UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
Form 10-K
____________
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐
Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
For the transition period from to .
Commission file number: 000-26727
____________
BioMarin Pharmaceutical Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
770 Lindaro Street
San Rafael
California
(Address of principal executive offices)
68-0397820
(I.R.S. Employer
Identification No.)
94901
(Zip Code)
(415) 506-6700
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $.001
Trading Symbol(s)
BMRN
Name of each exchange on which registered
The Nasdaq Global Select Market
Securities registered under Section 12(g) of the Act:
None
____________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☒
☐
Accelerated filer
Smaller reporting company
Emerging Growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b)
of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☒ No ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) Yes ☐ No ☒
The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of June 30, 2021 was $8.4 billion, based on the closing price reported for such date on
the Nasdaq Global Select Market.
As of February 22, 2022, the registrant had 184,032,162 shares of common stock, par value $0.001, outstanding.
Documents Incorporated by Reference: Specified portions of the registrant's definitive proxy statement for the registrant's 2022 annual meeting of stockholders, which will be filed with the Commission
no later than 120 days after the end of the registrant's fiscal year ended December 31, 2021, are incorporated by reference under Part III of this Annual Report on Form 10-K.
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Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16.
BIOMARIN PHARMACEUTICAL INC.
2021 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Part I
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Part II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
[Reserved]
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosure About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions and Director Independence
Principal Accounting Fees and Services
Part III
Exhibits, Financial Statement Schedules
Form 10-K Summary
SIGNATURES
Part IV
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55
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55
56
57
58
72
73
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80
81
Unless the context suggests otherwise, references in this Annual Report on Form 10-K to “BioMarin,” the “Company,” “we,” “us,” and “our” refer to
BioMarin Pharmaceutical Inc. and, where appropriate, its wholly owned subsidiaries.
BioMarin , Brineura , Kuvan , Naglazyme , Palynziq and Vimizim are our registered trademarks. Voxzogo™ is our trademark. Aldurazyme is a
®
®
®
®
®
®
®
registered trademark of BioMarin/Genzyme LLC. All other brand names and service marks, trademarks and other trade names appearing in this report are
the property of their respective owners.
Forward-Looking Statements
This Annual Report on Form 10-K contains “forward-looking statements” as defined under securities laws. Many of these statements can be
identified by the use of terminology such as “believes,” “expects,” “intends,” “anticipates,” “plans,” “may,” “will,” “could,” “would,” “projects,” “continues,”
“estimates,” “potential,” “opportunity” or the negative versions of these terms and other similar expressions. You should not place undue reliance on these
types of forward-looking statements, which speak only as of the date that they were made. These forward-looking statements are based on the beliefs and
assumptions of our management based on information currently available to management and should be considered in connection with any written or oral
forward-looking statements that we may issue in the future as well as other cautionary statements we have made and may make. Our actual results or
experience could differ significantly from the forward-looking statements. Factors that could cause or contribute to these differences include those discussed
in the section titled “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K as well as information provided elsewhere in this Annual Report on
Form 10-K. You should carefully consider that information before you make an investment decision. Moreover, we operate in a very competitive and rapidly
changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all
factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any
forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in
this Annual Report on Form 10-K may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-
looking statements.
Except as required by law, we do not undertake any obligation to release publicly any revisions to these forward-looking statements after
completion of the filing of this Annual Report on Form 10-K to reflect later events or circumstances or the occurrence of unanticipated events.
The following is a summary of the principal risks that could adversely affect our business, financial condition, operating results, cash flows or stock
price. Discussion of the risks listed below, and other risks that we face, are discussed in the section titled “Risk Factors” in Part I, Item 1A of this Annual
Report on Form 10-K.
Business and Operational Risks
Risk Factors Summary
•
•
•
•
•
•
•
The COVID-19 pandemic could continue to materially adversely affect our business, results of operations, and financial condition.
Because the target patient populations for our products are small, we must achieve significant market share and maintain high per-
patient prices for our products to achieve and maintain profitability.
If we fail to obtain and maintain an adequate level of coverage and reimbursement for our products by third-party payers, the sales of
our products would be adversely affected or there may be no commercially viable markets for our products.
If we fail to compete successfully with respect to product sales, we may be unable to generate sufficient sales to recover our expenses
related to the development of a product program or to justify continued marketing of a product and our revenues could be adversely
affected.
Changes in methods of treatment of disease could reduce demand for our products and adversely affect revenues.
If we fail to develop new products and product candidates or compete successfully with respect to acquisitions, joint ventures, licenses
or other collaboration opportunities, our ability to continue to expand our product pipeline and our growth and development would be
impaired.
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.
3
•
If we do not achieve our projected development goals in the timeframes we announce and expect, the commercialization of our product
candidates may be delayed and the credibility of our management may be adversely affected and, as a result, our stock price may
decline.
Regulatory Risks
•
•
•
If we fail to obtain regulatory approval to commercially market and sell our product candidates, or if approval of our product candidates is
delayed, we will be unable to generate revenues from the sale of these product candidates, our potential for generating positive cash
flow will be diminished, and the capital necessary to fund our operations will increase.
Any product for which we have obtained regulatory approval, or for which we obtain approval in the future, is subject to, or will be subject
to, extensive ongoing regulatory requirements by the Food and Drug Administration, the European Medicines Agency and other
comparable international regulatory authorities, and if we fail to comply with regulatory requirements or if we experience unanticipated
problems with our products, we may be subject to penalties, we will be unable to generate revenues from the sale of such products, our
potential for generating positive cash flow will be diminished, and the capital necessary to fund our operations will be increased.
To obtain regulatory approval to market our products, preclinical studies and costly and lengthy clinical trials are required and the results
of the studies and trials are highly uncertain. Likewise, preliminary, initial or interim data from clinical trials should be considered carefully
and with caution because the final data may be materially different from the preliminary, initial or interim data, particularly as more
patient data become available.
• Government price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our current and
future products, which would adversely affect our revenues and results of operations.
• Government healthcare reform could increase our costs and adversely affect our revenues and results of operations.
Risks Related to Valoctocogene Roxaparvovec
• Our valoctocogene roxaparvovec program is based on a gene therapy approach, which, as a novel technology, presents additional
development and treatment risks in relation to our other, more traditional drug development programs.
•
As compared to our other, more traditional products, our gene therapy product candidate valoctocogene roxaparvovec, if approved, may
present additional problems with respect to the pricing, coverage, and reimbursement and acceptance of the product candidate.
Financial and Financing Risks
•
If we continue to incur operating losses or are unable to sustain positive cash flows for a period longer than anticipated, we may be
unable to continue our operations at planned levels and be forced to reduce our operations.
Manufacturing Risks
•
•
If we fail to comply with manufacturing regulations, our financial results and financial condition will be adversely affected.
If we are unable to successfully develop and maintain manufacturing processes for our product candidates to produce sufficient
quantities at acceptable costs, we may be unable to support a clinical trial or be forced to terminate a program, or if we are unable to
produce sufficient quantities of our products at acceptable costs,
4
we may be unable to meet commercial demand, lose potential revenue, have reduced margins or be forced to terminate a program.
•
Supply interruptions may disrupt our inventory levels and the availability of our products and product candidates and cause delays in
obtaining regulatory approval for our product candidates, or harm our business by reducing our revenues.
Risks Related to International Operations
• We conduct a significant amount of our sales and operations outside of the United States (U.S.), which subjects us to additional
business risks that could adversely affect our revenues and results of operations.
•
A significant portion of our international sales are made based on special access programs, and changes to these programs could
adversely affect our product sales and revenues in these countries.
Intellectual Property Risks
•
•
If we are unable to protect our intellectual property, we may not be able to compete effectively or preserve our market shares.
Competitors and other third parties may have developed intellectual property that could limit our ability to market and commercialize our
products and product candidates, if approved.
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Table of Contents
Item 1. Business
Overview
Part I
BioMarin Pharmaceutical Inc. (BioMarin, we, us or our) is 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 products and multiple clinical and preclinical product candidates for the treatment of various diseases.
We continue to invest in our clinical and preclinical product pipeline by committing significant resources to research and development programs and
business development opportunities within our areas of scientific, manufacturing and technical expertise.
Recent Developments
In 2021, we achieved over $1.8 billion in total revenues despite impacts from the novel coronavirus disease (COVID-19) pandemic, while making
important advancements in our product development pipeline. Our key business developments since the beginning of 2021 include the regulatory approvals
of Voxzogo for the treatment of children with achondroplasia in the United States (U.S.), the European Union (EU) and Brazil, our release of positive two-
year data from our Phase 3 study of valoctocogene roxaparvovec for the treatment of adults with severe hemophilia A, and the European Medicines Agency
(EMA) validation of our resubmission of a Marketing Authorization Application (MAA) for valoctocogene roxaparvovec. The U.S. Food and Drug
Administration (FDA) placed a clinical hold on our Phase 1/2 study of BMN 307 for the treatment of adults with phenylketonuria (PKU) and requested data
from additional non-clinical studies. We plan to communicate next steps for the BMN 307 program when available. Please see the disclosures below in this
Part I, Item 1 of this Annual Report on Form 10-K for further discussion of these recent developments.
Commercial Products
A summary of our commercial products is provided below:
Commercial Products
Products marketed by BioMarin:
Vimizim (elosulfase alpha)
Naglazyme (galsulfase)
Kuvan (sapropterin dihydrochloride)
Palynziq (pegvaliase-pqpz)
Brineura (cerliponase alfa)
Voxzogo (vosoritide)
Products not marketed by BioMarin:
Aldurazyme (laronidase)
(3)
(1) Mucopolysaccharidosis
(2) Neuronal ceroid lipofuscinosis type 2
(3) Marketed by Sanofi (formerly referred to as Sanofi Genzyme)
Vimizim
Indication
2021 Net Product
Revenues
(1)
MPS IVA
MPS VI
PKU
PKU
CLN2
Achondroplasia
(2)
MPS I
$
$
$
$
$
$
$
623.1
380.4
285.8
237.5
128.0
5.9
122.8
Vimizim is an enzyme replacement therapy for the treatment of MPS IVA, a lysosomal storage disorder. MPS IVA is a disease characterized by
deficient activity of N-acetylgalactosamine-6-sulfatase (GALNS) causing excessive lysosomal storage of certain complex carbohydrates known as
glycosaminoglycans (GAGs), such as keratan sulfate and chondroitin sulfate. This excessive storage causes a systemic skeletal dysplasia, short stature,
and joint abnormalities, which limit mobility and endurance. Malformation of the chest impairs respiratory function, and looseness of joints in the neck cause
spinal instability and potentially spinal cord compression. Other symptoms may include hearing loss, corneal clouding, and heart disease. Initial symptoms
often become evident in the first five years of life. The disease substantially limits both the quality and length of life of those affected. We
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have identified over 2,000 patients worldwide suffering from MPS IVA and estimate that the total number of patients suffering from MPS IV A worldwide could
be as many as 3,000.
Vimizim is approved for marketing in the U.S., the EU and other international markets.
Naglazyme
Naglazyme is a recombinant form of N-acetylgalactosamine 4-sulfatase (arylsulfatase B) indicated for patients with MPS VI. MPS VI is a debilitating
life-threatening genetic disease for which no other drug treatment currently exists and is caused by the deficiency of arylsulfatase B, an enzyme normally
required for the breakdown of GAGs. Patients with MPS VI typically become progressively worse and experience multiple severe and debilitating symptoms
resulting from the build-up of carbohydrate residues in tissues in the body. These symptoms include: inhibited growth, spinal cord compression, enlarged
liver and spleen, joint deformities and reduced range of motion, skeletal deformities, impaired cardiovascular function, upper airway obstruction, reduced
pulmonary function, frequent ear and lung infections, impaired hearing and vision, sleep apnea, malaise and reduced endurance.
Naglazyme is approved for marketing in the U.S., the EU and other international markets.
Kuvan
Kuvan is a proprietary synthetic oral form of 6R-BH4, a naturally occurring enzyme co-factor for phenylalanine hydroxylase (PAH), indicated for
patients with PKU. Kuvan is the first drug for the treatment of PKU, which is an inherited metabolic disease that affects at least 50,000 diagnosed patients
under the age of 40 in the developed world. We believe that approximately 30% to 50% of those with PKU could benefit from treatment with Kuvan. PKU is
caused by a deficiency of activity of an enzyme, PAH, which is required for the metabolism of phenylalanine (Phe). Phe is an essential amino acid found in
all protein-containing foods. Without sufficient quantity or activity of PAH, Phe accumulates to abnormally high levels in the blood, resulting in a variety of
serious neurological complications, including severe mental retardation and brain damage, mental illness, seizures and other cognitive problems. As a result
of newborn screening efforts implemented in the 1960s and early 1970s, virtually all PKU patients under the age of 40 in developed countries have been
diagnosed at birth. Currently, PKU can be managed by a Phe-restricted diet, which is supplemented by nutritional replacement products, like formulas and
specially manufactured foods; however, it is difficult for most patients to adhere to the strict diet to the extent needed for achieving adequate control of blood
Phe levels.
Kuvan is approved for marketing in the U.S., the EU and other international markets (excluding Japan). In certain international markets, Kuvan is
also approved for, or is only approved for, the treatment of primary BH4 deficiency, a different disorder than PKU.
Generic versions of Kuvan are available in several countries around the world, including multiple generic versions in the U.S. We are also aware
that manufacturers are challenging our patent portfolio related to Kuvan in several jurisdictions, and one generic version of Kuvan has been approved by the
EMA, although it is not yet commercially available. Please see “Risk Factors” included in Part I, Item 1A of this Annual Report on Form 10-K for a discussion
of the risks posed by generic versions of Kuvan in the U.S. and international markets.
Palynziq
Palynziq is a PEGylated recombinant phenylalanine ammonia lyase enzyme, which is delivered through subcutaneous injection to reduce blood
Phe concentrations. Palynziq is our second approved treatment for PKU. Palynziq is approved for marketing in the U.S. for adult patients with PKU who have
uncontrolled blood Phe concentrations greater than 600 micromol/L on existing management. Palynziq is also approved for marketing in the EU and
Australia for patients ages 16 and older who have inadequate blood Phe control (blood Phe concentrations greater than 600 micromol/L) despite prior
management with available treatment options.
Palynziq is only available in the U.S. through the Palynziq Risk Evaluation and Mitigation Strategy (REMS) program, which is required by the FDA
to mitigate the risk of anaphylaxis while using the product. Notable requirements of our REMS program include the following:
•
•
•
•
prescribers must be certified by enrolling in the REMS program and completing training;
prescribers must prescribe auto-injectable epinephrine with Palynziq;
pharmacies must be certified with the REMS program and must dispense Palynziq only to patients who are authorized to receive it;
patients must enroll in the REMS program and be educated about the risk of anaphylaxis by a certified prescriber to ensure they understand
the risks and benefits of treatment with Palynziq; and
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•
patients must have auto-injectable epinephrine available at all times while taking Palynziq.
Please see “Risk Factors” included in Part I, Item 1A of this Annual Report on Form 10-K for a discussion of the risks posed by the REMS program.
Brineura
Brineura is a recombinant human tripeptidyl peptidase 1 (TPP1) for the treatment of patients with CLN2, a form of Batten disease. CLN2 is an
incurable, rapidly progressive disease that typically ends in patient death by 10-12 years of age. Patients are initially healthy but begin to decline at
approximately the age of three. We estimate that up to 1,200 to 1,600 cases exist worldwide. Brineura is the first treatment approved to slow the progression
of loss of ambulation in children with CLN2 disease and was one of the first therapies to go through an accelerated review procedure in the EU.
Brineura is administered via intracerebroventricular (ICV) infusion and intended to be used in combination with a delivery device, such as an injector
or other delivery system. Please see “Government Regulation – Regulation of Product Marketing and Promotion – Combination Products” in this Annual
Report on Form 10-K for additional information on combination products.
Brineura is approved for marketing in the U.S. (for ages three and older) and in the EU (for all ages from birth) and in other international markets.
Voxzogo
Voxzogo (formerly referred to as vosoritide) is a once daily injection analog of C-type Natriuretic Peptide (CNP) for the treatment of achondroplasia,
the most common form of disproportionate short stature in humans. In patients with achondroplasia, endochondral bone growth, an essential process by
which bone tissue is created, is negatively regulated due to a gain of function mutation in fibroblast growth factor receptor 3 gene (FGFR3). Voxzogo acts as
a positive regulator of the signaling pathway downstream of FGFR3 to promote endochondral bone growth.
Voxzogo was approved for marketing in the EU in August 2021 and in Brazil in November 2021, in both cases for patients ages two and older with
open growth plates. In November 2021, the FDA granted accelerated approval for the use of Voxzogo in the U.S for patients ages five and older with open
growth plates. The FDA issued us a Rare Pediatric Disease Priority Review Voucher (PRV) in connection with Voxzogo’s accelerated approval, which
confers priority review to a subsequent drug application that would not otherwise qualify for priority review. The PRV program is designed to encourage
development of new drugs and biologics for the treatment of rare pediatric diseases. On February 9, 2022, we announced that we entered into a definitive
agreement to sell the PRV we obtained in connection with Voxzogo’s accelerated approval for a lump sum payment of $110 million. The transaction remains
subject to customary closing conditions, including anti-trust review. Voxzogo was available to patients in the EU in September 2021 and in the U.S. in
December 2021 and is expected to be available in Brazil in the first quarter of 2022.
We continue to research Voxzogo’s safety and effectiveness in children with achondroplasia. On February 23, 2022, we announced results from our
Phase 2 randomized, double-blind, placebo-controlled clinical trial of Voxzogo in infants and young children up to five years of age with achondroplasia.
Results at 52 weeks trended in favor of Voxzogo compared to placebo on height (adjusted for age and gender) and annualized growth velocity, with no
worsening in proportionality in the overall study population. The safety profile was generally consistent with older children from the Phase 3 study and
product label population. Serious adverse events (SAEs) were higher in the placebo group (18%) compared to children treated with Voxzogo (7%). All SAEs,
including a fatal event of sudden infant death syndrome in the treatment group, were deemed by the study investigators to be unrelated to treatment. A small
increase in events of sleep apnea were reported in the treatment group that were mild or moderate in severity and did not require treatment discontinuation.
These events will be fully assessed when sleep study and magnetic resonance imaging data are available. We intend to initiate discussions with regulatory
health authorities to discuss next steps regarding efforts to expand access to Voxzogo treatment for this younger age group. In addition, we are currently
enrolling patients in our Phase 2 randomized, open-label clinical trial of Voxzogo in infants and young children with life-threatening foramen magnum
compression at a heightened risk of requiring cervicomedullary decompression surgery.
Moreover, an investigator-initiated study sponsored by Children's National Hospital in Washington, D.C. to investigate Voxzogo in children with
selected genetic forms of short stature is currently enrolling patients.
Aldurazyme
Aldurazyme is a highly purified protein that is designed to be identical to a naturally occurring form of the human enzyme alpha-L-iduronidase, a
lysosomal enzyme normally required for the breakdown of GAGs. MPS I is a progressive and debilitating life-threatening genetic disease, for which no other
drug treatment currently exists, that is caused by the deficiency of alpha-L-iduronidase. Patients with MPS I typically become progressively worse and
experience multiple severe and debilitating symptoms resulting from the build-up of carbohydrate residues in all tissues in the body. These symptoms
include: inhibited growth, delayed and regressed mental development (in the severe form of the disease), enlarged liver and spleen, joint deformities and
reduced
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range of motion, impaired cardiovascular function, upper airway obstruction, reduced pulmonary function, frequent ear and lung infections, impaired hearing
and vision, sleep apnea, malaise and reduced endurance.
We developed Aldurazyme through collaboration with Sanofi. Under our collaboration agreement with Sanofi, we are responsible for manufacturing
Aldurazyme and supplying it to Sanofi. We receive payments ranging from 39.5% to 50% on worldwide net Aldurazyme sales by Sanofi depending on sales
volume. Sanofi and we are members of BioMarin/Genzyme LLC, a 50/50 limited liability company (the BioMarin/Genzyme LLC) that: (1) holds the intellectual
property relating to Aldurazyme and other collaboration products and licenses all such intellectual property on a royalty-free basis to us and Sanofi to allow
us to exercise our rights and perform our obligations under the agreements related to the BioMarin/Genzyme LLC, and (2) engages in research and
development activities that are mutually selected and funded by Sanofi and us.
Aldurazyme is approved for marketing in the U.S., the EU and other international markets.
Clinical Development Programs
A summary of our clinical development programs is provided below:
Clinical Development Programs
Valoctocogene roxaparvovec
BMN 307
BMN 255
Valoctocogene Roxaparvovec
Target
Indication
Severe Hemophilia A
PKU
Primary hyperoxaluria
Stage
Clinical Phase 3
Clinical Phase 1/2
Clinical Phase 1/2
Valoctocogene roxaparvovec is an adeno associated virus (AAV5) vector drug development candidate designed to restore factor VIII plasma
concentrations in patients with severe hemophilia A. Hemophilia A, also called factor VIII deficiency or classic hemophilia, is a genetic disorder caused by
missing or defective factor VIII, a clotting protein. According to the World Federation of Hemophilia rankings of severity of hemophilia A, the normal range of
factor VIII activity levels is between 50% and 150%, expressed as a percentage of normal factor activity in blood, the mild hemophilia A range of factor VIII
activity levels is between 5% and 40%, the moderate hemophilia A range of factor VIII activity levels is between 1% and 5%, and the severe hemophilia
range of factor VIII activity levels is less than 1%. People living with hemophilia A are not able to form blood clots efficiently and are at risk for excessive
bleeding from modest injuries, potentially endangering their lives. People with severe hemophilia often bleed spontaneously into their muscles or joints.
On July 21, 2021, we announced an update to our previously reported results of an open-label Phase 1/2 study of valoctocogene roxaparvovec for
the treatment of adults with severe hemophilia A. The five-year update for the 6e13 vg/kg and four-year update for the 4e13 vg/kg cohorts showed a
sustained treatment benefit of valoctocogene roxaparvovec. All participants in both cohorts had remained off prophylactic factor VIII treatment since
receiving their single dose of valoctocogene roxaparvovec. In addition, cumulative mean annualized bleed rates (ABR) remained one or less in both cohorts
and below pre-treatment baseline levels.
On January 9, 2022, we announced topline results from our two-year analysis of the global Phase 3 study of valoctocogene roxaparvovec for the
treatment of adults with severe hemophilia A, and on February 4, 2022, we announced additional details from the two-year analysis. All 134 study
participants received a single dose of valoctocogene roxaparvovec and had a minimum of 24 months of follow-up. For a pre-specified group of 112
participants in a non-interventional prospective baseline observational study with a median follow-up of 110 weeks after dosing with valoctocogene
roxaparvovec (the Rollover Population), Annualized Bleeding Rate (ABR) was significantly reduced by 4.1 treated bleeds per year (p-value <0.0001), or 85%
from a baseline mean of 4.8 (median 2.8). The percentage of the Rollover Population participants with zero treated bleeds increased from 32% at baseline to
82% during year one and 84% during year two. The mean ABR for the Rollover Population was 0.8 (median 0.0) through the entire efficacy evaluation
period, 0.9 (median 0.0) during year one, and 0.7 (median 0.0) during year two. Valoctocogene roxaparvovec also significantly reduced the mean annualized
factor VIII infusion rate in the Rollover Population by 133 infusions per year (p-value <0.0001), or 98% from baseline. The mean annualized infusion rate was
2.6 (median 0.0) through the entire efficacy evaluation period, 1.5 (median 0.0) during year one, and 3.4 (median 0.0) during year two. As of the two-year
data cut, 95% of the Rollover Population participants remained off factor VIII prophylactic therapy. At the end of the second year post-infusion with
valoctocogene roxaparvovec, 132 participants in the modified intent-to-treat (mITT) population had a mean endogenous factor VIII activity level of 23.0
(median 11.8) IU/dL, as measured by the chromogenic substrate (CS) assay and 36.1 (median 21.6) IU/dL, as measured by the one-stage (OS) assay. In
the 17 participants who comprise a subset of the mITT population and had been dosed at least three years prior to the data cut, mean factor VIII activity was
16.8 (median 9.3) IU/dL by the CS assay and 27.0 (median 19.1) IU/dL by the OS assay at the end of year three. The mean cumulative ABR for this
subpopulation was 0.7 (median 0.0) through the entire efficacy evaluation period (median follow up of 174 weeks) and 0.6 (median 0.0) during year three.
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In addition to the ongoing Phase 1/2 and Phase 3 studies of valoctocogene roxaparvovec described above, we have multiple other clinical studies
of valoctocogene roxaparvovec underway. We recently completed enrolling participants in a Phase 3b, single arm, open-label study to evaluate the efficacy
and safety of valoctocogene roxaparvovec at a dose of 6e13 vg/kg with prophylactic corticosteroids in people with severe hemophilia A. We are conducting a
Phase 1/2 study with the 6e13kg/vg dose of valoctocogene roxaparvovec which aims to dose approximately 10 participants with pre-existing AAV5
antibodies, as well as another Phase 1/2 Study with the 6e13 vg/kg dose of valoctocogene roxaparvovec in people with severe hemophilia A with active or
prior factor VIII inhibitors.
Overall, valoctocogene roxaparvovec continues to have a favorable safety profile and has been generally well tolerated by participants across all
doses in the Phase 1/2 and Phase 3 studies. No participants developed inhibitors to factor VIII, malignancy, or thromboembolic events. The most common
adverse events associated with valoctocogene roxaparvovec across studies occurred early and included transient infusion-associated reactions and mild to
moderate rise in liver enzymes with no long-lasting clinical sequelae. During year two of the Phase 3 study, no new safety signals emerged, and no
treatment-related SAEs were reported. Most patients had discontinued any corticosteroid (CS) use in year one, and there were no CS-related serious
adverse events in the remaining patients being tapered off CS in year two.
On February 20, 2020, we announced that the FDA accepted for priority review our BLA for valoctocogene roxaparvovec for the treatment of adults
with severe hemophilia A. On August 18, 2020, the FDA issued a Complete Response Letter (CRL) to our BLA for valoctocogene roxaparvovec for the
treatment of adults with severe hemophilia A. In the CRL, the FDA introduced a new request for two-year follow-up safety and efficacy data on all study
participants from our ongoing Phase 3 study of valoctocogene roxaparvovec. We are planning to meet with the FDA to discuss resubmission of our BLA,
including the requested two-year data analysis. The BLA resubmission is targeted for the second quarter of 2022. If the FDA deems our resubmission to be
a complete response to the CRL, we expect the resubmission will be followed by a six-month review procedure by the FDA.
The EMA validated our resubmission of a Marketing Authorization Application (MAA) on July 15, 2021. In May 2021, the EMA granted our request
for accelerated assessment. Accelerated assessment potentially reduces the time frame for the EMA Committee for Medicinal Products for Human Use
(CHMP) and Committee for Advanced Therapies (CAT) to review a MAA for an Advanced Therapy Medicinal Product (ATMP), although an application
initially designated for accelerated assessment can revert to the standard procedure during the review for a variety of reasons. The decision to grant
accelerated assessment has no impact on the eventual CHMP and CAT opinion on whether a marketing authorization should be granted. The MAA
submission included safety and efficacy data from the 134 subjects enrolled in the Phase 3 GENEr8-1 study, all of whom have been followed for at least one
year after treatment with valoctocogene roxaparvovec, as well as four and three years of follow-up from the 6e13 vg/kg and 4e13 vg/kg dose cohorts,
respectively, in the ongoing Phase 1/2 dose escalation study. We also recently submitted our 2-year Phase 3 data to the EMA. A CHMP and CAT opinion is
anticipated in the first half of 2022, with potential launch of the product, if approved, in the EU in the second quarter of 2022.
Valoctocogene roxaparvovec has Orphan Drug designation from the FDA and the EMA. Valoctocogene roxaparvovec has also been accepted for
Priority Medicines (PRIME) program from the EMA. Additionally, the FDA has granted valoctocogene roxaparvovec Regenerative Medicine Advanced
Therapy (RMAT) designation and Breakthrough Therapy designation, which are intended to expedite development of drugs for serious or life-threatening
diseases and conditions.
BMN 307
BMN 307 is an AAV5 mediated gene therapy that is designed to normalize blood Phe concentration levels in patients with PKU. We tested a broad
range of vector constructs and combinations to optimize the vector and increase potency, resulting in a 10-fold increase in potency for the selected vector.
Treatment of mice in a validated PKU mouse model with BMN 307 showed a lifetime normalization of Phe and normalized neurotransmitter levels. We intend
to evaluate BMN 307 to determine the treatment's safety and whether a single dose of BMN 307 can restore natural Phe metabolism, normalize plasma Phe
levels, and enable a normal diet in patients with PKU. On January 13, 2020, we announced that both the FDA and the Medicines and Healthcare Products
Regulatory Agency (MHRA) in the United Kingdom (U.K.) granted IND status and approved our Clinical Trial Application (CTA), respectively, for BMN 307 for
the treatment of PKU. On September 24, 2020, we announced that we had dosed the first participant in the global PHEarless Phase 1/2 study of BMN 307.
On February 25, 2021, we announced that we planned to dose escalate in the PHEarless Phase 1/2 study of BMN 307 based on encouraging Phe lowering
and safety signals observed in study participants who were treated with the lowest dose. In September 2021, the FDA placed a clinical hold on our
PHEarless study. The hold was based on pre-clinical study findings from a model designed to understand the durability of BMN 307 activity in mice bearing
two germline mutations, one rendering the mice immunodeficient. Of 63 animals treated, six of seven animals administered BMN 307 at the highest dose
group (2e14 Vg/kg) had tumors on liver necropsy 52 weeks after dosing with evidence for integration of portions of AAV vector into the genome. No lesions
were observed in any mice at 24 weeks. The clinical significance of these findings is being evaluated to assure safe and appropriate use of BMN 307. To
date, we have seen no evidence from our studies or scientific literature indicating these findings are translatable to humans, species other than mice or other
gene therapy vectors. The durability study was one of multiple pre-clinical studies we conducted and was not designed to test safety. However, we promptly
notified the FDA upon availability of the integration site analysis results. The FDA initiated a clinical hold shortly after being notified, and we announced the
hold before the next business day after we were informed of the FDA’s decision. In February 2022, the FDA
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requested data from additional non-clinical studies to assess the theoretical oncogenic risk to human study participants, which is expected to take several
quarters. We will communicate next steps for the program when available.
BMN 307 has Orphan Drug designation from the FDA and the EMA and Fast Track designation from the FDA.
BMN 255
BMN 255 is a small-molecule therapy that is designed to treat primary hyperoxaluria type 1, a subset of chronic renal disease. The IND for BMN
255 is active and we are dosing subjects with dose selection for advanced studies expected in the second half of 2022. 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.
Manufacturing
We manufacture the active pharmaceutical ingredients (API) for Aldurazyme, Naglazyme, Palynziq and Voxzogo in our production facilities located
in Novato, California. We manufacture the API for Brineura and Vimizim in our manufacturing facility in Shanbally, Cork, Ireland. These facilities have been
inspected and have demonstrated compliance with current Good Manufacturing Practices (cGMPs) to the satisfaction of the FDA, the European Commission
(EC) and health agencies in other countries.
We contract with third parties to manufacture Kuvan API. All our product manufacturing (which includes vials, syringes, tablets, and powder) and
most packaging operations are performed by contract manufacturers. We expect to continue to contract with outside service providers for certain
manufacturing services, including drug substance, drug product, and packaging operations for our products. All of our facilities and those of any third-party
manufacturers will be subject to periodic inspections confirming compliance with applicable law and must pass inspection before we can manufacture our
drugs for commercial sales. Third-party manufacturers’ facilities are subject to periodic inspections to confirm compliance with applicable law and must be
cGMP certified. We believe that our current agreements with third-party manufacturers and suppliers provide for ample operating capacity to support the
anticipated clinical and commercial demand for these products. In certain instances, there is only one approved contract manufacturer for certain aspects of
the manufacturing process. In such cases, we attempt to prevent disruption of supplies through supply agreements, maintaining safety stock and other
appropriate strategies.
In July 2017, we commissioned our commercial-scale gene therapy manufacturing facility, located in Novato, California, where we conduct cGMP
production of valoctocogene roxaparvovec and BMN 307 to support clinical development activities and anticipated commercial demand. This facility has the
potential to produce multiple gene therapy products to meet global commercial demand, depending on dose and production mix. The facility holds a GMP
certificate and its production processes have been developed in accordance with International Conference on Harmonisation Technical Requirements for
Registration of Pharmaceuticals for Human Use facilitating worldwide registration with health authorities.
Raw Materials
Raw materials and supplies required for the production of our products and product candidates are available in some instances from one supplier
and in other instances from multiple suppliers. In those cases where raw materials are only available through one supplier, such supplier may be either a
sole source (the only recognized supply source available to us) or a single source (the only approved supply source for us among other sources). We have
adopted policies to attempt, to the extent feasible, to minimize our raw material supply risks, including maintenance of greater levels of raw materials
inventory and implementation of multiple raw materials sourcing strategies, especially for critical raw materials. Although to date we have not experienced
any significant delays in obtaining any raw materials from our suppliers, we cannot provide assurance that we will not face shortages from one or more of
them in the future.
Sales and Marketing
We have established a commercial organization, including a sales force, to support our product lines directly in the U.S., Europe, South America
and certain other significant markets. For other selected markets, we have signed agreements with other companies to act as distributors of all our products,
other than Aldurazyme. Most of these agreements generally grant the distributor the right to market the product in the territory and the obligation to secure all
necessary regulatory approvals for commercial or named patient sales. Additional markets are being assessed at this time and additional agreements may
be signed in the future.
Sanofi has the exclusive right to distribute, market and sell Aldurazyme globally and is required to purchase its requirements exclusively from us.
In the U.S., our products (other than Aldurazyme) are marketed through our commercial teams, including sales representatives and supporting staff
members, who promote our products, directly to physicians in specialties appropriate for each
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product. Outside of the U.S., our sales representatives and supporting staff members market our products (other than Aldurazyme). We believe that with
moderate changes in 2022, the size of our sales force will be appropriate to effectively reach our target customers in markets where our products are directly
marketed. The launch of any future products, if approved, will likely require expansion of our commercial organization, including our sales force, in the U.S.
and international markets.
We utilize third-party logistics companies to store and distribute our products. Moreover, we use third-party vendors, such as advertising agencies,
market research firms and suppliers of marketing and other sales support-related services, to assist with our commercial activities.
Customers
Our Brineura, Kuvan, Naglazyme, Palynziq, Vimizim and Voxzogo customers include a limited number of specialty pharmacies and end-users, such
as hospitals and non-U.S. government agencies. We also sell Brineura, Kuvan, Naglazyme, Palynziq, Vimizim and Voxzogo 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, in certain countries, governments place large periodic orders for Naglazyme and Vimizim. The timing of these orders
can be inconsistent and can create significant quarter to quarter variation in our revenue. Palynziq is currently distributed in the U.S. pursuant to the REMS
program through a limited number of certified specialty pharmacies. During 2021, 44% of our net product revenues, excluding Aldurazyme, was generated
by three customers. Sanofi is our sole customer for Aldurazyme and is responsible for marketing and selling Aldurazyme to third parties.
Competition
The biopharmaceutical industry is rapidly evolving and highly competitive. Within the industry, there are many public and private companies,
including pharmaceutical companies and biotechnology companies that have or may soon initiate programs for the same indications that our products and
product candidates are intended to treat. Furthermore, universities and non-profit research organizations may have research programs, both early-stage and
clinical, in the same disease areas. Our competitors may have advantages over us due to greater financial or scientific resources, lower labor and other
costs, or due to higher headcount and more robust organizational structures. Our competitors have considerable experience in drug manufacturing,
preclinical and clinical research and development, regulatory affairs, marketing, sales, and distribution. They pursue broad patent portfolios and other
intellectual property to protect the products they are developing. Their products may outcompete ours due to one or more factors, including faster progress
through preclinical and clinical development, lower manufacturing costs, superior safety and efficacy, lower pricing, stronger patent protection, and better
marketing, sales, and distribution capabilities. In this event, our products and product candidates, if approved, could fail to gain significant market share, and
as a result, our business, financial condition and results of operations could be adversely affected.
Other than Kuvan (which faces generic competition, as described below), our products have no direct approved competition currently on the market
in the U.S. or the EU; however, other companies are in the development phase with new and generic products. Our products and product candidates have
potential competition from products under development either using similar technology to our programs or different treatment strategies. The following is a
summary of some of the primary possible future competitors for our products and product candidates, but the information below may not include all potential
competition.
Commercial Products
Aldurazyme, Naglazyme, and Vimizim
In the mucopolysaccharidosis field, several companies are researching treatments using small molecules, gene therapy, and other novel
technologies. Aldurazyme, for the treatment of MPS I, has potential competition from clinical stage product candidates from ArmaGen, Inc., JCR
Pharmaceuticals Co., Ltd., Orchard Therapeutics Plc, RegenxBio Inc. and earlier stage product candidates, including a product candidate from Immusoft
Corporation. Naglazyme, for the treatment of MPS VI, has potential competition from a clinical stage product candidate from Inventiva S.A. and other
potential candidates in earlier stages. Vimizim, for the treatment of MPS IVA, has potential competition from a preclinical product candidate from Esteve
Pharmaceuticals, S.A. and other potential candidates in earlier stages.
Brineura
Brineura, for the treatment of CLN2, has potential competition from preclinical product candidates from RegenxBio Inc. and the Roche Group.
Kuvan and Palynziq
There are currently no other approved, non-generic drugs on the market in the U.S. or the EU for the treatment of PKU. However, generic versions
of Kuvan are available in several countries around the world, including multiple generic versions in the
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U.S. We are also aware that manufacturers are challenging our patent portfolio related to Kuvan in several jurisdictions, and one generic version of Kuvan
has been approved by the EMA, although it is not yet commercially available. Please see “Risk Factors” included in Part I, Item 1A of this Annual Report on
Form 10-K for a discussion of the risks posed by generic versions of Kuvan in the U.S. and international markets. Kuvan and Palynziq also have potential
competition from clinical stage product candidates from Homology Medicines, Inc., Nestle Health Science, S.A., PTC Therapeutics, Inc. and Synlogic, Inc.
and earlier stage product candidates, including product candidates from Codexis, Inc, Generation Bio Co., Jnana Therapeutics Inc., LogicBio Therapeutics,
Inc., Moderna Therapeutics, Inc., Sangamo Therapeutics, Inc. and SOM Innovation Biotech, S.A. BMN 307 is our clinical gene therapy program for PKU,
and other companies are also developing gene therapy product candidates for PKU, as described in “Competition—Product Candidates—BMN 307” in this
Annual Report on Form 10-K.
Voxzogo
Voxzogo, for the treatment of achondroplasia, could have competition from clinical stage products under development by Ascendis Pharma A/S,
Pfizer, Inc. and QED Therapeutics, Inc (a subsidiary of BridgeBio Pharma, Inc.) and preclinical product candidates from other companies, including Astellas
Pharma Inc.
Clinical Development Programs
Valoctocogene roxaparvovec
Valoctocogene roxaparvovec, a gene therapy product candidate for severe hemophilia A, has potential competition from marketed recombinant
factor VIII replacement therapies, a novel bispecific antibody marketed by the Roche Group, and clinical stage programs, including gene therapy product
candidates under development by Bayer AG, Pfizer, Inc., the Roche Group, Sangamo Therapeutics, Inc., Takeda Pharmaceutical Company Ltd. and
preclinical product candidates from other companies, including Freeline Therapeutics Ltd., Uniqure N.V. and ASC Therapeutics, Inc. In addition, Novo
Nordisk A/S, Pfizer, Inc. and Sanofi S.A. are developing novel non-factor replacement product candidates in the clinic for the treatment of hemophilia A.
BMN 255
BMN 255, a small-molecule product candidate for primary hyperoxaluria type 1, a subset of chronic renal disease, has potential competition from
marketed products from Alnylam Pharmaceuticals, Inc., clinical stage product candidates from Allena Pharmaceuticals, Inc., BridgeBio Pharma, Inc, Dicerna
Pharmaceuticals, Inc. (a subsidiary of Novo Nordisk A/S.) and preclinical product candidates from other companies, including Amarna Therapeutics and
Chinook Therapeutics, Inc.
BMN 307
BMN 307, a gene therapy product candidate for the treatment of PKU, has potential competition from clinical stage product candidates from PTC
Therapeutics, Inc., Homology Medicines, Inc., Nestle Health Science, S.A., Synlogic, Inc. and earlier stage product candidates, including product candidates
from Generation Bio Co., LogicBio Therapeutics, Inc., Moderna Therapeutics, Inc., Sangamo Therapeutics, Inc. and SOM Innovation Biotech, S.A.
Patents, Proprietary Rights and Regulatory Exclusivity
Our success depends on an intellectual property portfolio that supports our future revenue streams and also erects barriers to our competitors. We
are maintaining and building our patent portfolio through: filing new patent applications; prosecuting existing applications; and licensing and acquiring new
patents and patent applications. Furthermore we seek to protect our ownership of know-how, trade secrets and trademarks through an active program of
legal mechanisms including registrations, assignments, confidentiality agreements, material transfer agreements, research collaborations and licenses.
U.S. patents, as well as most foreign patents, are generally effective for 20 years from the date the earliest application was filed. U.S. patents that
were issued on applications filed before June 8, 1995, may be effective until 17 years from the issue date, if that is later than the 20-year date. In some
cases, the patent term may be extended to recapture a portion of the term lost during regulatory review of the claimed therapeutic or, in the case of the U.S.,
because of U.S. Patent and Trademark Office (USPTO) delays in prosecuting the application. In the U.S., under the Drug Price Competition and Patent Term
Restoration Act of 1984 (commonly known as the Hatch-Waxman Act), a patent that covers a drug approved by the FDA may be eligible for patent term
extension (for up to five years, but not beyond a total of 14 years from the date of product approval) as compensation for patent term lost during the FDA
regulatory review process. The duration and extension of the term of foreign patents varies in accordance with local law. In the EU, Supplementary
Protection Certificates, or SPCs, are available to extend a patent term up to five years to compensate for patent protection lost during regulatory review.
Although all EU Member States must provide SPCs, SPCs must be applied for and granted on a country-by-country basis. Limited exceptions apply to the
protection conferred by the SPC.
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The table below lists our outstanding patents and patent applications of primary importance for our products other than Aldurazyme by territory,
general subject matter (including composition, methods of treatment and approved use, methods of production and purification, pharmaceutical compositions
and clinical formulations) and latest expiry date. With respect to Aldurazyme, the last of our patents expired in November 2020. One or more patents with the
same or earlier expiry dates may fall under the same general subject matter and are not listed separately in the table below. We continue to pursue
additional patents and patent term extensions in the U.S. and other territories covering various aspects of our products that may, if issued, extend patent
exclusivity beyond the expiration dates listed in the table below.
Product
Territory
Patent No(s).
General Subject Matter
Patent Expiration
Brineura
U.S.
Kuvan
EU
EU
Naglazyme
U.S.
Palynziq
Vimizim
(7)
EU
U.S.
EU
U.S.
EU
Voxzogo
U.S.
EU
8,029,781
9,044,473
10,279,015
1,673,104
Method of treatment
Method of treatment by administration into the
cerebrospinal fluid
Formulation; kit
Pharmaceutical composition
16793229.2
(2)
Formulation
(1)
July 3, 2023
February 18, 2032
May 5, 2036
August 30, 2024
May 5, 2036
Use for treating with once daily dosing regimen
November 7, 2024
3138566
(2)
2545939;
3461503
6,866,844
Use for treating once daily after a meal
Use for treating after a meal
Compositions; methods of treatment; production;
purification
7,713,709
Antibody assays
1565209; 2327414
7,534,595
10,221,408
9,557,340
2,152,868
Compositions; pharmaceutical compositions; use to treat
an enzyme deficiency
Composition; method of treating
Purification
Antibody detection assay
Composition; pharmaceutical composition
2531209; 3025728
Formulation; purification
Compositions; methods of treatment
8128925
8765437
2,245,145
2,595,650
8,198,242
9,907,834
10,646,550
2,432,489
Purification; formulation; methods of treatment
January 10, 2032
Composition; use for treating
April 30, 2029
Purification; composition; use for treating; formulation
July 22, 2031
Compositions, Methods of Treatment
Formulation
Clinical methods of treatment
Compositions, Methods of Treatment
June 11, 2030
(5)
August 1, 2036
August 1, 2036
May 20, 2030
(6)
April 11, 2028
April 11, 2028
November 7, 2022
July 20, 2028
November 7, 2023
August 16, 2027 / May
24, 2032
(3)
February 3, 2031
July 30, 2029
May 23, 2028 / May
(4)
23, 2033
February 03, 2031
April 10, 2030
(1) Under a patent term extension (PTE) that has been granted.
