During the quarter, marketing authorization for Voxzogo was approved in bothJapan andAustralia , with commercial sales anticipated beginning in the third quarter of 2022. During the quarter, we provided a top-line update on the Phase 2 randomized, double-blind, placebo-controlled Voxzogo study in infants and young children up to five years of age with achondroplasia at the 2022Endocrine Society Annual Meeting (ENDO). We intend to initiate discussions on the favorable results from the study with regulatory health authorities to discuss next steps regarding efforts to expand access to Voxzogo treatment for this younger age group. Also at the ENDO meeting, the investigator-initiated study with Voxzogo in children with selected genetic causes of short stature, preliminary six-month results from 12 subjects demonstrated a positive response in all subgroups with interindividual variability. The 52-week study is ongoing, and is expected to complete in 2023. In the quarter, our interventional Phase 2 study with Voxzogo for the treatment of infants under the age of two who are at risk for foramen magnum compression completed enrollment. The study is investigating the safety of 23
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Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
(In millions, except as otherwise disclosed)
Voxzogo in infants at risk of requiring surgery to alleviate compression at the
foramen magnum, the opening in the base of the skull through which the spinal
cord passes. The study will also measure a secondary endpoint to evaluate the
effect of Voxzogo on growth of the foramen magnum volume through magnetic
resonance imaging (MRI) scans.
Late-stage Regulatory Portfolio and Mid-stage Product Life Cycle Expansion Opportunities
?Valoctocogene roxaparvovec: In the quarter, the Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion recommending conditional marketing authorization for valoctocogene roxaparvovec, for adults with severe hemophilia A. A final approval decision, typically consistent with the CHMP recommendation, is expected from theEuropean Commission in the third quarter of 2022.
We are targeting a Biologics License Application (BLA) resubmission for
valoctocogene roxaparvovec by the end of
In July, at theInternational Society on Thrombosis and Haemostasis 2022Congress , we reported that durable hemostatic efficacy was maintained over six years in the ongoing Phase 1/2 study with valoctocogene roxaparvovec in the 6e13vg/kg dose cohort, representing the longest duration of clinical observation with any gene therapy treatment for adults with severe hemophilia A. Product expansion opportunities with valoctocogene roxaparvovec are supported by a number of clinical studies currently underway. The Phase 3b study to evaluate valoctocogene roxaparvovec with prophylactic corticosteroids has completed enrollment and is expected to read-out in early 2023. Two additional studies, one investigating valoctocogene roxaparvovec treatment in those with active or prior inhibitors, as well as one study investigating valoctocogene roxaparvovec in people with pre-existing antibodies against AAV5, are actively recruiting at sites around the world.
Select Earlier-stage Development Portfolio
?BMN 255 for primary hyperoxaluria type 1, a subset of chronic renal disease: We were recently given permission by theFood and Drug Administration (FDA) to move forward with the multiple ascending dose portion of the First-in-Human study with BMN 255. We believe the availability of a potent, orally bioavailable, small molecule like BMN 255 may be able to significantly reduce disease and treatment burden in certain people with chronic renal disease.
?BMN 331 gene therapy product candidate for Hereditary Angioedema (HAE): We announced that we have dosed patients in the Phase 1/2 HAERMONY study to evaluate BMN 331, an investigational AAV5-mediated gene therapy for people living with HAE.
Critical Accounting Estimates In preparing our Condensed Consolidated Financial Statements in accordance withU.S. GAAP and pursuant to the rules and regulations promulgated by theSecurities and Exchange Commission (theSEC ), 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, revenues and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and discuss our critical accounting estimates with the Audit Committee of our Board of Directors. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. Historically, our assumptions, judgments and estimates relative to our critical accounting estimates have not differed materially from actual results. The full extent to which the ongoing COVID-19 pandemic could continue to directly or indirectly impact our business, results of operations and financial condition, including revenues, expenses, reserves and allowances, manufacturing, clinical trials and research and development costs will depend on future developments that continue to remain highly uncertain at this time, particularly as virus variants continue to spread. As events continue to evolve and additional information becomes available, our estimates may change materially in future periods.
