UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
|
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2019
Or
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File Number: 000-26727
BioMarin Pharmaceutical Inc.
(Exact name of registrant as specified in its charter)
|
Delaware |
|
68-0397820 |
|
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
770 Lindaro Street, San Rafael, California |
|
94901 |
|
(Address of principal executive offices) |
|
(Zip Code) |
(415) 506-6700
(Registrant’s telephone number including area code)
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 |
|
☒ |
|
Accelerated filer |
|
☐ |
|
|
|
|
|
|||
|
Non-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 is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ☐ No ☒
Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 179,071,353 shares of common stock, par value $0.001, outstanding as of April 15, 2019.
|
|
|
|
|
Page |
|
PART I. |
|
|
3 |
|
|
Item 1. |
|
|
3 |
|
|
|
|
Condensed Consolidated Balance Sheets as of March 31, 2019 (Unaudited) and December 31, 2018 |
|
3 |
|
|
|
|
4 |
|
|
|
|
|
5 |
|
|
|
|
|
6 |
|
|
|
|
Notes to Condensed Consolidated Financial Statements (Unaudited) |
|
7 |
|
Item 2. |
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
24 |
|
Item 3. |
|
|
34 |
|
|
Item 4. |
|
|
34 |
|
|
|
|
|
|
|
|
PART II. |
|
|
34 |
|
|
Item 1. |
|
|
34 |
|
|
Item 1A. |
|
|
34 |
|
|
Item 2. |
|
|
57 |
|
|
Item 3. |
|
|
57 |
|
|
Item 4. |
|
|
57 |
|
|
Item 5. |
|
|
57 |
|
|
Item 6. |
|
|
58 |
|
|
|
|
|
|
|
|
|
60 |
|||
Unless the context suggests otherwise, references in this Quarterly Report on Form 10-Q to “BioMarin,” the “Company,” “we,” “us,” and “our” refer to BioMarin Pharmaceutical Inc. and, where appropriate, its wholly owned subsidiaries.
BioMarin®, Brineura®, Firdapse®, Kuvan®, Naglazyme®, Palynziq® and Vimizim® are our registered trademarks. 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 Quarterly Report on Form 10-Q contains “forward-looking statements” as defined under securities laws. Many of these statements can be identified by the use of terminology such as “believes,” “expects,” “intends,” “anticipates,” “plans,” “may,” “will,” “could,” would,” “projects,” “continues,” “estimates,” “potential,” “opportunity” or the negative versions of these terms and other similar expressions. Our actual results or experience could differ significantly from the forward-looking statements. Factors that could cause or contribute to these differences include those discussed in “Risk Factors,” in Part II, Item 1A of this Quarterly Report on Form 10-Q as well as information provided elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2018, which was filed with the Securities and Exchange Commission (the SEC) on February 28, 2019. You should carefully consider that information before you make an investment decision.
You should not place undue reliance on these types of forward-looking statements, which speak only as of the date that they were made. These forward-looking statements are based on the beliefs and assumptions of the Company’s management based on information currently available to management and should be considered in connection with any written or oral forward-looking statements that the Company may issue in the future as well as other cautionary statements the Company has made and may make. Except as required by law, the Company does not undertake any obligation to release publicly any revisions to these forward-looking statements after completion of the filing of this Quarterly Report on Form 10-Q to reflect later events or circumstances or the occurrence of unanticipated events.
The discussion of the Company’s financial condition and results of operations should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and the related Notes thereto included in this Quarterly Report on Form 10-Q.