(2) Patent application.
(3) We filed for a PTE for this patent, and if granted, the patent expiration will extend to May 24, 2032.
(4) We applied for SPCs for this patent, and we have to date received SPC to extend the patent expiration to May 23, 2033 in certain European countries,
including Austria, Cyprus, Czech Republic, Denmark, Estonia, France, Greece, Hungary, Ireland, Iceland, Italy, Latvia, Lithuania, Luxembourg,
Malta, Netherlands, Norway, Spain, Slovenia, and Sweden.
(5) We filed for a PTE for this patent, and if granted, the patent expiration will extend to May 20, 2035.
(6) We applied for SPCs for this patent, and if granted, the patent expiration will extend to May 30, 2035.
(7) We applied for SPCs for this patent, and we have to date received SPC to extend the patent expiration in certain European countries, including Austria,
Bulgaria, Cypress, Czech Republic, Denmark, Estonia, Finland, France, Greece,
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Iceland, Ireland, Italy, Latvia, Lithuania, Luxembourg, Netherlands, Norway, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, to
April 30, 2029.
In addition to patent protection, certain of our products are entitled to regulatory exclusivity in the U.S. and the EU through the dates set forth below:
Commercial Products
Brineura
Palynziq
Vimizim
Voxzogo
United States
Orphan
Drug
Exclusivity
(1)
Expiration
2024
2025
Expired
Pending
United
States
Biologic
Exclusivity
(2)
Expiration
2029
2030
2026
Not Applicable
European
Union
Orphan Drug
Exclusivity
(1)
Expiration
2027
2029
2024
2031
(1) See “Government Regulation—Other Regulation—Orphan Drug Designation” in this Annual Report on Form 10-K for further discussion.
(2) See “Government Regulation—Other Regulation—Exclusivity for Biologics in the U.S.” in this Annual Report on Form 10-K for further discussion.
With respect to our clinical product candidates, we believe we have the necessary intellectual property rights to allowing us to undertake the
development of these candidates. Certain of our product candidates are in therapeutic areas that have been the subject of many years of extensive research
and development by academic organizations and third parties who may control patents or other intellectual property that they might assert against us, should
one or more of our product candidates in these therapeutic areas succeed in obtaining regulatory approval and thereafter be commercialized. We continually
evaluate the intellectual property rights of others in these areas in order to determine whether a claim of infringement may be made by others against us.
Should we determine that a third party has intellectual property rights that could impact our ability to freely market a compound we consider a number of
factors in determining how best to prepare for the commercialization of any such product candidate. In making this determination we consider, among other
things, the stage of development of our product candidate and whether we and our outside counsel believe the intellectual property rights of others are valid,
whether we infringe the intellectual property rights of others, whether a license is available upon commercially reasonable terms, whether we will seek to
challenge the intellectual property rights of others, and the likelihood of and liability resulting from an adverse outcome should we be found to infringe the
intellectual property rights of others.
Government Regulation
Regulation by governmental authorities in the U.S., European countries and other countries is a significant factor in the development, manufacture,
commercialization, pricing and reimbursement of our products. Our industry is subject to significant federal, state, local and non-U.S. regulation. Our
products require approval from the FDA, the EC (on the basis of the scientific opinions issued by the EMA) and corresponding agencies in other countries
before they can be marketed. Failure to comply with applicable U.S. and foreign requirements may subject a company to a variety of administrative or
judicial sanctions, such as FDA refusal to approve pending NDAs or BLAs, warning or untitled letters, product recalls, product seizures, total or partial
suspension or withdrawal of marketing, production or distribution authorizations, injunctions, fines, civil penalties, and criminal prosecution.
Approval Process in the U.S. and EU
Satisfaction of FDA and EU pre-market approval requirements typically takes many years and the actual time required may vary substantially based
upon the type, complexity and novelty of the product or disease. Pharmaceutical product development in the U.S. and the EU typically involves preclinical
laboratory and animal tests, the submission to the applicable regulatory agency of an application (e.g., an IND in the U.S. or a CTA in the EU), which must
become effective before clinical testing may commence, and adequate and well-controlled human clinical trials to establish the safety and effectiveness of
the drug for each indication for which marketing approval is sought. On January 31, 2022, Regulation EU No 536/2014 (CTR) became fully applicable in the
EU. The CTR established a centralized application procedure where one of the National Competent Authorities (NCA) of the Member States where the trial
will take place takes the lead in reviewing certain aspects of the application, while the other NCAs have a lesser involvement than they had under the
previous regime established by Directive 2001/20/EC (CTD). The CTD indeed introduced the first set of harmonized rules on clinical trials in the EU but
resulted in a patchwork of different national regimes. The CTR was adopted with a view to introducing a more uniform set of the rules across the EU for the
authorization of clinical trials. Such authorization still involves the national regulatory authorities and Ethics Committees of each of the EU Member States
where the trial is to be conducted. However, the relevant procedures have now been streamlined with a view to facilitating a swifter and more seamless
authorization and deployment of multi-center trials occurring in more than one EU Member State. More
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specifically, the CTR allows sponsors to rely on one single submission for CTAs regardless of the number of Member States where the trial takes place and
based on a single harmonized application. Furthermore, under the CTR, deadlines for regulatory approvals are shortened with a view to accelerating the
authorization process. The CTR also established an EU Portal which will act as a single-entry point for submission of data and information relating to clinical
trials. The CTD will continue to apply in parallel to the CTR for a transitional period.
Preclinical tests include laboratory evaluation, as well as animal studies, to assess the characteristics and potential pharmacology,
pharmacokinetics and toxicity of the product. The conduct of the preclinical tests must comply with FDA and/or EU and national regulations and
requirements, including good laboratory practices (GLP). The results of preclinical testing, along with other information, including information about product
chemistry, manufacturing and controls and a proposed clinical trial protocol are reviewed by the applicable regulatory agency as part of an IND or CTA.
Long-term preclinical tests, such as animal tests of reproductive toxicity and carcinogenicity, may continue after the IND or CTA is submitted. Until the CTA or
IND is approved, or becomes effective following a waiting period, and appropriate reviews have been satisfactorily completed by the applicable Institutional
Review Boards (IRBs) or Ethics Committees, we may not start the clinical trial in the relevant jurisdiction.
Clinical trials involve the administration of the investigational new drug to healthy volunteers or patients under the supervision of a qualified
investigator. Clinical trials must be conducted in compliance with applicable regulations, good clinical practices (GCP), as well as under protocols detailing
the objectives of the trial and the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. Each protocol involving testing on
patients and subsequent protocol amendments must be submitted to the FDA as part of the IND and to the relevant regulatory agency in the EU as part of a
new CTA.
The regulatory agencies may order the temporary halt or permanent discontinuation of a clinical trial at any time or impose other sanctions if they
believe that the clinical trial is not being conducted in accordance with applicable requirements or presents an unacceptable risk to the clinical trial patients.
An IRB/Ethics Committee may also require the clinical trial at the site to be halted, either temporarily or permanently, for failure to comply with the IRB/Ethics
Committee’s requirements, or may impose other conditions. Clinical trials that are deployed to support NDAs, BLAs or MAAs for marketing approval are
typically conducted in three sequential phases, but the phases may overlap or be combined. Typically, we undertake a three-phase human clinical testing
program as follows:
•
•
•
Phase 1 - the initial introduction of the drug into healthy human subjects or patients, the drug is tested to assess metabolism,
pharmacokinetics, pharmacological actions, side effects associated with increasing doses and, if possible, early evidence on effectiveness.
Phase 2 - usually involves trials in a limited patient population, to determine the effectiveness of the drug for a particular indication or
indications, dosage tolerance and optimum dosage, and to identify common adverse effects and safety risks. If a compound demonstrates
evidence of effectiveness and an acceptable safety profile in Phase 2 evaluations.
Phase 3 - undertaken to obtain the additional information about clinical efficacy and safety in a larger number of patients, typically at
geographically dispersed clinical trial sites.
After completion of the required clinical testing, an application is prepared and submitted to the applicable regulatory agency. Approval of the
application by the applicable regulatory agency is required before marketing of the product may begin. In the European Economic Area (i.e., the EU as well
as Iceland, Liechtenstein and Norway) (the EEA), there are two types of marketing authorizations (MA), namely: (i) the “Union” MA, which is issued by the
EC through the so-called “centralized procedure”, based on the positive opinion of the EMA’s Committee for Medicinal Products for Human Use, and results
in a single marketing authorization that is valid across the EEA; and (ii) “National MAs,” which are issued by the competent NCAs and only cover their
respective territory. The centralized procedure is mandatory for certain types of products such as: (i) medicinal products derived from certain biotechnology
processes, (ii) designated orphan medicinal products, (iii) medicinal products containing a new active substance indicated for the treatment of certain
diseases such as HIV/AIDS, cancer, neurodegenerative disorders, diabetes, autoimmune diseases and other auto-immune dysfunctions, viral diseases; and
(iv) Advanced Therapy Medicinal Products (ATMPs) (such as gene therapy, somatic cell therapy or tissue-engineered medicines). The NDA, BLA or MAA
must include the results of all preclinical, clinical and other testing, a compilation of data relating to the product’s pharmacology, chemistry, manufacture and
controls and proposed labeling, among other things. In the U.S., each NDA or BLA is subject to a significant user fee at the time of submission, unless a
waiver is granted by the FDA. Similarly, in the EU, the submission of an MAA is subject to the payment of fees, a waiver of which may be obtained only
under limited circumstances. The FDA and the EMA initially review the applications for a threshold determination that it is sufficiently complete to permit
substantive review. The regulatory agency may request additional information rather than accepting an application for filing or validation. Once the
submission is accepted, the applicable agency begins an in-depth review. For the FDA, the review period for standard review applications is typically an
additional ten months and, for priority review of drugs, that is, drugs that the FDA determines address a significant unmet need and represent a significant
improvement over existing therapy, the review period is typically an additional six months in duration. The review process may be extended by the FDA for
three additional months to consider new information submitted during the review or clarification regarding information already provided in the submission.
The FDA may also refer applications for novel products or products that present difficult questions of safety or efficacy to an advisory committee, typically a
panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is
not bound by the recommendation of an advisory committee, but it generally follows such recommendations. After the FDA evaluates
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the information provided in the NDA/BLA, it issues an approval letter, or a complete response letter. A complete response letter outlines the deficiencies in
the submission and may require substantial additional testing or information in order for the FDA to reconsider the application. If and when those deficiencies
have been addressed and the NDA/BLA has been resubmitted, the FDA will re-initiate review. If it is satisfied that the deficiencies have been addressed, the
FDA will issue an approval letter.
Under the centralized procedure in the EU, the maximum timeframe for the evaluation of an MAA by the EMA is 210 days. This excludes so-called
clock stops, during which additional written or oral information is to be provided by the applicant in response to questions asked by the CHMP. At the end of
the review period, the CHMP provides an opinion to the EC. If the opinion is favorable, the EC may then adopt a decision to grant marketing authorization. In
the event of a negative opinion, the company may request a re-examination of the application within 15 days of receipt of the negative opinion. The company
then has 60 days to provide the CHMP with detailed grounds for requesting the re-examination. Within 60 days of providing this information, the CHMP must
re-examine its opinion. The EC follows the recommendation of the CHMP in almost all cases. In exceptional cases, the CHMP might perform an accelerated
review of an MAA in no more than 150 days. This is usually when the product is of major interest from the point of view of public health and, in particular,
from the viewpoint of therapeutic innovation.
During the review period, the FDA and/or the European authorities may typically inspect one or more clinical sites and/or the sponsor to assure
compliance with GCP regulations and may equally inspect the facility or the facilities at which the drug is manufactured to ensure compliance with cGMPs
regulations. Neither the FDA nor the EC will approve the product unless compliance is satisfactory and the application contains data that provide substantial
evidence that the drug is safe and effective in the indication studied.
Fast Track Designation and Accelerated Approval
The FDA is required to facilitate the development and expedite the review of drugs that are intended for the treatment of a serious or life-threatening
condition for which there is no effective treatment and that demonstrate the potential to address unmet medical needs for the condition. Under the FDA’s fast
track program, the sponsor of a new drug candidate may request that the FDA designate the drug candidate for a specific indication as a fast track drug
concurrent with or after the filing of the IND for the drug candidate. The FDA must determine if the drug candidate qualifies for fast track designation within
60 days of receipt of the sponsor’s request.
In addition to other benefits, such as the ability to use surrogate endpoints and have greater interactions with the FDA, the FDA may initiate review
of sections of a fast track drug’s NDA or BLA before the application is complete. This rolling review is available if the applicant provides and the FDA
approves a schedule for the submission of the remaining information and the applicant pays applicable user fees. However, the FDA’s time period goal for
reviewing an application does not begin until the last section of the NDA or BLA is submitted. Additionally, the fast track designation may be withdrawn by the
FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process.
Under the fast track program and the FDA’s accelerated approval regulations, the FDA may approve a drug for a serious or life-threatening illness
that provides meaningful therapeutic benefit to patients over existing treatments based upon a surrogate endpoint that is reasonably likely to predict clinical
benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on
irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of
alternative treatments. In clinical trials, a surrogate endpoint is a measurement of laboratory or clinical signs of a disease or condition that substitutes for a
direct measurement of how a patient feels, functions, or survives. Surrogate endpoints can often be measured more easily or more rapidly than clinical
endpoints. A drug candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of a Phase 4 or
post-approval clinical trial to confirm the effect on the clinical endpoint. Failure to conduct a required post-approval study or confirm a clinical benefit through
a post-marketing study will allow the FDA to withdraw the drug from the market on an expedited basis. All promotional materials for drug candidates
approved under accelerated regulations are subject to prior review by the FDA.
Breakthrough Therapy Designation
The FDA is also required to expedite the development and review of the application for approval of drugs that are intended to treat a serious or life-
threatening disease or condition where preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing
therapies on one or more clinically significant endpoints. Under the breakthrough therapy program, the sponsor of a new drug candidate may request that
the FDA designate the drug candidate for a specific indication as a breakthrough therapy concurrent with, or after, the filing of the IND for the drug candidate.
The FDA must determine if the drug candidate qualifies for breakthrough therapy designation within 60 days of receipt of the sponsor’s request.
Adaptive Pathways
The EMA has an adaptive pathways approach which allows for early and progressive patient access to a medicine in cases of high medical need.
To achieve this goal, several approaches are envisaged including for example identifying small populations with severe disease where a medicine’s benefit-
risk balance could be favorable or making more use of real-world data
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where appropriate to support clinical trial data. The adaptive pathways concept applies primarily to treatments in areas of high medical need where it is
difficult to collect data via traditional routes and where large clinical trials would unnecessarily expose patients who are unlikely to benefit from the medicine.
The approach builds on regulatory processes already in place within the existing EU legal framework. These include: scientific advice; compassionate use;
the conditional MA; patient registries and other pharmacovigilance tools that allow collection of real-life data and development of a risk-management plan for
each medicine.
A conditional MA may be granted prior to the submission of comprehensive clinical data if the benefit of the immediate availability on the market of
the product is deemed to outweigh the risk inherent in the fact that additional data are still required. In emergency situations, a MA for such medicinal
products may be granted also where comprehensive pre-clinical or pharmaceutical data have not been provided. Under this procedure a MA can be granted
as soon as sufficient data becomes available to demonstrate that the drug's benefits outweigh its risks, with safeguards and controls in place post-
authorization. This procedure can also be combined with a rolling review of data during the development of a promising medicine, to further expedite its
evaluation. Conditional MAs are typically subject to obligations that are reviewed annually. These include the obligation to complete ongoing studies, or to
conduct new studies, with a view to confirming that the risk-benefit balance is favorable. Conditional MAs are valid for one year and are renewable.
PRIME Program
The EMA launched its PRIME regulatory program to enhance support for the development of therapies that target an unmet medical need. The
initiative focuses on drugs that may offer a major therapeutic advantage over existing treatments, or benefit patients with no treatment options. These
therapies are considered priority medicines within the EU. Through PRIME, the EMA offers early, proactive and enhanced support to drug developers to
optimize the generation of robust data on a therapy’s benefits and risks and enable accelerated assessment of drug applications.
Regulation of Product Marketing and Promotion
A marketing approval authorizes commercial marketing of the drug with specific prescribing information for specific indications. As a condition of
NDA or BLA approval, the FDA may require a REMS, to help ensure that the benefits of the drug outweigh the potential risks. A REMS can include
medication guides, communication plans for healthcare professionals, and elements to assure safe use, such as special training or certification for
prescribing or dispensing, dispensing only under certain circumstances, special monitoring and the use of patient registries. Moreover, product approval may
require substantial post-approval testing and surveillance to monitor the drug’s safety or efficacy. Once granted, product approvals may be withdrawn if
compliance with regulatory standards is not maintained or problems are identified following initial marketing. Similar rules apply outside of the U.S. For
example, products approved in the EU may be subject to post- authorization requirements such as the obligation to perform post-authorization efficacy
studies (PAES) or post-authorization safety studies (PASS) imposed as conditions to the MA, or other Risk Minimization Measures (RMMs), such as
educational programs or controlled access programs, which may sometimes vary from one EU Member State to another.
Regulation of Manufacturing Standards
The FDA as well as other regulatory agencies around the world, regulate and inspect the equipment, facilities, laboratories and processes used in
the manufacturing and testing of products prior to granting approval to market products. If after receiving approval from the FDA and other agencies such as
the EC we make a material change in manufacturing equipment, location or process, additional regulatory review and approval may be required. We also
must adhere to cGMP regulations and product-specific regulations enforced by the FDA and other regulatory agencies through their facilities inspection
program. The FDA and other regulatory agencies around the world conduct regular, periodic visits to reinspect our equipment, facilities, laboratories and
processes following an initial approval.
Combination Products
Combination products are defined by the FDA as products composed of two or more regulated components (e.g., a biologic and/or drug and a
device). Biologics/drugs and devices each have their own regulatory requirements, and combination products may have additional requirements. For
example, in the EU, if a device intended to administer a medicinal product is sold together with such medicinal product in such a way that they form a single
integral product which is intended exclusively for use in the given combination and which is not reusable, that single integral product is regulated as a
medicinal product. In addition, the relevant general safety and performance requirements established for medical devices by EU medical devices legislation
apply to the device component of such combination products. A number of our products qualify as combination products and are regulated under the
applicable framework, and we expect that a number of our pipeline product candidates will be evaluated for regulatory approval under such framework as
well.
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Post-Approval Regulatory Requirements
Following approval, the FDA and the regulatory authorities around the world will impose certain post-approval requirements related to a product.
For instance, the FDA and European authorities closely regulate the post-approval marketing and promotion of approved products, including standards and
regulations for direct-to-consumer advertising (which is prohibited in the EU for prescription products such as our products), off-label promotion, industry-
sponsored scientific and educational activities and promotional activities involving the Internet. Moreover, if a company obtains original approval for a product
via an accelerated approval pathway, the company will be typically required to conduct a post-marketing confirmatory trial to verify and describe the clinical
benefit in support of full approval. An unsuccessful post-marketing study or failure to complete such a study could result in the withdrawal of the marketing
approval for a product.
Approved products may be marketed only for the approved indications and in accordance with the provisions of the approved labeling. Changes to
some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, may
require a submission to and approval by the FDA or the EC, as applicable, before the change can be implemented. An NDA/BLA or MAA supplement for a
new indication typically requires clinical data similar to that in the original application, and similar procedures and actions in reviewing NDA/ BLA or MAA
supplements as in reviewing NDAs/BLAs and MAAs.
Adverse event reporting and submission of periodic reports is required following marketing approval. Either the FDA or the EC/EMA may also
require post-marketing testing, known as Phase 4 testing, a risk evaluation and mitigation strategy, and surveillance to monitor the effects of an approved
product or place conditions on an approval that could restrict the distribution or use of the product. In addition, quality control as well as the manufacture,
packaging, and labeling procedures must continue to conform to cGMPs after approval. Drug and biological product manufacturers and certain of their
subcontractors are subject to periodic unannounced inspections by the FDA, the EMA/NCAs, during which the inspectors audit manufacturing facilities to
assess compliance with cGMPs. Regulatory authorities may withdraw product approvals or request product recalls if a company fails to comply with
regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently discovered. In addition,
prescription drug manufacturers in the U.S. must comply with applicable provisions of the Drug Supply Chain Security Act and provide and receive product
tracing information, maintain appropriate licenses, ensure they only work with other properly licensed entities and have procedures in place to identify and
properly handle suspect and illegitimate products. Similarly, in the EU, stringent rules have been introduced to fight medicine falsifications and to ensure that
the trade in medicines is subject to rigorous controls. Measures required to ensure that include: a unique identifier and an anti-tampering device on the outer
packaging of drugs, stringent rules on import of active pharmaceutical ingredients and record-keeping requirements for wholesale distributors.
Approval Regulation Outside of the U.S. and the EU
For marketing outside the U.S. and the EU, we are subject to non-U.S. regulatory requirements governing human clinical testing and marketing
approval for our products. These requirements vary by jurisdiction, can differ from those in the U.S. and the EU and may require us to perform additional
preclinical or clinical testing. The amount of time required to obtain necessary approvals may be longer or shorter than that required for FDA or EC approval.
In many countries outside of the U.S., approvals for pricing, coverage and reimbursement offered by third-party payers, including government payers and
private insurance plans, are also required.
Other Regulation
Exclusivity for Biologics in the U.S.
The Biologics Price Competition and Innovation Act of 2009 (BPCIA), which was enacted as part of the Patient Protection and Affordable Care Act
of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (as amended, the PPACA), created an abbreviated approval pathway for
biological products that are demonstrated to be “biosimilar” or “interchangeable” with an FDA-licensed reference biological product. Biosimilarity sufficient to
reference a prior FDA-licensed product requires that there be no differences in conditions of use, route of administration, dosage form, and strength, and no
clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency. Biosimilarity must be shown
through analytical studies, animal studies, and at least one clinical study, absent a waiver from the Secretary of the U.S. Department of Health and Human
Services. In order to meet the higher hurdle of interchangeability, a sponsor must demonstrate that the biosimilar product can be expected to produce the
same clinical result as the reference product, and for a product that is administered more than once, that the risk of switching between the reference product
and biosimilar product is not greater than the risk of maintaining the patient on the reference product. The first biosimilar product was approved under the
BPCIA in 2015, and the first interchangeable product was approved in 2021. Complexities associated with the larger, and often more complex, structures of
biological products, as well as the process by which such products are manufactured, pose significant hurdles to implementation that are still being
evaluated by the FDA. A reference biologic is granted 12 years of exclusivity from the time of first licensure of the reference product and no application for a
biosimilar can be submitted for four years from the date of licensure of the reference product. The first biologic product submitted under the abbreviated
approval pathway that is determined to be interchangeable with the reference product has exclusivity against a finding of interchangeability
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for other biologics for the same condition of use for the lesser of (i) one year after first commercial marketing of the first interchangeable biosimilar, (ii)
eighteen months after the first interchangeable biosimilar is approved if there is not patent challenge, (iii) eighteen months after resolution of a lawsuit over
the patents of the reference biologic in favor of the first interchangeable biosimilar applicant, or (iv) 42 months after the first interchangeable biosimilar’s
application has been approved if a patent lawsuit is ongoing within the 42-month period.
Data Exclusivity and Market Exclusivity in the EU
The EU provides opportunities for market and data exclusivity for all products containing a New Active Substance, or NAS (such as a chemical,
biological or radiopharmaceutical substance not previously authorized as a medicinal product in the EU), which have been granted an MA. These products
receive eight years of data exclusivity and an additional two years of market exclusivity. The data exclusivity period prevents generic or biosimilar applicants
from relying on the pre-clinical and clinical trial data contained in the dossier of the reference product when applying for a generic or biosimilar MA in the EU
during a period of eight years from the date on which the reference product was first authorized in the EU. The market exclusivity period prevents a
successful generic or biosimilar applicant from commercializing its product in the EU until ten years have elapsed from the initial MA of the reference product
in the EU. The overall ten-year market exclusivity period can be extended to a maximum of eleven years if, during the first eight years of those ten years, the
MA holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to
bring a significant clinical benefit in comparison with existing therapies.
Orphan Drug Designation
Orphan drug designation is granted by the FDA and the EC to drugs intended to treat a rare disease or condition, which in the U.S. is defined as
having a prevalence of less than 200,000 individuals in the U.S. In the EU, orphan drug designation is available if a sponsor can establish: that the medicine
is intended for the diagnosis, prevention or treatment of (1) a life-threatening or chronically debilitating condition affecting no more than five in 10,000 people
in the EU, which is equivalent to around 250,000 people or fewer, or (2) a life-threatening, seriously debilitating or serious and chronic condition in the EU
and that without incentives derived from the orphan status, it is unlikely that the marketing of the medicinal product in the EU would generate sufficient return
to justify the necessary investment. For either of these criteria, the applicant must demonstrate that there exists no satisfactory method of diagnosis,
prevention or treatment of the condition in question that has been authorized in the EU or, if such method exists, the medicinal product will be of significant
benefit to those affected by that condition. Orphan drug designation must be requested before submitting a marketing application and, in the EU, it must be
maintained until the time of the granting of the MA. Orphan designation is indeed lost in the EU if it is established that the product no longer meets the
orphan criteria at the time a MA is granted for such product.
Orphan drug designation does not shorten the regulatory review and approval process. However, if an orphan drug later receives approval for the
indication for which it has designation, the relevant regulatory authority may not approve any other applications to market the same drug for the same
indication, except in very limited circumstances, for seven years in the U.S. and ten years in the EU (extendable to twelve years for medicines that have
complied with an agreed Pediatric Investigation Plan (PIP) pursuant to Regulation 1901/2006) and, in addition, a range of other benefits during the
development and regulatory review process are available in the EU, including scientific assistance for study protocols, authorization through the centralized
marketing authorization procedure covering all member countries and a reduction or elimination of registration and marketing authorization fees. Among the
benefits of orphan drug designation in the U.S. are tax credits for certain research and a waiver of the NDA/BLA application user fee. Orphan drug exclusive
marketing rights may be lost under certain conditions, such as if the request for designation was materially defective or if the manufacturer is unable to
assure sufficient quantity of the drug. In the EU, a MA may be granted to a similar medicinal product with the same orphan indication during the regulatory
exclusivity period with the consent of the MA holder for the original orphan medicinal product or if the MA holder of the original orphan medicinal product is
unable to supply sufficient quantities. A MA may also be granted to a similar medicinal product with the same orphan indication if the second applicant can
establish that its medicinal product is safer, more effective or otherwise clinically superior to the original orphan medicinal product. The period of market
exclusivity may, in addition, be reduced to six years if, at the end of the fifth year, it can be demonstrated on the basis of available evidence that the criteria
for its designation as an orphan medicine are no longer satisfied, for example if the original orphan medicinal product has become sufficiently profitable not
to justify maintenance of market exclusivity.
Healthcare Reform
The U.S. federal and state governments continue to propose and pass legislation designed to regulate the healthcare industry, including legislation
that seeks to directly or indirectly regulate pharmaceutical drug pricing. For more information, see Item 1A. Risk Factors “Government healthcare reform
could increase our costs and adversely affect our revenue and results of operations.”
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Other Regulatory Requirements
In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal laws have been applied to restrict
certain business and marketing practices in the pharmaceutical industry in recent years. These laws include anti-kickback, false claims, patient data privacy
and security, and transparency statutes and regulations.
The federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to
induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under
Medicare, Medicaid or other federally financed healthcare programs. The PPACA amended the intent requirement of the federal Anti-Kickback and certain
other criminal healthcare fraud statutes such that 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. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and
prescribers, purchasers and formulary managers on the other. Although there are a number of statutory exceptions and regulatory safe harbors protecting
certain common activities from prosecution or other regulatory sanctions, the exceptions and safe harbors are drawn narrowly, and practices that involve
remuneration intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor.
Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal
government, or knowingly making, or causing to be made, a false statement to have a false claim paid. The PPACA amended the statute so 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 laws. Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for
allegedly inflating drug prices they report to pricing services, which in turn are used by the government to set Medicare and Medicaid reimbursement rates,
and for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. In addition, certain
marketing practices, including off-label promotion, may also violate false claims laws.
The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for, among other things,
executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters. HIPAA, as amended by the Health
Information Technology for Economic and Clinical Health Act and their 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.
The federal Physician Payments Sunshine Act requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment
is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to the CMS information
related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors),
physician assistants, certain types of advanced practice nurses and teaching hospitals, and applicable manufacturers and applicable group purchasing
organizations to report annually to CMS ownership and investment interests held by the physicians and their immediate family members.
The majority of states also have statutes or regulations similar to the federal Anti-Kickback Statute and false claims laws, which apply to items and
services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payer. Several states now require
pharmaceutical companies to report expenses relating to the marketing and promotion of pharmaceutical products and to report gifts and payments to
individual physicians in these states while other states prohibit various other marketing-related activities. Other states require submission or disclosure of
certain pricing information. Still other states require the posting of information relating to clinical studies and their outcomes. In addition, states including
California, Connecticut, Nevada and Massachusetts require pharmaceutical companies to implement compliance programs or marketing codes. Currently,
several additional states are considering similar proposals. Compliance with these laws is difficult and time consuming, and companies that do not comply
with these state laws face civil penalties. Sanctions under these federal and state laws may include significant penalties, including administrative and
criminal sanctions, civil monetary penalties, damages, monetary fines, disgorgement, exclusion of a company from federal healthcare programs, integrity
oversight and reporting obligations, criminal fines, contractual damages, reputational harm, diminished profits and future earnings, curtailment of operations
and imprisonment.
The U.S. Foreign Corrupt Practices Act (FCPA), to which we are subject, prohibits corporations and individuals from engaging in certain activities to
obtain or retain business or to influence a person working in an official capacity. It is illegal to pay, offer to pay or authorize the payment of anything of value
to any non-U.S. government official, government staff member, political party or political candidate in an attempt to obtain or retain business or to otherwise
influence a person working in an official capacity. Similar laws exist in other countries, such as the U.K., that restrict improper payments to public and private
parties. Many countries have laws prohibiting these types of payments within the respective country. In the EU, for example, harmonized rules prohibit gifts,
pecuniary advantages or benefits in kind to Health Care Professionals (HCPs) unless they are inexpensive and relevant to the practice of medicine or
pharmacy. Similarly, strict rules apply to hospitality at sales promotion events. Based on these rules, a body of industry guidelines and sometimes national
laws in force in individual EU Member States has been introduced to fight improper payments or other transfers of value to HCPs, and in general
inducements that may have a broadly promotional character. Historically, pharmaceutical companies have been the target of FCPA and other anti-corruption
and similar
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investigations, as well as of wide media attention, sometimes resulting in significant penalties, image and other costs for such companies.
Pricing and Reimbursement
Because the course of treatment for patients using our products is expensive, sales of our products depend, in significant part, on the availability
and extent of coverage and reimbursement offered by third-party payers, including government payers and private insurance plans. Governments may
regulate access to, prices of or reimbursement levels for our products to control costs or to affect levels of use of our products, and private insurers may be
influenced by government reimbursement methodologies.
Third-party payers carefully review and increasingly challenge the prices charged for drugs, examine their medical necessity, and review their cost
effectiveness. Reimbursement rates from private companies vary depending on the third-party payer, the insurance plan and other factors. One payer’s
determination to provide coverage for a product does not assure that other payers will also provide coverage for the product. Moreover, the process for
determining whether a third-party payer will provide coverage for a product may be separate from the process for setting the price of a product or for
establishing the reimbursement rate that such a payer will pay for the product. Obtaining coverage and adequate reimbursement for our products may be
particularly difficult because of the higher prices often associated with drugs administered under the supervision of a physician. A payer’s decision to provide
coverage for a product does not imply that an adequate reimbursement rate will be approved. Adequate third-party reimbursement may not be available to
enable us to maintain high enough price levels to realize sufficient revenues from our investment in product development. In addition, emphasis on managed
care in the U.S. has increased and we expect will continue to increase the pressure on pharmaceutical pricing. Coverage policies and third-party
reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we or our
collaborators receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
Outside of the U.S. our products are paid for by a variety of payers, with governments being the primary source of payment. 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
pricing and/or reimbursement is approved. In many countries the government closely regulates drug pricing and reimbursement and often has a significant
discretion in determining whether a product will be reimbursed at all and, if it is, how much will be paid. Negotiating prices with governmental authorities can
delay commercialization of our products. Payers in many countries use a variety of cost-containment measures that can include referencing prices in other
countries and using those reference prices to set their own price, mandatory price cuts and rebates. This international patchwork of price regulation has led
to different prices across countries and some cross-border trade in our products from markets with lower prices. Even after a price is negotiated, countries
frequently request or require adjustments to the price and other concessions over time.
Government Pricing and Reimbursement Programs for Marketed Drugs in the U.S.
Medicaid, the 340B Drug Pricing Program, and Medicare
Federal law requires that a pharmaceutical manufacturer, as a condition of having its products receive federal reimbursement under Medicaid and
Medicare Part B, must pay rebates to state Medicaid programs for all units of its covered outpatient drugs dispensed to Medicaid beneficiaries and paid for
by a state Medicaid program under either a fee-for-service arrangement or through a managed care organization. This federal requirement is effectuated
through a Medicaid drug rebate agreement between the manufacturer and the Secretary of Health and Human Services. CMS administers the Medicaid drug
rebate agreements, which provide, among other things, that the drug manufacturer will pay rebates to each state Medicaid agency on a quarterly basis and
report certain price information on a monthly and quarterly basis. The rebates are based on prices reported to CMS by manufacturers for their covered
outpatient drugs. For non-innovator products, generally generic drugs marketed under ANDAs, the rebate amount is 13% of the average manufacturer price
(AMP) for the quarter. The AMP is the weighted average of prices paid to the manufacturer (1) directly by retail community pharmacies and (2) by
wholesalers for drugs distributed to retail community pharmacies. For innovator products (i.e., drugs that are marketed under NDAs or BLAs), the rebate
amount is the greater of 23.1% of the AMP for the quarter or the difference between such AMP and the best price for that same quarter. The best price is
essentially the lowest price available to non-governmental entities. Innovator products may also be subject to an additional rebate that is based on the
amount, if any, by which the product’s AMP for a given quarter exceeds the inflation-adjusted baseline AMP, which for most drugs is the AMP for the first full
quarter after launch. Since 2017, non-innovator products are also subject to an additional rebate. To date, the rebate amount for a drug has been capped at
100% of the AMP; however, effective January 1, 2024, this cap will be eliminated, which means that a manufacturer could pay a rebate amount on a unit of
the drug that is greater than the average price the manufacturer receives for the drug.
The terms of participation in the Medicaid drug rebate program impose an obligation to correct the prices reported in previous quarters, as may be
necessary. Any such corrections could result in additional or lesser rebate liability, depending on the direction of the correction. In addition to retroactive
rebates, if a manufacturer were found to have knowingly submitted false information to the government, federal law provides for civil monetary penalties for
failing to provide required information, late submission of required information, and false information.
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A manufacturer must also participate in a federal program known as the 340B drug pricing program in order for federal funds to be available to pay
for the manufacturer’s drugs under Medicaid and Medicare Part B. Under this program, the participating manufacturer agrees to charge certain safety net
healthcare providers no more than an established discounted price for its covered outpatient drugs. The formula for determining the discounted price is
defined by statute and is based on the AMP and the unit rebate amount as calculated under the Medicaid drug rebate program, discussed above.
Manufacturers are required to report pricing information to the Health Resources and Services Administration (HRSA) on a quarterly basis. HRSA has also
issued regulations relating to the calculation of the ceiling price as well as imposition of civil monetary penalties for each instance of knowingly and
intentionally overcharging a 340B covered entity.
Federal law also requires that manufacturers report data on a quarterly basis to CMS regarding the pricing of drugs that are separately
reimbursable under Medicare Part B. These are generally drugs, such as injectable products, that are administered “incident to” a physician service and are
not generally self-administered. The pricing information submitted by manufacturers is the basis for reimbursement to physicians and suppliers for drugs
covered under Medicare Part B. As with the Medicaid drug rebate program, federal law provides for civil monetary penalties for failing to provide required
information, late submission of required information, and false information.
Medicare Part D provides prescription drug benefits for seniors and people with disabilities. Medicare Part D beneficiaries have a gap in their
coverage (between the initial coverage limit and the point at which catastrophic coverage begins) where Medicare does not cover their prescription drug
costs, known as the coverage gap. However, starting in 2020, Medicare Part D beneficiaries pay 25% of drug costs after they reach the initial coverage limit -
the same percentage they were responsible for before they reached that limit - thereby closing the coverage gap. The cost of closing the coverage gap is
being borne by innovator companies and the government through subsidies. Each manufacturer of drugs approved under NDAs or BLAs is required to enter
into a Medicare Part D coverage gap discount agreement and provide a 70% discount on those drugs dispensed to Medicare beneficiaries in the coverage
gap, in order for its drugs to be reimbursed by Medicare Part D.
U.S. Federal Contracting and Pricing Requirements
Manufacturers are also required to make their covered drugs, which are generally drugs approved under NDAs or BLAs, available to authorized
users of the Federal Supply Schedule (FSS) of the General Services Administration. The law also requires manufacturers to offer deeply discounted FSS
contract pricing for purchases of their covered drugs by the Department of Veterans Affairs, the Department of Defense, the Coast Guard, and the Public
Health Service (including the Indian Health Service) in order for federal funding to be available for reimbursement or purchase of the manufacturer’s drugs
under certain federal programs. FSS pricing to those four federal agencies for covered drugs must be no more than the Federal Ceiling Price (FCP), which is
at least 24% below the Non-Federal Average Manufacturer Price (Non-FAMP) for the prior year. The Non-FAMP is the average price for covered drugs sold
to wholesalers or other middlemen, net of any price reductions.
The accuracy of a manufacturer’s reported Non-FAMPs, FCPs, or FSS contract prices may be audited by the government. Among the remedies
available to the government for inaccuracies is recoupment of any overcharges to the four specified federal agencies based on those inaccuracies. If a
manufacturer were found to have knowingly reported false prices, in addition to other penalties available to the government, the law provides for significant
civil monetary penalties per incorrect item. Finally, manufacturers are required to disclose in FSS contract proposals all commercial pricing that is equal to or
less than the proposed FSS pricing, and subsequent to award of an FSS contract, manufacturers are required to monitor certain commercial price reductions
and extend commensurate price reductions to the government, under the terms of the FSS contract Price Reductions Clause. Among the remedies available
to the government for any failure to properly disclose commercial pricing and/or to extend FSS contract price reductions is recoupment of any FSS
overcharges that may result from such omissions.
Disclosure of Clinical Trial Information
Sponsors of clinical trials of FDA-regulated products, including drugs and biologics, are required to register and disclose certain clinical trial
information. Information related to the product, patient population, phase of investigation, study sites and investigators, and other aspects of the clinical trial
are then made public as part of the registration. Sponsors are also obligated to discuss the results of their clinical trials after completion. In certain
circumstances, disclosure of the results of these trials can be delayed for up to two years after the date of completion of the trial. Competitors may use this
publicly available information to gain knowledge regarding the progress of development programs. In the EU there is an increasing trend requiring public
disclosure of development data, in particular clinical trial data. These data were traditionally regarded as Confidential Commercial Information (CCI);
however, under policies adopted in the EU, clinical study data submitted to the EMA in MAAs, including preclinical data, and patient level data, may be
subject to public disclosure. This is confirmed in the CTR, the new EU legislation on clinical trials, according to which clinical trial applications and all the
related documentation are uploaded and stored in the Clinical Trials Information System (CTIS) which is managed by the EMA. Confirming the transparency
principle, the CTR provides that the information stored in such system is publicly accessible unless confidentiality is justified on the basis of a limited set of
exceptions. These exceptions, which - as such - are to be interpreted narrowly in the EU, include the protection of CCI, in particular through taking into
account the status of the MA for the applicable product; however, CCI is overridden in those cases where the authorities conclude that there is an overriding
public interest in disclosure. Case law of the Court of Justice of the European Union has also
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confirmed the absence of a general presumption of confidentiality over documents containing clinical and preclinical data provided to the EMA in support of a
MAA.
Pediatric Indications
In the U.S., under the Pediatric Research Equity Act of 2007 (PREA), NDAs or BLAs or supplements to NDAs or BLAs must contain data to assess
the safety and effectiveness of the drug for the claimed indication(s) in all relevant pediatric subpopulations and to support dosing and administration for
each pediatric subpopulation for which the drug is safe and effective. The FDA may grant deferrals for submission of data or full or partial waivers. Unless
otherwise required by statute or regulation, PREA does not apply to any drug for an indication for which orphan drug designation has been granted. The Best
Pharmaceuticals for Children Act (BPCA) provides sponsors of NDAs with an additional six-month period of market exclusivity for all unexpired patent or
non-patent exclusivity on all forms of the drug containing the active moiety if the sponsor submits results of pediatric studies specifically requested by the
FDA under BPCA within required timeframes. The BPCIA provides sponsors of BLAs an additional six-month extension for all unexpired non-patent market
exclusivity on all forms of the biological containing the active moiety pursuant to the BPCA if the conditions under the BPCA are met.
In the EU, companies developing a new medicinal product must agree to a PIP with the EMA and must conduct pediatric clinical trials in
accordance with that PIP, unless a deferral or waiver is granted by the EMA on request by the applicant (e.g., because the relevant disease or condition
occurs only in adults). The PIP requirement also applies when a MA holder intends to add a new indication, pharmaceutical form or route of administration
for a medicinal product that has already been authorized. The MAA for the product must include the results of pediatric clinical trials conducted in
accordance with the PIP, unless a waiver applies, or a deferral has been granted, in which case the pediatric clinical trials must be completed at a later date.
Once all the studies and measures agreed have been conducted in accordance with the PIP, products are eligible for a six -month extension of the protection
under a supplementary protection certificate (if any is in effect at the time of approval) or, in the case of orphan medicinal products, a two -year extension of
the orphan market exclusivity. This pediatric reward is granted subject to specific conditions. These conditions include that the applicant demonstrates
having complied with all the measures contained in the PIP, that the summary of product characteristics, and if appropriate the package leaflet, reflects the
results of studies conducted in compliance with such PIP, and that the product is authorized in all Member States. The rewards for conducting studies in the
pediatric population can be granted irrespective of the fact that the information generated in compliance with the agreed PIP fails to lead to the authorization
of a pediatric indication.
Privacy and Security Legislation
We are subject to various laws and regulations globally regarding privacy and data protection. These laws and regulations involve the collection,
storage, handling, use, disclosure, transfer and security of personal data. The legislative and regulatory environments regarding privacy and data protection
are continually evolving and developing, as these issues are the subjects of increasing amounts of attention in countries globally. For example, we are
subject to the EU’s General Data Protection Regulation GDPR, which became effective on May 25, 2018. The GDPR requires that personal data is only
collected for specified, explicit and legal purposes as set out in the GDPR or local laws, and the data may then only be processed in a manner consistent
with those purposes. The personal data collected and processed must be adequate, relevant and not excessive in relation to the purposes for which it is
collected and processed, it must be held securely, not transferred outside of the EEA (unless certain steps are taken to ensure an adequate level of
protection), and must not be retained for longer than necessary for the purposes for which it was collected. The GDPR also requires companies processing
personal data to implement adequate technical measures in order to ensure the most appropriate level of security which may vary depending on different
factors such as the categories of processed personal data, the state of the art, the costs of implementation and the nature, scope, context and purposes of
processing as well as the risk of varying likelihood and severity for the rights and freedoms of natural persons. In addition, the GDPR requires companies
processing personal data to take certain organizational steps to ensure that they have adequate records, policies, security, training and governance
frameworks in place to ensure the protection of data subject rights, including as required to respond to complaints and requests from data subjects. For
example, the GDPR requires us to make more detailed disclosures to data subjects, requires disclosure of the legal basis on which we can process personal
data, provides for conditions under which a valid consent for processing can be obtained, requires the appointment of a data protection officer where
sensitive personal data (i.e., health data) is processed on a large scale, imposes mandatory data breach notification throughout the EEA and imposes
additional obligations when contracting with service providers or partners. In addition, to the extent a company processes, controls or otherwise uses “special
category” of personal data (including patients’ health or medical information, genetic information and biometric information), more stringent rules apply,
further limiting the circumstances and the manner in which a company is legally permitted to process that data.
