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). 20
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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 eight 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)
ROCTAVIAN (valoctocogene roxaparvovec) (7) Severe Hemophilia A
Products not marketed by
MPS I (8)
(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 (EU) and for various age ranges for other markets
(7)ROCTAVIAN (formerly known as valoctocogene roxaparvovec) for the treatment of
adults with severe hemophilia A was conditionally approved by the
(8)For the treatment of Mucopolysaccharidosis I
A summary of our on-going clinical development programs, as ofSeptember 30, 2022 , is provided below: Target Clinical Development Programs Indication Stage ROCTAVIAN (1) Severe Hemophilia A Clinical Phase 3 BMN 255 Primary Hyperoxaluria Clinical Phase 1/2 BMN 331 Hereditary Angioedema Clinical Phase 1/2
(1)In
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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 Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Total revenues $ 505.3 $ 408.7 $ 1,558.5 $ 1,396.5
Cost of sales $ 116.3 $ 103.5 $ 356.4 $ 350.8
Research and development (R&D) expense $ 157.8 $ 157.9 $ 476.9 $ 467.7
Selling, general and administrative (SG&A)
expense $ 216.8 $
183.3
Gain on sale of nonfinancial assets, net $ - $
-
Provision for (benefit from) income taxes$ 4.7 $ (9.7) $ 25.3 $ (2.6) Net income (loss)$ (6.7) $ (36.5) $ 141.8 $ (6.2)
See "Results of Operations" below for discussion of our results for the periods presented.
Uncertainty Relating to the COVID-19 Pandemic
The COVID-19 pandemic continues to affect economies and business around the world. Our global revenue sources, mostly in the form of demand interruptions such as missed patient infusions and delayed treatment starts for new patients, and our overall business operations were impacted by COVID-19 during the nine months endedSeptember 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, Approvals and Mid-stage Product Life Cycle Expansion Opportunities
•VOXZOGO: The global expansion of VOXZOGO is actively underway, with market access and reimbursement activities progressing as anticipated. As ofSeptember 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 third quarter, Voxzogo became commercially available in
During the third quarter, we held discussions with global regulatory health authorities regarding the favorable results from the Phase 2 randomized, double-blind, placebo-controlled VOXZOGO study in infants and young children up to five years of age with achondroplasia. Based on these interactions, we intend to submit supplemental marketing applications in theU.S. and EU by the end of 2022 to expand access to VOXZOGO treatment for this younger age group. •ROCTAVIAN: Following EMA approval in the third quarter of 2022, the commercial launch of ROCTAVIAN is now underway. To determine eligibility for ROCTAVIAN, treating physicians in countries covered by the EMA approval can use a companion diagnostic (CDx) test to ensure that patients do not have pre-existing antibodies to AAV5. The CDx test is CE-marked and designed to ensure the highest safety standards for use in determining patient eligibility for treatment with ROCTAVIAN. 22
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Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued)
(In millions, except as otherwise disclosed)
On October 12, 2022 , the FDA accepted our resubmission of the BLA for ROCTAVIAN
with a current Prescription Drug User Fee Act (PDUFA) target action date of
March 31, 2023 . However, we anticipate three additional months of review may be
necessary based on the number of data read-outs that will emerge during the
procedure. The FDA recently communicated plans to hold an advisory committee
meeting, but has yet to provide a date. If approved, ROCTAVIAN would be the
first gene therapy in the U.S. for the treatment of severe hemophilia A.
At present, in the U.S. the Premarket Approval (PMA) application is under review
at the Center for Devices and Radiological Health to support contemporaneous
approval of a CDx test along with the ROCTAVIAN BLA.
Product expansion opportunities with ROCTAVIAN are supported by a number of
clinical studies currently underway. The Phase 3b study to evaluate ROCTAVIAN
with prophylactic corticosteroids has completed enrollment and is expected to
read-out in early 2023. There are two additional studies: one investigating
ROCTAVIAN treatment in those with active or prior inhibitors, as well as one
study investigating ROCTAVIAN in people with pre-existing antibodies against
AAV5.