2
BIOMARIN PHARMACEUTICAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2019 and December 31, 2018
(In thousands, except share and per share amounts)
|
|
|
March 31, |
|
|
December 31, |
|
||
|
|
|
2019 |
|
|
2018(1) |
|
||
|
ASSETS |
|
(unaudited) |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
364,369 |
|
|
$ |
493,982 |
|
|
Short-term investments |
|
|
530,485 |
|
|
|
590,326 |
|
|
Accounts receivable, net |
|
|
393,429 |
|
|
|
342,633 |
|
|
Inventory |
|
|
534,696 |
|
|
|
530,871 |
|
|
Other current assets |
|
|
93,876 |
|
|
|
98,403 |
|
|
Total current assets |
|
|
1,916,855 |
|
|
|
2,056,215 |
|
|
Noncurrent assets: |
|
|
|
|
|
|
|
|
|
Long-term investments |
|
|
320,000 |
|
|
|
235,864 |
|
|
Property, plant and equipment, net |
|
|
951,890 |
|
|
|
948,682 |
|
|
Intangible assets, net |
|
|
485,981 |
|
|
|
491,808 |
|
|
Goodwill |
|
|
197,039 |
|
|
|
197,039 |
|
|
Deferred tax assets |
|
|
467,333 |
|
|
|
460,952 |
|
|
Other assets |
|
|
96,300 |
|
|
|
36,568 |
|
|
Total assets |
|
$ |
4,435,398 |
|
|
$ |
4,427,128 |
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
$ |
412,830 |
|
|
$ |
437,290 |
|
|
Short-term contingent consideration |
|
|
88,156 |
|
|
|
85,951 |
|
|
Total current liabilities |
|
|
500,986 |
|
|
|
523,241 |
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent liabilities: |
|
|
|
|
|
|
|
|
|
Long-term convertible debt, net |
|
|
834,766 |
|
|
|
830,417 |
|
|
Long-term contingent consideration |
|
|
48,461 |
|
|
|
46,883 |
|
|
Other long-term liabilities |
|
|
114,558 |
|
|
|
58,647 |
|
|
Total liabilities |
|
|
1,498,771 |
|
|
|
1,459,188 |
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value: 500,000,000 shares authorized; 179,033,104 and 178,252,954 shares issued and outstanding, respectively. |
|
|
179 |
|
|
|
178 |
|
|
Additional paid-in capital |
|
|
4,682,900 |
|
|
|
4,669,926 |
|
|
Company common stock held by Nonqualified Deferred Compensation Plan (the NQDC) |
|
|
(12,912 |
) |
|
|
(13,301 |
) |
|
Accumulated other comprehensive income |
|
|
19,794 |
|
|
|
5,271 |
|
|
Accumulated deficit |
|
|
(1,753,334 |
) |
|
|
(1,694,134 |
) |
|
Total stockholders’ equity |
|
|
2,936,627 |
|
|
|
2,967,940 |
|
|
Total liabilities and stockholders’ equity |
|
$ |
4,435,398 |
|
|
$ |
4,427,128 |
|
|
|
(1) |
December 31, 2018 balances were derived from the audited Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 28, 2019. |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Three Months Ended March 31, 2019 and 2018
(In thousands, except per share amounts)
(Unaudited)
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2019 |
|
|
2018 |
|
||
|
REVENUES: |
|
|
|
|
|
|
|
|
|
Net product revenues |
|
$ |
394,483 |
|
|
$ |
369,099 |
|
|
Royalty and other revenues |
|
|
6,262 |
|
|
|
4,348 |
|
|
Total revenues |
|
|
400,745 |
|
|
|
373,447 |
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
89,182 |
|
|
|
82,333 |
|
|
Research and development |
|
|
183,591 |
|
|
|
183,948 |
|
|
Selling, general and administrative |
|
|
162,158 |
|
|
|
138,336 |
|
|
Intangible asset amortization and contingent consideration |
|
|
19,765 |
|
|
|
13,202 |
|
|
Total operating expenses |
|
|
454,696 |
|
|
|
417,819 |
|
|
LOSS FROM OPERATIONS |
|
|
(53,951 |
) |
|
|
(44,372 |
) |
|
|
|
|
|
|
|
|
|
|
|
Equity in the income (loss) of BioMarin/Genzyme LLC |