We are also subject to the California Consumer Privacy Act of 2018, which became effective on January 1, 2020. Other jurisdictions where we
operate have enacted or proposed similar legislation and/or regulations. Failure to comply with these laws could result in significant penalties, including,
under GDPR, fines of up to 20 million Euro or 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher.
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Human Capital
As of December 31, 2021, we had 3,045 full-time employees worldwide, of whom 1,336 were in operations, 692 were in research and development,
516 were in sales and marketing and 501 were in administration. Of the 3,045 full-time employees as of December 31, 2021, 2,105 employees were in the
U.S. and Canada, and 940 employees were in other non-U.S. countries, including 756 in Europe and the Middle East, 120 in Latin America and 64 in Asia
Pacific. We also leverage temporary workers to fill short-term positions for our business and manufacturing needs. Since the start of the COVID-19
pandemic, a significant portion of our global workforce has worked remotely, with some employees recently returning to our offices on a voluntary basis. A
portion of our employee base in the U.S. and Ireland continues to work onsite supporting manufacturing and laboratory operations.
Diversity, Equity and Inclusion
At BioMarin, prejudice, racism and intolerance are unacceptable. We are committed to diversity, equity and inclusion (DEI) across all aspects of our
organization, including hiring, promotion and development practices. As of December 31, 2021, racial and ethnic minorities represented 45% of our
employees in the U.S. Globally, 50% of our workforce were women and 46% of our positions at director-level and above were held by women. We are
committed to continuing our ongoing efforts to ensure diversity in all positions, including leadership.
We remain steadfast in our commitment to fostering a community that reflects equality and inclusiveness and working towards making BioMarin a
place where every employee feels heard, respected and valued. This commitment is a cultural value, and we believe incorporating and encouraging different
perspectives from employees of varied backgrounds and experiences helps us better achieve our business goals and objectives. In 2020, we formed a DEI
Employee Advisory Committee to help us define our DEI roadmap and ensure that perspectives from employees of different age, tenure, gender, sexual
orientation, race, ethnicity, level and location are considered in how we build the most inclusive environment. We also continue to support and increase the
number of our employee resource groups that build community for employees from underrepresented groups.
We are honored to be recognized as a company of choice. In January 2022, we were recognized for the second year in a row as a Best Place to
Work for lesbian, gay, bisexual, transgender and queer (LGBTQ) equality by the Human Rights Campaign, scoring 100% on their Corporate Equality Index,
one of the foremost benchmarking surveys and reports in the U.S. measuring corporate policies and practices related to LGBTQ workplace equality.
Compensation, Benefits and Well-being
We offer competitive compensation and benefits in order to attract and retain excellent people and support our employees’ overall well-being. Our
total rewards compensation package includes market-competitive salary, the potential to earn bonuses or sales commissions, equity, healthcare benefits,
retirement savings plans, paid time off and family leave, fitness and wellness programs, free flu vaccinations and an Employee Assistance Program and
other mental health services.
In response to the COVID-19 pandemic, we developed a comprehensive global plan that established clear and standardized COVID-19 policies,
safety protocols and communications for all employees. We implemented significant changes that we determined were in the best interest of our employees
as well as the communities in which we operate. These include having the majority of our employees work from home, while implementing additional safety
measures for employees continuing critical onsite work and those who have recently returned to our offices on a voluntary basis. We also instituted a policy
restricting domestic and international non-essential travel for our employees. As part of our response to the changes implemented due to the COVID-19
pandemic, we established additional employee support programs to support the transition to remote working and to provide financial support and time-off for
working parents. In addition, policies and programs were established to help support our employees, including safety screening, onsite COVID-19 testing
and financial support for those who incurred additional expenses related to higher commuting costs, fitness facility closures, personal purchase of supplies
and equipment, and increased childcare demands.
We believe people should be paid for the value of their work, regardless of race, ethnicity, gender or other protected characteristics. To this end, we
benchmark and tie compensation to market data as well as to an employee’s experience, function, and performance. We regularly review our workforce
compensation practices and strive for equity. Specifically, we partner with independent, third-party experts to conduct a regular and detailed pay equity
assessment to determine whether gender and race/ethnicity have a significant impact on pay levels across the organization. This pay equity analysis is
conducted on an employee’s total compensation, including base pay, bonus, and equity. If we identify any pay gap across the organization, we typically
make adjustments to mitigate such gaps. Our managers also receive training in how to recognize and prevent discrimination in hiring, performance
management and compensation decisions.
Professional Growth and Development
We help our employees develop the skills and capabilities to support BioMarin’s growth and innovation. We continually invest in our employees’
career growth and provide them with a wide range of development opportunities, including face-to-face, virtual and self-directed learning, mentoring, mobile
coaching and external development. We offer our employees career-specific
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training and resources and support development opportunities through company sponsored programs in addition to our tuition reimbursement program. We
also provide our high-potential employees with a variety of leadership coaching and management programs.
Patient and Community Connections
We are striving to support our local communities around the world by developing programs that inspire and enrich both our patient populations and
the areas where we live and work. We actively engage with underrepresented populations through a variety of outreach and programs. We have
collaborated with Biotech Partners, a non-profit organization in the San Francisco Bay Area focused on helping students underrepresented in the
biotechnology field to gain experience through classroom instruction and paid internships. In addition, we have a partnership with Health Career Connection,
a national non-profit that prepares the next generation of diverse, transformational health, equity, and racial justice leaders, by providing promising
undergraduate college students from underrepresented backgrounds and under resourced communities with paid internship programs, health equity
scholars programs and alumni professional development initiatives. Through our Rare Scholars program, we award annual scholarships to students living
with rare disease.
Other Information
We were incorporated in Delaware in October 1996. Our principal executive offices are located at 770 Lindaro Street, San Rafael, California 94901
and our telephone number is (415) 506-6700. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, proxy statements, current reports on Form
8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the
Exchange Act) are available free of charge at www.bmrn.com as soon as reasonably practicable after electronically filing such reports with the Security and
Exchange Commission (the SEC). Such reports and other information may be accessed through the SEC’s website at www.sec.gov. Information contained in
our website is not part of this or any other report that we file with or furnish to the SEC.
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Item 1A. Risk Factors
An investment in our securities involves a high degree of risk. We operate in a dynamic and rapidly changing industry that involves numerous risks
and uncertainties. The risks and uncertainties described below are not the only ones we face. Other risks and uncertainties, including those that we do not
currently consider material, may impair our business. If any of the risks discussed below actually occur, our business, financial condition, operating results or
cash flows could be materially adversely affected. This could cause the value of our securities to decline, and you may lose all or part of your investment.
Business and Operational Risks
The COVID-19 pandemic could continue to materially adversely affect our business, results of operations, and financial condition.
The COVID-19 pandemic has resulted in travel restrictions, quarantines, “work-from-home” and “shelter-in-place” orders and extended shutdown of
certain businesses around the world, including in many countries in which we operate. Our 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 the
COVID-19 pandemic, and we expect that the pandemic will continue to adversely impact our financial results and our business generally in 2022. Ongoing
and future effects of the COVID-19 pandemic (or any future pandemic) on all aspects of our business and operations, including revenues, expenses,
reserves and allowances, manufacturing, clinical trials and research and development costs, and the duration of such effects, are highly uncertain and
difficult to predict.
The COVID-19 pandemic has adversely affected and will likely continue to adversely impact our product development programs, including
preclinical study and clinical trial operations. We have been, and will likely continue to be, unable to initiate or continue conducting clinical trials as originally
planned due to the prioritization of hospital resources toward the pandemic, difficulty in recruiting and retaining healthcare providers and staff due to their
diversion toward treating COVID-19 patients or their heightened exposure to COVID-19, potential unwillingness of patients to enroll or continue in trials for
fear of exposure to COVID-19 at sites, or the inability of patients to comply with clinical trial protocols as quarantines or travel restrictions impede patient
movement or otherwise interrupt healthcare services. For example, we experienced delays in certain clinical trials due to COVID-19 related complications
and have had to reevaluate expected timelines for those trials. In addition, we rely on independent clinical investigators, contract research organizations
(CROs) and other third-party service providers to assist us in managing, monitoring and otherwise carrying out our preclinical studies and clinical trials, and
the pandemic has impacted, may continue to affect their ability to devote sufficient time and resources to our programs or to travel to sites to perform work
for us. Additionally, the COVID-19 pandemic has delayed, and may continue to postpone, necessary regulatory inspections and other interactions with
regulators regarding our product candidates, which could delay review or approval of our regulatory submissions.
COVID-19 has adversely affected and will likely continue to affect our ability to source materials and supplies and could adversely impact our ability
to manufacture and distribute our product candidates and products. The pandemic has resulted and may continue to result in reduced operations of third-
party suppliers of raw materials and supplies upon whom we rely or otherwise limit our ability to obtain sufficient materials and supplies necessary for
production of our therapies. Our manufacturing facilities and those of our contract manufacturers are located in areas impacted by the COVID-19 pandemic,
which may result in delays or disruptions in our ability to produce product candidates and products. If we or any third party in our supply or distribution chain
are adversely impacted by the COVID-19 pandemic, including as a result of required closures, staffing shortages, production slowdowns and disruptions in
delivery systems, our operations may be disrupted, limiting our ability to manufacture and distribute our product candidates for clinical trials and research
and development operations and our products for commercial sales.
Our commercial operations have also been, and will likely continue to be, adversely impacted by the COVID-19 pandemic. Many of our products
are administered via infusions in a clinic or hospital setting and/or by a healthcare professional. Treating COVID-19 patients has become the priority for many
healthcare facilities and workers, so it has become, and may continue to be, difficult for some of our patients to receive our therapies that are administered
by infusion. Although we are working with our patient community and healthcare providers to find alternative arrangements where necessary, such as
providing infusions at home, the revenue from doses of our products that are missed by patients and the lost revenues from delayed treatment starts for new
patients will never be recouped. Moreover, some patients may choose to skip infusions because they do not want to risk exposure to COVID-19 by having a
healthcare provider administer the therapy at a healthcare facility or at home. The pandemic has also hindered our ability to find new patients and start
treating these patients, and it has limited our sales force’s ability to promote our products to distributors, hospitals, clinics, doctors and pharmacies, which
could adversely affect our revenues and results of operations. In addition, the COVID-19 pandemic could adversely affect our workforce and the employees
of companies with which we do business, thereby disrupting our business operations. We have implemented work-from-home policies for employees whose
jobs do not require them to be onsite. Increased reliance by us and the companies with which we do business on personnel working from home may
negatively impact productivity, increase cyber security risk, create data accessibility issues, increase the risk for communication disruptions, or otherwise
disrupt or delay normal business operations. For our employees whose jobs require them to be onsite, we have taken precautions to avoid the spread of
COVID-19 among our employees, but we cannot guarantee our workforce will not face an outbreak that could adversely impact our operations.
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While the long-term economic impact and the duration of the COVID-19 pandemic may be difficult to predict, the pandemic has resulted in, and may
continue to result in, significant disruption of global financial markets, which could reduce our ability to access capital and could negatively affect our liquidity
and the liquidity and stability of markets for our common stock and convertible notes. In addition, a recession, further market correction or depression
resulting from the COVID-19 pandemic could materially adversely affect our business and the value of our common stock and convertible notes.
To the extent the COVID-19 pandemic continues to adversely affect our business and financial results, it may also have the effect of heightening
many of the other risks described in this Risk Factors section, such as those relating to our conducting a significant amount of our sales and operations
outside of the U.S., exposure to changes in foreign exchange rates, our substantial indebtedness, our need to generate sufficient cash flows to service our
indebtedness and finance our operations, our ability to comply with the covenants contained in the agreements that govern our indebtedness and the
volatility of our stock price.
Because the target patient populations for our products are small, we must achieve significant market share and maintain high per-
patient prices for our products to achieve and maintain profitability.
All of our products target diseases with small patient populations. As a result, our per-patient prices must be relatively high in order to recover our
development and manufacturing costs and achieve and maintain profitability. For Brineura, Naglazyme and Vimizim in particular, we must market worldwide
to achieve significant market penetration of the product. In addition, because the number of potential patients in each disease population is small, it is not
only important to find patients who begin therapy to achieve significant market penetration of the product, but we also need to be able to maintain these
patients on therapy for an extended period of time. Due to the expected costs of treatment for our products, we may be unable to maintain or obtain sufficient
market share at a price high enough to justify our product development efforts and manufacturing expenses.
If we fail to obtain and maintain an adequate level of coverage and reimbursement for our products by third-party payers, the sales of our
products would be adversely affected or there may be no commercially viable markets for our products.
The course of treatment for patients using our products is expensive. We expect patients to need treatment for extended periods, and for some
products throughout the lifetimes of the patients. We expect that most families of patients will not be capable of paying for this treatment themselves. There
will be no commercially viable market for our products without coverage and reimbursement from third-party payers. Additionally, even if there is a
commercially viable market, if the level of reimbursement is below our expectations, our revenues and gross margin will be adversely affected.
Third-party payers, such as government or private healthcare insurers, carefully review and increasingly challenge the prices charged for drugs.
Reimbursement rates from private companies vary depending on the third-party payer, the insurance plan and other factors. Obtaining coverage and
adequate reimbursement for our products may be particularly difficult because of the higher prices often associated with drugs administered under the
supervision of a physician. Reimbursement systems in international markets vary significantly by country and by region, and reimbursement approvals must
be obtained on a country-by-country basis.
Government authorities and other third-party payers are developing increasingly sophisticated methods of controlling healthcare costs, such as by
limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payers are requiring that drug companies provide
them with predetermined discounts from list prices as a condition of coverage, are using restrictive formularies and preferred drug lists to leverage greater
discounts in competitive classes, and are challenging the prices charged for medical products. Further, no uniform policy requirement for coverage and
reimbursement for drug products exists among third-party payers in the U.S. Therefore, coverage and reimbursement for drug products can differ
significantly from payer to payer. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide
scientific and clinical support for the use of our products to each payer separately, with no assurance that coverage and adequate reimbursement will be
applied consistently or obtained in the first instance.
We cannot be sure that coverage and reimbursement will be available for any product that we commercialize or will continue to be available for any
product that we have commercialized and, if reimbursement is available, what the level of reimbursement will be. Even if favorable coverage and
reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement
rates may be implemented in the future. Coverage and reimbursement may impact the demand for, or the price of, any product candidate for which we
obtain marketing approval. If coverage and reimbursement are not available or reimbursement is available only to limited levels, we may not successfully
commercialize any product candidate for which we obtain marketing approval or continue to market any product that has already been commercialized.
Reimbursement in the European Union (EU) and many other territories must be negotiated on a country-by-country basis and in many countries the
product cannot be commercially launched until pricing and/or reimbursement is approved. The timing to complete the negotiation process in each country is
highly uncertain, and in some countries, we expect that it will exceed 12 months. Even after a price is negotiated, countries frequently request or require
reductions to the price and other concessions over time.
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For our future products, we will not know what the reimbursement rates will be until we are ready to market the product and we actually negotiate
the rates. If we are unable to obtain sufficiently high reimbursement rates for our products, they may not be commercially viable or our future revenues and
gross margin may be adversely affected.
If we fail to compete successfully with respect to product sales, we may be unable to generate sufficient sales to recover our expenses
related to the development of a product program or to justify continued marketing of a product and our revenues could be adversely affected.
Our competitors may develop, manufacture and market products that are more effective or less expensive than ours. They may also obtain
regulatory approvals for their products faster than we can obtain them (including those products with orphan drug designation, which may prevent us from
marketing our product entirely) or commercialize their products before we do. With respect to valoctocogene roxaparvovec, if the product candidate is
approved, we will face a highly developed and competitive market for hemophilia A treatments. As we commercialize valoctocogene roxaparvovec, if
approved, we may face intense competition from large pharmaceutical companies with extensive resources and established relationships in the hemophilia
A community. If we do not compete successfully, our revenues would be adversely affected, and we may be unable to generate sufficient sales to recover
our expenses related to the development of a product program or to justify continued marketing of a product.
Changes in methods of treatment of disease could reduce demand for our products and adversely affect revenues.
Even if our product candidates are approved, if doctors elect a course of treatment which does not include our products, this decision would reduce
demand for our products and adversely affect revenues. For example, if gene therapy becomes widely used as a treatment of genetic diseases, the use of
enzyme replacement therapy, such as Aldurazyme, Naglazyme, and Vimizim in MPS diseases, could be greatly reduced. Moreover, if we obtain regulatory
approval for valoctocogene roxaparvovec, the commercial success of valoctocogene roxaparvovec will still depend, in part, on the acceptance of physicians,
patients and healthcare payers of gene therapy products in general, and our product candidate in particular, as medically necessary, cost effective and safe.
Changes in treatment method can be caused by the introduction of other companies’ products or the development of new technologies or surgical
procedures which may not directly compete with ours, but which have the effect of changing how doctors decide to treat a disease.
If we fail to develop new products and product candidates or compete successfully with respect to acquisitions, joint ventures, licenses
or other collaboration opportunities, our ability to continue to expand our product pipeline and our growth and development would be impaired.
Our future growth and development depend in part on our ability to successfully develop new products from our research and development
activities. The development of biopharmaceutical products is very expensive and time intensive and involves a great degree of risk. The outcomes of
research and development programs, especially for innovative biopharmaceuticals, are inherently uncertain and may not result in the commercialization of
any products.
Our competitors compete with us to attract organizations for acquisitions, joint ventures, licensing arrangements or other collaborations. To date,
several of our former and current product programs have been acquired through acquisitions and several of our former and current product programs have
been developed through licensing or collaborative arrangements, such as Aldurazyme, Kuvan and Naglazyme. These collaborations include licensing
proprietary technology from, and other relationships with, academic research institutions. Our future success will depend, in part, on our ability to identify
additional opportunities and to successfully enter into partnering or acquisition agreements for those opportunities. If our competitors successfully enter into
partnering arrangements or license agreements with academic research institutions, we will then be precluded from pursuing those specific opportunities.
Because each of these opportunities is unique, we may not be able to find a substitute. Several pharmaceutical and biotechnology companies have already
established themselves in the field of genetic diseases. These companies have already begun many drug development programs, some of which may target
diseases that we are also targeting, and have already entered into partnering and licensing arrangements with academic research institutions, reducing the
pool of available opportunities.
Universities and public and private research institutions also compete with us. While these organizations primarily have educational or basic
research objectives, they may develop proprietary technology and acquire patents that we may need for the development of our product candidates. We will
attempt to license this proprietary technology, if available. These licenses may not be available to us on acceptable terms, if at all. If we are unable to
compete successfully with respect to acquisitions, joint venture and other collaboration opportunities, we may be limited in our ability to develop new
products and to continue to expand our product pipeline.
The sale of generic versions of Kuvan by generic manufacturers has adversely affected and will continue to adversely affect our
revenues and may cause a decline in Kuvan revenues faster than expected.
Generic versions of Kuvan are available in several countries around the world, including multiple generic versions in the U.S. This generic
competition has adversely affected and will continue to adversely affect our revenues from Kuvan, and we cannot
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accurately predict the rate of decline of Kuvan revenues in these countries. We are also aware that manufacturers are challenging our patent portfolio related
to Kuvan in several jurisdictions, and one generic version of Kuvan has been approved by the European Medicines Agency (EMA), although it is not yet
commercially available. If these patent challenges are successful, or if a manufacturer chooses to offer a generic version of Kuvan, notwithstanding our
existing patents, our revenues may decline faster than expected.
If we do not achieve our projected development goals in the timeframes we announce and expect, the commercialization of our product
candidates may be delayed and the credibility of our management may be adversely affected and, as a result, our stock price may decline.
For planning purposes, we estimate the timing of the accomplishment of various scientific, clinical, regulatory and other product development goals,
which we sometimes refer to as milestones. These milestones may include the commencement or completion of scientific studies and clinical trials and the
submission of regulatory filings. From time to time, we publicly announce the expected timing of some of these milestones. All of these milestones are based
on a variety of assumptions. The actual timing of these milestones can vary dramatically compared to our estimates, in many cases for reasons beyond our
control. If we do not meet these milestones as publicly announced, the commercialization of our products may be delayed and the credibility of our
management may be adversely affected and, as a result, our stock price may decline.
We have in the past and may in the future enter into licensing arrangements, and we may not realize the benefits of such licensing
arrangements.
We have in the past and may in the future enter into licensing arrangements with third parties. It is possible that we may not achieve financial or
strategic benefits that justify a specific license, or we may otherwise not realize the benefits of such licensing arrangement. Further, licensing arrangements
impose various diligence, milestone and royalty payment and other obligations on us. If we fail to comply with our obligations under any current or future
licenses, our licensors may have the right to terminate these license agreements, which could harm our business prospects, financial condition and results of
operations. Further, counterparties to our license agreements have in the past and may in the future allege that we have breached a license agreement,
which can result in litigation or other disputes that can divert management’s attention away from our business and require us to expend resources, as well as
potentially having to negotiate new or reinstated licenses with less favorable terms. Any such situation could adversely affect our business, financial
condition, and results of operations.
Regulatory Risks
If we fail to obtain regulatory approval to commercially market and sell our product candidates, or if approval of our product candidates
is delayed, we will be unable to generate revenues from the sale of these product candidates, our potential for generating positive cash flow will
be diminished, and the capital necessary to fund our operations will increase.
We must obtain regulatory approval to market and sell our product candidates. For example, in the U.S., we must obtain Food and Drug
Administration (FDA) approval for each product candidate that we intend to commercialize, and in the EU we must obtain approval from the European
Commission (EC), based on the opinion of the Committee for Medicinal Products for Human Use of the EMA. The FDA and EC approval processes are
typically lengthy and expensive, and approval is never certain. To obtain regulatory approval, we must first show that our product candidates are safe and
effective for target indications through preclinical studies and clinical trials. Preclinical studies and clinical development are long, expensive and uncertain
processes. Completion of clinical trials may take several years, and failure may occur at any stage of development. The length of time required varies
substantially according to the type, complexity, novelty and intended use of a product candidate. Interim results of a preclinical test or clinical trial do not
necessarily predict final results, and acceptable results in early clinical trials may not be repeated in later clinical trials. Accordingly, there are no assurances
that we will obtain regulatory approval for any of our product candidates. Furthermore, there can be no assurance that approval of one of our product
candidates by one regulatory authority will mean that other authorities will also approve the same product candidate. Similarly, regulatory authorities may
approve a product candidate for fewer or more limited indications than requested. In addition, regulatory authorities may not approve the labeling claims that
are necessary or desirable for the successful commercialization of our product candidates.
We have had fewer interactions with regulatory authorities outside the U.S. and the EU as compared to our interactions with the FDA and EMA. The
approval procedures vary among countries and can involve additional clinical testing, and the time required to obtain approval may differ from that required
to obtain FDA or EC approval. Moreover, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries. Approval
by the FDA or EC does not ensure approval by regulatory authorities in other countries, and approval by one or more non-U.S. regulatory authorities does
not ensure approval by regulatory authorities in other non-U.S. countries or by the FDA or EC. However, a failure or delay in obtaining regulatory approval in
one country may have a negative effect on the regulatory process in others. The non-U.S. regulatory approval process may include all of the risks associated
with obtaining FDA or EC approval. We may not obtain non-U.S. regulatory approvals on a timely basis, if at all. We may not be able to file for regulatory
approvals and even if we file, we may not receive necessary approvals to commercialize our product candidates in any market.
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We also rely on independent third-party CROs to file some of our non-U.S. marketing applications, and while we keep a close oversight on the
activities we delegate to CROs, important aspects of the services performed for us by the CROs are out of our direct control. If we fail to adequately manage
our CROs, if the CRO elects to prioritize work on our projects below other projects or if there is any dispute or disruption in our relationship with our CROs,
the filing of our applications may be delayed.
Although the FDA and the EMA have programs to facilitate expedited development and accelerated approval processes, the timelines agreed under
legislative goals or mandated by regulations are subject to the possibility of substantial delays. Accordingly, even if any of our applications receives a
designation to facilitate expedited development and accelerated approval processes, these designations may not result in faster review or approval for our
product candidates compared to product candidates considered for approval under conventional procedures and, in any event, do not assure ultimate
approval of our product candidates by regulatory authorities. In addition, the FDA, the EMA and other comparable international regulatory authorities have
substantial discretion over the approval process for pharmaceutical products. These regulatory agencies may not agree that we have demonstrated the
requisite level of product safety and efficacy to grant approval and may require additional data. If we fail to obtain regulatory approval for our product
candidates, we will be unable to market and sell those product candidates, which would have a negative effect on our business and financial condition.
We may experience challenges specific to gene therapy that cause significant delays or unanticipated costs, or that cannot be solved. Although
numerous companies are currently advancing gene therapy product candidates through clinical trials, the FDA has only approved a very small number of
vector-based gene therapy products thus far. Moreover, there are very few approved gene therapy products outside the U.S. As a result, it is difficult to
determine how long it will take or how much it will cost to obtain regulatory approvals for our gene therapy product candidates in any jurisdiction. Regulatory
requirements governing gene and cell therapy products are still evolving and may continue to change in the future. For example, in October 2020, it was
reported that the Director of the Center for Biologics Evaluation and Research, the center of the FDA responsible for reviewing marketing applications for
gene therapies, stated that the FDA will assess the importance of durability of effect differently for a gene therapy that treats a disease that has no other
available therapies versus a condition for which there are multiple approved treatments. Additionally, in September 2021, the FDA held a Cellular, Tissue,
and Gene Therapies Advisory Committee (CTGTAC) to discuss toxicity risks of adeno-associated virus (AAV) vectors for gene therapy and to seek the
CTGTAC’s insight into strategies to evaluate and mitigate risks in the context of AAV vector-based product design and quality, preclinical studies, and clinical
trials. Valoctocogene roxaparvovec and BMN 307 are AAV vector-based product candidates.
Regulatory agencies and the new requirements and guidelines they promulgate may lengthen the regulatory review process, require us to perform
additional or larger studies, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and
commercialization of our treatment candidate or lead to significant post-approval studies, limitations or restrictions. For example, on August 18, 2020, the
FDA issued a Complete Response Letter (CRL) to our BLA for valoctocogene roxaparvovec for the treatment of adults with severe hemophilia A. In the CRL,
the FDA introduced a new request for two-year follow-up safety and efficacy data on all study participants from our ongoing Phase 3 study of valoctocogene
roxaparvovec. In January 2022, we announced results from the requested two-year data analysis from our Phase 3 study. We are planning to meet with the
FDA to discuss resubmission of our BLA, including this two-year data analysis. The BLA resubmission is targeted for the second quarter of 2022. If the FDA
deems our resubmission to be a complete response to the CRL, we expect the resubmission will be followed by a six-month review procedure by the FDA.
With respect to BMN 307, in September 2021, the FDA placed a clinical hold on our PHEarless study. The hold was based on pre-clinical study findings from
a model designed to understand the durability of BMN 307 activity in mice bearing two germline mutations, one rendering the mice immunodeficient. Of 63
animals treated, six of seven animals administered BMN 307 at the highest dose group (2e14 Vg/kg) had tumors on liver necropsy 52 weeks after dosing
with evidence for integration of portions of AAV vector into the genome. No lesions were observed in any mice at 24 weeks. The clinical significance of these
findings is being evaluated to assure safe and appropriate use of BMN 307. To date, we have seen no evidence from our studies or scientific literature
indicating these findings are translatable to humans, species other than mice or other gene therapy vectors. The durability study was one of multiple pre-
clinical studies we conducted and was not designed to test safety. However, we promptly notified the FDA upon availability of the integration site analysis
results. The FDA initiated a clinical hold shortly after being notified, and we announced the hold before the next business day after we were informed of the
FDA’s decision. In February 2022, the FDA requested data from additional non-clinical studies to assess the theoretical oncogenic risk to human study
participants, which is expected to take several quarters. We will communicate next steps for the program when available. Continued delay or failure to
obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring our gene therapy product candidates to market could have a negative
effect on our business and financial condition. Even if we do obtain regulatory approval, ethical, social and legal concerns about gene therapy arising in the
future could result in additional regulations restricting or prohibiting sale of our products.
In addition, some of our product candidates are intended to be used in combination with a medical device, such as an injector or other delivery
system or companion diagnostic. Such products may be regulated as “combination products” in the U.S and the EU, which are generally defined as products
consisting of components from two or more regulatory categories (e.g., drug/device, device/biologic, drug/biologic). In the U.S., each component of a
combination product is subject to the requirements established by the FDA for that type of component, whether a new drug, biologic or device. In order to
facilitate pre-market review of combination products, the FDA designates one of its centers to have primary jurisdiction for the pre-market review and
regulation of the overall product based upon a determination by the FDA of the primary mode of action of the combination product. The determination
whether a product is a combination product or two separately regulated products is made by the FDA on a case-by-
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case basis. In the EU, if a device intended to administer a medicinal product is sold together with such medicinal product in such a way that they form a
single integral product which is intended exclusively for use in the given combination and which is not reusable, that single integral product is regulated as a
medicinal product. In addition, the relevant general safety and performance requirements established for medical devices by EU medical devices legislation
apply to the device component of such combination products. Our product candidates intended for use with separately regulated devices, or expanded
indications that we may seek for our products used with such devices, may not be approved or may be substantially delayed in receiving approval if the
devices do not gain and/or maintain their own regulatory approvals or clearances. Where approval of the drug or biologic product and device is sought under
a single application, the increased complexity of the review process may delay approval. The FDA review process and criteria are not well-established areas,
which could also lead to delays in the approval process. In addition, because these devices are provided by unaffiliated third-party companies, we are
dependent on the sustained cooperation and effort of those third-party companies both to obtain regulatory approval and to maintain their own regulatory
compliance. Failure of third-party companies to assist in the approval process or to maintain their own regulatory compliance could delay or prevent approval
of our product candidates, or limit our ability to sell a product once it is approved.
From time to time during the development and regulatory approval process for our products and product candidates, we engage in discussions with
the FDA, the EMA and other comparable international regulatory authorities regarding our development programs, including discussions about the regulatory
requirements for approval. As part of these discussions, we sometimes seek advice in the design of our clinical programs from various regulatory agencies
globally, but we do not always follow such guidance. This increases the chance of adverse regulatory actions, but we try to always provide appropriate
scientific evidence to support approval. 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 effectively and efficiently resolve and
comply with the inquiries and requests of the FDA, the EMA and other comparable international regulatory authorities, the approval of our product
candidates may be delayed and their value may be reduced.
Any product for which we have obtained regulatory approval, or for which we obtain approval in the future, is subject to, or will be
subject to, extensive ongoing regulatory requirements by the FDA, the EMA and other comparable international regulatory authorities, and if we
fail to comply with regulatory requirements or if we experience unanticipated problems with our products, we may be subject to penalties, we will
be unable to generate revenues from the sale of such products, our potential for generating positive cash flow will be diminished, and the capital
necessary to fund our operations will be increased.
Aldurazyme, Brineura, Kuvan, Naglazyme and Vimizim have received regulatory approval to be commercially marketed and sold in the U.S., the EU
and certain other countries, Palynziq has received regulatory approval to be commercially marketed in the U.S., the EU, and Australia. Voxzogo has received
regulatory approval to be commercially marketed in the U.S., the EU, and Brazil. Any product for which we have obtained regulatory approval, or for which
we obtain regulatory approval in the future, along with the manufacturing processes and practices, post-approval clinical research, product labeling,
advertising and promotional activities for such product, are subject to continual requirements of, and review by, the FDA, the EMA and other comparable
international regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration and
listing requirements, current good manufacturing practices (cGMP) requirements relating to manufacturing, quality control, quality assurance and
corresponding maintenance of records and documents, import and export requirements and record keeping.
An example of the ongoing regulatory requirements our products are subject to is the Palynziq Risk Evaluation and Mitigation Strategy (REMS)
program. In the U.S., Palynziq is only available through the REMS program, which is required by the FDA to mitigate the risk of anaphylaxis while using the
product. Notable requirements of our REMS program include the following:
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prescribers must be certified by enrolling in the REMS program and completing training;
prescribers must prescribe auto-injectable epinephrine with Palynziq;
pharmacies must be certified with the REMS program and must dispense Palynziq only to patients who are authorized to receive it;
patients must enroll in the REMS program and be educated about the risk of anaphylaxis by a certified prescriber to ensure they
understand the risks and benefits of treatment with Palynziq; and
patients must have auto-injectable epinephrine available at all times while taking Palynziq.
Failure of prescribers, pharmacies or patients to enroll in our REMS program or to successfully complete and comply with its requirements may
result in regulatory action from the FDA or decreased sales of Palynziq. The restrictions and requirements under our REMS program, as well as potential
changes to these restrictions and requirements in the future, subject us to increased risks and uncertainties, any of which could harm our business. The
requirement for a REMS program can materially affect the potential market for and profitability of a drug. We cannot predict whether the FDA will request,
seek to require or ultimately require modifications to, or impose additional requirements on, the Palynziq REMS program, or whether the FDA will permit
modifications to the Palynziq REMS program that we consider warranted. Any modifications required or rejected by the FDA could make it more
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difficult or expensive for us to distribute Palynziq in the U.S., impair the safety profile of Palynziq, disrupt continuity of care for Palynziq patients and/or
negatively affect sales of Palynziq.
Moreover, promotional communications with respect to prescription drugs, including biologics, are subject to a variety of legal and regulatory
restrictions and must be consistent with the information in the product’s approved labeling. In particular, a product may not be promoted for uses that are not
approved by the FDA or the EC as reflected in the product’s approved labeling. Although the FDA and other comparable international regulatory authorities
do not regulate a physician’s choice of drug treatment made in the physician’s independent medical judgment, they do restrict promotional communications
from companies or their sales force with respect to off-label uses of products for which marketing clearance has not been issued. The FDA and other
national competent authorities or international regulatory agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a
company that is found to have improperly promoted off-label uses may be subject to significant civil, criminal and administrative penalties. Thus, we will not
be able to promote any products we develop for indications or uses for which they are not approved. Additionally, in the EU, it is prohibited to promote
prescription drugs to the general public and we are therefore limited to promote our products exclusively to healthcare professionals.
Moreover, if original FDA approval for one of our product candidates is granted via the accelerated approval pathway, we will be required to conduct
a post-marketing confirmatory trial to verify and describe the clinical benefit in support of full approval. An unsuccessful post-marketing study or failure to
complete such a study with due diligence could result in the withdrawal of the FDA’s marketing approval for a product candidate. For example, Voxzogo is
approved in the U.S. under accelerated approval based on an improvement in annualized growth velocity. Continued approval for this indication may be
contingent upon verification and description of clinical benefit in confirmatory studies. To fulfill this post-marketing requirement, we intend to use our ongoing
open-label extension studies compared to available natural history. In addition, the FDA and the EC often require post-marketing testing and surveillance to
monitor the effects of products. The FDA, the EMA and other comparable international regulatory agencies may condition approval of our product candidates
on the completion of such post-marketing clinical studies. These post-marketing studies may suggest that a product causes undesirable side effects or may
present a risk to the patient.
Discovery after approval of previously unknown problems with any of our products, manufacturers or manufacturing processes, or failure to comply
with regulatory requirements, may result in actions such as:
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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;
injunctions; or
imposition of civil or criminal penalties.
If such regulatory actions are taken, our value and our operating results will be adversely affected. Additionally, if the FDA, the EMA or any other
comparable international regulatory authorities withdraws its approval of a product, we will be unable to generate revenues from the sale of that product in
the relevant jurisdiction, our potential for generating positive cash flow will be diminished and the capital necessary to fund our operations will be increased.
Accordingly, we continue to expend significant time, money and effort in all areas of regulatory compliance, including manufacturing, production, product
surveillance, post-marketing studies and quality control.
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
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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.
As part of the drug development process we must conduct, at our own expense, preclinical studies in the laboratory, including studies in animals,
and clinical trials on humans for each product candidate. The number of preclinical studies and clinical trials that regulatory authorities require varies
depending on the product candidate, the disease or condition the drug is being developed to address and regulations applicable to the particular drug.
Generally, new drugs for diseases or conditions that affect larger patient populations, are less severe, or are treatable by alternative strategies must be
validated through additional preclinical and clinical trials and/or clinical trials with higher enrollments. With respect to our early stage product candidates, we
may need to perform multiple preclinical studies using various doses and formulations before we can begin clinical trials, which could result in delays to our
development timeline. Furthermore, even if we obtain favorable results in preclinical studies, the results in humans may be significantly different. After we
have conducted preclinical studies, we must demonstrate that our product candidates are safe and efficacious for use in the targeted human patients in
order to receive regulatory approval for commercial sale. Clinical testing is expensive and can take many years to complete, and its outcome is inherently
uncertain. Failure can occur at any time during the clinical trial process. The results of preclinical studies and early clinical trials of our product candidates
may not be predictive of the results of later-stage clinical trials, and favorable data from interim analyses do not ensure the final results of a trial will be
favorable. From time to time, we have and may in the future publish or report preliminary, initial or interim data from our clinical trials. Preliminary, initial or
interim data from our clinical trials may not be indicative of the final results of the trial and are subject to the risk that one or more of the clinical outcomes
may materially change as patient enrollment continues and/or more patient data become available. In this regard, such data may show initial evidence of
clinical benefit, but as patients continue to be followed and more patient data become available, there is a risk that any therapeutic effects will not be durable
in patients and/or will decrease over time or cease entirely. Preliminary, initial or interim data also remain subject to audit and verification procedures that
may result in the final data being materially different from such preliminary, initial or interim data. As a result, preliminary, initial or interim data should be
considered carefully and with caution until the final data are available.
Product candidates may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical
trials, or despite having favorable data in connection with an interim analysis. A number of companies in the biopharmaceutical industry have suffered
significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Also, as
noted above, we do not always follow the advice of regulatory authorities or comply with all of their requests regarding the design of our clinical programs. In
those cases, we may choose a development program that is inconsistent with the advice of regulatory authorities, which may limit the jurisdictions where we
conduct clinical trials and/or adversely affect our ability to obtain approval in those jurisdictions where we do not follow the regulatory advice.
Adverse or inconclusive clinical results could stop us from obtaining regulatory approval of our product candidates. Additional factors that can cause
delay or termination of our clinical trials include:
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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 preclinical 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 for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive
compensation in connection with such services reportable to the FDA or other regulatory authority. If the FDA or other regulatory authority concludes that a
financial relationship between us and a principal investigator has created a conflict of interest, the FDA or other regulatory authority may question the
integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized.
Similar rules governing clinical trials to those in place in the U.S. apply in the EU. Since January 31, 2022, a new Clinical Trials Regulation (CTR) is
fully in force in the EU. The CTR was adopted with a view to introducing a more uniform set of the rules across the EU for the authorization of clinical trials.
The relevant procedures have now been streamlined with a view to facilitating a
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swifter and more seamless authorization and deployment of multi-center trials occurring in more than one EU Member State. However, such authorization
still involves the national regulatory authorities and Ethics Committees of each of the EU Member States where the trial is to be conducted. The CTD will
continue to apply in parallel to the CTR for a transitional period. This means that clinical trials in the EU can currently be conducted in accordance with the
requirements of the CTD, as implemented in national law by each EU Member State, or the CTR, as applicable, as well as applicable good clinical practice
standards.
Government price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our current and
future products, which would adversely affect our revenues and results of operations.
We expect that coverage and reimbursement may be increasingly restricted in all the markets in which we sell our products. The escalating cost of
healthcare has led to increased pressure on the healthcare industry to reduce costs. In particular, drug pricing by pharmaceutical companies has recently
come under increased scrutiny and continues to be subject to intense political and public debate in the U.S. and abroad. Governmental and private third-
party payers have proposed healthcare reforms and cost reductions. A number of federal and state proposals to control the cost of healthcare, including the
cost of drug treatments, have been made in the U.S. Specifically, there have been several recent U.S. congressional inquiries and proposed bills and
enacted legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer
patient programs, and reform government program reimbursement methodologies for drugs. Further, Congress and the executive branch have each
indicated that they will continue to seek new legislative and/or administrative measures to control drug costs. In some international markets, the government
controls the pricing, which can affect the profitability of drugs. Current government regulations and possible future legislation regarding healthcare may affect
coverage and reimbursement for medical treatment by third-party payers, which may render our products not commercially viable or may adversely affect
our future revenues and gross margins.
International operations are also generally subject to extensive price and market regulations, and there are many proposals for additional cost-
containment measures, including proposals that would directly or indirectly impose additional price controls or mandatory price cuts or reduce the value of
our intellectual property portfolio. As part of these cost containment measures, some countries have imposed and continue to propose revenue caps limiting
the annual volume of sales of our products. Some of these caps are significantly below the actual demand in certain countries, and if the trend regarding
revenue caps continues, our future revenues and gross margins may be adversely affected. For example, in the EU, governments influence the price of
medicinal products through their pricing and reimbursement rules and control of national healthcare systems that fund a large part of the cost of those
products to consumers. EU Member States are free to restrict the range of medicinal products for which their national health insurance systems provide
reimbursement and to control the prices of medicinal products for human use. Some jurisdictions operate positive and negative list systems under which
products may only be marketed once a reimbursement price has been agreed to by the government. An EU Member State may approve a specific price for
the medicinal product, or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the
market, including volume-based arrangements, caps and reference pricing mechanisms. Other EU Member States allow companies to fix their own prices
for medicines but monitor and control company profits. The downward pressure on healthcare costs in general, particularly prescription medicines, has
become very intense. Pharmaceutical products may face competition from lower-priced products in foreign countries that have placed price controls on
pharmaceutical products and may also compete with imported foreign products. Furthermore, there is no assurance that a product will be considered
medically reasonable and necessary for a specific indication, will be considered cost-effective by third-party payors, that an adequate level of reimbursement
will be established even if coverage is available or that the third-party payors’ reimbursement policies will not adversely affect our business.
We cannot predict the extent to which our business may be affected by these or other potential future legislative or regulatory developments.
However, future price controls or other changes in pricing regulation or negative publicity related to our product pricing or the pricing of pharmaceutical drugs
generally could restrict the amount that we are able to charge for our current and future products or our sales volume, which would adversely affect our
revenues and results of operations.
Government healthcare reform could increase our costs and adversely affect our revenues and results of operations.
Our industry is highly regulated and changes in law may adversely impact our business, operations or financial results. In the U.S., there have been
and continue to be a number of legislative initiatives to contain healthcare costs. For example, the Patient Protection and Affordable Care Act of 2010, as
amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the PPACA) is a sweeping measure intended to, among other things,
expand healthcare coverage within the U.S., primarily through the imposition of health insurance mandates on employers and individuals and expansion of
the Medicaid program. Several provisions of the law have affected us and increased certain of our costs. Since its enactment, there have been executive,
judicial and congressional challenges to certain aspects of the PPACA. Although the PPACA has generally been upheld thus far, it is unclear how continued
challenges to the law may impact the PPACA and our business. In addition, other legislative changes have been adopted since the PPACA was enacted.
Some of these changes have resulted in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on our
customers and, accordingly, our financial operations.
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We anticipate that the PPACA, as well as other healthcare reform measures that may be adopted in the future in the U.S. or abroad, may result in
more rigorous coverage criteria and an additional downward pressure on the reimbursement our customers may receive for our products. Recently there has
been heightened governmental scrutiny in countries worldwide over the manner in which manufacturers set prices for their marketed products.
In the U.S., there have been several recent congressional inquiries, proposed and enacted federal and state legislation, and executive action
designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs,
reduce the cost of drugs under Medicare, and reform government program reimbursement methodologies for drug products. Any reduction in reimbursement
from Medicare and other government programs may result in a similar reduction in payments from private payers. In addition, individual states in the U.S.
have also increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing, including price or patient
reimbursement constraints, price disclosure and reporting requirements, discounts, restrictions on certain product access and marketing cost disclosure and
transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Moreover, regional healthcare
authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be
included in their prescription drug and other healthcare programs. Further, it is possible that additional governmental action is taken in response to the
COVID-19 pandemic.