There have been no significant changes to our critical accounting estimates
during the six months ended
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Recent Accounting Pronouncements
See Note 1 to our accompanying Condensed Consolidated Financial Statements for a description of recent accounting pronouncements, if any, and our expectation of their impact on our results of operations and financial condition. Results of Operations Net Product Revenues
Net Product Revenues consisted of the following:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 Change 2022 2021 Change
Net product revenues by product:
Vimizim $ 173.3 $ 171.7 $ 1.6 $ 356.4 $ 329.9 $ 26.5
Naglazyme 115.8 118.8 (3.0) 243.8 226.1 17.7
Palynziq 61.6 59.0 2.6 116.5 113.0 3.5
Kuvan 57.6 78.8 (21.2) 116.9 149.6 (32.7)
Brineura 37.7 30.3 7.4 73.9 57.7 16.2
Voxzogo 34.4 - 34.4 54.0 - 54.0
Total net product revenues
marketed by BioMarin $ 480.4 $ 458.6 $ 21.8 $ 961.5 $ 876.3 $ 85.2
Aldurazyme net product revenues
marketed by Sanofi 37.3 28.1 9.2 61.7 78.1 (16.4)
Total net product revenues $ 517.7 $ 486.7 $ 31.0 $ 1,023.2 $ 954.4 $ 68.8
Net Product Revenues include revenues generated from our approved products. In
the U.S. , our commercial products, except for Palynziq and Aldurazyme, are
generally sold to specialty pharmacies or end-users, such as hospitals, which
act as retailers. Palynziq is distributed in the U.S. through certain certified
specialty pharmacies under the Palynziq Risk Evaluation and Mitigation Strategy
(REMS) program, and Aldurazyme is marketed worldwide by Sanofi. Outside the
U.S. , our commercial products are sold to authorized distributors or directly to
government purchasers or hospitals, which act as the end-users. In certain
countries, governments place large periodic orders for our products. The timing
of these large government orders can be inconsistent and can create significant
quarter to quarter variation in our revenues.
The increase in Net Product Revenues for the three months ended June 30, 2022 as
compared to the three months ended June 30, 2021 was primarily attributed to the
following:
•Voxzogo: commercial sales due to new patients initiating therapy in
•Aldurazyme: higher product revenues due to timing of product fulfillment to Sanofi; and
•Brineura: higher sales primarily due to new patients initiating therapy in
•Kuvan: lower sales primarily attributed to generic competition as a result of the loss of exclusivity in theU.S. that occurred inOctober 2020 . We anticipated and prepared for this loss of exclusivity and the reduction in our market share, as well as the adverse effect on our revenues and results of operations. We expect to continue to experience adverse effects on our market share and revenues in the future due to the loss of exclusivity in theU.S. and the contracting sapropterin dihydrochloride market. The increase in Net Product Revenues for the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 was primarily attributed to the following:
•Voxzogo: commercial sales due to new patients initiating therapy in
•Vimizim and Naglazyme: higher product sales primarily attributed to new
patients initiating therapy and timing of orders in countries that place large
government orders, particularly in
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Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
(In millions of U.S. dollars, except as otherwise disclosed)•Brineura: higher sales primarily due to new patients initiating therapy; partially offset by
•Kuvan: lower sales primarily attributed to generic competition as a result of
the loss of exclusivity in the
•Aldurazyme: lower product revenues primarily due to timing of product fulfillment to Sanofi.
In certain countries, governments place large periodic orders for our products.
We expect that the timing of these large government orders will continue to be
inconsistent, which may create significant period to period variation in our
revenues. We anticipate the COVID-19 pandemic will have a continued impact on
the remainder of 2022 Net Product Revenues as many of our products are
administered via infusions in a clinic or hospital setting and/or by a
healthcare professional. Although we continue to work with our patient community
and health care providers to find alternative arrangements where necessary, such
as providing infusions at home, the revenue from the doses of our products that
are missed by patients and the lost revenue from delayed treatment starts for
new patients will never be recouped.
See the risk factors "The sale of generic versions of Kuvan by generic
manufacturers has adversely affected and will continue to adversely affect our
revenues and may cause a decline in Kuvan revenues faster than expected" and
"The COVID-19 pandemic could continue to materially adversely affect our
business, results of operations and financial condition" in "Risk Factors"
included in Part II, Item 1A of this Quarterly Report for additional information
on risks we face.