|
|
(185 |
) |
|
|
68 |
|
|
Interest income |
|
|
6,298 |
|
|
|
5,234 |
|
|
Interest expense |
|
|
(6,727 |
) |
|
|
(11,562 |
) |
|
Other income (expense), net |
|
|
1,608 |
|
|
|
(172 |
) |
|
LOSS BEFORE INCOME TAXES |
|
|
(52,957 |
) |
|
|
(50,804 |
) |
|
Provision for (benefit from) income taxes |
|
|
3,516 |
|
|
|
(6,655 |
) |
|
NET LOSS |
|
$ |
(56,473 |
) |
|
$ |
(44,149 |
) |
|
NET LOSS PER SHARE, BASIC |
|
$ |
(0.32 |
) |
|
$ |
(0.25 |
) |
|
NET LOSS PER SHARE, DILUTED |
|
$ |
(0.32 |
) |
|
$ |
(0.26 |
) |
|
Weighted average common shares outstanding, basic |
|
|
178,271 |
|
|
|
175,932 |
|
|
Weighted average common shares outstanding, diluted |
|
|
178,271 |
|
|
|
176,150 |
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE LOSS |
|
$ |
(41,950 |
) |
|
$ |
(49,147 |
) |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
4
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
Three Months Ended March 31, 2019 and 2018
(In thousands)
(Unaudited)
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
2019 |
|
|
2018 |
|
|||
|
Shares of Common Stock |
|
|
|
|
|
|
|
|
|
Beginning balance (at December 31, 2018 and December 31, 2017, respectively) (1) |
|
|
178,253 |
|
|
|
175,844 |
|
|
Issuances under equity incentive plans |
|
|
780 |
|
|
|
809 |
|
|
Ending balance |
|
|
179,033 |
|
|
|
176,653 |
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity, beginning balances (at December 31, 2018 and December 31, 2017, respectively) |
|
$ |
2,967,940 |
|
|
$ |
2,808,663 |
|
|
Common stock: |
|
|
|
|
|
|
|
|
|
Beginning balance (1) |
|
|
178 |
|
|
|
176 |
|
|
Issuances under equity incentive plans, net of tax |
|
|
1 |
|
|
|
1 |
|
|
Ending balance |
|
|
179 |
|
|
|
177 |
|
|
Additional paid-in capital: |
|
|
|
|
|
|
|
|
|
Beginning balance (1) |
|
|
4,669,926 |
|
|
|
4,483,220 |
|
|
Issuances under equity incentive plans, net of tax |
|
|
(28,732 |
) |
|
|
(9,766 |
) |
|
Stock-based compensation |
|
|
41,706 |
|
|
|
36,997 |
|
|
Beginning balance (1) |
|
|
4,682,900 |
|
|
|
4,510,451 |
|
|
Company common stock held by the NQDC: |
|
|
|
|
|
|
|
|
|
Beginning balance |
|
|
(13,301 |
) |
|
|
(14,224 |
) |
|
Common stock held by the NQDC |
|
|
389 |
|
|
|
207 |
|
|
Ending balance |
|
|
(12,912 |
) |
|
|
(14,017 |
) |
|
Accumulated other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
Beginning balance (1) |
|
|
5,271 |
|
|
|
(22,961 |
) |
|
Impact of changes in accounting principle |
|
|
— |
|
|
|
(586 |
) |
|
Other comprehensive income (loss) |
|
|
14,523 |
|
|
|
(4,998 |
) |
|
Ending balance |
|
|
19,794 |
|
|
|
(28,545 |
) |
|
Accumulated Deficit: |
|
|
|
|
|
|
|
|
|
Beginning balance (1) |
|
|
(1,694,134 |
) |
|
|
(1,637,548 |
) |
|
Impact of changes in accounting principles |
|
|
(2,727 |
) |
|
|
20,634 |
|
|
Net loss |
|
|
(56,473 |
) |
|
|
(44,149 |
) |
|
Ending balance |
|
|
(1,753,334 |
) |
|
|
(1,661,063 |
) |
|
Total stockholders' equity, ending balances (at March 31, 2019 and March 31, 2018, respectively) |
|
$ |
2,936,627 |
|
|
$ |
2,807,003 |
|
|
|
(1) |
The beginning balances were derived from the audited Consolidated Financial Statements included in Company’s Annual Report on Form 10-K for the year ended December 31, 2018 and 2017, respectively, filed with the SEC on February 28, 2019 and February 26, 2018, respectively. |
.