Likewise, in many EU Member States, legislators and other policymakers continue to propose and implement healthcare cost-containing measures
in response to the increased attention being paid to healthcare costs in the EU. Certain of these changes could impose limitations on the prices we will be
able to charge for our products and any approved product candidates or the amounts of reimbursement available for these products from governmental and
private third-party payers, may increase the tax obligations on pharmaceutical companies or may facilitate the introduction of generic competition with
respect to our products. Further, an increasing number of EU Member States and other non-U.S. countries use prices for medicinal products established in
other countries as “reference prices” to help determine the price of the product in their own territory. If the price of one of our products decreases
substantially in a reference price country, it could impact the price for that product in other countries. Consequently, a downward trend in prices of our
products in some countries could contribute to similar downward trends elsewhere, which would have a material adverse effect on our revenues and results
of operations. Moreover, in order to obtain reimbursement for our products in some countries, we may be required to conduct clinical trials that compare the
cost-effectiveness of our products to other available therapies.
Legally mandated price controls on payment amounts by governmental and private third-party payers or other restrictions could harm our business,
results of operations, financial condition and prospects. The implementation of cost containment measures or other healthcare reforms may prevent us from
being able to generate revenue, attain profitability or commercialize our products.
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, pursuant to the Orphan Regulation, orphan drug designation is available if a sponsor can
establish that: (1) the medicine is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting no
more than five in 10,000 people in the EU at the time the application is made, or, (2) that it is intended for the diagnosis, prevention or treatment of a life-
threatening, seriously debilitating or serious and chronic condition in the EU and that without incentives derived from the orphan status, it is unlikely that the
marketing of the medicine in the EU would generate sufficient return to justify the necessary investment. In both cases, the applicant must demonstrate that
there exists no satisfactory method of diagnosis, prevention or treatment of the condition in question that has been authorized in the EU or, if such method
exists, the medicine will be of significant benefit to those affected by that condition.
In the U.S., the company that first obtains FDA approval for a designated orphan drug for a given rare disease receives marketing exclusivity for
use of that drug for the stated condition for a period of seven years. Orphan drug exclusive marketing rights may be lost if the FDA later determines that the
request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug. In addition, the FDA may approve
another drug during a period of orphan drug exclusivity if the second drug is found to be clinically superior to the first drug. In the EU, a ten-year period of
market exclusivity (extendable to twelve years for orphan drugs that have complied with an agreed Pediatric Investigation Plan (PIP) pursuant to Regulation
1901/2006), during which similar medicines for the same indication cannot be placed on the market, is granted. MAs may also be granted to a similar
medicinal product with the same orphan indication if: (i) the applicant can establish that the second medicinal product, although similar to the orphan
medicinal product already authorized is safer, more effective or otherwise clinically superior to the orphan medicinal product already authorized; (ii) the MA
holder for the first orphan medicinal product grants its consent; or (iii) if the MA holder of the orphan medicinal product is unable to supply sufficient
quantities. The period of market exclusivity may, in addition, be reduced to six years if, at the end of the fifth year, it can be demonstrated on the basis of
available evidence that the criteria for its designation as an orphan medicine are no longer satisfied, for example if the original orphan medicinal product has
become sufficiently profitable not to justify maintenance of market exclusivity. Because the extent
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and scope of patent protection for some of our products is limited, orphan drug designation is especially important for our products that are eligible for
orphan drug designation. For eligible products, we plan to rely on the exclusivity period under the Orphan Drug Act and/or the Orphan Regulation, as
applicable, to maintain a competitive position. If we do not obtain orphan drug exclusivity for our products that do not have broad patent protection, our
competitors may then sell the same drug to treat the same condition and our revenues will be reduced.
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. Moreover, with respect to certain biologics and
gene therapies, there may be some uncertainty regarding how similarity between product candidates designed to treat the same rare disease or condition
may affect such product candidates’ orphan drug exclusivities. For biologics and gene therapies, the FDA’s determination of whether a drug is the same drug
or a different drug will be based on the principal molecular structural features of the products. For gene therapy products, the FDA has stated in guidance
that it generally intends to consider certain key features such as transgenes and vectors used in gene therapy products to be principal molecular structural
features. Further, even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because
different drugs can be approved for the same condition and the same drug can be approved for different conditions and potentially used off-label in the
orphan indication. Even after an orphan drug is approved and granted orphan drug exclusivity, the FDA can subsequently approve the same drug for the
same condition if the FDA concludes that the later drug is safer or more effective or makes a major contribution to patient care. Orphan drug designation
neither shortens the development time or regulatory review time of a drug, nor gives the drug any advantage in the regulatory review or approval process.
We may face competition from biosimilars approved through an abbreviated regulatory pathway.
Our Aldurazyme, Brineura, Naglazyme, Palynziq and Vimizim products are regulated by the FDA as biologics under the Federal Food, Drug, and
Cosmetic Act and the Public Health Service Act (the PHS Act). Biologics require the submission of a BLA and approval by the FDA prior to being marketed
in the U.S. The Biologics Price Competition and Innovation Act of 2009 (BPCIA) created a regulatory pathway under the PHS Act for the abbreviated
approval of biological products that are demonstrated to be “biosimilar” or “interchangeable” with an FDA-approved biological product. A similar abridged MA
process is available to biosimilar products in the EU. In particular, applicants for MAs of biosimilars are required to demonstrate through comprehensive
comparability studies with the reference biological medicine that: a) their biological medicine is highly similar to the reference medicine, notwithstanding
natural variability inherent to all biological medicines; and b) there are no clinically meaningful differences between the biosimilar and the reference medicine
in terms of safety, quality and efficacy.
In the U.S., in order to meet the standard of interchangeability, a sponsor must demonstrate that the biosimilar product can be expected to produce
the same clinical result as the reference product, and for a product that is administered more than once, that the risk of switching between the reference
product and biosimilar product is not greater than the risk of maintaining the patient on the reference product. The BPCIA establishes a period of 12 years of
exclusivity for reference products. In the EU, a medicinal product containing a new active substance benefits from eight years of data exclusivity, during
which biosimilar applications referring to the data of that product may not be accepted by the regulatory authorities, and a further two years of market
exclusivity, during which such biosimilar products may not be placed on the market. The two-year period may be extended to three years if during the first
eight years a new therapeutic indication with significant clinical benefit over existing therapies is approved. Our products approved under BLAs in the U.S. or
as a result of Marketing Authorization Applications (MAAs) in the EU, as well as our product candidates that may be approved in the future, could be
reference products for biosimilar marketing applications.
Changes in funding for the FDA, the EMA, other comparable international regulatory authorities and other government agencies or
government shutdowns could hinder the ability of such agencies to hire and retain key leadership and other personnel or otherwise prevent
those agencies from performing normal functions on which the operation of our business may rely, which could negatively impact our business.
Changes in funding levels of government agencies can affect their ability to hire and retain key personnel and carry out their normal functions that
support our business. For example, the ability of the FDA or the EMA to timely review and approve INDs or MAAs for our product candidates may be
hindered by a lack of resources and qualified personnel. In addition, funding of other government agencies on which our operations rely, including those that
fund research and development activities, is subject to the political budget process, which is inherently fluid and unpredictable.
Government shutdowns could also impact the ability of government agencies to function normally and support our operations. For example, the
U.S. federal government has shut down repeatedly since 1980, including for a period of 35 days beginning on December 22, 2018. During a shutdown,
certain regulatory agencies, such as the FDA, have had to furlough key personnel and stop critical activities. If a prolonged government shutdown occurs, it
could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our
business.
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Risks Related to Valoctocogene Roxaparvovec
Our valoctocogene roxaparvovec program is based on a gene therapy approach, which, as a novel technology, presents additional
development and treatment risks in relation to our other, more traditional drug development programs.
In addition to the risks set forth in this Risk Factors section associated with developing more traditional pharmaceutical drugs, there are additional,
unique development and treatment risks associated with gene therapy products like our product candidate valoctocogene roxaparvovec. The goal of gene
therapy is to be able to correct an inborn genetic defect through administration of therapeutic genetic material containing non-defective gene copies. The
gene copies are designed to reside permanently in a patient, allowing the patient to produce an essential protein or ribonucleic acid (RNA) molecule that a
healthy person would normally produce. There is a risk, however, that the new gene copies will produce too little or too much of the desired protein or RNA.
Although administration of a gene therapy product like our product candidate valoctocogene roxaparvovec is intended to correct an inborn genetic defect for
at least several years, there is a risk that the therapeutic effect will not be durable and production of the desired protein or RNA will decrease more quickly or
cease entirely earlier than expected. If the therapeutic effect decreases significantly or ceases entirely, it is uncertain whether redosing is possible or would
be effective. Furthermore, because gene therapy treatment is irreversible, there may be challenges in managing side effects, particularly those caused by
potential overproduction of the desired protein. Adverse effects would not be able to be reversed or relieved by stopping dosing, and we may have to
develop additional clinical safety procedures. Furthermore, because the new gene copies are designed to reside permanently in a patient, there is a risk that
they will disrupt other normal biological molecules and processes, including other healthy genes, and we may not learn the nature and magnitude of these
side effects until long after clinical trials have been completed.
As compared to our other, more traditional products, our gene therapy product candidate valoctocogene roxaparvovec, if approved, may
present additional problems with respect to the pricing, coverage, and reimbursement and acceptance of the product candidate.
In addition to the risks set forth in this Risk Factors section associated with commercializing more traditional pharmaceutical drugs, there are
additional, unique commercial risks associated with gene therapy products like our product candidate valoctocogene roxaparvovec. Due to the relative
novelty of gene therapy and the potential to provide extended duration therapeutic treatment with a one-time administration, we face uncertainty with respect
to the pricing, coverage and reimbursement of valoctocogene roxaparvovec, if approved. In order to recover our research and development costs and
commercialize this one-time treatment on a profitable basis, we expect the cost of a single administration of valoctocogene roxaparvovec to be substantial.
Therefore, we expect that coverage and reimbursement by governments and other third-party payers will be essential for the vast majority of patients to be
able to afford valoctocogene roxaparvovec. Accordingly, sales of valoctocogene roxaparvovec, if approved, will depend substantially, both domestically and
internationally, on the extent to which its cost will be paid by third-party payers. Even if coverage is provided, the reimbursement amounts approved by third-
party payers may not be high enough to allow us to realize sufficient revenues from our investment in the development of valoctocogene roxaparvovec.
We also face uncertainty as to whether gene therapy will gain the acceptance of the public or the medical community. Even if we obtain regulatory
approval for valoctocogene roxaparvovec, the commercial success of valoctocogene roxaparvovec will depend, in part, on the acceptance of physicians,
patients and third-party payers of gene therapy products in general, and our product candidate in particular, as medically necessary, cost-effective and safe.
In particular, our success will depend upon physicians prescribing our product candidate in lieu of existing treatments they are already familiar with and for
which greater clinical data may be available. Moreover, physicians and patients may delay acceptance of valoctocogene roxaparvovec until the product
candidate has been on the market for a certain amount of time. Negative public opinion or more restrictive government regulations could have a negative
effect on our business and financial condition and may delay or impair the successful commercialization of, and demand for, valoctocogene roxaparvovec.
We have implemented data access plans for our main clinical trials of valoctocogene roxaparvovec, which restrict our management’s
review of emerging key efficacy data from these trials. Without access to this ongoing data, management does not have the ability to adjust the
trials based on such emerging data, which could adversely impact the ultimate outcome of these trials.
In order to preserve the scientific integrity of our main valoctocogene roxaparvovec clinical trials and to allow us to only report on data at intervals
that we believe will be meaningful to investors, we have implemented data access plans related to these ongoing open label trials, which is designed to
significantly mirror blinded trials. Pursuant to the plans, the ongoing emerging data for key endpoints are generally not accessed by us, with the exception
that certain specific data points are reviewed by a small group of medical personnel monitoring and managing the trials, and then, only to the extent
necessary to allow them to perform their monitoring responsibilities. As we disclose and publicly discuss prior data from one of these trials, such discussions
do not incorporate any of the currently emerging data that are being collected and reviewed by personnel monitoring the trial and, accordingly, this prior data
may differ significantly from more recent data that are only available to such personnel. Further, because our management does not have access to any of
the ongoing key efficacy data and does not have the ability to adjust the trials based on such emerging data, the data access plans could adversely impact
the ultimate outcome of the trials.
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Financial and Financing Risks
If we continue to incur operating losses or are unable to sustain positive cash flows for a period longer than anticipated, we may be
unable to continue our operations at planned levels and be forced to reduce our operations.
Since we began operations in March 1997, we have been engaged in substantial research and development and capital investments, and we have
operated at a net loss for each year since our inception, with the exception of 2008, 2010 and 2020. Our future profitability and cash flows depend on our
marketing and selling of our products, the receipt of regulatory approval of our product candidates, our ability to successfully manufacture and market any
products, either by ourselves or jointly with others, our spending on our development programs, the impact of any possible future business development
transactions and other risks set forth in this Risk Factors section. The extent of our future losses and the timing of profitability and positive cash flows are
highly uncertain. If we fail to become profitable or are unable to sustain profitability and positive cash flows on a continuing basis, then we may be unable to
continue our operations at planned levels and be forced to reduce our operations.
If we fail to obtain the capital necessary to fund our operations, our financial results and financial condition will be adversely affected
and we will have to delay or terminate some or all of our product development programs.
As of December 31, 2021, we had cash, cash equivalents and investments totaling $1.5 billion and debt obligations of $1.1 billion (undiscounted),
which consisted of our 0.599% senior subordinated convertible notes due in 2024 (the 2024 Notes) and our 1.25% senior subordinated convertible notes due
in 2027 (the 2027 Notes). The 2024 Notes and the 2027 Notes (collectively, the Notes), if not converted, will be required to be repaid in cash at maturity in
August 2024 and May 2027, respectively. We will need cash not only to pay the ongoing interest due on the Notes during their term, but also to repay the
principal amount of the Notes if not converted.
In January 2016, we terminated our License and Commercialization Agreement with Ares Trading, S.A. (Merck Serono). Pursuant to the
Termination and Transition Agreement related to Kuvan and the Termination Agreement related to Palynziq, we are obligated to make certain payments to
Merck Serono if sales and development milestones are achieved. The remaining milestone payments that may become payable include up to a maximum of
€60 million, in cash, if future sales milestones are met with respect to Kuvan and Palynziq.
We may require additional financing to fund the repayment of the Notes, future milestone payments and our future operations, including the
commercialization of our products and product candidates currently under development, preclinical studies and clinical trials, and potential licenses and
acquisitions. We may be unable to raise additional financing due to a variety of factors, including our financial condition, the status of our product programs,
and the general condition of the financial markets. If we fail to raise any necessary additional financing we may have to delay or terminate some or all of our
product development programs and our financial condition and operating results will be adversely affected.
We expect to continue to spend substantial amounts of capital for our operations for the foreseeable future. The amount of capital we will need
depends on many factors, including:
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our ability to successfully market and sell our products;
the time and cost necessary to develop commercial manufacturing processes, including quality systems, and to 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;
our possible achievement of development and commercial milestones under agreements with third parties, such as the Kuvan and
Palynziq milestones under the termination agreements with Merck Serono;
any changes made to, or new developments in, our existing collaborative, licensing and other commercial relationships or any new
collaborative, licensing and other commercial relationships that we may establish;
Sanofi’s (formerly referred to as Sanofi Genzyme) ability to continue to successfully commercialize Aldurazyme; and
whether our convertible debt is converted to common stock in the future.
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Moreover, our fixed expenses such as rent, license payments, interest expense and other contractual commitments are substantial and may
increase in the future. These fixed expenses may increase because we may enter into:
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additional licenses and collaborative agreements;
additional contracts for product manufacturing; and
additional financing facilities or arrangements.
We will need to raise additional funds from equity or debt securities, loans or collaborative agreements if we are unable to satisfy our liquidity
requirements. The sale of additional equity and/or equity-linked securities will result in additional dilution to our stockholders. Furthermore, additional
financing may not be available in amounts or on terms satisfactory to us or at all. This could result in the delay, reduction or termination of our research,
which could harm our business.
We have incurred substantial indebtedness that may decrease our business flexibility, access to capital, and/or increase our borrowing
costs, which may adversely affect our operations and financial results.
As of December 31, 2021, we had $1.1 billion (undiscounted) principal amount of indebtedness, including $495.0 million (undiscounted) principal
amount of indebtedness under the 2024 Notes and $600.0 million (undiscounted) principal amount of indebtedness under the 2027 Notes. In October 2018,
we also entered into an unsecured credit agreement (the 2018 Credit Facility) with Bank of America, N.A., as the administrative agent, swingline lender and
a lender, Citibank, N.A. as letter of credit issuer and each of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citibank, N.A. and Wells Fargo Securities,
LLC as joint lead arrangers and joint bookrunners, providing up to $200.0 million in revolving loan commitments. In May 2021, we amended the 2018 Credit
Agreement to, among other things, extend the maturity date of the revolving credit facility from October 18, 2021 to May 28, 2024. Our indebtedness may:
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limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions or other general business purposes;
limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions or other
general business purposes;
require us to use a substantial portion of our cash flow from operations to make debt service payments;
limit our flexibility to plan for, or react to, changes in our business and industry;
place us at a competitive disadvantage compared to our less leveraged competitors; and
increase our vulnerability to the impact of adverse economic and industry conditions.
In addition, the 2018 Credit 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 Facility, the outstanding borrowings thereunder could become
immediately due and payable, the 2018 Credit Facility lenders could refuse to permit additional borrowings under the facility, or it could lead to defaults under
agreements governing our current or future indebtedness, including the indentures governing the Notes. If we default under any of the Notes, such Notes
could become immediately due and payable and it could lead to defaults under the other Notes and/or the 2018 Credit Facility.
In addition, our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time.
Our outstanding indebtedness consists primarily of the 2024 Notes and 2027 Notes, which, if not converted, will be required to be repaid in cash at
maturity in August 2024 and May 2027, respectively. While we could seek to obtain additional third-party financing to pay for any amounts due in cash upon
maturity of the Notes, we cannot be sure that such third-party financing will be available on commercially reasonable terms, if at all.
In addition, we also may borrow up to $200.0 million in revolving loans under the 2018 Credit Facility, which would be required to be repaid in cash
at maturity on May 28, 2024.
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Manufacturing Risks
If we fail to comply with manufacturing regulations, our financial results and financial condition will be adversely affected.
Before we can begin commercial manufacture of our products, regulatory authorities must approve marketing applications that identify
manufacturing facilities operated by us or our contract manufacturers that have passed regulatory inspection and manufacturing processes that are
acceptable to the regulatory authorities. In addition, our pharmaceutical manufacturing facilities are continuously subject to scheduled and unannounced
inspection by the FDA, and other comparable EU and other international regulatory authorities, before and after product approval, to monitor and ensure
compliance with cGMP and other regulations. Our manufacturing facility in the U.S. has been approved by the FDA and the EC for the manufacture of
Palynziq, and it has been approved by the FDA, the EC, and health agencies in other countries for the manufacture of Aldurazyme, Brineura, Naglazyme,
Vimizim and 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 and Brineura. In addition, our third-party manufacturers’ facilities involved with the manufacture of our products have also
been inspected and approved by various regulatory authorities. Although we are not involved in the day-to-day operations of our contract manufacturers, we
are ultimately responsible for ensuring that our products are manufactured in accordance with cGMP regulations.
Due to the complexity of the processes used to manufacture our products and product candidates, we may be unable to continue to pass or initially
pass federal or international regulatory inspections in a cost-effective manner. For the same reason, any potential third-party manufacturer of our products or
our product candidates may be unable to comply with cGMP regulations in a cost-effective manner and may be unable to initially or continue to pass a
federal or international regulatory inspection.
If we, or third-party manufacturers with whom we contract, are unable to comply with manufacturing regulations, we may be subject to delay of
approval of our product candidates, warning or untitled letters, fines, unanticipated compliance expenses, recall or seizure of our products, total or partial
suspension of production and/or enforcement actions, including injunctions, and criminal or civil prosecution. These possible sanctions would adversely
affect our financial results and financial condition.
If we are unable to successfully develop and maintain manufacturing processes for our product candidates to produce sufficient
quantities at acceptable costs, we may be unable to support a clinical trial or be forced to terminate a program, or if we are unable to produce
sufficient quantities of our products at acceptable costs, we may be unable to meet commercial demand, lose potential revenue, have reduced
margins or be forced to terminate a program.
Due to the complexity of manufacturing our product candidates and products, we may not be able to manufacture sufficient quantities. Our inability
to produce enough of our product candidate at acceptable costs may result in the delay or termination of development programs. With respect to our
commercial portfolio, we may not be able to manufacture our products successfully with a commercially viable process or at a scale large enough to support
their respective commercial markets or at acceptable margins.
The development of commercially viable manufacturing processes typically is very difficult to achieve and is often very expensive and may require
extended periods of time. Changes in manufacturing processes (including manufacturing cell lines), equipment or facilities (including moving manufacturing
from one of our facilities to another one of our facilities or a third-party facility, or from a third-party facility to one of our facilities) may require us to complete
clinical trials to receive regulatory approval of any manufacturing modifications.
With respect to valoctocogene roxaparvovec, gene therapy products are relatively novel and complex and have only in limited cases been
manufactured at scales sufficient for pivotal trials and commercialization. Few pharmaceutical contract manufacturers specialize in gene therapy products
and those that do are still developing appropriate processes and facilities for large-scale production. We invested a considerable amount of capital building
our own commercial gene therapy manufacturing facility, which may be subject to significant impairment if our gene therapy programs are unsuccessful. As
we develop, seek to optimize and operate the valoctocogene roxaparvovec manufacturing process, we will likely face technical and scientific challenges,
considerable capital costs, and potential difficulty in recruiting and hiring experienced, qualified personnel. There may also be unexpected technical or
operational issues during clinical or commercial manufacturing campaigns. As a result, we could experience manufacturing delays that prevent us from
completing our clinical studies in a timely manner, if at all, or commercializing valoctocogene roxaparvovec on a profitable basis, if at all.
Also, we may be required to demonstrate product comparability between a biological product made after a manufacturing change and the product
made before implementation of the change through additional types of analytical and functional testing or may have to complete additional clinical studies. If
we contract for manufacturing services with an unproven process, our contractor is subject to the same uncertainties, high standards and regulatory controls,
and may therefore experience difficulty if further process development is necessary.
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
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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 have been within our expectations, which are based on industry norms. If the failure rate increased substantially, we could experience
increased costs, lost revenue, damage to customer relations, time and expense investigating the cause and, depending upon the cause, similar losses with
respect to other lots or products. If problems are not discovered before the product is released to the market, recall and product liability costs may also be
incurred.
In order to produce product within our time and cost parameters, we must continue to produce product within our expected success rate and yield
expectations. Because of the complexity of our manufacturing processes, it may be difficult or impossible for us to determine the cause of any particular lot
failure and we must effectively take corrective action in response to any failure in a timely manner.
We currently rely on third parties for portions of the manufacture of each of our commercial products. If those manufacturers are unwilling or unable
to fulfill their contractual obligations or satisfy demand outside of or in excess of the contractual obligations, we may be unable to meet demand for these
products or sell these products at all and we may lose potential revenue. Further, the availability of suitable contract manufacturing capacity at scheduled or
optimum times is not certain.
In addition, our manufacturing processes subject us to a variety of federal, state and local laws and regulations governing the use, generation,
manufacture, storage, handling and disposal of hazardous materials and wastes resulting from their use. We incur significant costs in complying with these
laws and regulations.
Supply interruptions may disrupt our inventory levels and the availability of our products and product candidates and cause delays in
obtaining regulatory approval for our product candidates, or harm our business by reducing our revenues.
We depend on single-source suppliers for critical raw materials and a limited number of manufacturing facilities to manufacture our finished
products and product candidates. Numerous factors could cause interruptions in the supply or manufacture of our products and product candidates,
including:
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timing, scheduling and prioritization of production by our contract manufacturers or a breach of our agreements by our contract
manufacturers;
labor interruptions;
changes in our sources for manufacturing;
the timing and delivery of shipments;
our failure to locate and obtain replacement suppliers and manufacturers as needed on a timely basis; and
conditions affecting the cost and availability of raw materials.
If one of our suppliers or manufacturers fails or refuses to supply us with necessary raw materials or finished products or product candidates on a
timely basis or at all, it would take a significant amount of time and expense to qualify a new supplier or manufacturer. We may not be able to obtain active
ingredients or finished products from new suppliers or manufacturers on acceptable terms and at reasonable prices, or at all.
Any interruption in the supply of finished products could hinder our ability to distribute finished products to meet commercial demand and adversely
affect our financial results and financial condition.
With respect to our product candidates, production of product is necessary to perform clinical trials and successful registration batches are
necessary to file for approval to commercially market and sell product candidates. Delays in obtaining clinical material or registration batches could adversely
impact our clinical trials and delay regulatory approval for our product candidates.
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.
Either party may terminate the Manufacturing, Marketing and Sales Agreement (the MMS Agreement) between Sanofi and us related to
Aldurazyme for specified reasons, including if the other party is in material breach of the MMS Agreement, has experienced a change of control, as such
term is defined in the MMS Agreement, or has declared bankruptcy and also is in breach
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of the MMS Agreement. Although we are not currently in breach of the MMS Agreement, there is a risk that either party could breach the MMS Agreement in
the future. Either party may also terminate the MMS Agreement upon one-year prior written notice for any reason.
If the MMS Agreement is terminated for breach, the breaching party will transfer its interest in the BioMarin/Genzyme LLC to the non-breaching
party, and the non-breaching party will pay a specified buyout amount for the breaching party’s interest in Aldurazyme and in the BioMarin/Genzyme LLC. If
we are the breaching party, we would lose our rights to Aldurazyme and the related intellectual property and regulatory approvals. If the MMS Agreement is
terminated without cause, the non-terminating party would have the option, exercisable for one year, to buy out the terminating party’s interest in Aldurazyme
and in the BioMarin/Genzyme LLC at a specified buyout amount. If such option is not exercised, all rights to Aldurazyme will be sold and the
BioMarin/Genzyme LLC will be dissolved. In the event of termination of the buyout option without exercise by the non-terminating party as described above,
all right and title to Aldurazyme is to be sold to the highest bidder, with the proceeds to be split between Sanofi and us in accordance with our percentage
interest in the BioMarin/Genzyme LLC.
If the MMS Agreement is terminated by either party because the other party declared bankruptcy, the terminating party would be obligated to buy
out the other party and would obtain all rights to Aldurazyme exclusively. If the MMS Agreement is terminated by a party because the other party
experienced a change of control, the terminating party shall notify the other party, the offeree, of its intent to buy out the offeree’s interest in Aldurazyme and
the BioMarin/Genzyme LLC for a stated amount set by the terminating party at its discretion. The offeree must then either accept this offer or agree to buy
the terminating party’s interest in Aldurazyme and the BioMarin/Genzyme LLC on those same terms. The party who buys out the other party would then
have exclusive worldwide rights to Aldurazyme. The Amended and Restated Collaboration Agreement between us and Sanofi 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 Sanofi’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 Sanofi’s
interest, we may be held in breach of the agreement and may lose any claim to the rights to Aldurazyme and the related intellectual property and regulatory
approvals. We would then effectively be prohibited from developing and commercializing Aldurazyme. If this happened, not only would our product revenues
decrease, but our share price would also decline.
Risks Related to International Operations
We conduct a significant amount of our sales and operations outside of the U.S., which subjects us to additional business risks that
could adversely affect our revenues and results of operations.
A significant portion of the sales of Aldurazyme, Brineura, Kuvan, Naglazyme, Palynziq and Vimizim are generated from countries other than the
U.S. Similarly, we expect a significant portion of the sales of Voxzogo to be generated from countries other than the U.S. We have operations in Canada and
in several European, Middle Eastern, Asian, and Latin American countries. We expect that we will continue to expand our international operations in the
future. International operations inherently subject us to a number of risks and uncertainties, including:
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the increased complexity and costs inherent in managing international operations;
diverse regulatory and compliance requirements, and changes in those requirements that could restrict our ability to manufacture,
market and sell our products;
political and economic instability;
diminished protection of intellectual property in some countries outside of the U.S.;
trade protection measures and import or export licensing requirements;
difficulty in staffing and managing international operations;
differing labor regulations and business practices;
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 non-U.S. governments;
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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 protection and the privacy and security of commercial and personal
information.
Any of these factors may, individually or as a group, have a material adverse effect on our business and results of operations.
As we continue to expand our existing international operations, we may encounter new risks. For example, as we focus on building our international
sales and distribution networks in new geographic regions, we must continue to develop relationships with qualified local distributors and trading companies.
If we are not successful in developing and maintaining these relationships, we may not be able to grow sales in these geographic regions. These or other
similar risks could adversely affect our revenues and profitability.
A significant portion of our international sales are made based on special access programs, and changes to these programs could
adversely affect our product sales and revenues in these countries.
We make a significant portion of our international sales of Brineura, Naglazyme and Vimizim through early access, special access or “named
patient sales” programs in markets where we are not required to obtain regulatory approval, and we expect a significant portion of our international sales of
Voxzogo will also be through such programs. The specifics of the programs vary from country to country. Generally, special approval must be obtained to
initiate such programs, and in some cases, special approval must be obtained for each patient. The approval normally requires an application or a lawsuit
accompanied by evidence of medical need.
These programs are not well defined in some countries and are subject to changes in requirements, funding levels, unmet medical need and
classification of the disease treated by our product. Any change to these programs could adversely affect our ability to sell our products in those countries
and delay sales. If the programs are not funded by the respective government, there could be insufficient funds to pay for all patients. Further, governments
have and may continue to undertake unofficial measures to limit purchases of our products, including initially denying coverage for purchasers, delaying
orders, requiring additional in-country testing and denying or taking excessively long to approve customs clearance. Any such actions could materially delay
or reduce our revenues from such countries.
Without the special access programs, we would need to 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.
U.S. export control and economic sanctions may adversely affect our business, financial condition and operating results. Moreover,
compliance with such regulatory requirements may increase our costs and negatively impact our ability to sell our products and collect cash
from customers.
Our products are subject to U.S. export control laws and regulations, including the U.S. Export Administration Regulations and various economic
and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC). Exports of our products and
solutions must be made in compliance with these laws and regulations. Changes to these laws and regulations, or to the countries, governments, persons or
activities targeted by such laws, could result in decreased use of our products, or hinder our ability to export or sell our products to existing or potential
customers, which would likely adversely affect our results of operations, financial condition or strategic objectives. If we fail to comply with these laws and
regulations, we could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges and fines.
We rely on a general license from OFAC to sell our medicines for eventual use by hospital and clinic end-users in Iran. The use of this OFAC
general license requires us to observe strict conditions with respect to products sold, end-user limitations and payment requirements. Although we believe
we have maintained compliance with the general license requirements, there can be no assurance that the general license will not be revoked, the general
license will be renewed in the future or we will remain in compliance with the general license. A violation of the OFAC general license could result in
substantial fines, sanctions, civil or criminal penalties, competitive or reputational harm, litigation or regulatory action and other consequences that might
adversely affect our results of operations, financial condition or strategic objectives.
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Moreover, U.S. export control and economic sanctions may make operating in certain countries more difficult and expensive. For example, we may
be unable to find distributors or financial institutions willing to facilitate the sale of our products and collection of cash from such sales in a cost-effective
manner, if at all.
Failure to comply with applicable anti-corruption legislation could result in fines, criminal penalties and materially adversely affect our
business, financial condition and results of operations.
We are required to comply with anti-corruption and anti-bribery laws in the jurisdictions in which we operate, including the FCPA in the U.S. and
other similar laws in other countries in which we do business. We operate in a number of countries that are recognized to have a reputation for corruption
and pose an increased risk of corrupt practices. We also regularly interact with government regulators in many countries, including those that are considered
higher risk for corruption, in order to secure regulatory approval to manufacture and distribute our products. The anti-corruption and anti-bribery laws to
which we are subject generally prohibit companies and their intermediaries from making improper payments to non-U.S. government officials or other
persons for the purposes of influencing official decisions or obtaining or retaining business and/or other benefits. These laws also require us to make and
keep books and records that accurately and fairly reflect our transactions and to devise and maintain an adequate system of internal accounting controls. As
part of our business, we deal with state-owned business enterprises, the employees and representatives of which may be considered non-U.S. government
officials for purposes of applicable anti-corruption laws.
Although we have adopted policies and procedures designed to ensure that we, our employees and third-party agents will comply with such laws,
there can be no assurance that such policies or procedures will work effectively at all times or protect us against liability under these or other laws for actions
taken by our employees, partners and other third parties with respect to our business. If we are not in compliance with anti-corruption laws and other laws
governing the conduct of business with government entities and/or officials (including local laws), we may be subject to criminal and civil penalties and other
remedial measures, which could harm our business, financial condition, results of operations, cash flows and prospects. Investigations of any actual or
alleged violations of such laws or policies related to us could harm our business, financial condition, results of operations, cash flows and prospects.
Moreover, there has been enhanced scrutiny of company-sponsored patient assistance programs, including insurance premium and co-pay
assistance programs and donations to third-party independent charities that provide such assistance. There has also been enhanced scrutiny by
governments on reimbursement support offerings, clinical education programs and promotional speaker programs. If we, our third-party agents or donation
recipients are deemed to have failed to comply with laws, regulations or government guidance in any of these areas, we could be subject to criminal or civil
sanctions. Any similar violations by our competitors could also negatively impact our industry reputation and increase scrutiny over our business and our
products.
Our international operations pose currency risks, which may adversely affect our operating results and net income.
A significant and growing portion of our revenues and earnings, as well as our substantial international net assets, are exposed to changes in
foreign exchange rates. As we operate in multiple foreign currencies, including the Euro, the Brazilian Real, the Great British Pound, the Canadian Dollar
and several other currencies, changes in those currencies relative to the U.S. Dollar (USD) will impact our revenues and expenses. If the USD were to
weaken against another currency, assuming all other variables remained constant, our revenues would increase, having a positive impact on earnings, and
our overall expenses would increase, having a negative impact on earnings. Conversely, if the USD were to strengthen against another currency, assuming
all other variables remained constant, our revenues would decrease, having a negative impact on earnings, and our overall expenses would decrease,
having a positive impact on earnings. In addition, because our financial statements are reported in USD, changes in currency exchange rates between the
USD and other currencies have had, and will continue to have, an impact on our results of operations. Therefore, significant changes in foreign exchange
rates can impact our results and our financial guidance.
We implement currency hedges intended to reduce our exposure to changes in certain foreign currency exchange rates. However, our hedging
strategies may not be successful, and any of our unhedged foreign exchange exposures will continue to be subject to market fluctuations. These risks could
cause a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to
decline.
We face credit risks from government-owned or sponsored customers outside of the U.S. that may adversely affect our results of
operations.
Our product sales to government-owned or supported customers in various countries outside of the U.S. are subject to significant payment delays
due to government funding and reimbursement practices. This has resulted and may continue to result in an increase in days sales outstanding due to the
average length of time that we have accounts receivable outstanding. If significant changes were to occur in the reimbursement practices of these
governments or if government funding becomes unavailable, we may not be able to collect on amounts due to us from these customers and our results of
operations would be adversely affected.
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Intellectual Property Risks
If we are unable to protect our intellectual property, we may not be able to compete effectively or preserve our market shares.
Where appropriate, we seek patent protection for certain aspects of our technology. Patent protection may not be available for some of the products
we are developing. If we must spend significant time and money protecting or enforcing our patents, designing around patents held by others or licensing,
potentially for large fees, patents or other proprietary rights held by others, our business and financial prospects may be harmed.
The patent positions of biopharmaceutical products are complex and uncertain. The scope and extent of patent protection for some of our products
and product candidates are particularly uncertain because key information on some of our product candidates has existed in the public domain for many
years. The composition and genetic sequences of animal and/or human versions of Aldurazyme, Naglazyme and many of our product candidates have been
published and are believed to be in the public domain. The chemical structure of 6R-BH4 (the active ingredient in Kuvan) has also been published.
Publication of this information may prevent us from obtaining or enforcing patents relating to our products and product candidates, including without limitation
composition-of-matter patents, which are generally believed to offer the strongest patent protection.
We own or have licensed patents and patent applications related to our products. However, these patents and patent applications do not ensure the
protection of our intellectual property for a number of reasons, including without limitation the following:
• 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.
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Patents have limited duration and expire.
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.
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 our ability to review and redact a narrow sub-set of confidential commercial information, the EU policies have resulted and will
continue to 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.
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.
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If a court agrees, we would not be able to enforce that patent. Moreover, generic manufacturers may use litigation and regulatory means to obtain approval
for generic versions of our products notwithstanding our filed patents or patent applications.
If we are unable to protect our intellectual property, third parties could develop competing products, which could adversely affect our revenues and
financial results generally.
Competitors and other third parties may have developed intellectual property that could limit our ability to market and commercialize our
products and product candidates, if approved.
Similar to us, competitors continually seek intellectual property protection for their technology. Several of our development programs, such as
valoctocogene roxaparvovec, focus on therapeutic areas that have been the subject of extensive research and development by third parties for many years.
Due to the amount of intellectual property in our field of technology, we cannot be certain that we do not infringe intellectual property rights of competitors or
that we will not infringe intellectual property rights of competitors granted or created in the future. For example, if a patent holder believes our product
infringes its patent, the patent holder may sue us even if we have received patent protection for our technology. If someone else claims we infringe its
intellectual property, we would face a number of issues, including the following:
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Defending a lawsuit takes significant executive resources and can be very expensive.
If a court decides that our product infringes a competitor’s intellectual property, we may have to pay substantial damages.
• With respect to patents, in addition to requiring us to pay substantial damages, a court may prohibit us from making, selling, offering to
sell, importing or using our product unless the patent holder licenses the patent to us. The patent holder is not required to grant us a
license. If a license is available, it may not be available on commercially reasonable terms. For example, we may have to pay substantial
royalties or grant cross licenses to our patents and patent applications.
• We may need to redesign our product so it does not infringe the intellectual property rights of others.
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Redesigning our product so it does not infringe the intellectual property rights of competitors may not be possible or could require
substantial funds and time.
We may also support and collaborate in research conducted by government organizations, hospitals, universities or other educational institutions.
These research partners may be unwilling to grant us any exclusive rights to technology or products derived from these collaborations.
If we do not obtain required licenses or rights, we could encounter delays in our product development efforts while we attempt to design around
other patents or may be prohibited from making, using, importing, offering to sell or selling products requiring these licenses or rights. There is also a risk
that disputes may arise as to the rights to technology or products developed in collaboration with other parties. If we are not able to resolve such disputes
and obtain the licenses or rights we need, we may not be able to develop or market our products.
Risks Related to Ownership of Our Securities
Our stock price has been and may in the future be volatile, and an investment in our stock could suffer a decline in value.
Our stock price has been and may in the future be volatile. Our valuation and stock price may have no meaningful relationship to current or
historical earnings, asset values, book value or many other criteria based on conventional measures of stock value. The market price of our common stock
will fluctuate due to factors including:
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• manufacturing, supply or distribution of our product candidates and commercial products;
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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;
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generic competition to Kuvan tablets and powder relating to our settlements with the two pharmaceutical companies described above in
this Risk Factors section 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 us or the pharmaceutical industry;
changes in the structure of healthcare payment systems;
cybersecurity incidents experienced by us or others in our 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 periodic orders for our products by
governments in certain countries;
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.
Furthermore, the stock markets have recently experienced extreme price and volume fluctuations that have affected and continue to affect the
market prices of equity securities of many companies. In some cases, these fluctuations have been unrelated or disproportionate to the operating
performance of those companies. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities
class action litigation. For example, in September 2020, after a substantial drop in our stock price that followed an announcement providing a regulatory
update regarding valoctocogene roxaparvovec, we and certain of our officers were sued in a putative class action lawsuit alleging violations of the federal
securities laws for allegedly making materially false or misleading statements. In addition, in October 2021, after a drop in our stock price that followed an
announcement providing a regulatory update regarding BMN 307, we and certain of our current and former officers were sued in a putative class action
lawsuit alleging violations of the federal securities laws for allegedly making materially false or misleading statements. We may be the target of additional
litigation of this type in the future as well. Securities litigation against us could result in substantial costs and divert our management’s time and attention from
other business concerns, which could harm our business.
In addition, our stock price can be materially adversely affected by factors beyond our control, such as disruptions in global financial markets or
negative trends in the biotechnology sector of the economy, even if our business is operating well.
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. 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.
Anti-takeover provisions in our charter documents and under Delaware law may make an acquisition of us, which may be beneficial to
our stockholders, more difficult.
We are incorporated in Delaware. Certain anti-takeover provisions of Delaware law and our charter documents as currently in effect may make a
change in control of us 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 providing that stockholders’ meetings may only be called by our Chairman, the
lead independent director or the majority of
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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 us.
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 us over.
The terms of the Notes require us to repurchase the Notes in the event of a fundamental change. A takeover of us would trigger options by the
respective holders of the applicable Notes to require us to repurchase such Notes. This may have the effect of delaying or preventing a takeover of us that
would otherwise be beneficial to our stockholders or investors in the Notes.
Our amended and restated bylaws designate the Court of Chancery of the State of Delaware and the federal 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.
Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware is the sole and exclusive forum for the following
types of actions or proceedings under Delaware statutory or common law:
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any derivative claim or cause of action brought on our behalf;
any claim or cause of action for breach of a fiduciary duty owed by any director, officer or other employee of BioMarin to us or our
stockholders;
any claim or cause of action against us or any of our directors, officers or other employees arising pursuant to any provision of the
General Corporation Law of the State of Delaware, our restated certificate of incorporation or our amended and restated bylaws; any
claim or cause of action seeking to interpret, apply, enforce or determine the validity of our restated certificate of incorporation or our
amended and restated bylaws;
any claim or cause of action as to which the General Corporation Law of the State of Delaware confers jurisdiction to the Court of
Chancery of the State of Delaware; and
any claim or cause of action against us or any of our directors, officers or other employees that is governed by the internal affairs
doctrine.
This exclusive-forum provision would not apply to suits brought to enforce a duty or liability created by the Securities Act of 1933, as amended, the
Exchange Act or any other claim for which the U.S. federal courts have exclusive jurisdiction. In addition, our amended and restated bylaws provide that the
federal district courts of the U.S. of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities
Act.
While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a
claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and
enforceability of the exclusive forum provisions of our amended and restated bylaws. This may require significant additional costs associated with resolving
such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.
These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our
directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees. If a court were to find
either of our exclusive forum provisions to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with
resolving the dispute in other jurisdictions, all of which could seriously harm our business. Our amended and restated bylaws further provide that any person
or entity that acquires any interest in shares of our capital stock will be deemed to have notice of and consented to the provisions of such provisions.
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We depend upon our key personnel and our ability to attract and retain qualified employees.
General Risk Factors
Our future growth and success will depend in large part on our continued ability to attract, retain, manage and motivate our employees. The loss of
the services of a significant portion of our workforce or any member of our senior management or the inability to hire or retain qualified personnel could
adversely affect our ability to execute our business plan and harm our operating results.
Because of the specialized nature of our business, we rely heavily on our ability to attract and retain qualified scientific, technical and managerial
personnel. In particular, the loss of one or more of our senior executive officers could be detrimental to us if we do not have an adequate succession plan or
if we cannot recruit suitable replacements in a timely manner. While our senior executive officers are parties to employment agreements with us, these
agreements do not guarantee that they will remain employed with us in the future. In addition, in many cases, these agreements do not restrict our senior
executive officers’ ability to compete with us after their employment is terminated.
The competition for qualified personnel in the pharmaceutical field is intense, and there is a limited pool of qualified potential employees to recruit.
This competition has been exacerbated during the COVID-19 pandemic, and we have recently experienced increased employee turnover like many other
employers in the U.S. during the “great resignation.” Due to the intense competition for talent, we may be unable to continue to attract and retain qualified
personnel necessary for the development of our business or to recruit suitable replacement personnel. If we are unsuccessful in our recruitment and
retention efforts, our business may be harmed.
Our success depends on our ability to manage our growth.
Product candidates that we are currently developing or may license or acquire in the future may be intended for patient populations that are
significantly larger than any of the patient populations we currently target. In order to continue development and marketing of these products, if approved, we
will need to significantly expand 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 and corruption risks and our management may be unable to manage successfully future market opportunities or our
relationships with customers and other third parties.
New tax laws or regulations that are enacted or existing tax laws and regulations that are interpreted, modified or applied adversely to us
or our customers may have a material adverse effect on our business and financial condition.