We face exposure to movements in foreign currency exchange rates, primarily the
Euro. We use foreign currency exchange forward contracts to hedge a percentage
of our foreign currency exposure. The following table shows our Net Product
Revenues denominated in USD and foreign currencies:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 Change 2022 2021 Change
Sales denominated in USD $ 241.3 $ 256.7 $ (15.4) $ 500.6 $ 512.0 $ (11.4)
Sales denominated in foreign
currencies 276.4 230.0 46.4 522.6 442.4 80.2
Total net product revenues $ 517.7 $ 486.7 $ 31.0 $ 1,023.2 $ 954.4 $ 68.8
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 Change 2022 2021 Change
Favorable (unfavorable) impact of
foreign currency exchange rates on
product sales denominated in
currencies other than USD $ (13.7) $ 5.5 $ (19.2) $ (22.5) $ 2.1 $ (24.6)
The unfavorable impact for the three and six months ended June 30, 2022 as
compared to the three and six months ended June 30, 2021 was primarily driven by
weakness relative to the USD associated with the Euro, currencies from certain
Latin American markets, Turkish Lira and Japanese Yen.
Royalty and Other Revenues
Royalty and Other Revenues include royalties earned on net sales of products
sold by third parties, up-front licensing fees, milestones achieved by licensees
or sublicensees and rental income associated with the tenants in our facilities.
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 Change 2022 2021 Change
Royalty and other revenues $ 16.1 $ 15.0 $ 1.1 $ 30.0 $ 33.3 $ (3.3)
The increase in Royalty and Other Revenues for the three months ended June 30,
2022 as compared to the three months ended June 30, 2021 was primarily due to
higher royalties earned from net sales of third parties, partially offset by
lower license revenues earned from third parties.
The decrease in Royalty and Other Revenues for the six months ended June 30,
2022 as compared to the six months ended June 30, 2021 was primarily due lower
license revenues earned, partially offset by an increase in royalties earned
from net
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Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
(In millions of U.S. dollars, except as otherwise disclosed)sales of third parties. The decrease in licenses revenues is primarily attributed to the absence of the license payment earned in the first quarter of 2021 upon a third party's achievement of a regulatory milestone.
We expect to continue to earn royalties from third parties in the future.
Cost of Sales and Gross Margin
Cost of Sales includes raw materials, personnel and facility and other costs associated with manufacturing our commercial products. These costs include production materials, production costs at our manufacturing facilities, third-party manufacturing costs, and internal and external final formulation and packaging costs. Cost of Sales also includes royalties payable to third parties based on sales of our products and charges for inventory valuation reserves.
The following table summarizes our Cost of Sales and gross margin:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 Change 2022 2021 Change
Total revenues $ 533.8 $ 501.7 $ 32.1 $ 1,053.2 $ 987.7 $ 65.5
Cost of sales $ 123.1 $ 127.1 $ (4.0) $ 240.1 $ 247.2 $ (7.1)
Gross margin 76.9 % 74.7 % 2.2 % 77.2 % 75.0 % 2.2 %
Cost of Sales decreased for the three and six months ended June 30, 2022 as
compared to the three and six months ended June 30, 2021 primarily due to lower
inventory reserves and lower manufacturing costs per unit, partially offset by
costs related to increased sales volumes. Gross margin increased for the three
and six months ended June 30, 2022 as compared to the three and six months ended
June 30, 2021 primarily due to lower inventory reserves and the improved per
unit manufacturing costs.
We expect gross margin to range between approximately 75.5% and 77.5% through 2022.
Research and Development
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 clinical product, quality control and assurance, other R&D activities, facilities and regulatory costs.
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. We continuously evaluate the recoverability of costs associated with pre-launch or pre-qualification manufacturing activities, and capitalize the costs incurred related to those activities if it is determined that recoverability is highly likely and therefore future revenues are expected. 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. We had$31.8 million of manufacturing-related costs for valoctocogene roxaparvovec capitalized as pre-launch inventory as ofJune 30, 2022 . See Note 3 to our accompanying Consolidated Financial Statements for additional information regarding our inventory. 27
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Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
(In millions of U.S. dollars, except as otherwise disclosed)R&D expense consisted of the following:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 Change 2022 2021 Change
Research and early development $ 63.9 $ 51.1 $ 12.8 $ 125.6 $ 96.3 $ 29.3
Valoctocogene roxaparvovec 31.0 29.1 1.9 61.7 54.9 6.8
Other approved products 28.7 28.7 - 57.0 54.7 2.3
Voxzogo 25.3 36.6 (11.3) 54.4 72.9 (18.5)
BMN 331 6.5 9.6 (3.1) 13.5 19.2 (5.7)
BMN 255 2.3 2.4 (0.1) 4.5 4.2 0.3
Other 0.5 3.6 (3.1) 2.3 7.6 (5.3)
Total R&D expense $ 158.2 $ 161.1 $ (2.9) $ 319.0 $ 309.8 $ 9.2 The decrease in R&D expense for the three months ended
•a decrease in Voxzogo related expenses due to increased capitalization of manufacturing costs following the regulatory approvals in the second half of 2021; partially offset by
•higher spend in research and early development programs due to increased pre-clinical activities and Investigational New Drug (IND)-enabling studies for planned IND filings.