Select Earlier-stage Development Portfolio
?BMN 255 for primary hyperoxaluria type 1, a subset of chronic renal disease: We are proceeding with the multi-ascending dose phase of the First-in-Human study with BMN 255. We believe the availability of a potent, orally bioavailable, small molecule like BMN 255 may be able to significantly reduce disease and treatment burden in certain people with chronic renal disease. ?BMN 331 gene therapy product candidate for Hereditary Angioedema (HAE): Dosing continues in the Phase 1/2 HAERMONY study to evaluate BMN 331, an investigational AAV5-mediated gene therapy for people living with HAE, including dose escalation to the 6e13vg/kg dose, which our non-clinical studies project to provide therapeutic levels of C1-inhibitor.
Reorganization Plan
OnOctober 6, 2022 , we announced our decision to redesign and simplify the organization to better focus investments that advance our Research and Development pipeline, maximize recent commercial launch success, prepare for a potential launch of ROCTAVIAN in theU.S. , and drive core infrastructure optimization. As a result, there will be a reduction in force of approximately 120 employees (representing approximately 4% of our global workforce), most of whom are from ourU.S. operations. We expect to incur pre-tax severance and employee termination benefit charges of approximately$20.0 million to$25.0 million , of which$4.8 million was recorded in the third quarter of 2022 with the remainder expected to be recorded in the fourth quarter of 2022.
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 nine months ended
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.
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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)Results of Operations
Net Product Revenues
Net Product Revenues consisted of the following:
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 Change 2022 2021 Change
Net product revenues by product:
VIMIZIM $ 155.5 $ 136.9 $ 18.6 $ 511.7 $ 466.8 $ 44.9
NAGLAZYME 99.5 71.2 28.3 343.3 297.3 46.0
PALYNZIQ 66.2 60.7 5.5 182.7 173.7 9.0
KUVAN 57.0 67.7 (10.7) 174.0 217.3 (43.3)
VOXZOGO 48.3 0.1 48.2 102.3 0.1 102.2
BRINEURA 37.8 32.9 4.9 111.7 90.6 21.1
Total net product revenues
marketed by BioMarin $ 464.3 $ 369.5 $ 94.8 $ 1,425.7 $ 1,245.8 $ 179.9
ALDURAZYME net product revenues
marketed by Sanofi 29.0 24.4 4.6 90.8 102.5 (11.7)
Total net product revenues $ 493.3 $ 393.9 $ 99.4 $ 1,516.5 $ 1,348.3 $ 168.2
Net Product Revenues include revenues generated from our approved products. In
the U.S. , our commercial products, except for PALYNZIQ and ALDURAZYME, are
generally sold to specialty pharmacies or end-users, such as hospitals, which
act as retailers. PALYNZIQ is distributed in the 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.
The increase in Net Product Revenues for the three months ended
•VOXZOGO: ramp up of commercial sales due to new patients initiating therapy globally following regulatory approvals in late 2021 and 2022; and
•VIMIZIM and NAGLAZYME: higher product sales primarily attributed to the timing of orders in countries that place large government orders, particularly inEurope andLatin America and new patients initiating therapy inEurope and theMiddle East ; partially offset by •KUVAN: lower sales primarily attributed to increasing 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. , patent challenges in the EU, and the contracting sapropterin dihydrochloride market.