New tax laws or regulations could be enacted at any time, and existing tax laws or regulations could be interpreted, modified or applied in a manner
that is adverse to us or our customers, which could adversely affect our business and financial condition. For example, legislation enacted in 2017, informally
titled the Tax Cuts and Jobs Act (TCJA), as modified in 2020 by the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, enacted many
significant changes to the U.S. tax laws, including changes in corporate tax rates, the application of certain tax credits (including a reduction of tax credits
under the Orphan Drug Act), the deductibility of expenses, the utilization of net operating losses and other deferred tax assets, and the taxation of non-U.S.
earnings. Future guidance from the Internal Revenue Service and other tax authorities with respect to the TCJA, the CARES Act or other existing or future
laws may affect us, and certain aspects of existing laws could be repealed or modified in future legislation that is proposed or implemented by the current or
a future U.S. presidential administration, Congress or other governmental authorities. In addition, it is uncertain if and to what extent various states will
conform to the TCJA, the CARES Act, or any newly enacted tax legislation. The impact of changes under the TCJA, the CARES Act, or future legislation
could increase our future U.S. tax expense and could have a material adverse impact on our business and financial condition.
Moreover, changes in the tax laws of non-U.S. jurisdictions could arise, including as a result of the base erosion and profit shifting (BEPS) project
that was undertaken by the Organization for Economic Co-operation and Development (OECD), or other initiatives led by the OECD or the EC. The OECD,
which represents a coalition of member countries including the U.S. and other countries in which we have operations, made several recommendations with
the aim of addressing tax avoidance and ensuring that profits are taxed where economic activities generating the profits are performed and where value is
created. The OECD is also working on proposals, commonly referred to as “BEPS 2.0”, which, if implemented, would fundamentally change the international
tax system. These changes, as adopted by countries, may increase tax uncertainty and may adversely affect our provision for income taxes, results of
operations and cash flows. It is not uncommon for taxing authorities in different countries to have conflicting views, for instance, with respect to, among other
things, the manner in which the arm’s length standard is applied for transfer pricing purposes, or with respect to the valuation of intellectual property. If tax
authorities successfully challenge our transfer prices as not reflecting arm’s length transactions, they could require us to adjust our transfer prices and
thereby reallocate our income to reflect these revised transfer prices, resulting in a higher tax liability. In addition, if a country from which income is
reallocated does not agree with the reallocation, both that country and the other country to which the income was allocated could tax the same income,
potentially resulting in double taxation. If tax authorities were to allocate income to a higher tax jurisdiction,
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subject our income to double taxation or assess interest and penalties, it would increase our consolidated tax liability, which could adversely affect our
business, financial condition, results of operations and cash flows.
If we are found in violation of healthcare laws or privacy and data protection laws, we may be required to pay penalties, be subjected to
scrutiny by regulators or governmental entities, or be suspended from participation in government healthcare programs, which may adversely
affect our business, reputation, financial condition and results of operations.
We are subject to various healthcare laws and regulations in the U.S. and internationally, including anti-kickback laws, false claims laws, data
privacy and security laws, and laws related to ensuring compliance. In the U.S., the federal Anti-Kickback Statute makes it illegal for any person or entity,
including a pharmaceutical company, to knowingly and willfully offer, solicit, pay or receive any remuneration, directly or indirectly, in exchange for or to
induce the referral of business, including the purchase, order or prescription of a particular drug, for which payment may be made under federal healthcare
programs, such as Medicare and Medicaid. Under the federal Anti-Kickback Statute and related regulations, certain arrangements are deemed not to violate
the federal Anti-Kickback Statute if they fit within a statutory exception or regulatory safe harbor. However, the exceptions and safe harbors are drawn
narrowly, and practices that involve remuneration not intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do
not qualify for an exception or safe harbor. Our practices may not in all cases meet all of the criteria for safe harbor protection from Anti-Kickback liability,
although we seek to comply with these safe harbors. Many states have adopted laws similar to the federal Anti-Kickback Statute, some of which apply to
referral of patients for healthcare services reimbursed by any source, not just governmental payers.
Federal and state false claims laws, including the civil False Claims Act and the Civil Monetary Penalties Law, prohibit any person or entity from
knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false
statement to have a false claim paid, or knowingly making, using, or causing to be made or used, a false record or statement to avoid, decrease or conceal
an obligation to pay money to the federal government. In addition, certain marketing practices, including off-label promotion, may also violate false claims
laws.
Under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), we also are prohibited from, among other things, knowingly and
willfully executing a scheme to defraud any healthcare benefit program, including private payers, or knowingly and willfully falsifying, concealing or covering
up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items
or services.
In addition, recent healthcare reform legislation has strengthened these laws in the U.S. For example, the PPACA, among other things, amends the
intent requirement of the federal Anti-Kickback Statute and criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge
of these statutes or specific intent to violate them in order to commit a violation. Moreover, the PPACA provides that the government may assert that a claim
including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False
Claims Act.
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes
obligations, including mandatory contractual terms, on certain types of individuals and entities, with respect to safeguarding the privacy, integrity, availability,
security and transmission of individually identifiable health information. Many state and non-U.S. laws also govern the privacy and security of health
information. They often differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. The global
data protection landscape is rapidly evolving, and implementation standards and enforcement practices are likely to remain uncertain for the foreseeable
future. In the U.S., California recently enacted the California Consumer Privacy Act (CCPA), which took effect on January 1, 2020. The CCPA gives
California consumers expanded rights to access and delete their personal information, opt out of certain personal information sales, and receive detailed
information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data
breaches that is expected to increase data breach litigation. The CCPA will be expanded substantially on January 1, 2023 when the California Privacy Rights
Act of 2020 (CPRA), becomes fully operative. The CPRA will, among other things, give consumers the ability to limit use of information deemed to be
sensitive, increase the maximum penalties for violations concerning consumers under age 16, expand an individual’s private right of action and establish the
California Privacy Protection Agency to implement and enforce the new law and impose administrative fines. In addition to California, other U.S. states have
recently adopted consumer data protection and privacy laws, and more U.S. states may do so in the future. Aspects of the CCPA, CPRA and similar laws in
other states and their interpretation and enforcement remain uncertain. The potential effects of these laws are far-reaching and may require us to modify our
data processing practices and policies and to incur substantial costs and expenses in an effort to comply. Complying with these or other similar laws,
regulations, amendments to or re-interpretations of existing laws and regulations, and contractual or other obligations relating to privacy, data protection,
data transfers, data localization, or information security may require us to make changes to our services to enable us or our customers to meet new legal
requirements, incur substantial operational costs, modify our data practices and policies, and restrict our business operations. Any actual or perceived failure
by us to comply with these laws, regulations, or other obligations may lead to significant fines, penalties, regulatory investigations, lawsuits, significant costs
for remediation, damage to our reputation, or other liabilities.
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The European Regulation 2016/679, known as the General Data Protection Regulation (GDPR), as well as EEA Member State legislations
supplementing such regulation, apply to the processing of personal data of individuals located in the EEA, including health-related information, by companies
located in the EEA, or in certain circumstances, by companies located outside of the EEA. These laws impose strict obligations on the ability to collect,
record, store, disclose, use and transmit personal data, including health-related information. These include several requirements relating to (i) obtaining, in
some situations, the informed consent of the individuals to whom the personal data relates, (ii) the information provided to the individuals about how their
personal information is used, (iii) ensuring the security and confidentiality of the personal data, (iv) the obligation to notify regulatory authorities and affected
individuals of personal data breaches, (v) extensive internal privacy governance obligations, and (vi) obligations to honor rights of individuals in relation to
their personal data (for example, the right to access, correct and delete their data). Switzerland has adopted similar restrictions.
The GDPR and other European data protection laws generally restrict the transfer of personal information from Europe, including the EEA and
Switzerland, to the U.S. and most other countries unless the parties to the transfer have implemented specific safeguards to protect the transferred personal
information. One of the primary safeguards allowing U.S. companies to import personal information from the EEA has been the EC’s Standard Contractual
Clauses (SCCs). However, the Court of Justice of the EU (CJEU) issued a decision that called into question whether the SCCs can lawfully be used for
transfers of personal information from Europe to the United States or most other countries. At present, there are few, if any, viable alternatives to the SCCs,
on which we have relied for personal information transfers from Europe to the United States and other “third countries.” After the mentioned CJEU judgment,
new sets of SCCs were published on June 4, 2021. Entities having entered into the old SCCs before September 27, 2021 will be able to rely on them for a
transition period ending December 27, 2022. Most importantly, the use of SCCs does not any longer automatically ensure compliance with the GDPR.
Instead, companies remain required to conduct a data transfer impact assessment for each transfer, which adds a compliance burden.
Potential pecuniary fines for noncompliance with the GDPR may be up to the greater of €20 million or 4% of annual global revenue. The GDPR has
increased our responsibility and liability in relation to personal data that we process and has increased our compliance costs.
Substantial new laws and regulations affecting compliance have also been adopted in the U.S. and certain non-U.S. countries, which may require
us to modify our business practices with healthcare practitioners. For example, in the U.S., the PPACA, through the Physician Payments Sunshine Act,
requires certain drug, biologicals and medical supply manufacturers to collect and report to CMS information on payments or transfers of value to physicians
(defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other health care professionals (such as physicians assistants and nurse
practitioners), and teaching hospitals, as well as investment and ownership interests held by such physicians and their immediate family members during the
preceding calendar year. In addition, there has been a recent trend of increased state regulation of payments made to physicians. Certain states and/or local
jurisdictions mandate implementation of compliance programs, compliance with the Office of Inspector General Compliance Program Guidance for
Pharmaceutical Manufacturers and the Pharmaceutical Research and Manufacturers of America (PhRMA) Code on Interactions with Healthcare
Professionals, the registration of pharmaceutical sales representatives and/or the tracking and reporting of gifts, compensation and other remuneration to
physicians, marketing expenditures, and drug pricing. Likewise, in many non-U.S. countries there is an increasing focus on the relationship between drug
companies and healthcare practitioners. Recently enacted non-U.S. legislation creates reporting obligations on payments, gifts and benefits made to these
professionals; however, implementing regulations enacting such laws are still pending and subject to varying interpretations by courts and government
agencies. The shifting regulatory environment and the need to implement systems to comply with multiple jurisdictions with different compliance and/or
reporting requirements increases the costs of maintaining compliance and the possibility that we may violate one or more of the requirements and be subject
to fines or sanctions.
Due to the breadth of the healthcare and privacy and data protection laws described above, the narrowness of available statutory and regulatory
exceptions and safe harbors and the increased focus by law enforcement agencies in enforcing such laws, our business activities could be subject to
challenge under one or more of such laws. If we are found in violation of one of these laws, we may be subject to significant criminal, civil or administrative
sanctions, including damages, fines, disgorgement, imprisonment, contractual damages, reputational harm, diminished profits and future earnings, additional
reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance
with these laws, curtailment of our operations, and debarment, suspension or exclusion from participation in government healthcare programs, any of which
could adversely affect our business, financial condition and results of operations.
If product liability lawsuits are successfully brought against us, we may incur substantial liabilities.
We are exposed to the potential product liability risks inherent in the testing, manufacturing and marketing of human pharmaceuticals. We currently
maintain insurance against product liability lawsuits for the commercial sale of our products and for the clinical trials of our product candidates.
Pharmaceutical companies must balance the cost of insurance with the level of coverage based on estimates of potential liability. Historically, the potential
liability associated with product liability lawsuits for pharmaceutical products has been unpredictable. Although we believe that our current insurance is a
reasonable estimate of our potential liability and represents a commercially reasonable balancing of the level of coverage as compared to the cost of the
insurance, we may be subject to claims in connection with our clinical trials and commercial use of our products and product
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candidates for which our insurance coverage may not be adequate and we may be unable to avoid significant liability if any product liability lawsuit is brought
against us. If we are the subject of a successful product liability claim that exceeds the limits of any insurance coverage we obtain, we may incur substantial
charges that would adversely affect our earnings and require the commitment of capital resources that might otherwise be available for the development and
commercialization of our product programs.
We rely significantly on information technology systems and any failure, inadequacy, interruption or security lapse of that technology,
including any cybersecurity incidents, could harm our ability to operate our business effectively and have a material adverse effect on our
business, reputation, financial condition, and results of operations.
We rely significantly on our information technology systems to effectively manage and maintain our operations, inventory and internal reports, to
manufacture and ship products to customers and to timely invoice them. Any failure, inadequacy or interruption of that infrastructure or security lapse
(whether intentional or inadvertent) of that technology, including cybersecurity incidents or attacks, could harm our ability to operate our business effectively.
Our ability to manage and maintain our operations, inventory and internal reports, to manufacture and ship our products to customers and timely invoice
them depends significantly on our enterprise resource planning, production management and other information systems. Our technology systems, including
our cloud technologies, continue to increase in multitude and complexity, making them potentially vulnerable to breakdown, cyberattack and other
disruptions. Potential problems and interruptions associated with the implementation of new or upgraded technology systems or with maintenance or
adequate support of existing systems could disrupt or reduce the efficiency of our operations and expose us to greater risk of security breaches.
Cybersecurity incidents, including phishing attacks and attempts to misappropriate or compromise confidential or proprietary information or sabotage
enterprise IT systems are becoming increasingly frequent and more sophisticated. Cybersecurity incidents resulting in the failure of our enterprise resource
planning system, production management or other systems to operate effectively or to integrate with other systems, or a breach in security or other
unauthorized access or unavailability of these systems, have occurred in the past and may affect our ability in the future to manage and maintain our
operations, inventory and internal reports, and result in delays in product fulfillment and reduced efficiency of our operations.
As part of our business, we collect, store and transmit large amounts of confidential information, proprietary data, intellectual property and personal
data. The information and data processed and stored in our technology systems, and those of our research collaborators, CROs, contract manufacturers,
suppliers, distributors, or other third parties for which we depend to operate our business, may be vulnerable to loss, damage, denial-of-service,
unauthorized access or misappropriation. Data security breaches may be the result of unauthorized or unintended activity (or lack of activity) by our
employees or contractors or malware, hacking, business email compromise, phishing, ransomware or other cyberattacks directed by third parties. Third
parties for which we depend on to operate our business have experienced and may continue to experience cybersecurity incidents. While we have
implemented measures to protect our information and data stored in our technology systems and those of the third parties that we rely on, our efforts may
not be successful.
We have experienced and may continue to experience cybersecurity incidents. Although to our knowledge we have not experienced any material
incident or interruption to date, if such an event were to occur it could result in a material disruption of our development programs and commercial
operations, including due to a loss, corruption or unauthorized disclosure of our trade secrets, personal data or other proprietary or sensitive information.
Further, these cybersecurity incidents can lead to the public disclosure of personal information (including sensitive personal information) of our employees,
clinical trial patients and others and result in demands for ransom or other forms of blackmail. Such attacks are of ever-increasing levels of sophistication
and are made by groups and individuals with a wide range of motives (including industrial espionage) and expertise, including 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 or systems, or inappropriate disclosure of confidential, proprietary or personal
information, we could be exposed to a risk of loss, enforcement measures, penalties, fines, indemnification claims, litigation and potential civil or criminal
liability, which could materially adversely affect our business, financial condition and results of operations.
If a natural disaster, terrorist or criminal activity or other unforeseen event caused significant damage to our facilities or those 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.
The occurrence of an earthquake or other catastrophic disaster could cause damage to our facility and equipment, or that of our third-party
manufacturers or single-source suppliers, which could materially impair the ability for us or our third-party manufacturers to manufacture our products and
product candidates. Our Galli Drive facility, located in Novato, California, is currently our only manufacturing facility for Aldurazyme, Naglazyme, Voxzogo
and Palynziq and is one of two manufacturing
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facilities for Brineura and Vimizim. Our gene therapy manufacturing facility is also located in Novato, California, and it is currently our only manufacturing
facility to support valoctocogene roxaparvovec clinical development activities and the anticipated commercial demand for valoctocogene roxaparvovec, if
approved. These facilities are located in the San Francisco Bay Area near known earthquake fault zones and are 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, 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 our products, or to have our products manufactured, could be seriously, or potentially completely, impaired, and our commercialization efforts
and revenues could be seriously impaired.
Moreover, other unforeseen events, such as power outages, could significantly disrupt our operations or those of our third-party manufacturers and
suppliers, which could result in significant delays in the manufacture of our products and adversely impact our commercial operations and revenues. Pacific
Gas and Electric Company, the electric utility in the San Francisco Bay Area where many of our facilities are located, commenced widespread blackouts
during the fall of 2019 to avoid and contain wildfires sparked during strong wind events by downed power lines or equipment failures. While we have not
experienced damage to our facilities or material disruption to our operations as a result of these power outages, ongoing blackouts, particularly if prolonged
or frequent, could impact our business going forward. The insurance that we carry, the inventory that we maintain and our risk mitigation plans may not be
adequate to cover our losses resulting from disasters or other business interruptions.
Our business is affected by macroeconomic conditions.
Various macroeconomic factors could adversely affect our business and the results of our operations and financial condition, including changes in
inflation, interest rates and foreign currency exchange rates and overall economic conditions and uncertainties, including those resulting from the current and
future conditions in the global financial markets. For instance, if inflation 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 healthcare providers are reimbursed for our products by the government.
Interest rates, the liquidity of the credit markets and the volatility of the capital markets could also affect the value of our investments and our ability to
liquidate our investments in order to fund our operations. We purchase or enter into a variety of financial instruments and transactions, including investments
in commercial paper, the extension of credit to corporations, institutions and governments and hedging contracts. If any of the issuers or counter parties to
these instruments were to default on their obligations, it could materially reduce the value of the transaction and adversely affect our cash flows.
We sell our products in countries that face economic volatility and weakness. 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 revenues would be adversely affected.
Interest rates and the ability to access credit markets could also adversely affect the ability of our customers/distributors to purchase, pay for and
effectively distribute our products. Similarly, these macroeconomic factors could affect the ability of our contract manufacturers, sole-source or single-source
suppliers to remain in business or otherwise manufacture or supply product. Failure by any of them to remain a going concern could affect our ability to
manufacture products.
54
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
The following table contains information about our significant owned and leased properties as of December 31, 2021:
Location
Approximate
Square Feet
San Rafael facility, San Rafael, California
407,300
office
Corporate headquarters, laboratory and
Use
Several facilities in Novato, California
Several leased facilities in Novato,
California
293,300
laboratory and office
Clinical and commercial manufacturing,
164,000
Office and warehouse
Shanbally facility, Cork, Ireland
260,700
Manufacturing, laboratory and office
Lease
Expiration
Date
Owned
property
Owned
property
2023
Owned
property
We expect that these properties, together with our other smaller leased office facilities in various countries, will be adequate for our operations for
the foreseeable future.
Item 3. Legal Proceedings
On September 25, 2020, a purported shareholder class action lawsuit was filed against us, our Chief Executive Officer, our President of Worldwide
Research and Development and our Chief Financial Officer in the United States District Court in the Northern District of California, alleging violations under
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 as amended (the Exchange Act). The complaint alleges that we made materially false or
misleading statements regarding the clinical trials and Biologics License Application (BLA) for valoctocogene roxaparvovec by purportedly failing to disclose
that differences between the Company’s Phase 1/2 and Phase 3 clinical studies limited the ability of the Phase 1/2 study to support valoctocogene
roxaparvovec’s durability of effect and, as a result, that it was foreseeable that the FDA would not approve the BLA without additional data. The complaint
seeks an unspecified amount of damages, prejudgment and post-judgment interest, attorneys’ fees, expert fees, and other costs. The lead plaintiff filed an
amended complaint in February 2021, dropping our Chief Financial Officer as a defendant, and asserting that the Company misled investors about the
progress of the FDA's review of our BLA for valoctocogene roxaparvovec. On April 22, 2021, we moved to dismiss the amended complaint. On January 6,
2022, the court denied our motion to dismiss. We answered the amended complaint on February 15, 2022. We believe that the claims have no merit and we
intend to vigorously defend this action.
On October 22, 2021, a purported securities class action lawsuit was filed against us, our Chief Executive Officer, our current and prior Chief
Financial Officers, and our President of Worldwide Research & Development in the United States District Court for the Northern District of California, alleging
violations under Sections 10(b) and 20(a) of the Exchange Act. The complaint alleges that we made materially false or misleading statements regarding
BMN 307 by purportedly failing to disclose information about BMN 307’s safety profile, and by purportedly overstating BMN 307’s clinical and commercial
prospects. The complaint seeks an unspecified amount of damages, pre-judgment and post-judgment interest, attorneys’ fees, expert fees, and other costs.
The Court appointed lead plaintiffs and lead counsel on January 10, 2022. The deadline for lead plaintiffs to file an amended complaint is March 25, 2022.
We believe that the claims have no merit and we intend to vigorously defend this action.
Item 4. Mine Safety Disclosures
Not applicable.
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Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is listed under the symbol “BMRN” on the Nasdaq Global Select Market.
We have never paid any cash dividends on our common stock and we do not anticipate paying cash dividends in the foreseeable future.
Recent Sales of Unregistered Securities
We did not sell any unregistered securities during the year ended December 31, 2021 that were not previously disclosed in a Quarterly Report on
Form 10-Q or in a Current Report on Form 8-K.
Issuer Purchases of Equity Securities
None.
Holders
As of February 22, 2022, there were 38 holders of record of 184,032,162 outstanding shares of our common stock.
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Performance Graph
The following is not deemed “filed” with the Securities and Exchange Commission and is not to be incorporated by reference into any filing we make
under the Securities Act of 1933, as amended, whether made before or after the date hereof and irrespective of any general incorporation by reference
language in such filing.
The following graph shows the value of an investment in BioMarin common stock, the Nasdaq Composite Index and the Nasdaq Biotechnology
Index, assuming the investment of $100.00 at the beginning of the period and the reinvestment of dividends, if any. Our common stock is traded on the
Nasdaq Global Select Market and is a component of both the Nasdaq Composite Index and the Nasdaq Biotechnology Index. The comparisons shown in the
graph are based upon historical data and we caution that the stock price performance shown in the graph is not indicative of, nor intended to forecast, the
potential future performance of our stock.
* $100 invested on December 31, 2016 in stock or index, including reinvestment of dividends
2020
2017
2019
2018
2016
$
$
$
100.00
100.00
100.00
$
$
$
107.64
129.64
121.63
$
$
$
102.79
125.96
110.85
$
$
$
102.06
172.17
138.69
$
$
$
105.85
249.51
175.33
BioMarin
Pharmaceutical
Inc.
Nasdaq
Composite
Index
Nasdaq
Biotechnology
Item 6. [Reserved]
57
2021
$
$
$
106.65
304.85
175.37
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader
understand our results of operations and financial condition. MD&A is provided as a supplement to, and should be read in conjunction with, our audited
Consolidated Financial Statements and the accompanying notes to the Consolidated Financial Statements and other disclosures included in this Annual
Report on Form 10-K, including the disclosures under “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K. 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.” 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 Annual Report on Form 10-K. These statements, like all statements in this report, speak only as of the date of this Annual
Report on Form 10-K (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 Consolidated Financial Statements have been prepared in accordance with United States (U.S.) generally accepted
accounting principles (GAAP) and are presented in U.S. Dollars (USD).
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 products and multiple clinical and preclinical product candidates for the treatment of various diseases. A
summary of our commercial products, as of December 31, 2021, is provided below:
Commercial Products
Vimizim (elosulfase alpha)
Naglazyme (galsulfase)
Kuvan (sapropterin dihydrochloride)
Palynziq (pegvaliase-pqpz)
Brineura (cerliponase alfa)
Voxzogo (vosoritide)
Aldurazyme (laronidase)
(1)
(2)
(3)
(4)
(5)
(6)
For the treatment of Mucopolysaccharidosis IV Type A
For the treatment of Mucopolysaccharidosis VI
For the treatment of phenylketonuria
For adult patients with PKU
For the treatment of late infantile neuronal ceroid lipofuscinosis type 2
For the treatment of Mucopolysaccharidosis I
Indication
(1)
MPS IVA
(2)
MPS VI
(3)
PKU
PKU
CLN2
Achondroplasia
(6)
MPS I
(4)
(5)
A summary of our on-going clinical development programs as of December 31, 2021, is provided below:
Clinical Development Programs
Valoctocogene roxaparvovec
BMN 307
BMN 255
Target
Indication
Severe Hemophilia A
PKU
Primary hyperoxaluria
Stage
Clinical Phase 3
Clinical Phase 1/2
Clinical Phase 1/2
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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)
2021 Financial Highlights
Key components of our results of operations include the following:
Total revenues
Cost of sales
Research and Development (R&D) expense
Selling, general and administrative (SG&A) expense
Gain on sale of nonfinancial assets
Benefit from income taxes
Net income (loss)
Years Ended December 31,
2020
2019
2021
1,846.3 $
470.5 $
628.8 $
759.4 $
— $
(11.3) $
(64.1) $
1,860.5 $
524.3 $
628.1 $
737.7 $
(59.5) $
(901.4) $
859.1 $
1,704.0
359.5
715.0
680.9
(25.0)
(71.0)
(23.8)
$
$
$
$
$
$
$
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 years ended December 31, 2021 and 2020 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 COVID-19 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 I, Item
1A of this Annual Report on Form 10-K.
Business Developments
We continued to grow our commercial business and advance our product candidate pipeline during 2021. 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
Late-stage Regulatory Portfolio
◦
•
Voxzogo: In August 2021, the European Commission approved Voxzogo for the treatment of children, ages two years and older.
Regulatory approvals were also received in Brazil and in the U.S. in November 2021, for children ages five and older with open growth
plates. The launch is actively underway, with market access and reimbursement progressing as anticipated. At the end of 2021, there were
seven active markets contributing to Voxzogo sales.
Voxzogo marketing authorization reviews in Japan and Australia are in process, with potential approvals in those countries in 2022.
In February 2022, we announced an update from the Phase 2 randomized, double-blind, placebo-controlled Voxzogo study in infants and
young children up to five years of age with achondroplasia. Results at 52 weeks trended in favor of Voxzogo compared to placebo on
height (adjusted for age and gender) and annualized growth velocity, with no worsening in proportionality in the overall study population.
The safety profile was generally consistent with older children from the Phase 3 study and product label population. We intend to initiate
discussions with regulatory health authorities to discuss next steps regarding efforts to expand access to Voxzogo treatment for this
younger age group.
Valoctocogene roxaparvovec: The European Medicines Agency (EMA) validated our Marketing Authorization Application (MAA) for
valoctocogene roxaparvovec resulting in an anticipated Committee for Medicinal Products for Human Use opinion in the second quarter of
2022. We have provided the EMA with two-year follow-up safety and efficacy data from the GENEr8-1 study.
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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)
Based on the favorable results from the two-year follow-up safety and efficacy data from the GENEr8-1 study, we are targeting a Biologics
License Application (BLA) resubmission for valoctocogene roxaparvovec in the second quarter of 2022. If the resubmission satisfies Food
and Drug Administration’s (FDA) response to the Complete Response Letter received in August 2020, we expect resubmission will be
followed by a six-month review procedure by the FDA.
Select Earlier-stage Development Portfolio
◦
•
BMN 307 gene therapy product candidate for PKU: In September 2021, the FDA placed a clinical hold on PHEarless, the Phase 1/2 study
evaluating BMN 307, an investigational AAV5-phenylalanine hydroxylase (PAH) gene therapy, on adults with PKU. The hold was based on
pre-clinical study findings from a model designed to understand the durability of BMN 307 activity in mice bearing two germline mutations,
one rendering the mice immunodeficient. The durability study was one of multiple pre-clinical studies we conducted and was not designed
to test safety. However, we promptly notified the FDA upon availability of the integration site analysis results. The FDA initiated a clinical
hold shortly after being notified and we announced the hold before the next business day after informing the FDA. In February 2022, the
FDA requested data from additional non-clinical studies to assess theoretical oncogenic risk to human study participants, which is
expected to take several quarters. We will communicate next steps for the program when available.
BMN 255 for primary hyperoxaluria type 1, a subset of chronic renal disease: The Investigational New Drug application (IND) for BMN 255
is active and we are dosing subjects with dose selection for advanced studies expected in the second half of 2022. 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.
2022 Outlook
We expect that our product pipeline investments and expanding commercial infrastructure will enable us to execute on our 2022 operating
objectives. In 2022, we will continue to focus on our key operating objectives which include continued progression of our product pipeline and continued
global expansion of our commercial products. From an R&D perspective, we expect to continue to invest in our various ongoing clinical studies which
support both our commercial products and research and early development pipeline. We expect to move forward on our late and early-stage clinical studies
for new product candidates, including the resubmission of the BLA for valoctocogene roxaparvovec as noted above. From a commercial perspective, we
expect to continue to support our global business as it grows, including support of the commercialization of Voxzogo and pre-commercialization activities
related to valoctocogene roxaparvovec.
We expect to continue to experience significant declines in Kuvan revenues in the U.S. due to the October 2020 loss of market exclusivity. 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 experience growth in Net Product Revenues with respect to our new and other existing commercial products. We continue to
monitor conditions in the macroeconomic environment that could affect our ability to achieve our goals, such as the continuing impact of the COVID-19
pandemic on all aspects of our business, changes in the reimbursement and payer landscape, changes in economic conditions in certain key markets,
particularly in Europe and Latin America, market competition and the launch of generic competitors, international government pricing pressures and the
potential volatility in foreign currency exchange rates. We will adjust our business processes, as appropriate, to attempt to mitigate these risks to our
business.
Critical Accounting Estimates
In preparing our Consolidated Financial Statements in accordance with U.S. GAAP and pursuant to the rules and regulations promulgated by the
Securities and Exchange Commission (the SEC), we make assumptions, judgments and estimates that can have a significant impact on our net income/loss
and affect the reported amounts of certain assets, liabilities, revenue and expenses, and related disclosures. On an ongoing basis, we evaluate our
estimates and discuss our critical accounting policies and estimates with the Audit Committee of our Board of Directors. We base our 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 policies 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,
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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)
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.
Our significant accounting policies are described in Note 1 to our accompanying Consolidated Financial Statements included in this Annual Report
on Form 10-K. We believe the critical accounting policies below reflect the most critical judgments and estimates used in the preparation of our Consolidated
Financial Statements.
Revenue Recognition and Related Allowances
Net Product Revenues – We recognize revenue when the customer obtains control of promised goods or services, in an amount that reflects the
consideration which we expect to receive in exchange for those goods or services. For Aldurazyme revenues, we receive a payment ranging from 39.5% to
50% on worldwide net Aldurazyme sales by Sanofi (formerly referred to as Sanofi Genzyme) depending on sales volume, which is included in Net Product
Revenues in our Consolidated Statements of Operations. We recognize our best estimate of the entire revenue that we expect to receive when the product
is released and control is transferred to Sanofi. We record Aldurazyme net product revenues based on the estimated variable consideration payable when
the product is sold through by Sanofi. Differences between the estimated variable consideration to be received from Sanofi and actual payments received
are not expected to be material. If actual results vary from our estimates, we will make adjustments, which would affect Net Product Revenues and earnings
in the period such variances become known.
Gross-to-Net Sales Adjustments – We record product sales net of estimated mandatory and supplemental discounts to government payers, in
addition to discounts to private payers, and other related charges. Rebates, cash discounts and distributor fees represent the majority of our gross-to-net
deductions and are recorded in the same period the related sales occur. Rebates include amounts paid to Medicaid, other government programs, certain
managed care providers, as well as foreign government rebates. Rebates, branded co-pay assistance programs, cash discounts and distributor fees are
estimates based on contractual arrangements or statutory obligations, which may vary by product and payer. Estimation requires evaluation of our historical
experience, customer mix, current contractual and statutory obligations, specific known market events and trends and industry data. We evaluate our
customer mix to estimate which sales will be subject to these revenue dilutive items and consider changes to government program guidelines that would
impact the actual rebates and/or our estimates of which sales qualify for such rebates.
We update our estimates and assumptions each quarter based on actual historical experience, current contractual and statutory requirements,
specific known market events and trends and forecasted customer buying and payment patterns and record any necessary adjustments to our reserves to
reflect current information. We believe the methodologies that we use to estimate allowances are reasonable and appropriate given the facts and
circumstances. However, actual results may differ significantly from our estimates.
The following table summarizes the consolidated activities and ending balances of all our gross-to-net sales adjustments:
Year ended December 31,
Year ended December 31,
Year ended December 31,
2021
2020
2019
Balance at
Beginning of Year
Provision for
Current Period
Sales
Payments
Balance at End of
Year
$
$
$
104.4
114.4
80.7
$
$
$
252.9
239.9
198.1
$
$
$
(271.7)
(249.9)
(164.4)
$
$
$
85.6
104.4
114.4
Inventory Produced Prior to Regulatory Approval
When future commercialization for a product candidate is considered probable and management believes that material uncertainties related to the
ultimate regulatory approval have been significantly reduced and we expect to realize economic benefit in the future, we capitalize pre-launch or pre-
qualification manufacturing costs prior to regulatory approval. For inventories that are capitalized in preparation of product launch, management considers a
number of factors based on the information available at the time, including the product candidate’s current status in the drug development and regulatory
approval process, results from the related pivotal clinical trial, results from meetings with relevant regulatory agencies prior to the filing of regulatory
applications, historical experience, as well as potential impediments to the approval process such as product safety or efficacy, as well as commercialization
and market trends.
In applying the lower of cost or net realizable value to pre-launch inventory, we estimate a range of likely commercial prices based on our
comparable commercial products and consider the product candidate’s stability data for all of the pre-approval production to date to determine whether there
is adequate expected shelf life for the capitalized pre-launch production costs. If additional requirements are subsequently presented by the regulatory
authorities prior to their final decision, thus extending anticipated regulatory approval timelines resulting in expiration of the product prior to revised demand
forecasts, as occurred in the
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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)
third quarter of 2020 with valoctocogene roxaparvovec, the pre-launch inventory costs are expensed to Cost of Sales. If the marketing application is
ultimately rejected by the applicable regulators and the pre-launch inventory cannot be sold for commercial use, the pre-launch inventory costs are expensed
to R&D. As of December 31, 2021, there were no pre-launch inventory costs on our Consolidated Balance Sheets.
Income Taxes
We calculate and provide for income taxes in each of the tax jurisdictions in which we operate. Our Consolidated Balance Sheets reflect net
deferred tax assets and liabilities, which are measured using enacted tax rates. The net deferred tax assets primarily represent the tax benefit of tax credits
and timing differences between book and tax recognition of certain revenue and expense items, net of a valuation allowance. When it is more likely than not
that all or some portion of deferred tax assets may not be realized, we establish a valuation allowance for the amount that may not be realized. We utilize
financial projections to support our net deferred tax assets, which contain significant assumptions and estimates of future operations. If such assumptions
were to differ significantly, it may have a material impact on our ability to realize our deferred tax assets. Changes in our valuation allowance will result in a
change to tax expense.
We establish liabilities or reduce assets for certain tax positions when we believe those certain tax positions are not more likely than not to be
sustained if challenged. Each quarter, we evaluate these uncertain tax positions and adjust the related tax assets and liabilities in light of changing facts and
circumstances.
We are subject to income taxes in the U.S. and various foreign jurisdictions, including Ireland. Due to economic and political conditions, various
countries are actively considering changes to existing tax laws. We cannot predict the form or timing of potential legislative changes that could have a
material adverse impact on our results of operations. Management is not aware of any potential changes that would have a material effect on our
Consolidated Financial Statements. See Note 15 to our accompanying Consolidated Financial Statements for additional discussion.
Recent Accounting Pronouncements
See Note 1 to our accompanying Consolidated Financial Statements for a full description of recent accounting pronouncements and our expectation
of their impact, if any, 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 Income (Loss)
Net Income (Loss) consisted of the following:
Years Ended December 31,
2020
2021
2019
2021 vs. 2020
2020 vs. 2019
Total revenues
Cost of sales
R&D expense
SG&A expense
Intangible asset amortization and contingent
consideration
Gain on sale of nonfinancial assets
Other income (expense), net
Benefit from income taxes
Net income (loss)
$
$
1,846.3 $
470.5
628.8
759.4
69.9
—
7.0
(11.3)
(64.1) $
1,860.5 $
524.3
628.1
737.7
66.7
(59.5)
(5.5)
(901.4)
859.1 $
1,704.0 $
359.5
715.0
680.9
74.1
(25.0)
5.7
(71.0)
(23.8) $
(14.2) $
(53.8)
0.7
21.7
3.2
59.5
12.5
890.1
(923.2) $
156.5
164.8
(86.9)
56.8
(7.4)
(34.5)
(11.2)
(830.4)
882.9
2021 compared to 2020
The increase in Net Loss for the year ended December 31, 2021 as compared to 2020 was primarily attributed to the following:
•
•
•
decreased benefit from income taxes of $890.1 million, primarily due to the completion of an intra-entity transfer of certain IP rights to an
Irish subsidiary where our Ex-U.S. regional headquarters are located and we have significant manufacturing and commercial operations, to
better align ownership of IP rights with how the business operates, which resulted in a tax benefit of $835.1 million based on the fair value
of the transferred IP rights in the third quarter of 2020. There was no similar transaction in 2021; and
decreased gain on sale of nonfinancial assets of $59.5 million due to the divestiture and sale of the Firdapse business in 2020. There was
no similar transaction in 2021; partially offset by
an increase in gross profit primarily driven by the absence of the $81.2 million inventory charge related to pre-launch valoctocogene
roxaparvovec inventory reserves following regulatory responses received in the third quarter of 2020 requesting additional data extending
the anticipated regulatory approval timelines.
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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)
Net Product Revenues
Net Product Revenues consisted of the following:
Net product revenues by product:
Vimizim
Naglazyme
Kuvan
Palynziq
Brineura
Voxzogo
Firdapse
Total net product revenues marketed by the
Company
Aldurazyme net product revenues marketed by
Sanofi
Total net product revenues
2021 compared to 2020
Years Ended December 31,
2020
2021
2019
2021 vs. 2020
2020 vs. 2019
$
$
$
623.1 $
380.4
285.8
237.5
128.0
5.9
—
544.4 $
391.3
457.7
171.0
110.2
—
1.2
544.3 $
374.3
463.4
86.9
72.0
—
22.3
78.7 $
(10.9)
(171.9)
66.5
17.8
5.9
(1.2)
1,660.7 $
1,675.8 $
1,563.2 $
(15.1) $
122.8
1,783.5 $
130.1
1,805.9 $
97.8
1,661.0 $
(7.3)
(22.4) $
0.1
17.0
(5.7)
84.1
38.2
—
(21.1)
112.6
32.3
144.9
The decrease in Net Product Revenues for the year ended December 31, 2021 as compared to 2020 was primarily attributed to the following:
•
•
•
•
•
•
Kuvan: the decrease was primarily attributed to generic competition as a result of the loss of exclusivity in the U.S. that occurred in
October 2020. We anticipated and prepared for this loss of exclusivity and the reduction in our market share, as well as the adverse effect
on our revenues and results of operations. We expect to continue to experience adverse effects on our market share and revenues in the
future.
Naglazyme: the decrease was primarily attributed to timing of orders from Latin America and the Middle East partially offset by higher
sales in Europe;
Aldurazyme: the decrease was attributed to higher volume of product fulfillment to Sanofi in 2020 as compared to 2021; partially offset by
Palynziq: the increase was primarily attributed to a combination of revenue from more patients achieving maintenance dosing in the U.S.
and new patients initiating therapy in the U.S.;
Brineura: the increase was primarily attributed to new patients initiating therapy in Europe and North America; and
Voxzogo: the increase was due to the commercial launch in 2021, following regulatory approvals in the EU and the U.S. in the third and
fourth quarters of 2021, respectively.
In certain countries governments place large periodic orders for Naglazyme and Vimizim. We expect that the timing of these large government
orders will continue to be inconsistent, which can create significant period to period variation in our revenues. We anticipate the COVID-19 pandemic will
have a continued impact on 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 may adversely affect our revenues and results of operations”
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 I, Item 1A of this Annual Report on Form 10-K for additional information.
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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 face exposure to movements in foreign currency exchange rates, primarily the Euro. We use forward foreign currency exchange contracts to
hedge a percentage of our foreign currency exposure. The following table shows our Net Product Revenues denominated in USD and foreign currencies:
Sales denominated in USD
Sales denominated in foreign currencies
Total net product revenues
$
$
961.1 $
822.4
1,783.5 $
1,063.2 $
742.7
1,805.9 $
932.6 $
728.4
1,661.0 $
(102.1) $
79.7
(22.4) $
130.6
14.3
144.9
Years Ended December 31,
2020
2021
2019
2021 vs. 2020
2020 vs. 2019
Favorable (unfavorable) impact of foreign currency
exchange rates on product sales denominated in
currencies other than USD
$
2.3 $
(23.3) $
(24.8) $
25.6 $
1.5
Years Ended December 31,
2020
2021
2019
2021 vs. 2020
2020 vs. 2019
Relative to the USD, the favorable impact in 2021 was primarily driven by a strengthening of the Euro and Great British Pound; partially offset by
weakening of currencies in Latin American markets such as Brazil and Argentina.
See “Quantitative and Qualitative Disclosures about Market Risk” in Part II, Item 7A of this Annual Report on Form 10-K for information on currency
exchange rate risk related to our Net Product Revenues.
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.
Royalty and other revenues
$
62.8 $
54.6 $
43.0 $
8.2 $
11.6
Years Ended December 31,
2020
2021
2019
2021 vs. 2020
2020 vs. 2019
The increase in Royalty and Other Revenues in 2021 as compared to 2020 was primarily due a license payment received from a third party due to
their achievement of a regulatory milestone in the first quarter of 2021 and the subsequent royalties earned on third party net sales of the approved product.
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:
Total revenues
Cost of sales
Gross margin
2021
Years Ended December 31,
2020
2019
$
$
1,846.3
470.5
$
$
74.5 %
1,860.5
524.3
$
$
71.8 %
1,704.0
359.5
78.9 %
2021 vs. 2020
(14.2)
(53.8)
$
$
2020 vs. 2019
156.5
164.8
$
$
2.7 %
(7.1)%
Cost of Sales decreased for 2021 compared to 2020 primarily due to the absence of the $87.2 million pre-launch valoctocogene roxaparvovec
inventory charge following regulatory responses received in third quarter of 2020 requesting additional data extending the anticipated regulatory approval
timelines. Gross margin for 2021 compared to 2020 increased
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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)
primarily due to the pre-launch valoctocogene roxaparvovec inventory charge in the third quarter of 2020, partially offset by unfavorable impact of product
mix as there were higher sales of lower margin products.
We expect gross margin to range between 75% and 77% over the next twelve months.
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 did not
have any pre-launch or pre-qualification manufacturing activities capitalized as of December 31, 2021. See "Critical Accounting Estimates — Inventory
Produced Prior to Regulatory Approval" above, and Note 5 to our accompanying Consolidated Financial Statements for additional information regarding our
inventory.
R&D expense consisted of the following:
Research and early development
Voxzogo
Valoctocogene roxaparvovec
Other approved products
BMN 307
BMN 255
Other
Total R&D expense
2021 compared to 2020
Years Ended December 31,
2020
2021
2019
2021 vs. 2020
2020 vs. 2019
$
$
190.9 $
129.3
115.1
108.5
60.9
8.7
15.4
628.8 $
156.4 $
130.8
116.2
133.7
72.6
8.6
9.8
628.1 $
75.0 $
120.9
192.8
175.8
89.2
4.4
56.9
715.0 $
34.5 $
(1.5)
(1.1)
(25.2)
(11.7)
0.1
5.6
0.7 $
81.4
9.9
(76.6)
(42.1)
(16.6)
4.2
(47.1)
(86.9)
R&D expense was relatively flat but comprised the following offsetting components:
•
•
•
higher spend in research and early development programs due to increased pre-clinical activities and a $10.0 million development
milestone earned by a third party in the third quarter of 2021; partially offset by
a reduction in clinical activities related to approved products as various long-term post marketing studies were completed and
lower BMN 307 program expense primarily due to decreased clinical manufacturing activities, as no clinical product was manufactured in
2021.
We expect R&D expense to increase in future periods compared to 2021, primarily due to increased spending on preclinical 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
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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)
administrative (G&A) expense primarily consisted of corporate support and other administrative expenses, including employee-related expenses.