The increase in R&D expense for the six months ended
•higher spend in research and early development programs due to increased pre-clinical activities and IND-enabling studies for planned IND filings; and
•an increase in clinical trial activities related to continued development of valoctocogene roxaparvovec; partially offset by
•a decrease in Voxzogo related expenses due to increased capitalization of manufacturing costs following the regulatory approvals in the second half of 2021. We expect R&D expense to increase in future periods, primarily due to increased activities for our research and early development programs while we continue to develop our later stage programs.
Selling, General and Administrative
Sales and marketing (S&M) expense primarily consisted of employee-related expenses for our sales group, brand marketing, patient support groups and pre-commercialization expenses related to our product candidates. General and administrative (G&A) expense primarily consisted of corporate support and other administrative expenses, including employee-related expenses.
SG&A expenses consisted of the following:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 Change 2022 2021 Change
S&M expense $ 109.4 $ 100.9 $ 8.5 $ 214.4 $ 195.1 $ 19.3
G&A expense 87.4 83.3 4.1 177.1 163.4 13.7
Total SG&A expense $ 196.8 $ 184.2 $ 12.6 $ 391.5 $ 358.5 $ 33.0
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Operations (continued)
(In millions of U.S. dollars, except as otherwise disclosed)S&M expenses by product were as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 Change 2022 2021 Change
PKU Products (Kuvan and Palynziq) $ 31.6 $ 31.3 $ 0.3 $ 60.7 $ 62.1 $ (1.4)
MPS Products (Aldurazyme, Naglazyme
and Vimizim) 24.3 27.7 (3.4) 51.4 52.1 (0.7)
Voxzogo 23.9 17.9 6.0 46.0 34.4 11.6
Valoctocogene roxaparvovec 18.5 12.3 6.2 34.2 24.5 9.7
Brineura 7.4 9.1 (1.7) 15.1 17.2 (2.1)
Other 3.7 2.6 1.1 7.0 4.8 2.2
Total S&M expense $ 109.4 $ 100.9 $ 8.5 $ 214.4 $ 195.1 $ 19.3
The increase in S&M expense for the three and six months ended June 30, 2022 as
compared to the three and six months ended June 30, 2021 was primarily a result
of increased activities in support of Voxzogo commercial launch following EU and
U.S. regulatory approvals in the latter half of 2021 and an increase in
valoctocogene roxaparvovec commercial launch preparation activities.
The increase in G&A expense for the three months ended June 30, 2022 as compared
to the three months ended June 30, 2021 was primarily due to increased external
costs related to our strategic initiatives and legal expenses, partially offset
by lower idle plant time related to maintaining our gene therapy manufacturing
facility. The increase in G&A expense for the six months ended June 30, 2022 as
compared to the six months ended June 30, 2021 was primarily due to increased
external costs related to our strategic initiatives, as well as employee-related
and legal expenses.
We expect SG&A expense to increase in future periods as a result of preparing to launch new products and support of our global business as it grows.
