BioCryst Pharmaceuticals, Inc. (BCRX) Earnings Call Transcript & Summary

Good afternoon. Thank you for joining us at our annual health care conference. I'm Brian Cheng. I'm the senior biotech analyst here at Cantor. Joining us today is the full team, management team from BioCryst. With us, we have Jon Stonehouse, President and CEO; Anthony Doyle; Charlie; Bill; John; and Helen. So maybe Jon to get us started, let's talk about your story and also the pipeline that you're working on. Can you just spend a few minutes to give us a quick highlight of your company and the work that you're doing so far? And then we'll jump right back into a Q&A.

Sure. Absolutely. Brian, first, thanks for inviting us to the Cantor conference. It's fantastic to have you as an analyst. We've known Brian for a while, all the way back to another bank that I won't name the name. But you've always been known for doing extremely thorough work. And his recent survey, I think, is an example of the really good work that Brian does. And by the way, it's really consistent with what we've been telling folks as well, which is nice to see the consistency. So I will be making, and so will others, forward-looking statements. Those statements have risks, and you can find the risk factors on our website. So it's such an exciting time at BioCryst because things are really coming together. We have a fantastic launch with ORLADEYO, our lead oral drug for a patient suffering from a rare disease called HAE. And Charlie will spend some time with you talking about the wonderful success that we're seeing there. But it has the potential to be, and this is an old number, $500 million plus, with an emphasis on the plus, peak global sales product that can fund a lot of additional value creation. And that's the exciting part is behind that is a molecule, our oral Factor D inhibitor 99 -- BCX9930. That's a pipeline in a molecule. We're in a pivotal study in PNH and proof of concept in 3 nephritis indications. And we were wrapping up the Phase I at the beginning of this year, so incredibly exciting. A lot of value to create. And I think the really interesting part is it's all come from our discovery group in Birmingham, Alabama, a really talented group that understands structural biology as well as anybody in the industry and has been able to go after really tough targets and come up with potent, selective bioavailable molecules that we can make into oral drugs for patients suffering from rare diseases. So that, plus being in a really strong financial situation with revenue from ORLADEYO and opportunity to get cash from things like the debt and royalty deal that Anthony did at the tail end of last year, just put us in a really, really strong position to create even greater value.

Thanks for the intro, Jon. So I've been following your story for a long time. So when I first started on the sell side, you were one of the story that I learned from scratch. And fast forward to today, you reported $28.5 million last quarter for ORLADEYO sales. We have seen fantastic momentum in the launch. And when we look at consensus for the third quarter, I think consensus is now pointing in mid- to high-30s. Can you just give us some color on what you're seeing in the launch right now? And how should we think about the third quarter number?

Yes. We haven't really commented specifically on the third quarter, but what we have said is extreme confidence on our ability to get no less than $100 million in revenue for the year -- net revenue for the year. And by any measure, that's a fantastic launch for our first year for a rare disease drug, largely in the U.S. So the things that could allow that to go north of the $100 million and the things that could keep it closer are the same things, right? It's our ability to get face to face with customers. Summer, there was a lot of pent-up vacation, and so that made it more challenging. And then the Delta variant and some of the lockdowns that we've seen with the COVID outbreak has made it more challenging. But we still -- we started the launch in the worst part of the pandemic, and our expectation is that no less than $100 million for revenue -- net revenue this year.

Okay. Yes, I think we're -- right now, our model points to in the 120s range. So maybe just going back to the survey that you referenced. So we recently did a survey with particularly the prescribers for ORLADEYO. And one of the interesting point from the prescribers is that, when we asked them about the projection of use for ORLADEYO, it seems that a lot of the patients are expected to switch from Takhzyro. So can you just talk about whether that's in line with the dynamic that we should assume for the near term? And whether that's in line with the dynamics, particularly for the switchers.

Charlie, do you want to take that?

Yes. And again, it's great that you talk to multiple doctors to get that perspective. It's exactly in line with what we see, Brian, from both our market research and what we're seeing in the market as well. So in Q2, we saw 60% of patients switching from other prophylaxis products. That's what we expected. And Takhzyro was the #1 amongst that because Takhzyro is the market leader. So the switchers came in order of their position, and the great majority of those patients are having a really good experience on ORLADEYO.

Okay. And so one of the interesting points from your early launches that -- you're seeing a lot of prescribers coming from -- switching their acute patients to ORLADEYO. So I think that part is somewhat underappreciated right before you launched ORLADEYO, especially in HAE. So can you just talk about whether you're surprised by the reception from the acute switchers? And how should we think about those contributions from that, particularly the acute switchers in your sales number in the second half?