SG&A expenses consisted of the following:
S&M expense
G&A expense
Total SG&A expense
S&M expenses by product were as follows:
PKU Products (Kuvan and Palynziq)
MPS Products (Aldurazyme, Naglazyme and
Vimizim)
Voxzogo
Valoctocogene roxaparvovec
Brineura
Other
Total S&M expense
2021 compared to 2020
$
$
$
$
Years Ended December 31,
2020
2021
2019
2021 vs. 2020
2020 vs. 2019
405.1 $
354.3
759.4 $
403.4 $
334.3
737.7 $
382.2 $
298.7
680.9 $
1.7 $
20.0
21.7 $
21.2
35.6
56.8
Years Ended December 31,
2020
2021
2019
2021 vs. 2020
2020 vs. 2019
124.6 $
127.5 $
137.2 $
(2.9) $
102.9
75.1
54.0
36.2
12.3
405.1 $
108.1
34.5
87.3
37.8
8.2
403.4 $
119.2
13.3
50.3
45.4
16.8
382.2 $
(5.2)
40.6
(33.3)
(1.6)
4.1
1.7 $
(9.7)
(11.1)
21.2
37.0
(7.6)
(8.6)
21.2
The increase in S&M expense was primarily a result of an increase in pre-commercial activities related to Voxzogo, partially offset by a reduction in
valoctocogene roxaparvovec activities, based on a change in anticipated timelines for potential approval following regulatory responses received in the third
quarter of 2020 requesting additional data, and decreased activity related to our MPS Products.
The increase in G&A expense was primarily due to the idle plant time related to maintaining our valoctocogene roxaparvovec manufacturing
capabilities and higher employee-related 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
Changes during the periods presented for Intangible Asset Amortization and Contingent Consideration and Gain on Sale of Nonfinancial Assets
were as follows:
Amortization of intangible assets
Changes in the fair value of contingent
consideration (gain) / loss
Total intangible asset amortization and contingent
consideration
Gain on sale of nonfinancial assets
$
$
$
Years Ended December 31,
2020
2021
2019
2021 vs. 2020
2020 vs. 2019
61.9 $
62.2 $
53.5 $
(0.3) $
8.0
4.5
20.6
69.9 $
66.7 $
74.1 $
3.5
3.2 $
— $
59.5 $
25.0 $
(59.5) $
8.7
(16.1)
(7.4)
34.5
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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)
2021 compared to 2020
Fair value of contingent consideration: the 2021 increase in the change in the fair value of contingent consideration as compared to 2020 was due
to changes in the estimated probability of achieving sales milestones related to our PKU products.
Amortization of intangible assets: the change in 2021 as compared to 2020 was relatively flat.
Gain on Sale of Nonfinancial Assets: the decrease in 2021 as compared to 2020 is due to the recognition of a $59.5 million gain in 2020 related to
the divestiture and sale of the Firdapse business. See Note 3 to our accompanying Consolidated Financial Statements for additional information.
Interest Income
We invest our cash equivalents and investments in U.S. government securities and other high credit quality debt securities in order to limit default
and market risk.
Interest income
$
10.5 $
16.6 $
22.7 $
(6.1) $
(6.1)
Years Ended December 31,
2020
2021
2019
2021 vs. 2020
2020 vs. 2019
The decrease in Interest Income during 2021 compared to 2020 was primarily due to lower interest rates.
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:
Interest expense
$
15.3 $
29.3 $
23.5 $
(14.0) $
5.8
Years Ended December 31,
2020
2021
2019
2021 vs. 2020
2020 vs. 2019
The decrease in Interest Expense in 2021 compared to 2020 was primarily due to the maturity of our 1.50% senior subordinated convertible notes
which matured and were settled in October 2020.
We do not expect Interest Expense to fluctuate significantly over the next 12 months. See Note 10 to our accompanying 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, Net
Other Income, Net for the periods presented was as follows:
Other income, net
$
11.8 $
7.1 $
6.4 $
4.7 $
0.7
Years Ended December 31,
2020
2021
2019
2021 vs. 2020
2020 vs. 2019
Other Income, Net in 2021 increased compared to the same period in 2020 primarily due to the receipt of insurance proceeds in excess of direct
costs incurred in the third quarter of 2021 partially offset by a decrease in grant income and the fair value of the assets held in our deferred compensation
plan.
Benefit from Income Taxes
Benefit from Income Taxes for the periods presented was as follows:
Benefit from income taxes
$
(11.3) $
(901.4) $
(71.0) $
890.1 $
(830.4)
Years Ended December 31,
2020
2021
2019
2021 vs. 2020
2020 vs. 2019
Benefit from income taxes in 2021 decreased compared to the same period in 2020, primarily due to the 2020 intra-entity transfer of certain
intellectual property rights to an Irish subsidiary for which there was no a similar transaction in 2021. Our Benefit from Income Taxes in 2021 and 2020
consisted of state, federal and foreign current tax expense which was offset by tax benefits related to stock option exercises and deferred tax benefits from
federal orphan drug credits, federal R&D credits and California R&D credits. The Benefit from Income Taxes for the year ended December 31, 2021 was
further impacted by the renegotiation of a license agreement in the fourth quarter of 2021. As a result of the renegotiated agreement, royalty projections for
our Dutch subsidiary decreased through the remaining contractual life of the agreement. These royalties are the only source of income for our Dutch entity.
The revised royalty projections required an increase to the valuation allowance on net operating loss deferred tax assets that are no longer expected to be
realizable. See Note 15 to our accompanying Consolidated Financial Statements for additional information.
Results of Operations 2020 Compared to 2019
For a discussion of our results of operations pertaining to 2020 as compared to 2019 see Item 7, "Management's Discussion and Analysis of
Results of Operations and Financial Condition" in our Annual Report on Form 10-K for the year ended December 31, 2020.
Financial Condition, Liquidity and Capital Resources
Our cash, cash equivalents, and investments as of December 31, 2021 and 2020 were as follows:
Cash and cash equivalents
Short-term investments
Long-term investments
Total cash, cash equivalents and investments
2021
2020
$
$
587.3 $
426.6
507.8
1,521.7 $
649.2
416.2
285.5
1,350.9
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 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 options could change depending on many factors, including how much we elect to spend on our development
programs, potential licenses and acquisitions of complementary
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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)
technologies, products and companies or if we elect to settle all or a portion of 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 the U.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 for each of the years ended December 31, 2021 and 2020 were as follows:
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by financing activities
2021
2020
2021 vs. 2020
$
$
$
304.5 $
(366.3) $
— $
85.4 $
(53.6) $
181.1 $
219.1
(312.7)
(181.1)
The increase in net cash provided by operating activities in 2021 compared to 2020 was primarily attributed to the timing of cash receipts from our
customers and licensees, the timing of payments made to vendors and tax refund proceeds.
The increase in net cash used in investing activities in 2021 compared to 2020 was primarily attributable to higher net purchases of available-for-
sale debt securities and the absence of the $67.2 million in proceeds received from the divestiture and sale of Firdapse to a third party in the first quarter of
2020 partially offset by lower purchases of property, plant and equipment.
The decrease in net cash provided by financing activities in 2021 compared to 2020 was primarily attributed to the absence of net proceeds from
the 1.25% senior subordinated convertible notes due in 2027 Notes (the 2027 Notes) issued in 2020 and lower exercises of awards under our equity
incentive plans.
Financing and Credit Facilities
Our $1.1 billion (undiscounted) of total convertible debt as of December 31, 2021 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 of December 31, 2021, our indebtedness consisted of the 2027 Notes and
our 0.599% senior subordinated convertible notes due in 2024 (the 2024 Notes and together with the 2027 Notes, the Notes), which, if not converted, will be
required to be repaid in cash at maturity in August 2024 and May 2027, respectively.
Our 2020 Notes matured on October 15, 2020 and were settled in cash for approximately $375.0 million. No shares were issued in connection with
the settlement as our share price did not exceed the conversion price of $94.15, as measured over a 25-day averaging period, and the capped call
transaction entered into concurrently with the issuance of the 2020 Notes was not triggered.
In October 2018, we entered into an unsecured revolving credit facility of up to $200.0 million that included a letter of credit subfacility and a
swingline loan subfacility. The credit facility is intended to finance ongoing working capital needs and for other general corporate purposes. In May 2021, we
amended the credit facility agreement, extending the maturity date from October 19, 2021 to May 28, 2024, among other changes. The amended credit
facility contains financial covenants including a maximum leverage ratio and a minimum interest coverage ratio. As of December 31, 2021, there were no
outstanding amounts due on nor any usage of the credit facility and we were in compliance with all covenants.
See Note 10 to our accompanying Consolidated Financial Statements for additional discussion on our convertible debt and credit facility.
Other Material Sources of Cash
In February 2022, we entered into an agreement to sell our Rare Pediatric Disease Priority Review Voucher (PRV) received from the FDA in
connection with the U.S. approval of Voxzogo. In exchange for the PRV, we will receive a lump sum payment of $110.0 million. See Note 19 to our
accompanying Consolidated Financial Statements for additional discussion.
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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)
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. Our R&D expenses for the period since inception as of December 31, 2021 for certain of our key programs were
as follows:
Valoctocogene roxaparvovec
Voxzogo
BMN 307
BMN 255
Other approved products
Since Program
Inception
825.1
700.0
240.8
25.9
2,373.2
$
$
$
$
$
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 I, Item 1A of this Annual Report on Form 10-K, for a
discussion of the reasons we are unable to estimate such information.
Purchase and Lease Obligations
As of December 31, 2021, we had obligations of approximately $133.3 million, all of which was short term and 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.
As of December 31, 2021, we had lease payment obligations of $51.5 million, of which $12.6 million is payable within the next 12 months. See Note
9 to our accompanying Consolidated Financial Statements for details on our lease liabilities.
Contingent Obligations
As of December 31, 2021, we had $63.4 million of acquisition-related contingent consideration on our Consolidated Balance Sheet, of which $48.2
million was short-term.
As of December 31, 2021, we were subject to contingent payments deemed reasonably possible of incurring losses totaling approximately
$788.5 million upon achievement of certain development, regulatory and commercial sales milestones if they occur before certain dates in the future. Of this
amount, we may pay $37.7 million in 2022 if certain contingencies are met. See Note 18 to our accompanying Consolidated Financial Statements for
additional discussion on our contingent obligations.
Unrecognized Tax Benefits
As of December 31, 2021, our liability for unrecognized tax benefits was $205.1 million. Due to their nature, we cannot reasonably estimate the
timing of future payments. See Note 15 to our accompanying Consolidated Financial Statements for a full discussion on our income taxes.
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Item 7A. Quantitative and Qualitative Disclosure About Market Risk
We are exposed to market risks that may result from changes in foreign currency exchange rates, interest rates and credit risks. To reduce certain
of these risks, we enter into foreign currency derivative hedging transactions, follow investment guidelines and monitor outstanding trade receivables as part
of our risk management program.
Foreign Currency Exchange Rate Risk
Our operations include manufacturing activities in the U.S. and Ireland and sales activities in the U.S. as well as in regions outside the U.S,
including Europe, Latin America and Asia Pacific. As a result, our financial results may be significantly affected by factors such as the impact of the ongoing
worldwide COVID-19 pandemic, changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which we sell our
products. Our operating results are exposed to changes in foreign currency exchange rates between the U.S. Dollar (USD) and various foreign currencies,
primarily the Euro. When the USD strengthens against these currencies, the relative value of the sales made in the respective foreign currency decreases.
Conversely, when the USD weakens against these currencies, the relative value of such sales increases. Overall, we are a net receiver of foreign currencies
and, therefore, benefit from a weaker USD and are adversely affected by a stronger USD relative to those foreign currencies in which we transact significant
business.
During 2021, approximately 46% of our net product sales were denominated in foreign currencies and 21% of our operating expenses, excluding
Cost of Sales, were denominated in foreign currencies. To partially mitigate the impact of changes in currency exchange rates on net cash flows from our
foreign currency denominated sales and operating expenses, we may enter into foreign currency exchange forward contracts (forward contracts). We also
hedge certain monetary assets and liabilities, primarily those denominated in Euros, using forward contracts, which reduces but does not eliminate our
exposure to currency fluctuations between the date the transaction is recorded and the date the cash is collected or paid. Generally, the market risks of
these contracts are offset by the corresponding gains and losses on the transactions being hedged.
We do not use derivative financial instruments for speculative trading purposes, nor do we hedge foreign currency exchange rate exposure in a
manner that entirely offsets the effects of changes in foreign currency exchange rates. The counterparties to these forward contracts are creditworthy
multinational commercial banks, which minimizes the risk of counterparty nonperformance. We regularly review our hedging program and may, as part of this
review, make changes to the program.
As of December 31, 2021, we had open forward contracts with net notional amounts of $639.6 million. A hypothetical 10% adverse movement in
foreign currency exchange rates compared with the USD relative to exchange rates as of December 31, 2021 would have resulted in a reduction in the value
received over the remaining life of these contracts by approximately $62.6 million on this date and, if realized, would negatively affect earnings during the
remaining life of the contracts. The estimated fair value change was determined by measuring the impact of the hypothetical exchange rate movement on
outstanding forward contracts. This analysis does not consider the impact of the hypothetical changes in foreign currency rates would have on the forecasted
transactions that these foreign currency sensitive instruments were designated to offset. Our use of this methodology to quantify the market risk of such
instruments is subject to assumptions and actual impact could be significantly different.
Based on our overall foreign currency denominated exposures as of December 31, 2021, we believe that a near-term 10% fluctuation of the USD
exchange rate could result in a potential change in the fair value of our net foreign currency denominated assets and liabilities, excluding our investments
and open forward contracts, by approximately $9.1 million. We expect to continue to enter into transactions based in foreign currencies that could be
impacted by changes in exchange rates.
Interest Rate Market Risk
Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio, which includes our cash equivalents and
marketable debt securities. By policy, we place our investments with highly rated credit issuers and limit the amount of credit exposure to any one issuer. As
stated in our investment policy, we seek to improve the safety and likelihood of preservation of our invested funds by limiting default risk and market risk.
We mitigate default risk by investing in high credit quality securities and by positioning our portfolio to respond appropriately to a significant
reduction in a credit rating of any investment issuer or guarantor. The portfolio includes only marketable securities with active secondary or resale markets to
ensure portfolio liquidity.
We have outstanding $495.0 million (undiscounted) of the 2024 Notes and $600.0 million (undiscounted) of the 2027 Notes. The interest rates on
these notes are fixed and therefore they do not expose us to risk related to rising interest rates. As of December 31, 2021, the fair value of our convertible
debt was $1.1 billion.
As of December 31, 2021, our investment portfolio did not include any investments with significant exposure to countries that face economic
volatility and weakness. Although not predictive in nature, we believe a hypothetical 100 basis point threshold reflects a reasonably possible near-term
change in interest rates. Based on our investment portfolio and interest rates at December 31, 2021, period ending, we believe that a 100 basis point
increase in interest rates could result in a potential loss in fair
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value of our investment portfolio of approximately $8.4 million. Changes in interest rates may affect the fair value of our investment portfolio. However, we
will not recognize such gains or losses in our Consolidated Statements of Operations unless the investments are sold or we determine that the declines in
the investment’s fair values below the cost basis are a result of a credit loss, which, if any, are reported in Other Income, Net in the current period through an
allowance for credit losses.
The table below summarizes the expected maturities and average interest rates of our interest-generating investments as of December 31, 2021 (in
millions of U.S. Dollars):
Available-for-sale debt
securities
Average interest rate
Counterparty credit risks
2022
2023
2024
2025
2026
Thereafter
Total
Expected Maturity
$
427.6
$
362.9
$
134.1
$
0.4 %
0.7 %
0.9 %
$
9.3
0.8 %
$
—
— %
$
1.5
1.1 %
935.4
0.6 %
Our financial instruments, including derivatives, are subject to counterparty credit risk that we consider as part of the overall fair value
measurement. Our financial risk management policy limits derivative transactions by requiring transactions to be with institutions with minimum credit ratings
of A- or equivalent by Standards & Poor’s, Moody's or Fitch. In addition, we have an investment policy that limits investments to certain types of debt and
money market instruments issued by institutions primarily with investment grade credit ratings and places restriction on maturities and concentrations by
asset class and issuer.
Item 8. Financial Statements and Supplementary Data
The information required to be filed in this item appears under “Exhibits, Financial Statement Schedules” in Part IV, Item 15 of this Annual Report on
Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
An evaluation was carried out, under the supervision of and with the participation of our management, including our Chief Executive Officer and our
Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act)
as of the end of the period covered by this report. Based on the evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that
our disclosure controls and procedures were effective as of December 31, 2021.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting.
Under the supervision of and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, our
management has assessed the effectiveness of our internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act as of
December 31, 2021. Our management’s assessment was based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), Internal Control-Integrated Framework (2013).
Based on the COSO criteria, our management has concluded that our internal control over financial reporting as of December 31, 2021 was
effective at the reasonable assurance level.
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Our independent registered public accounting firm, KPMG LLP, has audited the financial statements included in this Annual Report on Form 10-K
and has issued a report on the effectiveness of our internal control over financial reporting. The report of KPMG LLP is incorporated by reference to Item 8 of
this Annual Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act, during our most recently completed quarter that have materially affected or are reasonably likely to materially affect our internal control over financial
reporting. We continue to utilize the Committee of Sponsoring Organizations of the Treadway Commission (COSO) 2013 Framework on internal control. We
believe that our ability to maintain an effective internal control environment has not been impacted by the COVID-19 pandemic. We are continually
monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.
Scope of the Effectiveness of Controls
Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with GAAP. Our internal control over financial reporting includes those policies
and procedures that:
•
•
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our
board of directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that
could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree
of compliance with the policies or procedures may deteriorate.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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Item 10. Directors, Executive Officers and Corporate Governance
Part III
The information required by this Item regarding our directors, executive officers and corporate governance is incorporated into this section by
reference to the sections captioned “Election of Directors” and “Executive Officers” in the proxy statement for our 2022 annual meeting of stockholders.
Item 11. Executive Compensation
The information required by this Item regarding executive compensation is incorporated into this section by reference to the section captioned
“Executive Compensation” in the proxy statement for our 2022 annual meeting of stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item regarding security ownership of our beneficial owners, management and related stockholder matters is
incorporated into this section by reference to the section captioned “Security Ownership of Certain Beneficial Owners and Management” in the proxy
statement for our 2022 annual meeting of stockholders.
The information required by this Item regarding the securities authorized for issuance under our equity compensation plans is incorporated into this
section by reference to the section captioned “Equity Compensation Plan Information” in the proxy statement for our 2022 annual meeting of stockholders.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item regarding certain relationships, related transactions and director independence is incorporated into this
section by reference to the sections captioned “Other Board Governance Information — Transactions with Related Persons, Promoters and Certain Control
Persons,” “Other Board Governance Information — Review, Approval and Ratification of Transactions with Related Parties” and “Director Independence” in
the proxy statement for our 2022 annual meeting of stockholders.
Item 14. Principal Accountant Fees and Services
The information required by this Item regarding our principal accountant fees and services is incorporated into this section by reference to the
section captioned “Independent Registered Public Accounting Firm” in the proxy statement for our 2022 annual meeting of stockholders.
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Item 15. Exhibits, Financial Statement Schedules
Exhibit Index
Financial Statements
Part IV
Reports of Independent Registered Public Accounting Firm (KPMG LLP, San Francisco, CA, Auditor Firm ID: 185)
Consolidated Financial Statements as of December 31, 2021 and 2020, and for the three years ended December 31, 2021:
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Changes in Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
76
Page
77
84
87
88
89
90
91
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Exhibit Index
Exhibit Number
Description
2.1
2.2
2.3
3.1
3.2
4.1
4.2
4.3
4.4
10.1†
10.2†
10.3†
10.4†
10.5†
Amended and Restated Termination and Transition Agreement, dated as of December 23, 2015, between BioMarin Pharmaceutical
Inc. and Ares Trading S.A., previously filed with the SEC on January 7, 2016 as Exhibit 2.1 to the Company’s Current Report on
Form 8-K (File No. 000-26727), which is incorporated herein by reference. Portions of this exhibit (indicated by asterisks) have been
omitted pursuant to a request for confidential treatment. Omitted portions have been filed separately with the SEC.
Termination and Transition Agreement, dated as of October 1, 2015, between BioMarin Pharmaceutical Inc. and Ares Trading S.A.,
previously filed with the SEC on January 7, 2016 as Exhibit 2.3 to the Company’s Current Report on Form 8-K (File No. 000-26727),
which is incorporated herein by reference. Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request
for confidential treatment. Omitted portions have been filed separately with the SEC.
First Amendment, dated as of December 12, 2016, to the Amended and Restated Termination and Transition Agreement, dated as
of December 23, 2015 and effective as of October 1, 2015, between BioMarin Pharmaceutical Inc. and Ares Trading S.A.,
previously filed with the SEC on February 27, 2017 as Exhibit 2.6 to the Company’s Annual Report on Form 10-K (File No. 000-
26727), which is incorporated herein by reference. Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a
request for confidential treatment. Omitted portions have been filed separately with the SEC.
Restated Certificate of Incorporation of BioMarin Pharmaceutical Inc., previously filed with the SEC on June 12, 2017 as Exhibit 3.2
to the Company’s Current Report on Form 8-K (File No. 000-26727), which is incorporated herein by reference.
Amended and Restated Bylaws of BioMarin Pharmaceutical Inc., previously filed with the SEC on December 18, 2020 as Exhibit 3.1
to the Company’s Current Report on Form 8-K (File No. 000-26727), which is incorporated herein by reference.
Base Indenture, dated August 11, 2017, between the Company and Wilmington Trust, National Association, as Trustee, previously
filed with the SEC on August 11, 2017 as Exhibit 4.1 to the Company’s Current Report on Form 8-K (File No. 000-26727), which is
incorporated herein by reference.
First Supplemental Indenture, dated August 11, 2017, between the Company and Wilmington Trust, National Association, as
Trustee (including the form of 0.599% Senior Subordinated Convertible Note due 2024), previously filed with the SEC on August 11,
2017 as Exhibit 4.2 to the Company’s Current Report on Form 8-K (File No. 000-26727), which is incorporated herein by reference.
Indenture, dated as of May 14, 2020, between BioMarin Pharmaceutical Inc. and U.S. Bank National Association, as trustee,
including the Form of Global Note representing BioMarin Pharmaceutical, Inc.’s 1.25% Senior Subordinated Convertible Notes due
2027 as Exhibit A thereto, previously filed with the SEC on May 14, 2020 as Exhibit 4.1 to the Company’s Current Report on Form
8-K (File No. 000-26727), which is incorporated herein by reference.
Description of Capital Stock, previously filed with the SEC on February 27, 2020 as Exhibit 4.6 to the Company’s Annual Report on
Form 10-K (File No. 000-26727), which is incorporated herein by reference.
Form of Indemnification Agreement for Directors and Officers, previously filed with the SEC on December 19, 2016 as Exhibit 10.1
to the Company’s Current Report on Form 8-K (File No. 000-26727), which is incorporated herein by reference.
BioMarin Pharmaceutical Inc. Amended and Restated 2006 Employee Stock Purchase Plan, as amended and restated April 12,
2019, previously filed with the SEC on August 2, 2019 as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q (File No.
000-26727), which is incorporated herein by reference.
BioMarin Pharmaceutical Inc. Amended and Restated 2006 Share Incentive Plan, as adopted on May 2, 2006 and as amended and
restated on April 16, 2015, previously filed with the SEC on June 15, 2015 as Exhibit 10.1 to the Company’s Current Report on
Form 8-K (File No. 000-26727), which is incorporated herein by reference.
Form of Agreement Regarding Restricted Share Units for the BioMarin Pharmaceutical Inc. 2006 Share Incentive Plan, previously
filed with the SEC on May 16, 2013 as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 000-26727), which is
incorporated herein by reference.
Form of Amendment to Agreement Regarding Restricted Share Units for the BioMarin Pharmaceutical Inc. 2006 Share Incentive
Plan, previously filed with the SEC on December 9, 2016 as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No.
000-26727), which is incorporated herein by reference.
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10.6†
10.7†
10.8
10.9
10.10
10.11
10.12
10.13†
10.14†
10.15†
10.16
10.17†
10.18†
10.19†
10.20†
10.21
Amended and Restated BioMarin Pharmaceutical Inc. Nonqualified Deferred Compensation Plan, as adopted on December 1, 2005
and as amended and restated on January 1, 2009 and further amended and restated on December 19, 2013 and October 7, 2014,
previously filed with the SEC on October 14, 2014 as Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No. 000-
26727), which is incorporated herein by reference.
Amended and Restated Employment Agreement with Jean-Jacques Bienaimé effective December 13, 2016 previously filed with the
SEC on December 19, 2016 as Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No. 000-26727), which is
incorporated herein by reference.
License Agreement dated July 30, 2004, between BioMarin Pharmaceutical Inc. and Daiichi Suntory Pharma Co., Ltd., as amended
by Amendment No. 1 to License Agreement dated November 19, 2004, previously filed with the SEC on March 16, 2005 as Exhibit
10.25 to the Company’s Annual Report on Form 10-K (File No. 000-26727), which is incorporated herein by reference. The SEC
has granted confidential treatment with respect to certain portions of this exhibit. Omitted portions have been filed separately with
the SEC.
Operating Agreement with Genzyme Corporation, previously filed with the SEC on July 6, 1999 as Exhibit 10.30 to the Company’s
Amendment No. 2 to Registration Statement on Form S-1 (File No. 333-77701), which is incorporated herein by reference.
Manufacturing, Marketing and Sales Agreement dated as of January 1, 2008, by and among BioMarin Pharmaceutical Inc.,
Genzyme Corporation and BioMarin/Genzyme LLC previously filed with the SEC on February 28, 2008 as Exhibit 10.30 to the
Company’s Annual Report on Form 10-K (File No. 000-26727), which is incorporated herein by reference. The SEC has granted
confidential treatment with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC.
Amended and Restated Collaboration Agreement dated as of January 1, 2008, by and among BioMarin Pharmaceutical Inc.,
Genzyme Corporation and BioMarin/Genzyme LLC previously filed with the SEC on February 28, 2008 as Exhibit 10.31 to the
Company’s Annual Report on Form 10-K (File No. 000-26727), which is incorporated herein by reference. The SEC has granted
confidential treatment with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC.
Members Agreement dated as of January 1, 2008 by and among BioMarin Pharmaceutical Inc., Genzyme Corporation, BioMarin
Genetics Inc., and BioMarin/Genzyme LLC previously filed with the SEC on February 28, 2008 as Exhibit 10.32 to the Company’s
Annual Report on Form 10-K (File No. 000-26727), which is incorporated herein by reference. The SEC has granted confidential
treatment with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC.
BioMarin Pharmaceutical Inc. 2012 Inducement Plan, adopted May 8, 2012, previously filed with the SEC on May 9, 2012 as Exhibit
10.2 to the Company’s Current Report on Form 8-K (File No. 000-26727), which is incorporated herein by reference.
Form of Stock Options Agreement for the BioMarin Pharmaceutical Inc. 2006 Share Incentive Plan. (as Amended and Restated
2010), previously filed with the SEC on August 2, 2012 as Exhibit 10.11 to the Company’s Quarterly Report on Form 10-Q (File No.
000-26727), which is incorporated herein by reference.
Form of Stock Options Agreement for the BioMarin Pharmaceutical Inc. 2012 Inducement Plan, previously filed with the SEC on
August 2, 2012 as Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q (File No. 000-26727), which is incorporated
herein by reference.
Contract of Purchase and Sale and Joint Escrow Instructions, dated December 17, 2013, for the San Rafael Corporate Center, by
and among BioMarin Pharmaceutical Inc., through its wholly-owned subsidiary, California Corporate Center Acquisition, LLC, SR
Corporate Center Phase One, LLC, and SR Corporate Center Phase Two, previously filed with the SEC on February 26, 2014 as
Exhibit 10.68 to the Company’s Annual Report on Form 10-K (File No. 000-26727), which is incorporated herein by reference.
BioMarin Pharmaceutical Inc. 2014 Inducement Plan, adopted December 17, 2014, previously filed with the SEC on December 23,
2014 as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 000-26727), which is incorporated herein by
reference.
Form of Stock Options Agreement for the BioMarin Pharmaceutical Inc. 2014 Inducement Plan, previously filed with the SEC on
March 2, 2015 as Exhibit 10.60 to the Company’s Annual Report on Form 10-K (File No. 000-26727), which is incorporated herein
by reference.
Form of Agreement Regarding Restricted Share Units for the BioMarin Pharmaceutical Inc. 2014 Inducement Plan, previously filed
with the SEC on March 2, 2015 as Exhibit 10.61 to the Company’s Annual Report on Form 10-K (File No. 000-26727), which is
incorporated herein by reference.
Form of Amended and Restated Employment Agreement for the Company’s Executive Officers (other than the Company’s Chief
Executive Officer) previously filed with the SEC on June 15, 2015 as Exhibit 10.2 to the Company’s Current Report on Form 8-K
(File No. 000-26727), which is incorporated herein by reference.
Settlement and License Agreement among BioMarin Pharmaceutical Inc., Merck & Cie, Dr. Reddy’s Laboratories, Inc. and Dr.
Reddy’s Laboratories, Ltd., dated September 14, 2015, previously filed with the SEC on November 2, 2015 as Exhibit 10.2 to the
Company’s Quarterly Report on Form 10-Q (File No. 000-26727), which is incorporated herein by reference. The SEC has granted
confidential treatment with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC.
78
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10.22
10.23†
10.24†
10.25†
10.26†
10.27†
10.28†
10.29
10.30
10.31
10.32*†
21.1*
23.1*
24.1*
31.1*
31.2*
32.1*
101.INS
Settlement and License Agreement among BioMarin Pharmaceutical Inc., Merck & Cie and Par Pharmaceutical, Inc., dated as of
April 12, 2017, previously filed with the SEC on November 13, 2017 as Exhibit 10.1 to the Company’s Amendment No. 1 to
Quarterly Report on Form 10-Q/A (File No. 000-26727), which is incorporated herein by reference. The SEC has granted
confidential treatment with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC.
Form of Agreement Regarding Performance Stock Award in the Form of Restricted Stock Units for the BioMarin Pharmaceutical Inc.
2006 Share Incentive Plan, previously filed with the SEC on February 27, 2017 as Exhibit 10.50 to the Company’s Annual Report on
Form 10-K (File No. 000-26727), which is incorporated herein by reference.
BioMarin Pharmaceutical Inc. 2017 Equity Incentive Plan, as adopted April 10, 2017 and amended April 5, 2021, previously filed
with the SEC on February 17, 2022 as Exhibit 99.1 to the Company’s Registration Statement on Form S-8 (File No. 333-262824),
which is incorporated herein by reference.
Form of Stock Options Agreement for the BioMarin Pharmaceutical Inc. 2017 Equity Incentive Plan, previously filed with the SEC on
June 12, 2017 as Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No. 000-26727), which is incorporated herein by
reference.
Form of Agreement Regarding Restricted Stock Units for the BioMarin Pharmaceutical Inc. 2017 Equity Incentive Plan, previously
filed with the SEC on June 12, 2017 as Exhibit 10.3 to the Company’s Current Report on Form 8-K (File No. 000-26727), which is
incorporated herein by reference.
Form of Agreement Regarding Performance Stock Award in the Form of Restricted Stock Units for the BioMarin Pharmaceutical Inc.
2017 Equity Incentive Plan, previously filed with the SEC on June 12, 2017 as Exhibit 10.4 to the Company’s Current Report on
Form 8-K (File No. 000-26727), which is incorporated herein by reference.
BioMarin Pharmaceutical Inc. Summary of Independent Director Compensation, previously filed with the SEC on November 4, 2019
as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File No. 000-26727), which is incorporated herein by reference.
Credit Agreement by and among BioMarin Pharmaceutical Inc., as the Borrower, Bank of America, N.A., as Administrative Agent,
Swing Line Lender and a Lender, and Citibank N.A. as L/C Issuer, and the Lenders party thereto, dated as of October 19, 2018,
previously filed with the SEC on February 28, 2019 as Exhibit 10.48 to the Company’s Annual Report on Form 10-K (File No. 000-
26727), which is herein incorporated by reference.
First Amendment, dated May 28, 2021, to the Credit Agreement by and among BioMarin Pharmaceutical Inc., as the Borrower,
Bank of America, N.A., as Administrative Agent, Swing Line Lender and a Lender, and Citibank N.A. as L/C Issuer, and the Lenders
party thereto, previously filed with the SEC on July 30, 2021 as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File
No. 000-26727), which is incorporated herein by reference.
First Amendment to the Amended and Restated BioMarin Pharmaceutical Inc. Nonqualified Deferred Compensation Plan, as
adopted June 4, 2019, previously filed with the SEC on August 2, 2019 as Exhibit 10.1 to the Company’s Quarterly Report on
Form 10-Q (File No. 000-26727), which is incorporated herein by reference.
Second amendment to the Amended and Restated BioMarin Pharmaceutical Inc. Nonqualified Deferred Compensation Plan, as
adopted on October 5, 2021.
Subsidiaries of BioMarin Pharmaceutical Inc.
Consent of KPMG LLP, Independent Registered Public Accounting Firm for BioMarin Pharmaceutical Inc.
Power of Attorney (Included in Signature Page to this Report)
Certification of Chief Executive Officer pursuant to Rules 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.
Certification of Chief Financial Officer pursuant to Rules 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. This Certification accompanies this report and shall not, except to the extent
required by the Sarbanes-Oxley Act of 2002, be deemed filed for purposes of §18 of the Securities Exchange Act of 1934, as
amended.
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are
embedded within the Inline XBRL document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document
79
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101.CAL
101.DEF
101.LAB
101.PRE
104
Inline XBRL Taxonomy Extension Calculation Document
Inline XBRL Taxonomy Extension Definition Linkbase
Inline XBRL Taxonomy Extension Labels Linkbase Document
Inline XBRL Taxonomy Extension Presentation Link Document
XBRL tags for the cover page from the Company’s Quarterly Report on Form 10-K for the year ended December 31, 2021, are
embedded within the Inline XBRL document.
* Filed herewith
† Management contract or compensatory plan or arrangement
Attached as Exhibit 101 to this report are documents formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance
Sheets as of December 31, 2021 and December 31, 2020, (ii) Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and
2019, (iii) Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2021, 2020 and 2019, (iv) Consolidated Statements
of Stockholders’ Equity for the years ended December 31, 2021, 2020 and 2019, (v) Consolidated Statements of Cash Flows for the years ended
December 31, 2021, 2020 and 2019, and (vi) Notes to Consolidated Financial Statements.
Item 16. Form 10-K Summary
None.
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
BIOMARIN PHARMACEUTICAL INC.
SIGNATURES
Dated: February 25, 2022
Executive Vice President, Finance & Chief Financial Officer
/S/ BRIAN R. MUELLER
Brian R. Mueller
By:
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POWER OF ATTORNEY
Exhibit 24.1
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jean-Jacques
Bienaimé and Brian R. Mueller, his or her attorney-in-fact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to
the Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Signature
/S/ JEAN-JACQUES BIENAIMÉ
Jean-Jacques Bienaimé
Chairman and Chief Executive Officer
(Principal Executive Officer)
Title
/S/ BRIAN R. MUELLER
Brian R. Mueller
/S/ MARK J. ALLES
Mark J. Alles
Executive Vice President, Finance & Chief
(Principal Financial Officer and Principal
Financial Officer
Accounting Officer)
Director
/S/ ELIZABETH MCKEE ANDERSON
Director
Elizabeth McKee Anderson
/S/ WILLARD H. DERE, M.D.
Willard H. Dere, M.D.
/S/ ELAINE J. HERON
Elaine J. Heron
/S/ MAYKIN HO
Maykin Ho
/S/ ROBERT J. HOMBACH
Robert J. Hombach
/S/ V. BRYAN LAWLIS
V. Bryan Lawlis
Director
Director
Director
Director
Director
Date
February 25, 2022
February 25, 2022
February 25, 2022
February 25, 2022
February 25, 2022
February 25, 2022
February 25, 2022
February 25, 2022
February 25, 2022
/S/ RICHARD A. MEIER
Lead Independent Director
February 25, 2022
Richard A. Meier
/S/ DAVID PYOTT
David Pyott
/S/ DENNIS J. SLAMON
Dennis J. Slamon
Director
Director
82
February 25, 2022
February 25, 2022
Table of Contents
BIOMARIN PHARMACEUTICAL INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firm
Consolidated Financial Statements as of December 31, 2021 and 2020, and for the three years ended December 31, 2021:
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
PAGE
84
87
88
89
90
91
92
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Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
BioMarin Pharmaceutical Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of BioMarin Pharmaceutical Inc. and subsidiaries (the Company) as of December 31, 2021
and December 31, 2020, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of
the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and December 31,
2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S.
generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s
internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 25, 2022 expressed an unqualified opinion on the
effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included
performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated
financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not
alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Evaluation of variable consideration relating to Aldurazyme product sales
As described in Notes 1 and 12 to the consolidated financial statements, during the year ended December 31, 2021 the Company recognized $123 million in
Aldurazyme net product revenue. Under its arrangement with Sanofi, the Company receives payments ranging from 39.5% to 50% on worldwide net
Aldurazyme sales by Sanofi, depending on Sanofi’s sales volume. The Company estimates this variable consideration based on the amount that it expects
to be entitled to from Sanofi’s sales of Aldurazyme. The Company recognizes this revenue upon satisfying the product performance obligation, which is
when the product is shipped to Sanofi and all required quality control certificates are complete.
We identified the evaluation of variable consideration relating to Aldurazyme net product revenue as a critical audit matter. Evaluating the key assumptions of
forecasted Sanofi sales volume and average price per vial involved a high degree of subjective auditor judgment due to the nature of available supporting
evidence being limited to historical sales and price data related to these assumptions. Changes in these key assumptions could have had a significant
impact on Aldurazyme net product revenue.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness
of certain internal controls related to the Company’s process for recognizing Aldurazyme net product revenue. This included controls over forecasting
Sanofi’s sales volume and average price per vial used to estimate variable
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Report of Independent Registered Public Accounting Firm
consideration. We evaluated the Company’s ability to estimate the variable consideration by comparing historical estimates of sales volume and price per
vial to actual sales volume and price per vial of product sold by Sanofi. We also compared the Company’s current-period forecasts of future Sanofi sales
volume and average price per vial to Sanofi’s historical sales volume and price per vial. We performed a sensitivity analysis to assess the impact of changes
in these key assumptions on the Company’s estimate of variable consideration.
/s/ KPMG LLP
We have served as the Company’s auditor since 2002.
San Francisco, California
February 25, 2022
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Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
BioMarin Pharmaceutical Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited BioMarin Pharmaceutical Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2021, based on
criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In
our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated
balance sheets of the Company as of December 31, 2021 and December 31, 2020, the related consolidated statements of operations, comprehensive
income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes
(collectively, the consolidated financial statements), and our report dated February 25, 2022 expressed an unqualified opinion on those consolidated financial
statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial
reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures
as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
San Francisco, California
February 25, 2022
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Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, net
Inventory
Other current assets
Total current assets
Noncurrent assets:
Long-term investments
Property, plant and equipment, net
Intangible assets, net
Goodwill
Deferred tax assets
Other assets
BIOMARIN PHARMACEUTICAL INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2021 and 2020
(In thousands of U.S. Dollars, except share and per share amounts)
ASSETS
December 31,
2021
December 31,
2020
$
$
$
$
587,276 $
426,599
373,399
776,669
110,442
2,274,385
507,793
1,035,461
388,652
196,199
1,449,075
151,760
6,003,325 $
491,590 $
48,232
539,822
1,079,077
15,167
98,519
1,732,585
184
5,191,502
(9,689)
14,432
(925,689)
4,270,740
6,003,325 $
649,158
416,228
448,351
698,548
129,934
2,342,219
285,473
1,032,471
417,271
196,199
1,432,150
142,237
5,848,020
492,548
—
492,548
1,075,145
60,130
114,195
1,742,018
182
4,993,407
(9,839)
(16,139)
(861,609)
4,106,002
5,848,020
Total assets
Current liabilities:
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and accrued liabilities
Short-term contingent consideration
Total current liabilities
Noncurrent liabilities:
Long-term convertible debt, net
Long-term contingent consideration
Other long-term liabilities
Total liabilities
Stockholders’ equity:
Common stock, $0.001 par value: 500,000,000 shares authorized;
183,912,514 and 181,740,999 shares issued and outstanding, respectively
Additional paid-in capital
Company common stock held by Nonqualified Deferred Compensation Plan (the NQDC)
Accumulated other comprehensive income (loss)
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
The accompanying notes are an integral part of these Consolidated Financial Statements.
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BIOMARIN PHARMACEUTICAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 2021, 2020 and 2019
(In thousands of U.S. Dollars, except per share amounts)
REVENUES:
Net product revenues
Royalty and other revenues
Total revenues
OPERATING EXPENSES:
Cost of sales
Research and development
Selling, general and administrative
Intangible asset amortization and contingent consideration
Gain on sale of nonfinancial assets
Total operating expenses
LOSS FROM OPERATIONS
Interest income
Interest expense
Other income, net
LOSS BEFORE INCOME TAXES
Benefit from income taxes
NET INCOME (LOSS)
NET INCOME (LOSS) PER SHARE, BASIC
NET INCOME (LOSS) PER SHARE, DILUTED
Weighted average common shares outstanding, basic
Weighted average common shares outstanding, diluted
$
$
$
$
2021
2020
2019
1,783,498 $
62,777
1,846,275
1,805,861 $
54,594
1,860,455
470,515
628,793
759,375
69,933
—
1,928,616
(82,341)
10,482
(15,337)
11,846
(75,350)
(11,270)
(64,080) $
(0.35) $
(0.35) $
182,852
182,852
524,272
628,116
737,669
66,658
(59,495)
1,897,220
(36,765)
16,610
(29,309)
7,142
(42,322)
(901,422)
859,100 $
4.75 $
4.53 $
180,804
191,678
1,661,043
43,005
1,704,048
359,466
715,007
680,924
74,108
(25,000)
1,804,505
(100,457)
22,748
(23,460)
6,358
(94,811)
(70,963)
(23,848)
(0.13)
(0.13)
179,039
179,039
The accompanying notes are an integral part of these Consolidated Financial Statements.
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BIOMARIN PHARMACEUTICAL INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Years Ended December 31, 2021, 2020 and 2019
(In thousands of U.S. Dollars)
NET INCOME (LOSS)
OTHER COMPREHENSIVE INCOME (LOSS):
Available-for-sale debt securities:
Unrealized holding gain (loss) arising during the period, net
of tax impact of $1,596, $(227) and $(1,640), respectively.
Less: reclassifications to net income (loss), net of tax impact of
$0, $(127) and $0, respectively.
Net change in unrealized holding gain (loss), net of tax
Cash flow hedges:
Unrealized holding gain (loss) arising during the period, net of tax impact of $0 for all
periods presented.
Less: reclassifications to net income (loss), net of tax impact of $0 for all periods
presented.
Net change in unrealized holding gain (loss), net of tax
2021
2020
2019
$
(64,080) $
859,100 $
(23,848)
(5,262)
—
(5,262)
34,379
(1,454)
35,833
749
425
324
(23,462)
13,180
(36,642)
5,482
—
5,482
25,266
15,853
9,413
(2)
14,893
(8,955)
Other
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
COMPREHENSIVE INCOME (LOSS)
—
30,571
(33,509) $
15
(36,303)
822,797 $
$
The accompanying notes are an integral part of these Consolidated Financial Statements.
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BIOMARIN PHARMACEUTICAL INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Years Ended December 31, 2021, 2020 and 2019
(In thousands of U.S. Dollars and share amounts in thousands)
Shares of Common Stock, beginning balances
Issuances under equity incentive plans
Repurchase of common stock
Shares of Common Stock, ending balances
Total stockholders' equity, beginning balances
Common stock:
Beginning balances
Issuances under equity incentive plans, net of tax
Ending balances
Additional paid-in capital:
Beginning balances
Issuances under equity incentive plans, net of tax
Stock-based compensation
Repurchase of common stock
Common stock held by the NQDC
Accounting impact of NQDC Plan change
Ending balances
Treasury stock:
Beginning balances
Purchase of treasury stock
Retirement of treasury stock
Ending balance
Company common stock held by the NQDC:
Beginning balances
Common stock held by the NQDC
Accounting impact of NQDC Plan change
Ending balances
Accumulated other comprehensive income (loss):
Beginning balances
Other comprehensive income (loss)
Ending balances
Accumulated deficit:
Beginning balances
Impact of changes in accounting principles
Net income (loss)
Ending balances
Total stockholders' equity, ending balances
2021
2020
2019
181,741
2,172
—
183,913
179,838
2,421
(518)
181,741
178,253
1,585
—
179,838
$
4,106,002 $
3,122,381 $
2,967,940
182
2
184
4,993,407
3,389
194,856
—
(150)
—
5,191,502
—
—
—
—
(9,839)
150
—
(9,689)
(16,139)
30,571
14,432
180
2
182
4,832,707
27,275
183,547
(50,000)
(122)
—
4,993,407
—
(50,000)
50,000
—
(9,961)
122
—
(9,839)
20,164
(36,303)
(16,139)
178
2
180
4,669,926
(11,071)
163,891
—
(692)
10,653
4,832,707
—
—
—
—
(13,301)
692
2,648
(9,961)
5,271
14,893
20,164
(861,609)
—
(64,080)
(925,689)
4,270,740 $
(1,720,709)
—
859,100
(861,609)
4,106,002 $
(1,694,134)
(2,727)
(23,848)
(1,720,709)
3,122,381
$
The accompanying notes are an integral part of these Consolidated Financial Statements.