Intangible Asset Amortization and Contingent Consideration and Gain on Sale of Nonfinancial Assets, Net
Changes during the periods presented for Intangible Asset Amortization and
Contingent Consideration and Gain on Sale of Nonfinancial Assets, Net were as
follows:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 Change 2022 2021 Change
Changes in the fair value of
contingent consideration $ 0.9 $ 2.2 $
(1.3)
15.5 0.1 31.2 30.9 0.3
Total intangible asset amortization
and contingent consideration
Gain on sale of nonfinancial assets, net $ - $ - $
-
Fair value of contingent consideration - the decrease in the fair value of
contingent consideration for the three and six months ended
Amortization of intangible assets - the expense for the three and six months endedJune 30, 2022 as compared to the three and six months endedJune 30, 2021 was relatively flat. Gain on Sale of Nonfinancial Assets, Net - the increase in the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 was due to the sale in the first quarter of 2022 of the Priority Review Voucher (PRV) that we received in connection with the FDA approval of Voxzogo in 2021. In exchange for the PRV, we received lump sum payment of$110.0 million , which was recognized as a gain on the sale of intangible assets, net of broker fees. 29
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Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
(In millions of U.S. dollars, except as otherwise disclosed)Interest Income
We invest our cash equivalents and investments inU.S. government securities and other high credit quality debt securities in order to limit default and market risk. Three Months Ended Six Months Ended June 30, June 30, 2022 2021 Change 2022 2021 Change Interest income$ 2.5 $ 4.5 $ (2.0) $ 4.3 $ 6.9 $ (2.6) The decrease in Interest Income for the three and six months endedJune 30, 2022 compared to the three and six months endedJune 30, 2021 was primarily due to the absence of one-time interest receipts earned in 2021. We expect Interest Income to be higher over the next 12 months due to anticipated higher interest rates and yields on our cash equivalents and investments.
Interest Expense
We incur interest expense primarily on our convertible debt. Interest Expense for the periods presented was as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 Change 2022 2021 Change
Interest expense $ 3.9 $ 3.8 $ 0.1 $ 7.7 $ 7.6 $ 0.1
Interest Expense for the three and six months ended June 30, 2022 was flat as
compared to the three and six months ended June 30, 2021 . We do not expect
Interest Expense to fluctuate significantly over the next 12 months as the rates
on our convertible debt are fixed. See Note 6 to our accompanying Condensed
Consolidated Financial Statements for additional information regarding our debt.
Other Income (Expense), Net
Other Income (Expense), Net for the periods presented was as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 Change 2022 2021 Change
Other income (expense), net $ (2.9) $ 1.8 $ (4.7) $ (4.1) The decrease in Other Income (Expense), Net for the three and six months endedJune 30, 2022 compared to the three and six months endedJune 30, 2021 was primarily due to the loss on the fair value of assets held in our nonqualified deferred compensation plan.
Provision for Income Taxes
The following table summarizes our Provision for Income Taxes:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 Change 2022 2021 Change
Provision for income taxes $ 7.2 $ 1.2 $ 6.0 $ 20.6 $ 7.1 $ 13.5
The increase in Provision for Income Taxes for the three and six months ended
June 30, 2022 as compared to the three and six months ended June 30, 2021 was
primarily due to taxes on higher income recognized and projected for 2022, which
includes income recognized in the first quarter of 2022 from the sale of the
PRV.
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Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
(In millions of U.S. dollars, except as otherwise disclosed)Financial Condition, Liquidity and Capital Resources
Our cash, cash equivalents, and investments as ofJune 30, 2022 andDecember 31, 2021 were as follows: June 30, 2022 December 31, 2021 Change Cash and cash equivalents$ 619.8 $ 587.3$ 32.5 Short-term investments 489.9 426.6 63.3 Long-term investments 412.5
507.8 (95.3)
Cash, cash equivalents and investments
We believe our cash generated from sales of our commercial products, in addition to our cash, cash equivalents and investments will be sufficient to satisfy our liquidity requirements for at least the next 12 months. We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities, available cash and investments balances and available revolving loan balances. We will need to raise additional funds from equity or debt securities, loans or collaborative agreements if we are unable to satisfy our liquidity requirements. For example, we may require additional financing to fund the repayment of our convertible debt, future milestone payments and our future operations, including the commercialization of our products and product candidates currently under development, preclinical studies and clinical trials, and potential licenses and acquisitions. The timing and mix of our funding alternatives could change depending on many factors, including how much we elect to spend on our development programs, potential licenses and acquisitions of complementary technologies, products and companies or if we settle our convertible debt in cash. Our ability to raise additional capital may also be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, financial markets in theU.S. and worldwide resulting from the ongoing COVID-19 pandemic. We are mindful that conditions in the current macroeconomic environment could affect our ability to achieve our goals. We sell our products in countries that face economic volatility and weakness. Although we have historically collected receivables from customers in such countries, sustained weakness or further deterioration of the local economies and currencies and adverse effects of the impact of the ongoing COVID-19 pandemic may cause customers in those countries to be unable to pay for our 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.