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2019 and 2018
(In thousands)
(Unaudited)
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2019 |
|
|
2018 |
|
||
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(56,473 |
) |
|
$ |
(44,149 |
) |
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
22,427 |
|
|
|
23,633 |
|
|
Non-cash interest expense |
|
|
4,409 |
|
|
|
8,601 |
|
|
Accretion of discount on investments |
|
|
(891 |
) |
|
|
761 |
|
|
Stock-based compensation |
|
|
42,761 |
|
|
|
36,608 |
|
|
Deferred income taxes |
|
|
(704 |
) |
|
|
(13,988 |
) |
|
Unrealized foreign exchange (gain) loss |
|
|
(419 |
) |
|
|
5,616 |
|
|
Non-cash changes in the fair value of contingent consideration |
|
|
12,260 |
|
|
|
5,631 |
|
|
Other |
|
|
(19 |
) |
|
|
662 |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
(51,690 |
) |
|
|
(26,257 |
) |
|
Inventory |
|
|
1,735 |
|
|
|
10,843 |
|
|
Other current assets |
|
|
10,112 |
|
|
|
2,924 |
|
|
Other assets |
|
|
2,220 |
|
|
|
(1,099 |
) |
|
Accounts payable and accrued liabilities |
|
|
(42,070 |
) |
|
|
(51,887 |
) |
|
Other long-term liabilities |
|
|
1,474 |
|
|
|
(408 |
) |
|
Net cash used in operating activities |
|
|
(54,868 |
) |
|
|
(42,509 |
) |
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
|
(28,756 |
) |
|
|
(30,164 |
) |
|
Maturities and sales of investments |
|
|
219,894 |
|
|
|
104,462 |
|
|
Purchases of available-for-sale securities |
|
|
(239,843 |
) |
|
|
(145,933 |
) |
|
Other |
|
|
(1,774 |
) |
|
|
(99 |
) |
|
Net cash used in investing activities |
|
|
(50,479 |
) |
|
|
(71,734 |
) |
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Proceeds from exercises of awards under equity incentive plans |
|
|
5,798 |
|
|
|
13,134 |
|
|
Taxes paid related to net share settlement of equity awards |
|
|
(30,105 |
) |
|
|
(22,899 |
) |
|
Other |
|
|
(674 |
) |
|
|
— |
|
|
Net cash used in financing activities |
|
|
(24,981 |
) |
|
|
(9,765 |
) |
|
Effect of exchange rate changes on cash |
|
|
715 |
|
|
|
(40 |
) |
|
NET DECREASE IN CASH AND CASH EQUIVALENTS |
|
|
(129,613 |
) |
|
|
(124,048 |
) |
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
Beginning of period |
|
$ |
493,982 |
|
|
$ |
598,028 |
|
|
End of period |
|
$ |
364,369 |
|
|
$ |
473,980 |
|
|
SUPPLEMENTAL CASH FLOW DISCLOSURES: |
|
|
|
|
|
|
|
|
|
Cash paid for income taxes |
|
$ |
906 |
|
|
$ |
11,731 |
|
|
Cash paid for interest |
|
|
1,483 |
|
|
|
1,528 |
|
|
SUPPLEMENTAL CASH FLOW DISCLOSURES FOR NON CASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Decrease in accounts payable and accrued liabilities related to fixed assets |
|
$ |
(3,502 |
) |
|
$ |
(11,367 |
) |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
6
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
(1) NATURE OF OPERATIONS
BioMarin Pharmaceutical Inc. (the Company) is a global biotechnology company that develops and commercializes innovative therapies for people with serious and life-threatening rare diseases and medical conditions. The Company selects product candidates for diseases and conditions that represent a significant unmet medical need, have well-understood biology and provide an opportunity to be first-to-market or offer a significant benefit over existing products. The Company’s portfolio consists of several commercial therapies and multiple clinical and pre-clinical product candidates.
The Company expects to continue to finance future cash needs that exceed its operating activities primarily through its current cash, cash equivalents and investments and through proceeds from debt or equity offerings, commercial borrowing, or through collaborative agreements with corporate partners. If the Company elects to increase its spending on development programs significantly above current long-term plans or enters into potential licenses and other acquisitions of complementary technologies, products or companies, the Company may need additional capital.
(2) BASIS OF PRESENTATION
The accompanying Condensed Consolidated Financial Statements have been prepared pursuant to United States (U.S.) generally accepted accounting principles (U.S. GAAP) and the rules and regulations of the SEC for Quarterly Reports on Form 10-Q and do not include all of the information and note disclosures required by U.S. GAAP for complete financial statements, although the Company believes that the disclosures herein are adequate to ensure that the information presented is not misleading. The Condensed Consolidated Financial Statements should therefore be read in conjunction with the Consolidated Financial Statements and Notes thereto for the fiscal year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K. The results of operations for the three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2019 or any other period.