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BIOMARIN PHARMACEUTICAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2021, 2020 and 2019
(In thousands of U.S. dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization
Non-cash interest expense
Amortization of premium on investments (accretion of discount)
Stock-based compensation expense
Gain on sale of nonfinancial assets
Inventory reserves, net of stock-based compensation
Deferred income taxes
Unrealized foreign exchange loss (gain)
Non-cash changes in the fair value of contingent consideration
Other
Changes in operating assets and liabilities:
Accounts receivable, net
Inventory
Other current assets
Other assets
Accounts payable and accrued liabilities
Other long-term liabilities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment
Maturities and sales of investments
Purchase of available-for-sale debt securities
Proceeds from sale of nonfinancial assets
Purchase of intangible assets
Investment in convertible note
Other
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercises of awards under equity incentive plans
Taxes paid related to net share settlement of equity awards
Repurchase of common stock
Proceeds from convertible senior subordinated note offering, net
Repayments of convertible debt
Payment of contingent consideration
Principal repayments of financing leases
Other
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents:
Beginning of period
End of period
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest, net of interest capitalized into fixed assets
Cash paid for income taxes
SUPPLEMENTAL CASH FLOW DISCLOSURES FOR NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Increase (decrease) in accounts payable and accrued liabilities related to fixed assets
Increase (decrease) in accounts payable and accrued liabilities related to intangible assets
2021
2020
2019
$
(64,080) $
859,100 $
(23,848)
108,039
4,146
5,155
197,263
—
—
(15,608)
(1,810)
8,026
(2,629)
65,574
(35,060)
29,760
(6,593)
15,689
(3,336)
304,536
(95,578)
691,049
(937,143)
—
(23,647)
—
(994)
(366,313)
49,194
(45,805)
—
—
—
—
(3,039)
(398)
(48)
(57)
(61,882)
105,172
16,511
567
189,711
(59,495)
75,609
(888,907)
8,011
4,500
(997)
(59,035)
(61,151)
18,312
(28,647)
(87,025)
(6,871)
85,365
(114,312)
555,834
(529,663)
67,159
(23,207)
(8,709)
(723)
(53,621)
71,913
(44,638)
(50,000)
585,752
(374,991)
—
(6,918)
—
181,118
(1,150)
211,712
$
$
$
$
$
649,158
587,276 $
10,395 $
18,153 $
437,446
649,158 $
12,178 $
8,977 $
(4,749) $
9,428 $
(5,184) $
(292) $
105,300
13,960
(2,000)
159,865
(25,000)
—
(82,760)
1,025
5,205
(2,393)
(37,852)
(107,554)
(27,008)
(8,895)
77,089
3,128
48,262
(145,026)
740,211
(632,023)
25,000
(18,380)
—
(808)
(31,026)
31,611
(42,680)
—
—
—
(58,518)
(5,087)
—
(74,674)
902
(56,536)
493,982
437,446
8,552
9,726
7,589
4,247
The accompanying notes are an integral part of these Consolidated Financial Statements.
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BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
(1) BUSINESS OVERVIEW AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
BioMarin Pharmaceutical Inc. (the Company or BioMarin) is a global biotechnology company that develops and commercializes innovative
therapies for people with serious and life-threatening rare diseases and medical conditions. The Company selects product candidates for diseases and
conditions that represent a significant unmet medical need, have well-understood biology and provide an opportunity to be first-to-market or offer a
significant benefit over existing products. The Company’s portfolio consists of seven commercial products and multiple clinical and preclinical product
candidates for the treatment of various diseases. Voxzogo (formerly known as vosoritide) was granted marketing approval in the European Union (EU) and
the United States (U.S.) on August 27, 2021 and November 19, 2021, respectively.
Basis of Presentation
These Consolidated Financial Statements have been prepared pursuant to United States generally accepted accounting principles (U.S. GAAP)
and the rules and regulations of the Securities and Exchange Commission (the SEC) for Annual Reports on Form 10-K and include the accounts of BioMarin
and its wholly owned subsidiaries. All intercompany transactions have been eliminated. Management performed an evaluation of the Company’s activities
through the date of filing of this Annual Report on Form 10-K, and has concluded that there were no subsequent events or transactions that occurred
subsequent to the balance sheet date and prior to the filing of this Annual Report on Form 10-K except for the transaction disclosed in Note 19 to these
Consolidated Financial Statements.
Use of Estimates
U.S. GAAP requires management to make estimates and assumptions that affect amounts reported in the Company’s Consolidated Financial
Statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that the
Company may undertake in the future, actual results may be different from those estimates. The Consolidated Financial Statements reflect all adjustments of
a normal, recurring nature that are, in the opinion of management, necessary for a fair presentation of results. The full extent to which the COVID-19
pandemic could continue to directly or indirectly impact the Company’s 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 remain uncertain at
this time, particularly as virus variants continue to spread. As events continue to evolve and additional information becomes available, the Company’s
estimates may change materially in future periods.
Significant Accounting Policies
Cash and Cash Equivalents
The Company treats highly liquid investments, readily convertible to cash, with original maturities of three months or less on the purchase date as
cash equivalents.
Marketable and Non-Marketable Securities
On January 1, 2020, the Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2016-13,
Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments (ASU 2016-13), as amended, using a modified retrospective
approach. The adoption of this standard had no impact on the Company’s Financial Statements.
Marketable Securities
The Company determines the appropriate classification of its investments in debt and equity securities at the time of purchase and reevaluates
such designations at each reporting period. The Company classifies its debt and equity securities with original maturities greater than three months when
purchased as either short-term or long-term investments based on each instrument’s underlying contractual maturity date and its availability for use in
current operations.
All marketable securities are classified as available-for-sale. Available-for-sale debt securities are measured and recorded at fair market value with
unrealized gains and losses included in Accumulated Other Comprehensive Income (AOCI) on the Company’s Consolidated Balance Sheets, with the
exception of any declines in fair value below the cost basis that are a result of a
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
credit loss, which, if any, are reported in Other Income, Net in the current period through an allowance for credit losses. 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 related to a credit loss and, if so, an impairment loss is recognized in earnings equal to the difference between the
investment’s amortized cost and fair value at such date.
Non-Marketable Equity Securities
The Company records investments in equity securities, other than equity method investments, at fair market value, if fair value is readily
determinable. Equity securities with no readily determinable fair values are recorded using the measurement alternative of cost adjusted for observable price
changes in orderly transactions for identical or similar investments of the same issuer less impairment, if any. Investments in equity securities are recorded in
Other Assets on the Company's Consolidated Balance Sheets. Unrealized gains and losses are reported in Other Income, Net. The Company regularly
reviews its non-marketable equity securities for indicators of impairment.
Inventory
Commercial Inventory
The Company values inventory at the lower of cost and net realizable value and determines the cost of inventory using the average-cost method.
The Company analyzes its inventory levels quarterly for obsolescence and, if required, adjusts inventory to its net realizable value if the cost basis of
inventory is in excess of its expected net realizable value, or for quantities in excess of expected demand. If the Company determines cost exceeds its net
realizable value, the resulting adjustments are recognized as Cost of Sales in the Consolidated Statements of Operations.
Inventory Produced Prior to Regulatory Approval
When future commercialization for a product candidate is considered probable and management believes that material uncertainties related to the
ultimate regulatory approval have been significantly reduced and the Company expects to realize economic benefit in the future, the Company capitalizes
pre-launch or pre-qualification manufacturing costs prior to regulatory approval. For inventories that are capitalized in preparation of product launch, a
number of factors are taken into consideration based on information available at the time, including the product candidate’s current status in the drug
development and regulatory approval process, results from the related pivotal clinical trial, results from meetings with the relevant regulatory authorities prior
to the filing of regulatory applications, historical experience, as well as potential impediments to the approval process such as product safety or efficacy, as
well as commercialization and market trends. If additional requirements are subsequently presented by the regulatory authorities, prior to their final decision
thus extending anticipated regulatory approval timelines resulting in expiration of the product prior to revised demand forecasts, the pre-launch inventory
costs are expensed to Cost of Sales. If the marketing application is ultimately rejected by the applicable regulators and the pre-launch inventory cannot be
sold for commercial use, the pre-launch inventory costs are expensed to Research and Development (R&D).
Property, Plant and Equipment
Property, plant and equipment are stated at historical cost net of accumulated depreciation. Depreciation is computed using the straight-line method
over the related estimated useful lives, as presented in the table below. Significant additions and improvements are capitalized, whereas repairs and
maintenance are expensed as incurred. Depreciation of property, plant and equipment are included in Cost of Sales, R&D and Selling, General and
Administrative (SG&A), as appropriate, in the Consolidated
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
Statements of Operations. Property and equipment purchased for specific R&D projects with no alternative future uses are expensed as incurred and
recorded to R&D in the Consolidated Statements of Operations.
Leasehold improvements
Building and improvements
Manufacturing and laboratory equipment
Computer hardware and software
Office furniture and equipment
Land improvements
Land
Construction-in-progress
Leases
Shorter of life of asset or lease term
20 to 50 years
5 to 15 years
3 to 7 years
5 years
10 to 20 years
Not applicable
Not applicable
The Company determines if an arrangement is a lease at contract inception. For leases where the Company is the lessee, ROU assets represent
the Company’s right to use the underlying asset for the term of the lease and the lease liabilities represent the lease payment obligation. ROU assets and
lease liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the lease term. The Company
uses its incremental borrowing rate based on the information available at the commencement date of the underlying lease arrangement to determine the
present value of lease payments. The ROU asset also includes any prepaid lease payments and any lease incentives received. The lease term to calculate
the ROU asset and related lease liability includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise the
option. The Company’s lease agreements generally do not contain any material variable lease payments, residual value guarantees or restrictive covenants.
Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense while expense for financing
leases is recognized as depreciation expense and interest expense using the accelerated interest method of recognition. When an arrangement requires
payments for lease and non-lease components, the Company has elected to account for lease and non-lease components separately. Lease expense for
leases with a term of twelve months or less is recognized on a straight-line basis and are not included in the recognized ROU assets and lease liabilities.
Goodwill and Intangible Assets
The Company records goodwill in a business combination when the total consideration exceeds the fair value of the assets acquired. Intangible
assets with indefinite useful lives are related to purchased in-process research and development (IPR&D) projects and are measured at their respective fair
values as of the acquisition date. Intangible assets related to IPR&D projects are considered to be indefinite-lived until the completion or abandonment of the
associated R&D efforts. If and when development is complete, which generally occurs if and when regulatory approval to market a product is obtained, the
associated assets are considered finite-lived and are amortized using the straight-line method based on their respective estimated useful lives at that point in
time. The amortization of these intangible assets is included in Intangible Asset Amortization and Contingent Consideration in the Consolidated Statements
of Operations.
Impairment
The Company assesses goodwill and indefinite-lived intangible assets for impairment annually in the fourth quarter, or more frequently as warranted
by events or changes in circumstances that indicate that the carrying amount may not be recoverable.
Goodwill is assessed for impairment by comparing the fair value of the Company’s reporting unit with its carrying amount. If the carrying value of the
reporting unit exceeds its fair value, an impairment loss equal to the difference would be recorded.
Indefinite-lived intangible assets are assessed for impairment first by performing a qualitative assessment. If the qualitative assessment indicates
that it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount, then the Company will perform a
quantitative assessment and record an impairment loss. Impairment charges that are not material are recorded to Intangible Asset Amortization and
Contingent Consideration in the Consolidated Statements of Operations.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
Long-lived Asset Impairment
The Company’s long-lived assets consist of property, plant and equipment, leased ROU assets and finite-lived intangible assets. Should there be an
indication of impairment, the Company tests for recoverability by comparing the estimated undiscounted future cash flows expected to result from the use of
the asset or asset group and its eventual disposition to the carrying amount of the asset or asset group. Any excess of the carrying value of the asset or
asset group over its estimated fair value is recognized as an impairment loss. Impairment charges related to property, plant or equipment that are not
material are recorded to depreciation expense and presented in SG&A in the Consolidated Statements of Operations. Impairment charges related to finite-
lived intangible assets that are not material are recorded to Intangible Asset Amortization and Contingent Consideration in the Consolidated Statements of
Operations.
Revenue Recognition
The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration
which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that are within the
scope of ASC Topic 606, the Company performs the following five steps:
(i)
(ii)
(iii)
(iv)
(v)
identification of the promised goods or services in the contract;
determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of
the contract;
measurement of the transaction price, including the constraint on variable consideration;
allocation of the transaction price to the performance obligations based on estimated selling prices; and
recognition of revenue when (or as) the Company satisfies each performance obligation. A performance obligation is a promise in a
contract to transfer a distinct good or service to the customer and is the unit of account.
Net Product Revenues
In the U.S., the Company’s 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) and Aldurazyme is marketed world-wide by Sanofi (formerly referred to as Sanofi Genzyme). Outside the U.S., the
Company’s commercial products are sold to its authorized distributors or directly to government purchasers or hospitals, which act as the end-users.
Revenues from product sales are recognized when the customer obtains control of the Company’s product, which occurs at a point in time, typically upon
shipment to the customer. Amounts collected from customers and remitted to governmental authorities, which primarily consist of value-added taxes related
to product sales in foreign jurisdictions, are presented on a net basis on the Company’s Consolidated Statements of Operations, in that taxes billed to
customers are not included as a component of Net Product Revenues.
For Aldurazyme revenues, the Company receives a payment ranging from 39.5% to 50% on worldwide net Aldurazyme sales by Sanofi depending
on sales volume, which is included in Net Product Revenues on the Company’s Consolidated Statements of Operations. The Company recognizes its best
estimate of the revenue it expects to earn when the product is released and control is transferred to Sanofi. The Company records Aldurazyme net product
revenues based on the estimated variable consideration payable when the product is sold through by Sanofi. Actual amounts of consideration ultimately
received may differ from the Company’s estimates. Differences between the estimated variable consideration to be received from Sanofi and actual
payments received are not expected to be material. If actual results vary from the Company’s estimates, the Company will make adjustments, which would
affect Net Product Revenues and earnings in the period such variances become known.
Revenue Reserves
Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which
reserves are established and which result from government rebates, sales returns, and other incentives that are offered within contracts between the
Company and its customers, such as specialty pharmacies, hospitals, authorized distributors and government purchasers. These reserves are based on the
amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to the customer) or a
current liability (if the amount is payable to a party other than a customer). Where appropriate, these estimates take into consideration a range of possible
outcomes that are probability-weighted for relevant factors such as the Company’s historical experience, current contractual and statutory requirements,
specific known market events and trends, industry data and forecasted customer buying and payment patterns. Overall, these reserves reflect the
Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the contract. The amount of variable consideration that
is included in the transaction price may be constrained and
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not
occur in a future period. Actual amounts of consideration ultimately received may differ from the Company’s estimates, however the Company does not
expect any such difference to be material. If actual results in the future vary from the Company’s estimates, the Company will adjust its estimates, which
would affect net product revenue and earnings in the period such variances become known.
Government Rebates: The Company records reserves for rebates payable under Medicaid and other government programs as a reduction of
revenue at the time product revenues are recorded. The Company’s reserve calculations require estimates, including estimates of customer mix, to
determine which sales will be subject to rebates and the amount of such rebates. The Company updates its estimates and assumptions on a quarterly basis
and records any necessary adjustments to its reserves.
Sales Returns: The Company records allowances for product returns, if appropriate, as a reduction of revenue at the time product sales are
recorded. Several factors are considered in determining whether an allowance for product returns is required, including market exclusivity of the products
based on their orphan drug status, the patient population, the customers’ limited return rights and the Company’s historical experience with returns. Because
of the pricing of the Company’s commercial products, the limited number of patients and the customers’ limited return rights, most customers and retailers
carry a limited inventory. The Company relies on historical return rates to estimate a reserve for returns. Based on these factors and the fact that the
Company has not experienced significant product returns to date, return allowances are not material.
Other Incentives: Other incentives include fees paid to the Company’s distributors and discounts for prompt payment. The Company also offers a
branded co-pay assistance program for eligible patients with commercial insurance in the U.S. who are on an eligible BioMarin product. The branded co-pay
assistance programs assist commercially insured patients who have coverage for an eligible BioMarin product and are intended to reduce each participating
patient’s portion of the financial responsibility of the purchase price up to a specified dollar amount of assistance. The Company records fees paid to
distributors, cash discounts and amounts paid under the brand specific co-pay assistance program for each patient as a reduction of revenue.
Royalty and Other Revenues
Royalties: For arrangements that include the receipt of sales-based royalties, including milestone payments based on the level of sales when the
license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (a) when the related sales occur,
or (b) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).
Licenses of intellectual property: If the license to the Company’s intellectual property is determined to be distinct from the other performance
obligations identified in the arrangement, the Company recognizes revenues from non-refundable, up-front fees allocated to the license when the license is
transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promises, the Company
uses judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over
time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front
fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue
recognition.
Milestone payments: At the inception of each arrangement that includes developmental, regulatory or commercial milestone payments, the
Company evaluates whether achieving the milestones is considered probable and estimates the amount to be included in the transaction price using the
most likely amount method. If it is probable that a significant revenue reversal would not occur, the value of the associated milestone (such as a regulatory
submission by the Company) is included in the transaction price. Milestone payments that are not within the control of the Company, such as approvals from
regulators or where attainment of the specified event is dependent on the development activities of a third party, are not considered probable of being
achieved until those approvals are received or the specified event occurs. Revenue is recognized from the satisfaction of performance obligations in the
amount billable to the customer.
Research and Development
R&D costs are generally expensed as incurred. These expenses include contract R&D services provided by third parties, preclinical and clinical
studies, raw materials costs associated with manufacturing clinical product, quality control and assurance, other R&D activities, facilities and regulatory costs
and R&D-related personnel costs including salaries, benefits and stock-based compensation. Upfront and milestone payments made to third parties in
connection with licensed intellectual property, which does
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
not have an alternative future use or does not reach technological feasibility, are expensed as incurred up to the point of regulatory approval.
Net Income (Loss) Per Common Share
Basic net income (loss) per share is calculated by dividing Net Income (Loss) by the weighted average shares of common stock outstanding during
the period. Diluted net income (loss) per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were
exercised or converted into common stock; however, potential common equivalent shares are excluded if their effect is anti-dilutive.
Stock-Based Compensation
The Company has equity incentive plans under which various types of equity-based awards may be granted to employees. Stock-based
compensation expense is recognized on a straight-line basis over the requisite service period, which is generally the vesting period required to obtain full
vesting, and is classified as Cost of Sales, R&D or SG&A, as appropriate, in the Consolidated Statements of Operations. The Company accounts for
forfeitures as they occur.
Restricted Stock Units
The fair value of restricted stock units (RSUs) with service-based vesting conditions and RSUs with performance conditions is determined to be the
fair market value of the Company’s underlying common stock on the date of grant. The stock-based compensation expense for RSUs with service-based
vesting is recognized over the period during which the vesting restrictions lapse. Stock-based compensation expense for RSUs with performance conditions
is recognized beginning in the period the Company determines it is probable that the performance condition will be achieved. Management expectations
related to the achievement of performance goals associated with RSUs with performance conditions are assessed regularly to determine whether such
grants are expected to vest. The fair value for RSUs with market conditions is estimated using the Monte Carlo valuation model, utilizing expected volatility
rates derived from those of the Company and the members of the referenced peer group. Related stock-based compensation is recognized, beginning on
the grant date, on a straight-line basis regardless of whether the market condition is met unless the required service is not performed.
Stock Options and Purchase Rights
The fair value of each stock option award and purchase rights under the Company’s Employee Stock Purchase Plan (ESPP) are estimated on the
date of grant using the Black-Scholes valuation model and the following assumptions: expected term, expected volatility, risk-free interest rate and expected
dividend yield. 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. The expected term of stock options is based on observed historical exercise patterns. In estimating the life of stock options, the
Company has identified two employee groups with distinctly different historical exercise patterns: executive and non-executive. The executive employee
group has a history of holding stock options for longer periods than non-executive employees. The expected term of purchase rights for ESPP is based on
each tranche of an offering period, which is four tranches in a twenty-four-month period.
The determination of the fair value of stock-based payment awards using an option-pricing model is affected by the Company’s stock price and may
use assumptions regarding a number of complex and subjective variables.
Income Taxes
The Company calculates and provides for income taxes in each of the tax jurisdictions in which it operates. Deferred tax assets and liabilities,
measured using enacted tax rates, are recognized for the future tax consequences of temporary differences between the tax and financial statement basis of
assets and liabilities. A valuation allowance reduces the deferred tax assets to the amount that is more likely than not to be realized. The Company
establishes liabilities or reduces assets for uncertain tax positions when the Company believes certain tax positions are not more likely than not of being
sustained if challenged. Each quarter, the Company evaluates these uncertain tax positions and adjusts the related tax assets and liabilities in light of
changing facts and circumstances.
The Company uses financial projections to support its net deferred tax assets, which contain significant assumptions and estimates of future
operations. If such assumptions were to differ significantly, it may have a material impact on the Company’s ability to realize its deferred tax assets. At the
end of each period, the Company will reassess the ability to realize its deferred tax benefits. If it is more likely than not that the Company would not realize
the deferred tax benefits, a valuation allowance may need to be established against all or a portion of the deferred tax assets, which will result in a charge to
tax expense.
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BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
Table of Content
Foreign Currency
For the Company and its subsidiaries, the functional currency has been determined to be the U.S. Dollar (USD). Assets and liabilities denominated
in foreign currency are remeasured at period-end exchange rates for monetary assets. Non-monetary assets and liabilities denominated in foreign currencies
are remeasured at historical rates. Foreign currency transaction gains and losses resulting from remeasurement are recognized in SG&A in the Consolidated
Statements of Operations.
Derivatives and Hedging Activities
The Company uses foreign currency exchange forward contracts (forward 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 USD, primarily the Euro. The Company designates certain of these forward contracts as hedging instruments and
also enters into forward contracts that are considered to be economic hedges that are not designated as hedging instruments. Whether designated or
undesignated, these forward 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 USD. To receive hedge accounting treatment,
cash flow hedges must be highly effective in offsetting changes to expected future cash flows on hedged transactions. The Company does not hold or issue
derivative instruments for trading or speculative purposes.
The Company is exposed to counterparty credit risk on its derivatives. The Company has established and maintains strict counterparty credit
guidelines and enters into hedging agreements with financial institutions that are investment grade or better to minimize the Company’s exposure to potential
defaults. The Company is not required to pledge collateral under these agreements.
The Company accounts for its derivative instruments as either assets or liabilities on its Consolidated Balance Sheets and measures them at fair
value, which is estimated using current exchange rates and interest rates and takes into consideration the current creditworthiness of the counterparties or
the Company, as applicable. For derivatives designated as hedging instruments, the entire change in the fair value of qualifying derivative instruments is
recorded in AOCI and amounts deferred in AOCI are reclassified to earnings in the same line item in which the earnings effect of the hedged item is
reported. Derivatives not designated as hedging instruments are adjusted to fair value through earnings in SG&A in the Consolidated Statements of
Operations.
Fair Value of Financial Instruments
The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or
disclosed at fair value in the financial statements on a recurring basis. The Company defines fair value as the price that would be received from selling an
asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value
measurements for assets and liabilities that are required to be recorded at fair value, the Company considers the principal or most advantageous market in
which the Company would transact and the market-based risk measurements or assumptions that market participants would use to price the asset or liability,
such as risks inherent in valuation techniques, transfer restrictions and credit risk. When estimating fair value, depending on the nature and complexity of the
asset or liability, the Company may use the following techniques:
•
•
Income approach, which is based on the present value of a future stream of net cash flows
Market approach, which is based on market prices and other information from market transactions involving identical or comparable assets
or liabilities.
The Company’s fair value methodologies depend on the following types of inputs:
•
•
•
Quoted prices for identical assets or liabilities in active markets (Level 1 inputs)
Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities that are not
active, or inputs other than quoted process that are directly or indirectly observable, or inputs that are derived principally from, or
corroborated by, observable market data by correlation or other means (Level 2 inputs)
Unobservable inputs that reflect estimates and assumptions (Level 3 inputs)
The Company’s Level 2 instruments 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,
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
obtaining market values from other pricing sources, analyzing pricing data in certain instances and confirming those securities traded in active markets.
The Company’s Level 3 financial assets and liabilities include acquired intangible assets and contingent consideration resulting from business
acquisitions. The estimated fair value of acquired finite-lived and indefinite-lived intangible assets and contingent consideration are measured by applying a
probability-based income approach utilizing an appropriate discount rate as of the acquisition date. Key assumptions used by management to estimate the
fair value of contingent consideration include estimated probabilities, the estimated timing of when a milestone may be attained and assumed discount
periods and rates. Changes in the fair value of the contingent consideration can result from changes to one or more inputs, including the estimated
probability with respect to regulatory approval, changes in the assumed timing of when milestones are likely to be achieved and changes in assumed
discount periods and rates. Contingent consideration is remeasured on a recurring basis and resulting changes in the fair value, due to the revision of key
assumptions, are recorded in Intangible Asset Amortization and Contingent Consideration on the Company’s Consolidated Statements of Operations.
See Notes 2, 7, 8, 10 and 17 to these Consolidated Financial Statements for further information on the nature of these financial instruments.
Segment Information
The Company currently operates in one segment focused on the development and commercialization of innovative therapies for people with serious
and life-threatening rare diseases and medical conditions. A single management team reports to the chief operating decision maker who comprehensively
manages the entire business. All products are included in one operating segment because the majority 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. The Company is not organized by market and is managed and operated as one business. The Company does not operate any separate lines
of business or separate business entities with respect to its products. Accordingly, the Company does not accumulate discrete financial information with
respect to separate products, other than revenues, cost of sales and certain other operating expenses.
Recent Accounting Pronouncements
There have been no new accounting pronouncements adopted by the Company or new accounting pronouncements issued by the FASB during
2021 that the Company believes are of significance or potential significance to the Company.
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BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
(2) FINANCIAL INSTRUMENTS
The following tables show the Company’s cash, cash equivalents and available-for-sale securities by significant investment category as of
December 31, 2021 and 2020, respectively:
Amortized Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Aggregate Fair
Value
Cash and Cash
Equivalents
Short-term
Marketable
(1)
Securities
Long-term
Marketable
(2)
Securities
December 31, 2021
$
301,177 $
— $
— $
301,177 $
301,177 $
— $
Level 1:
Cash
Level 2:
Money market
instruments
Corporate debt
securities
U.S. government
agency securities
Commercial paper
Asset-backed
securities
Foreign and other
Subtotal
Total
$
Level 1:
Cash
Level 2:
Money market
instruments
Corporate debt
securities
U.S. government
agency securities
Asset-backed
securities
Foreign and other
Subtotal
Total
$
285,099
584,000
224,774
68,384
56,936
3,097
1,222,290
1,523,467 $
—
386
182
—
10
141
719
719 $
—
285,099
285,099
—
(2,086)
582,300
—
200,304
381,996
(325)
—
224,631
68,384
(95)
(12)
(2,518)
(2,518) $
56,851
3,226
1,220,491
1,521,668 $
—
1,000
—
—
286,099
587,276 $
146,421
67,384
9,451
3,039
426,599
426,599 $
78,210
—
47,400
187
507,793
507,793
Amortized Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Aggregate Fair
Value
Cash and Cash
Equivalents
Short-term
Marketable
(1)
Securities
Long-term
Marketable
(2)
Securities
December 31, 2020
$
370,325 $
— $
— $
370,325 $
370,325 $
— $
264,833
413,137
265,298
31,659
549
975,476
1,345,801 $
—
3,261
1,555
85
168
5,069
5,069 $
—
(8)
(1)
264,833
264,833
—
416,390
266,852
—
220,551
195,839
14,000
192,488
60,364
(2)
—
(11)
(11) $
31,742
717
980,534
1,350,859 $
—
—
278,833
649,158 $
3,189
—
416,228
416,228 $
28,553
717
285,473
285,473
—
—
—
—
(1)
(2)
The Company’s short-term marketable securities mature in one year or less.
The Company’s long-term marketable securities mature between one and five years.
As of December 31, 2021, the Company had the ability and intent to hold all investments that were in an unrealized loss position until maturity. The
Company considered its intent and ability to hold the securities until recovery of amortized cost basis, the extent to which fair value is less than amortized
cost basis, conditions specifically related to the security’s industry and geography, payment structure and history and changes to the ratings (if any) in
determining that the decline in fair value compared to carrying value is not related to a credit loss.
The Company has certain investments in non-marketable equity securities, measured using unobservable valuation inputs and remeasured on a
nonrecurring basis, which are collectively considered strategic investments. As of December 31, 2021 and
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BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
2020, the fair value of the Company’s strategic investments was $16.5 million and $10.5 million, respectively. These investments were recorded in Other
Assets in the Company’s Consolidated Balance Sheets.
See Note 1 to these Consolidated Financial Statements for additional discussion regarding the Company’s fair value measurements.
(3) GOODWILL AND INTANGIBLE ASSETS
The change in the carrying value of Goodwill was as follows:
Beginning balance
Disposition
Ending carrying value
December 31,
2021
196,199
—
196,199
$
$
2020
197,039
(840)
196,199
$
$
In January 2020, the Company completed the sale of worldwide rights to Firdapse, the Company's commercial product for the treatment of
Lambert-Eaton myasthenic syndrome, to a third party in exchange for a one-time cash payment of $67.2 million plus residual royalties. Under the terms of
the agreement, the Company agreed to provide certain transition services to the third-party purchaser, such as customer sales and support, for up to 12
months after the closing of the transaction. During the first quarter of 2020, the Company recognized a before-tax net gain of $59.5 million related to the sale
of the Firdapse intellectual property (IP) and existing inventory. As a result of the sale of Firdapse, in the first quarter of 2020 the Company recognized a
$0.8 million reduction to Goodwill and disposed of $32.2 million in intangible assets, including related accumulated amortization of $31.6 million.
The Company performed its annual assessment for goodwill impairment for the year ended December 31, 2021 and no goodwill impairment
charges were recorded.
Intangible Assets, Net consisted of the following:
Finite-lived intangible assets
Accumulated amortization
Net carrying value
December 31,
2021
2020
$
$
677,350 $
(288,698)
388,652 $
644,087
(226,816)
417,271
During the fourth quarter of 2021 the Company capitalized a $6.0 million Voxzogo regulatory approval milestone payment as a finite-lived intangible
asset in the Company's Consolidated Balance Sheet following the FDA's approval of Voxzogo.
The following table summarizes the carrying value and estimated remaining life of the Company’s finite-lived intangible assets as of December 31,
2021:
Acquired intellectual property
Technology transfer
Repurchased royalty rights
License payments
Other
Total
(1)
The technology transfer intangible asset has not yet been placed into service.
101
Net Balance
295,299
74,055
12,937
6,203
158
388,652
$
$
Average Remaining
Life
6.0 years
Not applicable
1.9 years
8.7 years
1.4 years
(1)
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BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
As of December 31, 2021, the estimated future amortization expense associated with the Company’s finite-lived intangible assets, exclusive of the
technology transfer asset that has not been placed into service, was as follows:
Fiscal Year
2022
2023
2024
2025
2026
Thereafter
Amount
62,606
61,978
55,702
36,426
36,426
61,459
314,597
$
$
In 2019, the Company received $25.0 million due to the achievement by a third party of development and regulatory milestones and commercial
sales milestones related to a previously sold intangible asset, which the Company recorded as a Gain on Sale of Nonfinancial Assets in the Consolidated
Statements of Operations.
(4) PROPERTY, PLANT AND EQUIPMENT
Property, Plant and Equipment, Net, consisted of the following:
Building and improvements
Manufacturing and laboratory equipment
Computer hardware and software
Land
Leasehold improvements
Furniture and equipment
Land improvements
Construction-in-progress
Accumulated depreciation
Total property, plant and equipment, net
December 31,
2021
2020
$
$
774,923
444,182
201,382
90,418
55,279
42,976
10,132
136,743
1,756,035
(720,574)
1,035,461
$
$
761,560
414,439
189,740
90,418
55,134
40,223
7,412
109,140
1,668,066
(635,595)
1,032,471
Depreciation expense, net of amounts capitalized into inventory, was $46.1 million, $43.0 million and $51.8 million for the years ended
December 31, 2021, 2020 and 2019, respectively.
(5) INVENTORY
Inventory consisted of the following:
Raw materials
Work-in-process
Finished goods
Total inventory
December 31,
2021
2020
$
$
80,269
415,261
281,139
776,669
$
$
76,673
308,286
313,589
698,548
In the third quarter of 2020, the Company unexpectedly received a Complete Response Letter from the U.S. Food and Drug Administration (FDA)
and a Joint Assessment Report from the European Medicines Agency (EMA) respectively, both indicating that the Company’s regulatory applications for
valoctocogene roxaparvovec could not be approved in their present form and requesting additional safety and efficacy data from the ongoing Phase 3 study.
The Company evaluated the impact of the new requirement for Phase 3 data that is currently unknown and determined the value of the pre-launch inventory
was no longer
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BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
recoverable due to delays in anticipated regulatory approvals. As a result, the Company adjusted the pre-launch inventory to zero, its net realizable value, as
of December 31, 2020. The Company recorded $24.3 million and $87.2 million to Cost of Sales during the years ended December 31, 2021 and December
31, 2020. The Company had no pre-launch inventory balance as of December 31, 2021.
See Note 1 to these Consolidated Financial Statements for additional information related to the Company’s policy on inventory produced prior to
regulatory approval.
(6) SUPPLEMENTAL BALANCE SHEET INFORMATION
Accounts Payable and Accrued Liabilities consisted of the following:
Accrued compensation expense
Accounts payable and accrued operating expenses
Accrued rebates payable
Accrued royalties payable
Lease liabilities
Deferred revenue
Forward foreign currency exchange contracts
Value added taxes payable
Accrued income taxes
Other
Total accounts payable and accrued liabilities
December 31,
2021
2020
$
$
204,446 $
193,003
47,987
15,215
10,464
6,956
6,263
1,935
1,213
4,108
491,590 $
165,023
191,429
65,526
17,155
11,754
152
17,798
9,562
9,661
4,488
492,548
The roll forward of significant estimated accrued rebates and reserve for cash discounts for the years ended December 31, 2021, 2020 and 2019,
were as follows:
Year ended December 31, 2021:
Accrued rebates
Reserve for cash discounts
Year ended December 31, 2020:
Accrued rebates
Reserve for cash discounts
Year ended December 31, 2019:
Accrued rebates
Reserve for cash discounts
(7) FAIR VALUE MEASUREMENTS
Balance at
Beginning
of Period
Provision for
Current Period
Sales
Payments
Balance at
End of
Period
$
$
$
$
$
$
65,526 $
1,716 $
116,691 $
16,003 $
(134,230) $
(15,706) $
57,163 $
1,889 $
113,165 $
17,191 $
(104,802) $
(17,364) $
43,116 $
1,197 $
91,748 $
15,335 $
(77,701) $
(14,643) $
47,987
2,013
65,526
1,716
57,163
1,889
The Company measures certain financial assets and liabilities at fair value in accordance with the policy described in Note 1 to these Consolidated Financial
Statements.
The following tables present the classification within the fair value hierarchy of financial assets and liabilities not disclosed elsewhere in these Consolidated
Financial Statements that are remeasured on a recurring basis as of December 31, 2021 and 2020. Other than the Company’s fixed-rate convertible debt
disclosed in Note 10 to these Consolidated Financial Statements, there
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BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
were no financial assets or liabilities that were remeasured using a quoted price in active markets for identical assets (Level 1) as of December 31, 2021 and
2020.
Assets:
Other current assets:
NQDC Plan assets
Other assets:
NQDC Plan assets
Restricted investments
Total other assets
(1)
Total assets
Liabilities:
Current liabilities:
NQDC Plan liability
Contingent consideration
Total current liabilities
Other long-term liabilities:
NQDC Plan liability
Contingent consideration
Total other long-term liabilities
Total liabilities
Assets:
Other current assets:
NQDC Plan assets
Other assets:
NQDC Plan assets
Restricted investments
Total other assets
(1)
Total assets
Liabilities:
Current liabilities:
NQDC Plan liability
Other long-term liabilities:
NQDC Plan liability
Contingent consideration
Total other long-term liabilities
Total liabilities
Fair Value Measurements as of December 31, 2021
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
2,043 $
— $
2,043
23,929
2,940
26,869
28,912 $
2,043 $
—
2,043
23,929
—
23,929
25,972 $
—
—
—
— $
— $
48,232
48,232
—
15,167
15,167
63,399 $
23,929
2,940
26,869
28,912
2,043
48,232
50,275
23,929
15,167
39,096
89,371
Fair Value Measurements as of December 31, 2020
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
2,415 $
19,962
4,487
24,449
26,864 $
— $
—
—
—
— $
2,415
19,962
4,487
24,449
26,864
2,415 $
— $
2,415
19,962
—
19,962
22,377 $
—
60,130
60,130
60,130 $
19,962
60,130
80,092
82,507
$
$
$
$
$
$
$
$
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BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
(1)
The restricted investments as of December 31, 2021 and 2020 secure the Company’s irrevocable standby letters of credit obtained in connection
with certain commercial agreements.
There were no transfers between levels during the periods presented.
Liabilities measured at fair value using Level 3 inputs consisted of contingent consideration. The following tables represent a roll-forward of
contingent consideration.
Contingent consideration as of December 31, 2020
Changes in the fair value of contingent consideration
Foreign exchange remeasurement of Euro denominated contingent consideration
Contingent consideration as of December 31, 2021
$
$
60,130
8,026
(4,757)
63,399
(8) DERIVATIVE INSTRUMENTS AND HEDGING STRATEGIES
The Company's forward contracts designated as hedging instruments have maturities up 2 years. The Company's forward contracts that are
considered to be economic hedges that are not designated as hedging instruments have maturities up to 3 months.
The following table summarizes the aggregate notional amounts for the Company’s derivatives outstanding as of the periods presented.
Forward Foreign Exchange Contracts
Derivatives designated as hedging instruments:
Sell
Purchase
Derivatives not designated as hedging instruments:
Sell
Purchase
December 31, 2021
December 31, 2020
$
$
$
$
740,667 $
183,256 $
113,257 $
31,068 $
782,327
189,540
98,343
12,277
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BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
The fair value carrying amounts of the Company’s derivatives, as classified within the fair value hierarchy, were as follows:
Balance Sheet Location
Derivatives designated as hedging instruments:
Asset Derivatives - Level 2
(1)
Other current assets
Other assets
Subtotal
Liability Derivatives - Level 2
(1)
Accounts payable and accrued liabilities
Other long-term liabilities
Subtotal
Derivatives not designated as hedging instruments:
Asset Derivatives - Level 2
(1)
Other current assets
Liability Derivatives - Level 2
(1)
Accounts payable and accrued liabilities
Total Derivatives Assets
Total Derivatives Liabilities
December 31, 2021
December 31, 2020
$
$
$
$
$
$
$
$
17,357 $
4,991
22,348 $
5,487 $
1,378
6,865 $
427 $
776 $
22,775 $
7,641 $
6,268
3,148
9,416
17,551
11,020
28,571
84
247
9,500
28,818
(1) See Note 1 to these Consolidated Financial Statements for additional information related to the Company’s fair value measurements.
The following tables summarize the impact of gains and losses from the Company's derivatives on its Consolidated Statements of Operations for
the periods presented.
Derivatives Designated
as Cash Flow Hedging
Instruments
Net product
revenues as reported
Operating expenses
as reported
Derivatives Not
Designated as Hedging
Instruments
Operating expenses
Years Ended December 31,
2021
Cash Flow
Hedging Gains (Losses)
Reclassified into Earnings
2020
Cash Flow
Hedging Gains (Losses)
Reclassified into Earnings
$
$
1,783,498
1,928,616
$
$
196
(1,650)
$
$
1,805,861
1,897,220
$
$
18,122
(4,942)
Gains (Losses)
Recognized in Earnings
$
1,548
Gains (Losses)
Recognized in Earnings
$
115
As of December 31, 2021, the Company expects to reclassify unrealized losses of $12.2 million from AOCI to earnings as the forecasted revenue
and operating expense transactions occur over the next twelve months. For additional discussion of balances in AOCI see Note 11 to these Consolidated
Financial Statements.
106
BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
Table of Content
(9) LEASES
The following table presents the Company’s ROU assets and lease liabilities for the periods presented.
Lease Classification
Assets:
Operating
Financing
Total ROU assets
Liabilities:
Current:
Operating
Financing
Noncurrent:
Operating
Financing
Total lease liabilities
Classification
Other assets
Other assets
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities
Other long-term liabilities
Other long-term liabilities
December 31,
2021
2020
$
$
$
$
38,198 $
8,220
46,418 $
8,198 $
2,266
31,882
1,960
44,306 $
46,014
11,095
57,109
8,889
2,865
40,483
4,006
56,243
Maturities of lease liabilities as of December 31, 2021 by fiscal year were as follows:
Maturity of Lease Liabilities
2022
2023
2024
2025
2026
Thereafter
Total lease payments
Less: Interest
Present value of lease liabilities
Operating
Financing
Total
$
$
10,193 $
8,493
6,490
5,802
4,304
11,811
47,093
(7,013)
40,080 $
2,427 $
1,869
85
41
11
—
4,433
(207)
4,226 $
12,620
10,362
6,575
5,843
4,315
11,811
51,526
(7,220)
44,306
12,841
3,271
448
16,560
Lease costs associated with payments under the Company’s leases for the periods presented were as follows:
Lease Cost
(1)
Operating
Financing:
Amortization
Interest expense
Total lease costs
Classification
Operating expenses
Operating expenses
Operating expenses
$
$
Years Ended December 31,
2021
2020
13,962 $
3,339
283
17,584 $
(1) Includes short-term leases and variable lease costs, both of which were not material in the periods presented.
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BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
The following table includes the weighted average remaining lease terms and the weighted average discount rate used to calculate the present
value of the Company’s lease liabilities:
Other Information
Weighted average remaining lease term (in years):
Operating leases
Financing leases
Weighted average discount rate:
Operating leases
Financing leases
Years Ended December 31,
2021
2020
6.2
1.9
5.0 %
5.1 %
As of December 31, 2021, no leases were expected to commence that would create significant rights and obligations for the Company.
Supplemental Cash Flow Information
Cash paid for amounts included in the measurement of lease liabilities:
Cash used in operating activities:
Operating leases
Financing leases
Cash used in financing activities:
Financing leases
ROU assets obtained in exchange for lease obligations:
Operating leases
Financing leases
Years Ended December 31,
2021
2020
$
$
$
$
$
10,664 $
283 $
3,039 $
760 $
462 $
6.8
2.6
4.9 %
5.2 %
10,536
450
6,918
4,779
3,941
(10) DEBT
Convertible Notes
As of December 31, 2021, the Company had outstanding fixed-rate notes with varying maturities for an undiscounted aggregate principal amount of
$1.1 billion (collectively the Notes). The Notes are senior subordinated convertible obligations, and
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
interest is payable in arrears, semi-annually. The following table summarizes information regarding the Company’s convertible debt:
1.25% senior subordinated convertible notes due in May 2027 (the 2027 Notes)
Unamortized discount net of deferred offering costs
2027 Notes, net
0.599% senior subordinated convertible notes due in August 2024 (the 2024 Notes)
Unamortized discount net of deferred offering costs
2024 Notes, net
Total convertible debt, net
Fair value of fixed rate convertible debt
(1)
:
2027 Notes
2024 Notes
Total fair value of fixed rate convertible debt
December 31,
2021
2020
600,000 $
(10,971)
589,029
495,000
(4,952)
490,048
600,000
(12,995)
587,005
495,000
(6,860)
488,140
1,079,077 $
1,075,145
625,122 $
521,082
1,146,204 $
627,090
530,714
1,157,804
$
$
$
$
(1)
The fair value of the Company’s fixed-rate convertible debt is based on open market trades and is classified as Level 1 in the fair value hierarchy.