The increase in Net Product Revenues for the nine months ended
•VOXZOGO: ramp up of commercial sales due to new patients initiating therapy globally;
•VIMIZIM and NAGLAZYME: higher product sales primarily attributed to timing of orders in countries that place large government orders, particularly inLatin America , theMiddle East andEurope and new patients initiating therapy; and
•BRINEURA: higher sales primarily due to new patients initiating therapy in
•KUVAN: lower sales primarily attributed to increasing generic competition as a
result of the loss of exclusivity in the
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
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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)
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 Nine Months Ended
September 30, September 30,
2022 2021 Change 2022 2021 Change
Sales denominated in USD $ 239.2 $ 220.5 $ 18.7 $ 739.8 $ 732.5 $ 7.3
Sales denominated in foreign
currencies 254.1 173.4 80.7 776.7 615.8 160.9
Total net product revenues $ 493.3 $ 393.9 $ 99.4 $ 1,516.5 $ 1,348.3 $ 168.2
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 Change 2022 2021 Change
Favorable (unfavorable) impact of
foreign currency exchange rates on
product sales denominated in
currencies other than USD $ (18.1) $ (0.7) $ (17.4) $ (40.6) $ 1.8 $ (42.4)
The unfavorable impact for the three and nine months ended September 30, 2022 as
compared to the three and nine months ended September 30, 2021 was primarily
driven by weakness relative to the USD associated with the Euro, currencies from
certain Latin American markets, Japanese Yen and Turkish Lira.
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 Nine Months Ended
September 30, September 30,
2022 2021 Change 2022 2021 Change
Royalty and other revenues $ 12.0 $ 14.9 $ (2.9) $ 42.0 $ 48.2 $ (6.2)
The decrease in Royalty and Other Revenues for the three and nine months ended
September 30, 2022 as compared to the three and nine months ended September 30,
2021 was primarily due to lower license revenues earned from third parties.
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
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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)
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 Nine Months Ended
September 30, September 30,
2022 2021 Change 2022 2021 Change
Total revenues $ 505.3 $ 408.7 $ 96.6 $ 1,558.5 $ 1,396.5 $ 162.0
Cost of sales $ 116.3 $ 103.5 $ 12.8 $ 356.4 $ 350.8 $ 5.6
Gross margin 77.0 % 74.7 % 2.3 % 77.1 % 74.9 % 2.2 %
Cost of Sales increased for the three and nine months ended September 30, 2022
as compared to the three and nine months ended September 30, 2021 primarily due
to increased sales volumes. Gross margin increased for the three and nine months
ended September 30, 2022 as compared to the three and nine months ended
September 30, 2021 primarily due to lower per unit manufacturing costs, lower
inventory reserves, and higher sales volume of products with higher margins.
We expect 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.
R&D expense consisted of the following:
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 Change 2022 2021 Change
Research and early development $ 62.6 $ 61.7 $ 0.9 $ 188.3 $ 158.0 $ 30.3
ROCTAVIAN 29.0 29.1 (0.1) 90.7 84.0 6.7
Other approved products 29.4 25.8 3.6 86.4 80.5 5.9
VOXZOGO 22.5 26.1 (3.6) 76.9 99.0 (22.1)
BMN 331 8.4 9.1 (0.7) 21.9 28.3 (6.4)
BMN 255 2.3 2.9 (0.6) 6.8 7.1 (0.3)
Other 3.6 3.2 0.4 5.9 10.8 (4.9)
Total R&D expense $ 157.8 $ 157.9 $ (0.1) $ 476.9 $ 467.7 $ 9.2 R&D expense for the three months ended
The increase in R&D expense for the nine months ended
•higher spend in research and early development programs due to increased pre-clinical activities and IND-enabling studies for planned IND filings; partially offset by
•a decrease in VOXZOGO related expenses due to capitalization of manufacturing
costs and lower costs related to regulatory activities following the regulatory
approvals in the third and fourth quarters of 2021.
