BIOMARIN PHARMACEUTICAL INC

Results of Operations

Net Product Revenues

Net Product Revenues consisted of the following:

Net Product Revenues include revenues generated from our commercial products. In the U.S., our commercial products, except for PALYNZIQ and ALDURAZYME, are generally sold to specialty pharmacies or end-users, such as hospitals, which act as retailers. PALYNZIQ is distributed in the U.S. through certain certified specialty pharmacies under the PALYNZIQ Risk Evaluation and Mitigation Strategy program, and ALDURAZYME is marketed worldwide by Sanofi. Outside the U.S., our commercial products are sold to authorized distributors or directly to government purchasers or hospitals, which act as the end users.

The increase in Net Product Revenues for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was primarily attributed to the following:

•VOXZOGO: higher sales volume from new patients initiating therapy across all regions;

•PALYNZIQ: higher sales volume, primarily in the U.S.; partially offset by

•NAGLAZYME: lower sales volume due to timing of orders in countries that place large government orders, particularly in the Middle East; and

•KUVAN: lower product revenues attributed to increasing generic competition as a result of the loss of market exclusivity.

In certain countries, governments place large periodic orders for our products. We expect that the timing of these large government orders will continue to be inconsistent, which has created in the past and may continue to create significant period to period variation in our revenues.

Strong demand for VOXZOGO in certain markets has outpaced our projections in recent quarters, and we expect to face challenges meeting our current estimates of VOXZOGO demand through the first half of 2024. These challenges will result in modest reduction of our revenue growth for VOXZOGO during the supply-constrained period. The projected temporary supply constraint could result in postponement of planned entry into additional markets or delayed clinical development activities until VOXZOGO inventory levels increase. When the expected increases in supply become available during 2024, while overall inventory and ability to supply the market will increase, if actual demand continues to exceed our estimates, the supply constraint could be prolonged. We are working to increase fill-finish capacity to meet this increased demand while also implementing actions to manage growth and minimize patient impact. For example, in 2023 we secured increased supply commitments beginning in mid-2024. We do not expect a material impact on our revenues if we successfully execute our manufacturing plans. See "Risk Factors" in Part II, Item 1A of this Quarterly Report for additional information on risk factors that could impact our business and operations.

See also the risk factor “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” in “Risk Factors” included in Part II, Item 1Aof this Quarterly Report for additional information on risks we face.

We face exposure to movements in foreign currency exchange rates, which we expect to continue in future periods. We use foreign currency exchange forward contracts to hedge a percentage of our foreign currency exposure, primarily the Euro. The following table shows our Net Product Revenues denominated in USD and foreign currencies:

The unfavorable impact for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was primarily driven by weakening of Argentine Peso, partially offset by strengthening of the Euro.

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.

The change in Royalty and Other Revenues for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was relatively flat. 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, amortization of technology transfer intangible assets 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, idle plant costs and charges for inventory valuation reserves.

The following table summarizes our Cost of Sales and gross margin:

Cost of Sales and gross margin both benefited in the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, primarily from lower per-unit manufacturing costs and lower third-party royalties. Partially offsetting the benefits to Cost of Sales was the impact of higher sales volumes in the current quarter as compared to the first quarter of 2023. Gross margin also benefited in the current quarter from higher sales volumes for products with higher margin.

We expect gross margin to increase modestly compared to 2023 as the product mix is expected to shift to reflect an increase of sales volumes for higher margin commercial products.

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 commercial 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, R&D facilities and regulatory costs.

We group all of our R&D activities and related expense into three categories: (i) research and early pipeline, (ii) later-stage clinical programs and (iii) marketed products as follows:

We manage our R&D expense by identifying the R&D activities we anticipate will be performed during a given period and then prioritizing efforts based on scientific data, probability of successful development, market potential, available human and capital resources and other similar considerations. We continually review our product pipeline and the development status of product candidates and, as necessary, reallocate resources among the research and development portfolio that we believe will best support the future growth of our business.

R&D consisted of the following:

The increase in R&D expense for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was primarily due to higher spend in research and early pipeline attributable to increased pre-clinical activities, including studies for planned clinical trial application submissions. Lower spend in later-stage clinical programs was mostly offset by higher spend for our marketed products as spend related to ROCTAVIAN moved from late-stage to marketed products following Food and Drug Administration approval in mid-2023.

We expect R&D expense to increase in future periods compared to 2023, primarily due to increased spending on research and early development programs.

Selling, General and Administrative

Sales and marketing (S&M) expense primarily consisted of employee-related expenses for our sales group, brand marketing, patient support groups and pre-commercialization expenses related to our product candidates. General and administrative (G&A) expense primarily consisted of corporate support and other administrative expenses, including employee-related expenses.

SG&A consisted of the following:

S&M consisted of the following:

The increase in S&M expense for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was primarily a result of the continued support of the global VOXZOGO market expansion, partially offset by lower costs related to our enzyme products.

The increase in G&A expense for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was primarily due to higher employee-related costs and incremental administrative costs in the quarter, including external legal and consulting fees.

We expect SG&A expense to increase in future periods as a result of corporate matters and ongoing initiatives and the continued market expansion of our commercial products

Intangible Asset Amortization and Gain on Sale of Nonfinancial Assets

Intangible Asset Amortization and Gain on Sale of Nonfinancial Assets were as follows:

Amortization of intangible assets – the expense for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was relatively flat.