Our cash flows are summarized as follows:
Six Months Ended June 30,
2022 2021 Change
Net cash provided by operating activities $ 10.8 $ 196.3 $ (185.5)
Net cash provided by (used in) investing activities $ 58.1 $ (191.0) $ 249.1
Net cash used in financing activities $ (37.1) $
(13.4)
The decrease in net cash provided by operating activities in the six months endedJune 30, 2022 compared toJune 30, 2021 was primarily attributed to the timing of cash receipts from our customers, the absence of a tax refund from a Federal carryback claim received in the first quarter of 2021 and higher employee compensation-related payments.
The increase in net cash provided by investing activities in the six months
ended
The increase in net cash used in financing activities in the six months endedJune 30, 2022 compared toJune 30, 2021 was primarily attributed to the payment to a third party related to our achievement of a PKU sales milestone.
Financing and Credit Facilities
Our$1.1 billion (undiscounted) of total convertible debt as ofJune 30, 2022 will impact our liquidity due to the semi-annual cash interest payments as well as the repayment of the principal amount, if not converted. As ofJune 30, 2022 , our indebtedness consisted of our 0.599% senior subordinated convertible notes due in 2024 and our 1.25% senior subordinated convertible notes due in 2027, which, if not converted, will be required to be repaid in cash at maturity inAugust 2024 andMay 2027 , respectively. For additional information related to our convertible debt see, Note 6 to our accompanying Condensed Consolidated Financial 31
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Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
(In millions of U.S. dollars, except as otherwise disclosed)
Statements and Note 10 - Debt to the Consolidated Financial Statements
accompanying our Annual Report on Form 10-K for the year ended
InOctober 2018 , we entered into an unsecured revolving credit facility of up to$200.0 million which includes a letter of credit subfacility and a swingline loan subfacility. The credit facility is intended to finance ongoing working capital needs and for other general corporate purposes. InMay 2021 , we amended the credit facility agreement, extending the maturity date fromOctober 19, 2021 toMay 28, 2024 , among other changes. The amended credit facility contains financial covenants including a maximum leverage ratio and a minimum interest coverage ratio. As ofJune 30, 2022 , there were no amounts outstanding under the credit facility and we and certain of our subsidiaries that serve as guarantors were in compliance with all covenants.
Material Cash Requirements
Funding Commitments
Our investment in our research and early development of product candidates and continued development of our existing commercial products has a major impact on our operating performance. R&D expenses for our commercial products and certain product candidates for the period since inception as ofJune 30, 2022 were as follows: Since Program Inception Valoctocogene roxaparvovec $ 886.8 Voxzogo $ 754.4 BMN 331 $ 93.7 BMN 255 $ 30.4 Other approved products $ 2,430.2 We cannot estimate with certainty the cost to complete any of our product development programs. We may need or elect to increase our spending above our current long-term plans to be able to achieve our long-term goals. This may increase our capital requirements, including: costs associated with the commercialization of our products? additional clinical trials; investments in the manufacturing of our commercial products? preclinical studies and clinical trials for our product candidates? potential licenses and other acquisitions of complementary technologies, products and companies? and general corporate purposes. Additionally, we cannot precisely estimate the time to complete any of our product development programs or when we expect to receive net cash inflows from any of our product development programs. Please see "Risk Factors" included in Part II, Item 1A of this Quarterly Report on Form 10-Q, for a discussion of the reasons we are unable to estimate such information.
Purchase Obligations
As ofJune 30, 2022 , we had obligations of approximately$140.8 million , of which$16.0 million is expected to be paid in 2023, which primarily related to firm purchase commitments entered into in the normal course of business to procure active pharmaceutical ingredients, certain inventory-related items and certain third-party R&D services, production services and facility construction services. Contingent Consideration As ofJune 30, 2022 , we had$30.0 million of acquisition-related contingent consideration on our Condensed Consolidated Balance Sheet, all of which was Euro denominated and was short term. For additional information related to our obligation toMerck Serono related to a 2016 arrangement, see Note 17 to the Consolidated Financial Statements accompanying our Annual Report on Form 10-K for the year endedDecember 31, 2021 .
Other Obligations
Our lease, contingent obligations and unrecognized tax benefits as ofJune 30, 2022 have not materially changed from those discussed in "Financial Condition, Liquidity and Capital Resources" in Part II, Item 7 of our Annual Report on Form 10-K for the year endedDecember 31, 2021 . 32
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