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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)
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 Nine Months Ended
September 30, September 30,
2022 2021 Change 2022 2021 Change
S&M expense $ 111.3 $ 97.0 $ 14.3 $ 325.7 $ 292.0 $ 33.7
G&A expense 105.5 86.3 19.2 282.6 249.8 32.8
Total SG&A expense $ 216.8 $ 183.3 $ 33.5 $ 608.3 $ 541.8 $ 66.5 S&M expenses by product were as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 Change 2022 2021 Change
PKU Products (KUVAN and PALYNZIQ)
26.5 18.5 8.0 72.5 52.9 19.6
MPS Products (ALDURAZYME, NAGLAZYME
and VIMIZIM) 23.6 23.9 (0.3) 75.0 76.0 (1.0)
ROCTAVIAN 18.4 13.1 5.3 52.6 37.6 15.0
BRINEURA 7.9 8.9 (1.0) 23.0 26.1 (3.1)
Other 4.1 2.7 1.4 11.1 7.5 3.6
Total S&M expense $ 111.3 $ 97.0 $ 14.3 $ 325.7 $ 292.0 $ 33.7
The increase in S&M expense for the three and nine months ended September 30,
2022 as compared to the three and nine months ended September 30, 2021 was
primarily a result of increased activities in support of the VOXZOGO commercial
launch following EU and U.S. regulatory approvals in the latter half of 2021 and
an increase in ROCTAVIAN commercial launch preparation activities.
The increase in G&A expense for the three and nine months ended September 30,
2022 as compared to the three and nine months ended September 30, 2021 was
primarily due to increased severance, employee termination benefits and external
costs related to our reorganization plan, the impact from the revaluation of
non-USD denominated assets and liabilities and legal expenses, partially offset
by lower idle plant time related to maintaining our gene therapy manufacturing
facility.
We expect SG&A expense to increase in future periods as a result of preparing to launch new products and support of our global business as it grows.
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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)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 Nine Months Ended
September 30, September 30,
2022 2021 Change 2022 2021 Change
Changes in the fair value of
contingent consideration $ 0.9 $ 1.8 $
(0.9)
15.4 0.5 47.1 46.3 0.8
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 nine months endedSeptember 30, 2022 as compared toSeptember 30, 2021 was attributable to the attainment of a €30 million milestone in the first quarter of 2022.
Amortization of intangible assets - the expense for the three and nine months
ended
Gain on Sale of Nonfinancial Assets, Net - the increase in the nine months endedSeptember 30, 2022 as compared to the nine months endedSeptember 30, 2021 was due to the sale in the first quarter of 2022 of the Priority Review Voucher (PRV) that we received in connection with the FDA approval of VOXZOGO in 2021. In exchange for the PRV, we received lump sum payment of$110.0 million , which was recognized as a gain on the sale of intangible assets, net of broker fees.
Interest Income
We invest our cash equivalents and investments inU.S. government securities and other high credit quality debt securities in order to limit default and market risk. Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 Change 2022 2021 Change Interest income$ 5.0 $ 1.8 $ 3.2 $ 9.3 $ 8.7 $ 0.6 The increase in Interest Income for the three months endedSeptember 30, 2022 compared to the three months endedSeptember 30, 2021 was primarily due to higher interest rates and total portfolio returns. Interest Income for the nine months endedSeptember 30, 2022 as compared to the nine months endedSeptember 30, 2021 was relatively flat. We expect Interest Income to increase over the next 12 months due to anticipated higher interest rates and yields on our cash equivalents and investments.
Interest Expense
We incur interest expense primarily on our convertible debt. Interest Expense for the periods presented was as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 Change 2022 2021 Change
Interest expense $ 4.7 $ 3.9 $ 0.8 $ 12.3 $ 11.5 $ 0.8
Interest Expense for the three and nine months ended September 30, 2022 as
compared to the three and nine months ended September 30, 2021 was relatively
flat. We do not expect Interest Expense to fluctuate significantly over the next
12 months as the rates on our convertible debt are fixed. See Note 6 to our
accompanying Condensed Consolidated Financial Statements for additional
information regarding our debt.
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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)Other Income (Expense), Net
Other Income (Expense), Net for the periods presented was as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 Change 2022 2021 Change
Other income (expense), net $ 0.2 $ 9.1 $ (8.9) $ (3.9) The decrease in Other Income (Expense), Net for the three and nine months endedSeptember 30, 2022 compared to the three and nine months endedSeptember 30, 2021 was primarily due to the absence of insurance proceeds received in the third quarter of 2021 that were in excess of direct costs incurred. The decrease for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 was also attributed to the loss on the fair value of assets held in our nonqualified deferred compensation plan.