Gain on Sale of Nonfinancial Assets – in the first quarter of 2024, we recognized a gain of $10.0 million due to a third party’s achievement of a regulatory approval milestone related to previously sold intangible assets.

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.

The increase in Interest Income for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily due to higher yields on our cash equivalents and investment portfolio. We expect Interest Income to increase moderately over the next 12 months as compared to 2023 due to anticipated 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 for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was relatively flat. We expect Interest Expense to decrease over the next 12 months due to the settlement of our convertible debt that matures in August 2024. See Note 6 to our accompanying Condensed Consolidated Financial Statements for additional information regarding our debt.

Other Income (Expense), Net

Other Income (Expense), Net for the periods presented was as follows:

The increase in Other Income (Expense), Net for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily due to a $12.6 million impairment loss on an equity investment in the first quarter of 2023. There were no impairment charges in the first quarter of 2024.

Provision for Income Taxes

The Provision for Income Taxes for the periods presented was as follows:

The increase in Provision for Income Taxes for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was primarily due to higher pre-tax income and a lower tax benefit related to stock option exercises in the first quarter of 2024 compared to the first quarter of 2023. There was no material impact of the adoption of Pillar Two of the Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting Project on our financial statements.

Financial Condition, Liquidity and Capital Resources

Our cash, cash equivalents, and investments as of March 31, 2024 and December 31, 2023 were as follows:

We believe our cash generated from sales of our commercial products, in addition to our cash, cash equivalents and short-term investments will be sufficient to satisfy our liquidity requirements for at least the next 12 months. We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities and available cash and long-term investment balances. We will need to raise additional funds by issuing equity, debt or convertible securities, taking loans or entering into collaborative or other agreements if we are unable to satisfy our liquidity requirements. For example, we may require additional financing to fund the repayment of our convertible debt, future milestone payments and our future operations, including the commercialization of our products and product candidates currently under development, preclinical studies and clinical trials, and potential licenses and acquisitions. The timing and mix of our funding alternatives could change depending on many factors, including how much we elect to spend on our development programs, potential licenses and acquisitions of complementary technologies, products and companies or if we settle our convertible debt in cash.

We are mindful that conditions in the current macroeconomic environment, such as inflation, changes in interest and foreign currency exchange rates, natural disasters, and supply chain disruptions could affect our ability to achieve our goals. In addition, we sell our products in certain countries that face economic volatility and weakness. Although we have historically collected receivables from customers in such countries, sustained weakness or further deterioration of the local economies and currencies may cause customers in those countries to be unable to pay for our products. We will continue to monitor these conditions and will attempt to adjust our business processes, as appropriate, to mitigate macroeconomic risks to our business.

Our cash flows are summarized as follows:

The increase in net cash provided by operating activities in the three months ended March 31, 2024 compared to March 31, 2023 was primarily attributed to the timing of cash receipts from our customers, partially offset by the timing of payments to vendors.

The decrease in net cash used in investing activities in the three months ended March 31, 2024 compared to March 31, 2023 was primarily attributable to lower purchases of available-for-sale debt securities net of maturities, $10.0 million in proceeds from the sale of previously sold intangible assets, partially offset by an increase in purchases of intangible assets.

The change in net cash used in financing activities in the three months ended March 31, 2024 compared to March 31, 2023 was relatively flat but was comprised of lower proceeds from stock option exercises, partially offset by the absence of milestone payments to third parties.

Financing

Our $1.1 billion (undiscounted) of total convertible debt as of March 31, 2024 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 March 31, 2024, our indebtedness consisted of our 0.599% senior subordinated convertible notes due in 2024 and our 1.25% senior subordinated convertible notes due in 2027, which, if not converted, will be required to be repaid in cash at maturity in August 2024 and May 2027, respectively. We have reclassified the outstanding principal of the 2024 Notes as a current liability as there are less than twelve months remaining until maturity. If our common stock price remains below the conversion price of approximately $124.67 per share, we expect to settle the 2024 Notes in cash. If our common stock price meets or exceeds the conversion price, we intend to repurchase the equivalent shares to neutralize any dilutive impact of share settlement.

For additional information related to our convertible debt, see Note 6 to our accompanying Condensed Consolidated Financial Statements and Note 10 -Debt to the Consolidated Financial Statements accompanying our Annual Report on Form 10-K for the year ended December 31, 2023.

Material Cash Requirements

Purchase Obligations

As of March 31, 2024, we had obligations of approximately $386.7 million, of which $340.6 million is expected to be paid during the remainder of 2024. Our purchase obligations are primarily related to firm purchase commitments entered into in the normal course of business to procure active pharmaceutical ingredients, certain inventory-related items, certain third-party R&D services, production services and facility construction services. The amount also includes hosting fees and other enterprise resource planning (ERP) system implementation costs for which we are committed.

Other Obligations

Our lease, contingent obligations and unrecognized tax benefits as of March 31, 2024 have not materially changed from those discussed in “Financial Condition, Liquidity and Capital Resources” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023.

See Note 11 to our accompanying Condensed Consolidated Financial Statements for additional information on our commitments.

Critical Accounting Estimates

In preparing our Condensed 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, revenues 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 estimates have not differed materially from actual results.

There have been no significant changes to our critical accounting estimates during the three months ended March 31, 2024, compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 26, 2024.

Recent Accounting Pronouncements

See Note 1 to our accompanying Condensed Consolidated Financial Statements for a description of recent accounting pronouncements, if any, and our expectation of their impact on our results of operations and financial condition.