On January 1, 2019, the Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 842, Leases (ASC Topic 842) using the modified retrospective method for all lease arrangements at the beginning of the period of adoption. Results for reporting periods beginning January 1, 2019 are presented under ASC Topic 842, while prior period amounts were not adjusted and continue to be presented in accordance with the Company’s historical accounting under ASC Topic 840, Leases. ASC Topic 842 had a material impact on the Company’s Condensed Consolidated Balance Sheet but did not have a significant impact on the Company’s consolidated net loss. The Company elected to use the practical expedient allowing the use-of-hindsight and reassessed the lease term for all unexpired leases that commenced before the effective date of ASC Topic 842. For leases that commenced and expired before the effective date of ASC Topic 842, the Company elected not to reassess the expired leases. The Company also elected not to include leases with initial terms of twelve months or less in the recognized right-of-use (ROU) assets and lease liabilities.
As a result of the cumulative impact of adopting ASC Topic 842, the Company recorded lease ROU assets of $55.9 million and lease liabilities of $59.0 million as of January 1, 2019, primarily related to real estate and equipment, based on the present value of future lease payments on the date of adoption. The difference between the ROU assets and lease liabilities was recorded as an adjustment to Accumulated Deficit. Refer to Note 11 for additional disclosures required by ASC Topic 842.
On January 1, 2019, the Company adopted Accounting Standards Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12), using the modified retrospective method. This ASU provides new guidance about income statement classification and eliminates the requirement to separately measure and report hedge ineffectiveness. Results for reporting periods beginning January 1, 2019 are presented under ASU 2017-12, while prior period amounts were not adjusted and continue to be presented in accordance with the Company’s historical accounting. The adoption of this ASU did not have a significant impact on the Company’s Condensed Consolidated Financial Statements. See Note 10 for additional disclosures required by ASU 2017-12.
U.S. GAAP requires management to make estimates and assumptions that affect amounts reported in the Condensed Consolidated Financial Statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future, actual results may be different from those estimates. The Condensed Consolidated Financial Statements reflect all adjustments of a normal, recurring nature that are, in the opinion of management, necessary for a fair presentation of results for these interim periods.
Management performed an evaluation of the Company’s activities through the date of filing of this Quarterly Report on Form 10-Q, and has concluded that there were no subsequent events or transactions that occurred subsequent to the balance sheet date prior to filing this Quarterly Report on Form 10-Q that would require recognition or disclosure in the Condensed Consolidated Financial Statements.
7
BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Except as detailed below, there have been no material changes to the Company’s significant accounting policies during the three months ended March 31, 2019, as compared to the significant accounting policies disclosed in Note 3 – Significant Accounting Policies included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
Leases
The Company determines if an arrangement is a lease at 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 an obligation to make lease payments arising from the lease. 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.
Derivatives and Hedging Activities
The Company accounts for its derivative instruments as either assets or liabilities on the balance sheet 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 Accumulated Other Comprehensive Income (AOCI) and amounts deferred in AOCI will be 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 Operating Expenses in the Consolidated Statements of Comprehensive Loss.
(4) RECENT ACCOUNTING PRONOUNCEMENTS
Except as described in Note 2 – Basis of Presentation, there have been no new accounting pronouncements adopted by the Company or new accounting pronouncements issued by the FASB during the three months ended March 31, 2019, as compared to the recent accounting pronouncements described in Note 4 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, that the Company believes are of significance or potential significance to the Company.
8
BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
All marketable securities were classified as available-for-sale at March 31, 2019 and December 31, 2018.