See Note 1 to these Consolidated Financial Statements for additional discussion of fair value measurements.
Interest expense on the Company’s convertible debt consisted of the following:
Coupon interest expense
Accretion of discount on convertible notes
Amortization of debt issuance costs
Total interest expense on convertible debt
2027 Notes
Years Ended December 31,
2020
2019
2021
$
$
10,465 $
3,339
593
14,397 $
12,350 $
14,682
1,829
28,861 $
4,907
15,917
2,031
22,855
In May 2020, the Company issued $600.0 million in aggregate principal amount of senior subordinated unsecured convertible notes with a maturity
date of May 15, 2027. The 2027 Notes were issued to the public at par value and bear interest at the rate of 1.25% per annum. Interest is payable semi-
annually in cash in arrears on May 15 and November 15 of each year, beginning November 15, 2020. The 2027 Notes are convertible, at the option of the
holder into shares of the Company’s common stock. The initial conversion rate for the 2027 Notes is 7.2743 shares per $1,000 principal amount of the 2027
Notes, which represents a conversion price of approximately $137.47 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 2027 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 2027
Notes so long as the amount of the 2027 Notes converted is an integral multiple of $1,000 principal amount. Net proceeds from the offering were
$585.8 million. In connection with the issuance of the 2027 Notes, the Company recorded a discount on the 2027 Notes of $13.5 million, which will be
accreted and recorded as additional interest expense over the life of the 2027 Notes.
The 2027 Notes are senior subordinated, unsecured obligations, and rank (i) subordinated in right of payment to the prior payment in full of all of the
Company’s existing and future senior debt, (ii) equal in right of payment with the Company’s existing and future senior subordinated debt, (iii) senior in right
of payment to the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the notes, (vi) effectively subordinated to
the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness, and (v) structurally
subordinated to all existing
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
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 2027 Notes, the holders may require the
Company to repurchase all or a portion of such holder’s 2027 Notes for cash at 100% of the principal amount of the 2027 Notes being purchased, plus any
accrued and unpaid interest.
The offer and sale of the 2027 Notes and the shares of the Company’s common stock issuable upon conversion of the 2027 Notes have not been
registered under the Securities Act or any state securities laws and the 2027 Notes were offered only to qualified institutional buyers as defined in Rule 144A
under the Securities Act.
2024 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 in arrears 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. 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.
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 (iv)
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.
See Note 16 to these Consolidated Financial Statements for further discussion of the effect of conversion of the Company's convertible debt on net
income (loss) per common share.
Revolving Credit Facility
In October 2018, the Company entered into an unsecured revolving credit facility of up to $200.0 million, which includes a letter of credit subfacility
and a swingline loan subfacility. The credit facility is intended to finance ongoing working capital needs and for other general corporate purposes. In May
2021, the Company entered into an amendment agreement in respect of the credit facility, extending the maturity date from October 19, 2021 to May 28,
2024, among other changes. The amended credit facility contains financial covenants including a maximum leverage ratio and a minimum interest coverage
ratio. As of December 31, 2021, there were no amounts outstanding under the credit facility and the Company and certain of its subsidiaries that serve as
guarantors were in compliance with all covenants.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
(11) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table summarizes changes in the accumulated balances for each component of AOCI, including current period other comprehensive
income (loss) and reclassifications out of AOCI, for the periods presented.
Unrealized Gains
(Losses) on Cash
Flow Hedges
Unrealized Gains
(Losses) on
Available-for-Sale
Debt Securities
Other
Total
AOCI balance as of December 31, 2018
Other comprehensive income (loss) before
reclassifications
Less: gain (loss) reclassified from AOCI
Tax effect
Net current-period other comprehensive income (loss)
AOCI balance at December 31, 2019
Other comprehensive income (loss) before
reclassifications
Less: gain (loss) reclassified from AOCI
Tax effect
Net current-period other comprehensive income (loss)
AOCI balance at December 31, 2020
Other comprehensive income (loss) before
reclassifications
Less: gain (loss) reclassified from AOCI
Tax effect
Net current-period other comprehensive income (loss)
AOCI balance at December 31, 2021
7,201 $
(1,917) $
25,266
15,853
—
9,413
16,614 $
(23,462)
13,180
—
(36,642)
(20,028) $
34,379
(1,454)
—
35,833
15,805 $
7,122
—
(1,640)
5,482
3,565 $
976
552
(100)
324
3,889 $
(6,858)
—
1,596
(5,262)
(1,373) $
(13) $
(2)
—
—
(2)
(15) $
15
—
—
15
— $
—
—
—
—
— $
5,271
32,386
15,853
(1,640)
14,893
20,164
(22,471)
13,732
(100)
(36,303)
(16,139)
27,521
(1,454)
1,596
30,571
14,432
$
$
$
$
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BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
(12) REVENUE, CREDIT CONCENTRATIONS AND GEOGRAPHIC INFORMATION
The following table presents Total Revenues and disaggregates Net Product Revenues by product.
Net product revenues by product:
Vimizim
Naglazyme
Kuvan
Palynziq
Brineura
Voxzogo
Firdapse
Total net product revenues marketed by the Company
Aldurazyme net product revenues marketed by Sanofi
Total net product revenues
Royalty and other revenues
Total revenues
Years Ended December 31,
2020
2019
2021
$
$
623,145 $
380,449
285,776
237,474
128,034
5,855
—
1,660,733
122,765
1,783,498
62,777
1,846,275 $
544,257 $
391,298
457,736
170,983
110,192
—
1,288
1,675,754
130,107
1,805,861
54,594
1,860,455 $
544,345
374,334
463,353
86,857
71,997
—
22,348
1,563,234
97,809
1,661,043
43,005
1,704,048
The Company considers there to be revenue concentration risks for regions where Net Product Revenues exceed 10% of consolidated Net Product
Revenues. The concentration of the Company’s Net Product Revenues within the regions below may have a material adverse effect on the Company’s
revenues and results of operations if sales in the respective regions experience difficulties. The table below disaggregates total Net Product Revenues by
geographic region, which is based on patient location for Company's commercial products sold directly by the Company, except for Aldurazyme, which is
sold exclusively by Sanofi worldwide.
United States
Europe
Latin America
Rest of world
Total net product revenues marketed by the Company
Aldurazyme net product revenues marketed by Sanofi
Total net product revenues
Years Ended December 31,
2020
2019
2021
$
$
657,700 $
558,952
191,151
252,930
1,660,733
122,765
1,783,498 $
756,863 $
498,725
205,862
214,304
1,675,754
130,107
1,805,861 $
669,171
485,596
218,792
189,675
1,563,234
97,809
1,661,043
The following table illustrates the percentage of the Company’s total Net Product Revenues attributed to the Company’s largest customers for the
periods presented.
Customer A
Customer B
Customer C
Total
2021
Years Ended December 31,
2020
2019
18 %
14 %
10 %
42 %
16 %
15 %
12 %
43 %
17 %
13 %
11 %
41 %
On a consolidated basis, two customers accounted for 28% and 16% of the Company’s December 31, 2021 accounts receivable balance,
respectively, compared to December 31, 2020 when two customers accounted for 24% and 22% of the accounts receivable balance, respectively. As of
December 31, 2021 and 2020, the accounts receivable balance for Sanofi included $67.9 million and $72.1 million, respectively, of unbilled accounts
receivable, which becomes payable to the Company
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BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
when the product is sold through by Sanofi. The Company does not require collateral from its customers, but does perform periodic credit evaluations of its
customers’ financial condition and requires prepayments in certain circumstances.
The Company's global revenue sources and its business operations were impacted by the COVID-19 pandemic during the year ended
December 31, 2021 and 2020, mostly in the form of demand interruptions such as missed patient infusions and delayed treatment starts for new patients,
and the Company anticipates a continued impact due to COVID-19 on its financial results in 2022. The extent and duration of such effects remain uncertain
and difficult to predict, particularly as virus variants continue to spread. The Company is actively monitoring and managing its response and assessing actual
and potential impacts to its operating results and financial condition, as well as developments in its business, which could further impact developments,
trends and expectations.
The Company is mindful that conditions in the current macroeconomic environment could affect the Company’s ability to achieve its goals. The
Company sells its products in countries that face economic volatility and weakness. Although the Company has historically collected receivables from
customers in certain countries, sustained weakness or further deterioration of the local economies and currencies and effects of the impact of the ongoing
COVID-19 pandemic may cause customers in those countries to delay payment or be unable to pay for the Company’s products. The Company believes that
the allowances for doubtful accounts related to these countries, if any, are adequate based on its analysis of the specific business circumstances and
expectations of collection for each of the underlying accounts in these countries. The Company will continue to monitor these conditions and will attempt to
adjust its business processes, as appropriate, to mitigate macroeconomic risks to its business.
Long-lived assets, which consist of net property, plant and equipment and ROU assets are summarized by geographic region in the following table.
Long-lived assets by geography:
United States
Ireland
Rest of world
Total long-lived assets
(13) EQUITY COMPENSATION PLANS AND STOCK-BASED COMPENSATION
Equity Compensation Plans
Shares Available Under Equity Compensation Plans
December 31,
2021
2020
$
$
763,847
304,748
13,284
1,081,879
$
$
771,286
300,555
17,739
1,089,580
As of December 31, 2021, an aggregate of approximately 44.5 million unissued shares was authorized for future issuance under the Company’s
stock plans, which primarily includes shares issuable under the 2017 Equity Incentive Plan (2017 EIP) and the ESPP. Under the 2017 EIP, shares issued
and outstanding under the Amended and Restated 2006 Share Incentive Plan (the 2006 Share Incentive Plan) and the 2017 Equity Incentive Plan that
expire or are forfeited generally become available for future issuance under the 2017 Equity Incentive Plan. 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. The Company’s stock-based
compensation plans are administered by the Company’s Board of Directors (the Board), 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.
See Note 1 to these Consolidated Financial Statements for discussion regarding the valuation of equity awards.
2017 Equity Incentive Plan
The 2017 Equity Incentive Plan provides for awards of RSUs and stock options as well as other forms of equity compensation. Stock option awards
granted to employees generally vest over a four-year period on a cliff basis 12 months after the grant date and then monthly thereafter. The contractual term
of stock option awards is generally 10 years from the grant date. RSUs granted to employees generally vest annually over a straight-line four-year period
after the grant date. PRSUs generally vest
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BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
over a three-year period on a cliff basis three years after the grant date. As of December 31, 2021, approximately 29.6 million shares were authorized and
reserved for future issuance under the 2017 Equity Incentive Plan.
Employee Stock Purchase Plan
The ESPP was initially approved in June 2006, replacing the Company’s previous plan, and was most recently amended in June 2019. Under
BioMarin’s ESPP, employees meeting specific employment qualifications are eligible to participate and can purchase shares on established dates (each
purchase date) semi-annually through payroll deductions at the lower of 85% of the fair market value of the stock at the commencement of the offering
period or each purchase date of the offering period. Each offering period will span up to two years. The ESPP permits eligible employees to purchase
common stock through payroll deductions for up to 10% of qualified compensation, up to an annual limit of $25,000. The ESPP is intended to qualify as an
“employee stock purchase plan” under Section 423 of the Internal Revenue Code. During the year ended December 31, 2021, the Company issued 0.3
million shares under the ESPP. As of December 31, 2021, approximately 7.0 million shares were authorized and 3.1 million shares reserved for future
issuance under the ESPP.
Board of Director Grants
On the date of the Company’s annual meeting of stockholders for a given year, each re-elected Independent Director receives an RSU grant valued
at $400,000, with the number of RSUs to be granted calculated based on the three-month trailing average closing price of the Company’s common stock on
the Nasdaq Global Select Market. The annual RSU grant for a director who has served for less than a year is prorated to the nearest quarter of the calendar
year. The RSUs subject to the annual award vest in full on the one-year anniversary of the grant date, subject to each respective Director providing service
to the Company through such vesting date. Upon election or appointment, a new Independent Director will receive an RSU grant on the same terms as the
annual award, pro-rated for amount and vesting to the nearest quarter for the time such new Independent Director will serve prior to the Company’s next
annual meeting of stockholders.
Stock-based Compensation
Stock-based compensation expense included on the Company’s Consolidated Statements of Operations for all stock-based compensation
arrangements was as follows:
Cost of sales
Research and development
Selling, general and administrative
Total stock-based compensation expense
Years Ended December 31,
2020
2019
2021
$
$
22,357 $
67,196
107,710
197,263 $
26,246 $
61,942
101,523
189,711 $
16,146
56,649
87,070
159,865
Stock-based compensation of $20.0 million, $20.1 million and $20.3 million was capitalized into inventory for the years ended December 31, 2021,
2020 and 2019, respectively. Capitalized stock-based compensation is recognized in Cost of Sales when the related product is sold.
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BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
Restricted Stock Units
Restricted Stock Unit Awards with Service-Based Vesting Conditions
Below is a summary of activity related to RSUs with service-based vesting conditions under the plan for the year ended December 31, 2021:
Non-vested units as of December 31, 2020
Granted
Vested
Forfeited
Non-vested units as of December 31, 2021
Weighted
Average
Grant Date
Fair Value
83.41
78.46
85.74
80.57
80.38
Shares
4,173,124 $
2,338,270 $
(1,499,408) $
(574,474) $
4,437,512 $
The weighted-average grant date fair value per share of RSUs granted during the years ended December 31, 2021, 2020 and 2019, was $78.46,
$77.13 and $91.28, respectively. The total intrinsic value of restricted stock that vested and released in the years ended December 31, 2021, 2020 and 2019,
was $117.2 million, $109.9 million and $101.0 million respectively.
As of December 31, 2021, total unrecognized compensation cost related to unvested RSUs with service-based vesting conditions of $250.6 million
was expected to be recognized over a weighted average period of 2.6 years.
Restricted Stock Unit Awards with Performance-based Vesting Conditions
Revenue PRSUs: Although no PRSUs with vesting conditions based on revenue performance were granted during the year ended December 31,
2021 or 2020, awards granted during prior periods presented were contingent upon the achievement of an annual revenue target and the earned RSUs vest
over a three-year service period. The number of shares that may be earned ranged between 50% and 200% of the base RSUs, depending on the
percentage of the respective annual year's Net Product Revenues, excluding net revenues attributable to Aldurazyme, and determined using fixed foreign
currency exchange rates achieved against the target, with a threshold achievement level of 75% of target and a ceiling achievement level of 125% of target.
Below is a summary of activity related to Revenue PRSUs under the Company's equity plan for the year ended December 31, 2021:
Non-vested units as of December 31, 2020
Granted
Vested
Forfeited
Non-vested units as of December 31, 2021
Shares
Weighted
Average Grant
Date Fair Value
90.31
—
88.44
—
94.53
99,351 $
— $
(68,773) $
— $
30,578 $
The weighted-average grant date fair value of Revenue PRSUs granted during the year ended December 31, 2019, was $94.53. As of
December 31, 2021, total unrecognized compensation expense of $0.4 million related to Revenue PRSUs was expected to be recognized over a weighted
average period of approximately three months.
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BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
Other PRSUs: Below is a summary of activity related to RSUs with vesting conditions based on other performance targets under the Company's
equity plan for the year ended December 31, 2021:
Non-vested units as of December 31, 2020
Granted
Vested
Forfeited
Non-vested units as of December 31, 2021
Weighted
Average
Grant Date
Fair Value
83.83
78.09
116.83
61.09
70.82
Shares
220,665 $
234,120 $
(8,310) $
(40,004) $
406,471 $
The weighted-average grant date fair value of Other PRSUs for the years ended December 31, 2021, 2020 and 2019, was $78.09, $84.17 and
$81.00, respectively.
Non-vested Other PRSUs included grants with vesting contingent upon the achievement of a three-year Non-GAAP income target and grants with
vesting contingent upon achievement of a three-year strategic goal target. The awarded PRSUs, if any, vest ratably over a three-year service period. The
Company evaluated the targets in the context of its current long-range financial plan, its product candidate development pipeline and planned regulatory
activity and determined that attainment of each grant target was probable for accounting purposes commencing in the quarter granted. The number of
shares that may be earned range between 50% and 200% of the base RSUs.
Also included in non-vested Other PRSUs were awards that vest contingent upon achievement of certain regulatory milestones some of which, for
accounting purposes, were deemed not yet probable of vesting as of December 31, 2021. Therefore, as of December 31, 2021, total unrecognized
compensation expense of $10.9 million related to awards deemed probable of vesting and $10.6 million related to awards not yet deemed probable of
vesting. The expected weighted average period over which expense is to be recognized for the awards that are considered probable of vesting as of
December 31, 2021 was 1.7 years.
Restricted Stock Unit Awards with Market-based Vesting Conditions
The Compensation Committee and Board may grant RSUs with market-based vesting conditions (base TSR-RSUs) to certain executives. These
base TSR-RSUs vest, if at all, in full following a three-year service period only if certain total shareholder return (TSR) results relative to the Nasdaq
Biotechnology Index comparative companies are achieved. The number of shares that may be earned range between zero percent and 200% of the base
TSR-RSUs with a ceiling achievement level of 100% of the base TSR-RSUs in the event the Company’s TSR is above the 50th percentile but negative on an
absolute basis.
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BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
Below is a summary of activity related to RSUs with market-based vesting conditions under the Company's equity plan for the year ended
December 31, 2021:
Non-vested units as of December 31, 2020
Granted
Vested
Forfeited
Non-vested units as of December 31, 2021
Weighted
Average
Grant Date
Fair Value
127.23
117.52
—
114.94
123.73
Shares
220,990 $
141,610 $
— $
(11,740) $
350,860 $
The grant date fair values and assumptions used to determine the grant date fair value of TSR-RSUs granted during the periods presented were as
follows:
Grant date fair value
Expected volatility
Dividend yield
Expected term
Risk-free interest rate
2021
$117.52
24.7% – 161.7%
0.0%
2.8 years
0.3%
Years Ended December 31,
2020
$112.12 – $217.65
21.3% – 159.9%
0.0%
2.5 – 2.8 years
0.2 – 0.4%
2019
$143.92
21.7% – 155.6%
0.0%
2.8 years
2.4%
As of December 31, 2021, total unrecognized compensation expense of $14.9 million related to base TSR-RSUs was expected to be recognized over a
weighted average period of 1.9 years.
Stock Options and Purchase Rights
Stock Options
The following table summarizes activity under the Company’s stock option plans for the year ended December 31, 2021. All stock option grants
presented in the table had exercise prices not less than the fair value of the underlying common stock on the grant date:
Options outstanding as of December 31, 2020
Granted
Exercised
Expired and forfeited
Options outstanding as of December 31, 2021
Options unvested as of December 31, 2021
Exercisable at December 31, 2021
Shares
6,829,437 $
665,610 $
(892,890) $
(152,465) $
6,449,692 $
1,287,835 $
5,161,857 $
73.19
78.33
34.99
82.26
78.79
79.82
78.54
4.8 $
8.6 $
3.8 $
80,857
12,334
68,523
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Years
Aggregate
Intrinsic
(1)
Value
$
119,607
(1)
The aggregate intrinsic value for outstanding options is calculated as the difference between the exercise price of the underlying awards and the
quoted price of the Company’s common stock on the Nasdaq Global Select Market as of the last trading day for the respective year. The aggregate
intrinsic value of options outstanding and exercisable includes options with an exercise price below $88.35, the closing price of the Company’s
common stock on the Nasdaq Global Select Market on December 31, 2021.
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BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
The weighted-average fair value per stock option granted in the years ended December 31, 2021, 2020 and 2019, were $31.61, $27.47 and $36.84,
respectively. The total intrinsic value of options exercised during the years ended December 31, 2021, 2020 and 2019, was $40.7 million, $71.9 million and
$32.5 million, respectively, determined as of the date of option exercise. Upon the exercise of the options, the Company issues new common stock from its
authorized shares.
The assumptions used to estimate the per share fair value of stock options granted during the periods presented were as follows:
Expected volatility
Dividend yield
Expected term
Risk-free interest rate
2021
39.4 – 41.6%
0.0%
4.7 – 6.0 years
0.7 – 1.3%
Years Ended December 31,
2020
36.5 – 42.2%
0.0%
4.6 – 5.9 years
0.3 – 1.7%
2019
37.1 – 37.4%
0.0%
4.6 – 5.8 years
2.2 – 3.0%
As of December 31, 2021, total unrecognized compensation cost related to unvested stock options of $31.3 million was expected to be recognized
over a weighted average period of 2.5 years. The net tax expense from stock options exercised during the year ended December 31, 2021 was $0.5 million.
Stock Purchase Rights
The assumptions used to estimate the per share fair value of stock purchase rights granted under the ESPP were as follows:
Expected volatility
Dividend yield
Expected term
Risk-free interest rate
2021
23.7 – 69.2%
0.00%
0.5 – 2.0 years
0.04% – 2.4%
Years Ended December 31,
2020
30.6 – 69.2%
0.00%
0.5 – 2.0 years
0.1 – 2.8%
2019
27.7% – 35.0%
0.00%
0.5 – 2.0 years
1.2 – 2.8%
As of December 31, 2021, total unrecognized compensation cost related to unvested stock purchase rights under the ESPP of $17.0 million was
expected to be recognized over a weighted average period of 1.4 years.
(14) OTHER EMPLOYEE BENEFITS
401(k) Plan
The Company sponsors the BioMarin Retirement Savings Plan (the 401(k) Plan) for eligible U.S. employees. The Company pays the direct
expenses of the 401(k) Plan and matches 100% of each participating employee’s eligible contributions, up to a maximum of the lesser of 6% of the
employee’s annual compensation or the annual statutory contribution limit. The Company’s matching contribution vests immediately and was approximately
$31.6 million, $26.4 million and $28.5 million for the years ended December 31, 2021, 2020 and 2019, respectively.
Deferred Compensation Plan
The Company maintains the NQDC under which eligible directors and key employee may defer compensation. The NQDC prohibits the
diversification of deferrals of Company stock. Company stock issued and held by the NQDC is accounted for similarly to treasury stock in that the fair value
of the employer stock was determined on the grant date and the shares are issued into the NQDC when the restricted stock vests. The corresponding
deferred compensation obligation is classified as equity with no changes in the fair value of Company stock held in the NQDC recognized in earnings. Other
contributions held in the NQDC are classified
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BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
as trading securities, recorded at fair value with the corresponding deferred compensation obligation classified as a liability and subsequent changes in the
fair value of these non-BioMarin investments are recognized in earnings in the period they occur.
See Note 10 to these Consolidated Financial Statements for additional discussion on the fair value and presentation of the NQDC assets and
liabilities.
(15) INCOME TAXES
The benefit from income taxes was based on loss before income taxes as follows:
U.S. Source
Non-U.S. Source
Loss before income taxes
The U.S. and foreign components of the benefit from income taxes were as follows:
Provision for (benefit from) current income tax expense:
Federal
State and local
Foreign
Provision for (benefit from) deferred income taxes:
Federal
State and local
Foreign
Benefit from income taxes
2021
Years Ended December 31
2020
2019
(259,258) $
183,908
(75,350) $
(162,939) $
120,617
(42,322) $
(182,112)
87,301
(94,811)
Years Ended December 31,
2020
2019
2021
(2,038) $
1,339
5,037
4,338
(29,895)
(1,230)
15,517
(15,608)
(11,270) $
(14,758) $
1,201
1,042
(12,515)
(45,038)
(5,321)
(838,548)
(888,907)
(901,422) $
5,127
1,331
5,339
11,797
(58,311)
(5,394)
(19,055)
(82,760)
(70,963)
$
$
$
$
In the third quarter of 2020, the Company completed an intra-entity transfer of certain intellectual property rights from a wholly owned foreign
subsidiary (tax resident in the Bahamas) to its wholly owned Irish subsidiary. The rights were sold to the Company’s Irish subsidiary where its ex-U.S.
regional headquarters are located and has significant manufacturing and commercial operations, to better align ownership of intellectual property rights with
how the business operates. The intra-entity transfer did not result in a taxable gain in 2020 in any jurisdiction including the U.S. as the transaction was
disregarded for U.S. tax purposes. The Company filed an election to treat the Irish subsidiary as a disregarded entity for U.S. income tax purposes in 2011.
The transaction resulted in a step-up in the tax basis in the transferred intellectual property rights and the Company’s Irish subsidiary recognized a deferred
tax asset for the book and tax basis difference of the transferred intellectual property rights. As a result, the Company recognized a deferred tax asset of
$835.1 million and related tax benefit on its Consolidated Financial Statements based on the fair value of the transferred intellectual property rights. The fair
value of the transferred intellectual property rights was determined utilizing the income approach which relied on projections of product-specific revenues and
the inclusion or exclusion of a terminal value for each product.
The tax deductions related to the amortization of these transferred intellectual property rights will be recognized in the future and any amortization
not deducted for tax purposes will be carried forward indefinitely under Irish tax laws. The Company expects to be able to realize the deferred tax asset
resulting from this transaction and has not recorded a valuation allowance as of December 31, 2021 and 2020.
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BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
The following is a reconciliation of the statutory federal income tax benefit to the Company’s effective tax rate:
Federal statutory income tax benefit
State and local taxes
Orphan Drug & General Business Credit
Stock compensation expense
Changes in the fair value of contingent consideration
Foreign Source Income Subject to U.S. Tax
Foreign tax rate differential
Section 162(m) limitation
Tax Reserves
Intra-entity transfer of assets
CARES Act carryback claim
Valuation allowance/deferred benefit
Other
(1) (2)
Effective income tax benefit
2021
December 31,
2020
2019
$
$
(15,824) $
509
(29,363)
7,859
—
16,878
(16,971)
6,304
15,530
(3,920)
—
6,821
907
(11,270) $
(8,888) $
(3,264)
(44,114)
(1,101)
—
6,266
(16,238)
9,571
2,166
(852,338)
(2,201)
6,876
1,843
(901,422) $
(19,911)
(2,784)
(43,124)
239
(1,804)
(52)
(30,639)
8,294
12,123
—
—
7,827
(1,132)
(70,963)
(1) For the year ended December 31, 2021, the foreign rate differential included foreign local tax expense which was at an effective rate lower than the
U.S. statutory rate and includes the recognition of the valuation allowance against a portion of the deferred tax assets of the Company’s Dutch
subsidiary of $9.3 million.
(2) For the year ended December 31, 2019, the foreign rate differential included foreign local tax expense which was at an effective rate lower than the
U.S. statutory rate and was offset by the benefit of the valuation allowance release against the deferred tax assets of the Company’s Dutch
subsidiary of $29.6 million.
The significant components of the Company’s net deferred tax assets were as follows:
Net deferred tax assets:
Net operating loss carryforwards
Tax credit carryforwards
Accrued expenses, reserves, and prepaids
Intangible assets
Stock-based compensation
Lease liabilities
Inventory
Other
Valuation allowance
Total deferred tax assets
Joint venture basis difference
Acquired intangibles
Deferred revenue
ROU assets
Property, plant and equipment
Total deferred tax liabilities
Net deferred tax assets
December 31,
2021
2020
$
25,936 $
563,022
72,759
875,311
50,910
7,422
25,169
1,943
(109,176)
1,513,296
(1,665)
(1,250)
—
(6,808)
(54,498)
(64,221)
1,449,075 $
$
30,718
532,394
66,889
873,575
47,011
8,991
32,012
454
(93,075)
1,498,969
(1,164)
(1,364)
(1,517)
(8,280)
(54,682)
(67,007)
1,431,962
Valuation allowances are provided to reduce the amounts of the Company's deferred tax assets to an amount that is more likely than not to be
realized based on an assessment of positive and negative evidence, including estimates of future taxable income necessary to realize future deductible
amounts. At the end of each period, the Company will reassess the ability to realize
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BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
its deferred tax benefits. If it is more likely than not that the Company would not realize the deferred tax benefits, a valuation allowance may need to be
established against all or a portion of the deferred tax assets, which will result in a charge to tax expense.
In the fourth quarter of 2021, the Company renegotiated a license agreement that resulted in lower royalty projections for its Dutch subsidiary. The
revised royalty projections required establishment of a valuation allowance on net operating loss deferred tax assets that were no longer expected to be
realizable. The valuation allowance also increased in 2021 due to the Company’s expectation that state R&D credits will not be utilized.
As of December 31, 2021, the Company had the following net operating loss and tax credit carryforwards, which if not utilized, will expire as follows:
Type
Federal net operating loss carryforwards
Federal R&D and orphan drug credit carryforwards
State net operating loss carryforwards
Dutch net operating loss carryforwards
Amount
4,147
592,710
230,500
48,903
$
$
$
$
Year
2030-2033
2024-2041
2023-2041
Indefinite
Not included in the table above are $137.3 million of state research credit carryovers that will carry forward indefinitely.
The Company’s net operating losses and credits could be subject to annual limitations due to ownership change limitations provided by IRC Section
382 and similar state provisions. An annual limitation could result in the expiration of net operating losses and tax credit carryforward before utilization. There
are limitations on the tax attributes of acquired entities however, the Company does not believe the limitations will have a material impact on the utilization of
the net operating losses or tax credits.
The financial statement recognition of the benefit for a tax position is dependent upon the benefit being more likely than not to be sustainable upon
audit by the applicable taxing authority. If this threshold is met, the tax benefit is then measured and recognized at the largest amount that is greater than
50% likely of being realized upon ultimate settlement.
A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2021 and 2020, is as follows:
Balance at beginning of period
Additions based on tax positions related to the current year
(Deletions) Additions for tax positions of prior years
Lapse of statute of limitations
Balance at end of period
December 31,
2021
2020
$
$
182,564 $
23,499
(786)
(182)
205,095 $
168,748
16,481
(2,527)
(138)
182,564
Included in the balance of unrecognized tax benefits as of December 31, 2021 were potential benefits of $196.7 million that, if recognized, would
affect the effective tax rate. The Company’s policy for classifying interest and penalties associated with unrecognized income tax benefits is to include such
items in the income tax expense. The total amount of accrued interest and penalties was not significant as of December 31, 2021. The Company believes it
will not have any material decreases in its previously unrecognized tax benefits within the next twelve months.
The Company files income tax returns in the U.S., Ireland and various foreign jurisdictions. The U.S. and foreign jurisdictions have statute of
limitations ranging from three to five years. However, carryforward tax attributes that were generated in 2014 and earlier may still be adjusted upon
examination by tax authorities.
U.S. income and foreign withholding taxes have not been recognized on the excess of the amount for financial reporting over the tax basis of
investments in foreign subsidiaries that are essentially permanent in duration. This excess totaled approximately $16.3 million as of December 31, 2021,
which will be indefinitely reinvested; deferred income taxes have not been provided on such foreign earnings.
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BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
(16) NET INCOME (LOSS) PER COMMON SHARE
Potentially issuable shares of common stock include shares issuable upon the exercise of outstanding employee stock option awards, common
stock issuable under the Company’s ESPP, unvested RSUs, the Company's common stock held by the NQDC and contingent issuances of common stock
related to the Company's convertible debt.
The following table sets forth the computation of basic and diluted income (loss) per common share (common shares in thousands):
Numerator:
Net income (loss), basic
Add: Interest on convertible notes
Net income (loss), diluted
Denominator:
Weighted-average common shares outstanding, basic
Effect of dilutive securities:
Options to purchase common stock
Common stock issuable under the 2027 notes
Common stock issuable under the 2024 notes
Unvested RSUs
Common stock potentially issuable for ESPP purchases
The Company's common stock held by the NQDC
Weighted-average common shares outstanding, diluted
Net income (loss) per common share, basic
Net income (loss) per common share, diluted
Years Ended December 31,
2020
2019
2021
(64,080) $
—
(64,080) $
859,100 $
8,313
867,413 $
(23,848)
—
(23,848)
182,852
180,804
179,039
—
—
—
—
—
—
182,852
1,543
2,874
3,970
1,938
353
196
191,678
(0.35) $
(0.35) $
4.75 $
4.53 $
—
—
—
—
—
—
179,039
(0.13)
(0.13)
$
$
$
$
In addition to the equity instruments included in the table above, the table below presents potential shares of common stock that were excluded
from the computation of basic and diluted income (loss) per common share as they were anti-dilutive (in thousands):
Options to purchase common stock
Common stock issuable under the 2027 Notes
Common stock issuable under the 2024 Notes
Common stock issuable under the 2020 Notes
Unvested RSUs
Common stock potentially issuable for ESPP purchases
The Company's common stock held by the NQDC
Total number of potentially issuable shares
Years Ended December 31,
2020
2019
2021
6,450
4,365
3,970
—
5,225
594
181
20,785
5,287
—
—
—
2,235
314
—
7,836
7,264
—
3,970
3,983
3,956
587
205
19,965
The 1.50% senior subordinated convertible notes that matured on October 15, 2020 (the 2020 Notes) were settled in cash for approximately
$375.0 million. The potential effect of the capped call transactions with respect to the 2020 Notes was excluded from the diluted net income (loss) per share
as the Company’s closing stock price on December 31, 2019 did not exceed the conversion price of $94.15 per share for the 2020 Notes. There is no similar
capped call transaction associated with the 2024 Notes or 2027 Notes. See Note 10 to these Consolidated Financial Statements for information on the
Company’s convertible debt.
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BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
(17) LICENSE AND COLLABORATION AGREEMENTS
In October 2019, the Company entered into a worldwide, exclusive licensing agreement with a third party for tralesinidase alfa (formerly referred to
as BMN 250), an investigational enzyme replacement therapy to treat Sanfilippo Syndrome Type B. In consideration, the Company received an upfront
payment of $3.0 million, a minority 15% equity ownership interest in the licensee, and is entitled to receive royalties on net sales of tralesinidase alfa and
milestone payments if certain development, regulatory and sales milestones are met by the licensee.
The Company evaluated the design and purpose of the third-party licensee and determined that it is a variable interest entity (VIE), as the equity-at-
risk is insufficient to support the licensee’s operations. The Company has concluded that it is not the primary beneficiary of the VIE as the Company does not
have the power to direct the activities of the VIE that most significantly impact its performance. The Company is accounting for the minority equity investment
at cost, less impairment, if any, adjusted for observable price changes, as it does not exercise significant influence over the operations of the licensee. Other
than providing the licensee with specified transition services, the Company has no other involvement with the operations of the VIE as of December 31,
2021. As a result, the Company's loss exposure is limited to the value of the equity investment of $12.6 million which is included in Other Assets on the
Company’s Consolidated Balance Sheets as of December 31, 2021.
In July 2017, the Company executed a license agreement with Sarepta Therapeutics (Sarepta) that provides Sarepta with global exclusive rights to
the Company’s Duchenne muscular dystrophy (DMD) patent estate for EXONDYS 51 and all future exon-skipping products. Under the license agreement,
Sarepta pays the Company royalties and may pay the Company certain milestone payments for exons 51, 45, 53 and possibly other exon-skipping products.
In the fourth quarter of 2021, the Company and Sarepta amended the license agreement to, among other things, make the license co-exclusive at a future
date and reduce future royalty rates.
On October 1, 2015, the Company entered into an agreement with Ares Trading S.A. (Merck Serono) under which the Company acquired all global
rights to Kuvan and Palynziq from Merck Serono, with the exception of Kuvan in Japan. Previously, the Company had exclusive rights to Kuvan in the U.S.
and Canada and Palynziq in the U.S. and Japan. Pursuant to the A&R Kuvan Agreement, if future sales milestones are met, the Company is obligated to
pay Merck Serono up to a maximum of €60.0 million, in cash, which was an estimated value of $68.1 million using the current exchange rate as of
December 31, 2021. Pursuant to the Pegvaliase Agreement, the Company paid Merck Serono €125.0 million in cash when the Palynziq development
milestones were achieved.
In October 2012, the Company licensed to Catalyst Pharmaceutical Partners, Inc. (Catalyst) the North American rights to develop and market
Firdapse, the Company's former commercial product for the treatment of Lambert-Eaton myasthenic syndrome. In exchange for the North American rights to
Firdapse, commencing in the first quarter of 2019 the Company receives royalties of 7% to 10% on net product sales of Firdapse in North America. In
January 2020, the Company completed the sale of worldwide rights to Firdapse to a third party. The Company retained the rights to receive the royalties
from Catalyst. See Note 3 to these Consolidated Financial Statements for further information about the Firdapse sale.
In September 2007, the Company licensed to Asubio Pharma Co., Ltd. (a subsidiary of Daiichi Sankyo) exclusive rights to data and intellectual
property contained in the Kuvan new drug application. The Company receives royalties on net sales of the product in Japan.
The Company is engaged in R&D collaborations with various other entities. These provide for sponsorship of R&D by the Company and may also
provide for exclusive royalty-bearing intellectual property licenses or rights of first negotiation regarding licenses to intellectual property development under
the collaborations. Typically, these agreements can be terminated for cause by either party upon written notice.
(18) COMMITMENTS AND CONTINGENCIES
Contingencies
From time to time the Company is involved in legal actions arising in the normal course of its business. 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 or cash flows. The Company’s general practice is to expense legal fees as services are rendered in connection with
legal matters, and to accrue for liabilities when losses are probable and reasonably estimable.
123
BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
Table of Content
Contingent Payments
As of December 31, 2021, the Company was subject to contingent payments considered reasonably possible of $788.5 million, including $389.0
million related to an early stage development program licensed from a third party in the fourth quarter of 2021 and $225.0 million related to an early stage
development program licensed from a third party in the second quarter of 2020.
Other Commitments
The Company uses experts and laboratories at universities and other institutions to perform certain R&D activities. These amounts are included as
R&D expense as services are provided. In the normal course of business, the Company enters into various firm purchase commitments primarily to procure
active pharmaceutical ingredients, certain inventory-related items and certain third-party R&D services, production services and facility construction services.
As of December 31, 2021, such commitments were estimated at approximately $133.3 million, all of which were short-term. The Company has also licensed
technology, for which it is required to pay royalties upon future sales, subject to certain annual minimums.
(19) SUBSEQUENT EVENT
On February 9, 2022, the Company entered into an agreement to sell the Rare Pediatric Disease Priority Review Voucher (PRV) it received from
the FDA in connection with the U.S. approval of Voxzogo. In exchange for the PRV the Company will receive a lump sum payment of $110.0 million. The
transaction remains subject to customary closing conditions, including anti-trust review. The proceeds from the sale of the PRV will be recognized as a gain
on the sale of nonfinancial assets on the Company's Consolidated Statement of Operations.
124
SECOND AMENDMENT
TO THE AMENDED AND RESTATED
BIOMARIN PHARMACEUTICAL INC.
NONQUALIFIED DEFERRED COMPENSATION PLAN (the “Plan”)
(as amended and restated on October 7, 2014)
Effective Date: October 5, 2021
Exhibit 10.32
1.
Subsection 1.25 of the Plan is amended and restated in its entirety to read as follows:
2.
Section 5.1 of the Plan is amended and restated in its entirety to read as follows:
[intentionally omitted]
Fixed Payment Dates; Separation from Service. During the Open Enrollment Period of each Plan Year and on his or her Election a
Participant may select a fixed payment date for the payment of amounts (or a portion of amounts) credited to his or her vested Account
during the Plan Year for which the Participant Election is effective, which will be valued and payable according to the provisions of Article 6.
Such fixed payment dates or distribution methods set forth on the Election may be postponed to later dates so long as elections to so
postpone the dates or changes the distribution methods are made by the Participant at least twelve (12) months prior to the date on which
the distribution was originally scheduled to be made, the election will not take effect until at least twelve (12) months after the date on which
the election is made, and the new postponed distribution date is at least five (5) years after the originally scheduled date.
A Participant who selects a fixed payment date for amounts credited to his or her Account during a Plan Year shall receive payment of such
vested amounts at the earlier of such fixed payment date (as postponed, if applicable) or his or her Separation from Service.
Any fixed payment date elected by a Participant as provided above must be a date no earlier than the January 1 of the second calendar year
after the calendar year for which the election is effective.
During the first Open Enrollment Period for which a Participant elects Compensation Deferrals, the Participant may specify on his or her
Election whether he or she wishes to elect installment distributions in accordance with Section 6.3(b) for distributions on account of the
Participant’s Separation from Service. In the absence of such a timely election such payments will be in a lump sum in accordance with
Section 6, but a Participant may thereafter elect to receive installment distributions in accordance with Section 6.3(b) at any time that is at
least (12) months prior to the Participant’s Separation from Service if the election does not take effect until at least twelve (12) months after
the date on which the election is made, and payments do not commence until at least five (5) years after the originally scheduled distribution
date.
3.
Section 6.3(b) of the Plan is amended and restated in its entirety to read as follows:
the Participant’s employment was terminated, and if elected by the Participant in his or her most recent effective Election made in
accordance with Section 5.1, in annual installment payments of substantially equal amounts over a period of up to fifteen (15) years;
4.
Section 6.3(c) of the Plan is amended and restated in its entirety to read as follows:
a Participant may amend his or her Election so as to select installments upon Separation from Service by filing an amended Election
provided, however, that such Election to so change to installment distributions upon such Separation of Service is made by the Participant at
least twelve
Exhibit 10.32
(12) months prior to the separation date, the election will not take effect until at least twelve (12) months after the date on which the election
is made, and the new postponed distribution date is at least five (5) years from the original Separation from Service by the Participant;
provided that, in no event shall any such distribution date be accelerated to a date earlier than that initially selected by the Participant; and
5.
Section 6.3(d) of the Plan is amended and restated in its entirety to read as follows:
the Employer (or its designee) may establish from time to time limitations on the Participant’s ability to select the time and method of
payment of his Account based upon the amount in the Participant’s Account; provided further that, unless and until changed by the Employer
(or its designee), any Account that has a total vested balance of less than $5,000 ($50,000 in the case of a Participant who commences
participation after October 5, 2021) at the time of distribution shall be paid in a lump sum regardless of an election by the Participant to be
paid in installments.
6.
The modifications set forth above shall not affect any other provisions of the Plan.
Subsidiaries of BioMarin Pharmaceutical Inc. as of December 31, 2021
Exhibit 21.1
Name
BioMarin Commercial Ltd
BioMarin International Ltd
Direct Parent
BioMarin Pharmaceutical Inc.
BioMarin Commercial Ltd.
Ownership
100%
100%
Jurisdiction of Incorporation
Ireland
Ireland
Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
We consent to the incorporation by reference in the registration statements (No. 333-136963, 333-168552, 333-181697, 333-188620, 333-
197759, 333-201504, 333-206094, 333-218695, 333-234231, 333-262824 ) on Forms S-8 and in the registration statement (No. 333-
212974) on Form S-3 of our reports dated February 25, 2022, with respect to the consolidated financial statements of BioMarin
Pharmaceutical Inc. and the effectiveness of internal control over financial reporting..
/s/ KPMG LLP
San Francisco, California
February 25, 2022
I, Jean-Jacques Bienaimé, certify that:
1.
I have reviewed this Annual Report on Form 10-K of BioMarin Pharmaceutical Inc.;
CERTIFICATION
Exhibit 31.1
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
a)
b)
c)
d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
b)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: February 25, 2022
/S/ JEAN-JACQUES BIENAIMÉ
Jean-Jacques Bienaimé
Chief Executive Officer
I, Brian R. Mueller certify that:
1.
I have reviewed this Annual Report on Form 10-K of BioMarin Pharmaceutical Inc.;
CERTIFICATION
Exhibit 31.2
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
a)
b)
c)
d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
b)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: February 25, 2022
/S/ BRIAN R. MUELLER
Brian R. Mueller
Executive Vice President, Finance &
Chief Financial Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report on Form 10-K of BioMarin Pharmaceutical Inc. (the Company) for the year ended December 31, 2021 as filed with the
Securities and Exchange Commission on the date hereof (the Report), we, Jean-Jacques Bienaimé, and Brian R. Mueller, hereby certify, pursuant to 18
U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
(1)
(2)
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/S/ JEAN-JACQUES BIENAIMÉ
Jean-Jacques Bienaimé
Chief Executive Officer
Date: February 25, 2022
/S/ BRIAN R. MUELLER
Brian R. Mueller
Executive Vice President, Finance &
Chief Financial Officer
Date: February 25, 2022
This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be
incorporated by reference into any filing of BioMarin Pharmaceutical Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended (whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained in such filing.