Provision for (Benefit from) Income Taxes
The following table summarizes our Provision for Income Taxes:
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 Change 2022 2021 Change
Provision for (benefit from) income taxes $ 4.7 $ (9.7) $ 14.4 The increase in the income tax provision for the three and nine months endedSeptember 30, 2022 as compared to the three and nine months endedSeptember 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.
Financial Condition, Liquidity and Capital Resources
Our cash, cash equivalents, and investments as of
September 30,
2022 December 31, 2021 Change
Cash and cash equivalents $ 761.5 $ 587.3 $ 174.2
Short-term investments 512.3 426.6 85.7
Long-term investments 372.3 507.8 (135.5)
Cash, cash equivalents and investments $ 1,646.1 $
1,521.7
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, such as inflation, supply chain disruptions and impacts of the ongoing COVID-19 pandemic, could affect our ability to achieve our goals. In addition, we sell our products in certain countries that face economic volatility and weakness. Although we have historically collected receivables from customers in such countries, sustained weakness or further deterioration of the local economies and currencies may cause customers in those 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)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:
Nine Months Ended September 30,
2022 2021 Change
Net cash provided by operating activities $ 169.1 $ 293.4 $ (124.3)
Net cash provided by (used in) investing activities $ 34.7 $ (310.9) $ 345.6
Net cash used in financing activities $ (29.5) $
(14.4)
The decrease in net cash provided by operating activities in the nine months endedSeptember 30, 2022 compared toSeptember 30, 2021 was primarily attributed to the timing of cash receipts from our customers and the absence of a tax refund received in 2021.
The increase in net cash provided by investing activities in the nine months
ended
The increase in net cash used in financing activities in the nine months endedSeptember 30, 2022 compared toSeptember 30, 2021 was primarily attributed to the payment in 2022 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 ofSeptember 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 ofSeptember 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 Statements and Note 10 - Debt to the Consolidated Financial Statements accompanying our Annual Report on Form 10-K for the year endedDecember 31, 2021 . 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 30
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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)
maximum leverage ratio and a minimum interest coverage ratio. As of
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 ofSeptember 30, 2022 were as follows: Since Program Inception ROCTAVIAN $ 915.8 VOXZOGO $ 776.9 BMN 331 $ 101.9 BMN 255 $ 32.7 Other approved products $ 2,459.6 We cannot estimate with certainty the cost to complete any of our product development programs. We may need or elect to increase our spending above our current long-term plans to be able to achieve our long-term goals. This may increase our capital requirements, including: costs associated with the commercialization of our products? additional clinical trials; investments in the manufacturing of our commercial products? preclinical studies and clinical trials for our product candidates? potential licenses and other acquisitions of complementary technologies, products and companies? and general corporate purposes. Additionally, we cannot precisely estimate the time to complete any of our product development programs or when we expect to receive net cash inflows from any of our product development programs. Please see "Risk Factors" 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 ofSeptember 30, 2022 , we had obligations of approximately$171.5 million , which primarily related to firm purchase commitments entered into in the normal course of business to procure active pharmaceutical ingredients, certain inventory-related items, certain third-party R&D services, production services and facility construction services. Of this amount,$99.7 million is expected to be paid in 2023. Contingent Consideration As ofSeptember 30, 2022 , we had$28.3 million of acquisition-related contingent consideration on our Condensed Consolidated Balance Sheet, all of which was Euro denominated and short term. Of this amount, we expect to pay the USD equivalent of €15 million in cash in the fourth quarter of 2022 toMerck Serono related to our achievement of a PKU sales milestone in the third quarter of 2022. 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
As of
Our lease, contingent obligations and unrecognized tax benefits as of
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