The following tables show the Company’s cash, cash equivalents and available-for-sale securities by significant investment category as of March 31, 2019 and December 31, 2018, respectively:
|
|
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Aggregate Fair Value |
|
|
Cash and Cash Equivalents |
|
|
Short-term Marketable Securities (1) |
|
|
Long-term Marketable Securities (2) |
|
|||||||
|
Level 1: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
220,980 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
220,980 |
|
|
$ |
220,980 |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 2: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market instruments |
|
|
122,400 |
|
|
|
— |
|
|
|
— |
|
|
|
122,400 |
|
|
|
122,400 |
|
|
|
— |
|
|
|
— |
|
|
Corporate debt securities |
|
|
563,691 |
|
|
|
1,535 |
|
|
|
(765 |
) |
|
|
564,461 |
|
|
|
— |
|
|
|
309,721 |
|
|
|
254,740 |
|
|
Commercial paper |
|
|
84,584 |
|
|
|
— |
|
|
|
|
|
|
|
84,584 |
|
|
|
20,989 |
|
|
|
63,595 |
|
|
|
— |
|
|
U.S. government agency securities |
|
|
222,183 |
|
|
|
430 |
|
|
|
(369 |
) |
|
|
222,244 |
|
|
|
— |
|
|
|
157,169 |
|
|
|
65,075 |
|
|
Foreign and other |
|
|
50 |
|
|
|
136 |
|
|
|
(1 |
) |
|
|
185 |
|
|
|
— |
|
|
|
— |
|
|
|
185 |
|
|
Subtotal |
|
|
992,908 |
|
|
|
2,101 |
|
|
|
(1,135 |
) |
|
|
993,874 |
|
|
|
143,389 |
|
|
|
530,485 |
|
|
|
320,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,213,888 |
|
|
$ |
2,101 |
|
|
$ |
(1,135 |
) |
|
$ |
1,214,854 |
|
|
$ |
364,369 |
|
|
$ |
530,485 |
|
|
$ |
320,000 |
|
|
|
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Aggregate Fair Value |
|
|
Cash and Cash Equivalents |
|
|
Short-term Marketable Securities (1) |
|
|
Long-term Marketable Securities (2) |
|
|||||||
|
Level 1: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
228,809 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
228,809 |
|
|
$ |
228,809 |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 2: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market instruments |
|
|
205,736 |
|
|
|
— |
|
|
|
— |
|
|
|
205,736 |
|
|
|
205,736 |
|
|
|
— |
|
|
|
— |
|
|
Corporate debt securities |
|
|
564,852 |
|
|
|
214 |
|
|
|
(2,288 |
) |
|
|
562,778 |
|
|
|
2,000 |
|
|
|
376,545 |
|
|
|
184,233 |
|
|
Commercial paper |
|
|
77,702 |
|
|
|
— |
|
|
|
— |
|
|
|
77,702 |
|
|
|
21,964 |
|
|
|
55,738 |
|
|
— |
|
|
|
U.S. government agency securities |
|
|
240,436 |
|
|
|
144 |
|
|
|
(697 |
) |
|
|
239,883 |
|
|
|
31,474 |
|
|
|
156,967 |
|
|
|
51,442 |
|
|
Foreign and other |
|
|
5,126 |
|
|
|
139 |
|
|
|
(1 |
) |
|
|
5,264 |
|
|
3999 |
|
|
|
1,076 |
|
|
|
189 |
|
|
|
Subtotal |
|
|
1,093,852 |
|
|
|
497 |
|
|
|
(2,986 |
) |
|
|
1,091,363 |
|
|
|
265,173 |
|
|
|
590,326 |
|
|
|
235,864 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,322,661 |
|
|
$ |
497 |
|
|
$ |
(2,986 |
) |
|
$ |
1,320,172 |
|
|
$ |
493,982 |
|
|
$ |
590,326 |
|
|
$ |
235,864 |
|
(1)The Company’s short-term marketable securities mature in one year or less.
(2) The Company’s long-term marketable securities mature between one and five years.
As of March 31, 2019, the Company’s investments in an unrealized loss position were not significant, and since the Company has the ability and intent to hold all investments that have been in a continuous loss position until maturity or recovery, no other-than-temporary impairment was deemed to have occurred.
(6) INTANGIBLE ASSETS
Intangible assets consisted of the following:
|
|
|
March 31, |
|
|
December 31, |
|
||
|
|
|
2019 |
|
|
2018 |
|
||
|
Intangible assets: |
|
|
|
|
|
|
|
|
|
Finite-lived intangible assets |
|
$ |
309,702 |
|
|
$ |
307,995 |
|
|
Indefinite-lived intangible assets |
|
|
326,359 |
|
|
|
326,359 |
|
|
Gross intangible assets: |
|
|
636,061 |
|
|
|
634,354 |
|
|
Less: Accumulated amortization |
|
|
(150,080 |
) |
|
|
(142,546 |
) |
|
Net carrying value |
|
$ |
485,981 |
|
|
$ |
491,808 |
|
9
BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
(7) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, net consisted of the following:
|
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2019 |
|
|
2018 |
|
|||
|
Building and improvements |
|
$ |
698,231 |
|
|
$ |
694,447 |
|
|
Manufacturing and laboratory equipment |
|
|
349,967 |
|
|
|
345,947 |
|
|
Computer hardware and software |
|
|
161,063 |
|
|
|
157,787 |
|
|
Leasehold improvements |
|
|
42,201 |
|
|
|
41,188 |
|
|
Furniture and equipment |
|
|
33,667 |
|
|
|
33,234 |
|
|
Land improvements |
|
|
7,213 |
|
|
|
6,551 |
|
|
Land |
|
|
77,993 |
|
|
|
77,993 |
|
|
Construction-in-progress |
|
|
75,405 |
|
|
|
64,170 |
|
|
|
|
|
1,445,740 |
|
|
|
1,421,317 |
|
|
Accumulated depreciation |
|
|
(493,850 |
) |
|
|
(472,635 |
) |
|
Total property, plant and equipment, net |
|
$ |
951,890 |
|
|
$ |
948,682 |
|
The construction-in-process balance primarily includes costs related to the Company’s significant in-process projects at its facilities in Marin County, California, and in Shanbally, Ireland.
Depreciation expense for the three months ended March 31, 2019 was $21.4 million, of which $6.5 million was capitalized into inventory. Depreciation expense for the three months ended March 31, 2018 was $20.0 million, of which $4.0 million was capitalized into inventory.
(8) SUPPLEMENTAL BALANCE SHEET INFORMATION
Inventory consisted of the following:
|
|
|
March 31, |
|
|
December 31, |
|
||
|
|
|
2019 |
|
|
2018 |
|
||
|
Raw materials |
|
$ |
60,427 |
|
|
$ |
74,616 |
|
|
Work-in-process |
|
|
282,802 |
|
|
|
231,064 |
|
|
Finished goods |
|
|
191,467 |
|
|
|
225,191 |
|
|
Total inventory |
|
$ |
534,696 |
|
|
$ |
530,871 |
|
Accounts Payable and Accrued Liabilities consisted of the following:
|
|
|
March 31, |
|
|
December 31, |
|
||
|
|
|
2019 |
|
|
2018 |
|
||
|
Accounts payable and accrued operating expenses |
|
$ |
224,385 |
|
|
$ |
207,620 |
|
|
Accrued compensation expense |
|
|
87,260 |
|
|
|
149,937 |
|
|
Accrued rebates payable |
|
|
46,109 |
|
|
|
43,116 |
|
|
Accrued royalties payable |
|
|
19,223 |
|
|
|
19,977 |
|
|
Value added taxes payable |
|
|
11,351 |
|
|
|
7,785 |
|
|
Forward foreign currency exchange contracts |
|
|
6,904 |
|
|
|
4,178 |
|
|
Lease liability |
|
|
9,210 |
|
|
|
— |
|
|
Other |
|
|
8,388 |
|
|
|
4,677 |
|
|
Total accounts payable and accrued liabilities |
|
$ |
412,830 |
|
|
$ |
437,290 |
|
10
BIOMARIN PHARMACEUTICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(In thousands of U.S. Dollars, except per share amounts or as otherwise disclosed)
(9) FAIR VALUE MEASUREMENTS
The Company measures certain financial assets and liabilities at fair value in accordance with its policy in Note 3 – Significant Accounting Policies included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 28, 2019. The following tables below presents the classification within fair value hierarchy of financial assets and liabilities not disclosed elsewhere that are remeasured on a recurring basis.
|
|
|
Fair Value Measurements at March 31, 2019 |
|
|||||||||||||
|
|
|
Quoted Price in Active Markets For Identical Assets (Level 1) |
|
|
Significant Other Observable Inputs (Level 2) |
|
|
Significant Unobservable Inputs (Level 3) |
|
|
Total |
|
||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NQDC Plan assets |
|
$ |
— |
|
|
$ |
537 |
|
|
$ |
— |
|
|
$ |
537 |
|
|
Total other current assets |
|
|
— |
|
|
|
537 |
|
|
|
— |
|
|
|
537 |
|
|
Other assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NQDC Plan assets |
|
|
— |
|
|
< | ||||||||||