Yes. So again, we're not surprised. This is what we expected. And there's been a trend towards prophylaxis that started before ORLADEYO launched. So the time that we launched, there's about 60% of patients on prophylaxis. And physicians see that growing. And we just -- we think that ORLADEYO is going to accelerate that growth because taking an oral once-daily pill allows you to prevent attacks with a very low burden of treatment. So we see patients switching from acute-only being a big portion of our growth going forward as well as those switching from existing prophy. You can think of it roughly evenly split launch to date, and we see that going forward in the future, too.

I think one other thing, Brian, that's really important is -- and this goes for all prophy therapies. And that's why we're not surprised that there's this movement away from on-demand to prophylaxis is that what we hear, and it doesn't matter which therapy, is that when you get to a steady state, either C1 inhibitor levels or kallikrein inhibition, that the characteristics of the attack are different. So while you -- all drugs -- all these drugs have breakthrough attacks from time to time. They all work really well, but they're not perfect. But if your attack isn't as bad or you're not reaching for your rescue medicine or if it -- you get through it faster, why wouldn't you be on prophylaxis? And if you've got a once-a-day oral capsule, why would you be on ORLADEYO?

Right. I mean it's an oral drug so it's easy. So I guess one of the interesting dynamics that, especially in the last few months is Delta, as you pointed out, Jon. When you look at the doctors that you're interacting face to face almost every day, those doctors are -- majority of them are in the community setting. So maybe, Charlie, can you talk about whether or not, on a high level, whether their practice has been impacted by the Delta variant? And I guess, how should we think about their practice and your outreach in the last few months?

Well, definitely, COVID has had an impact on the HAE space and HAE treaters. I think that's true across the whole medical community. One thing, as we've talked to doctors and to patients, that really changed, and this goes back to 2020, is that the doctors really started to embrace telemedicine, virtual visits. And what we've heard from both patients and doctors is that that's gone well. So remember, we launched in the previous peak of COVID. Our team prepared for this. They got really good at it. In the between peaks, our team has done a nice job of meeting doctors and other health care providers face to face. So the relationships are established. So to the extent that the Delta variant has an impact, we've already got the connections with the offices. The doctors are still connecting with their patients even if it's virtually. And so we look forward to getting beyond this, but we don't see it as something that prevents us from getting to the long-term peak that we expect with ORLADEYO.

That's good to hear. And I recall that -- so I recall that over last month, where we took our team on the road, and you talked about how you conceptualized the prescriber base. You have Tier 1 and you also have Tier 2. Essentially in Tier 1, you have about -- I think you said 500 prescribers or so. And those are the prescribers that have a lot of patients at their practice. So as you're thinking about moving into the Tier 2 prescriber base, getting traction there, I just want to see, though, can you remind us how big the Tier 2 is? And as we think about the second half, how should we think about Tier 2 contribution into your sales number?

Well, I think a great thing is that we're already getting contribution from both Tier 1 and Tier 2. Our team was -- our sales team was sized appropriately to be able to reach both targets. But as you said, the Tier 1, the opportunity there is not just to get the breadth, but it's the depth because these are physicians who can prescribe ORLADEYO over and over to more patients. But we've seen really good contribution from Tier 2 already. Many of these doctors, they may only have 1, 2, 3 patients, but it's -- they're receiving it -- receiving the drug very well just as Tier 1 is. So we're reaching both, and we expect both segments to contribute in the second half of this year and well into next year.

Okay. And maybe just -- I want to touch on also on the European side as well. So early this month, we saw U.K., and I see recommendation for ORLADEYO. So that recommendation, I think you pointed out, it seems a little bit different than what we saw with injectables that are currently in the U.K. market. So can you just talk about the recommendation that you've got and how that compared to the injectables?

Yes. The NICE recommendation -- anytime you get a NICE recommendation, that's a big win. This was a particularly big win for patients in the U.K. because existing injectable prophylaxis therapy, so Takhzyro and Cinryze, NICE has limited to patients experiencing 2 attacks a week or more. So that's a very high frequency of attacks. The recommendation for ORLADEYO is 2 attacks a month or more. So basically, what NICE has done is created a first-line position for ORLADEYO to really grow the prophylaxis market and help a lot of patients. So what we've heard from doctors and patients is they're very excited about the launch, which will happen later in the fourth quarter.

Charlie and his team in Europe and the U.K. did a great job of getting early access to medicine scheme up and running and getting patient experience. And so I'm really looking forward to the results of both the NICE negotiation favorable positioning and the fact that we've got people getting experience and what that leads to in revenue over the course of next year.

Yes, same here. So -- and I guess, in some way, do you think the NICE is hinting that ORLADEYO should be used in the front line earlier than injectables? Like how -- I guess, how should we interpret it in terms of the line of setting?

Yes. I don't think it's a hint at all. I think it's -- that's what they're saying. The other thing that they're not saying is that you should -- they're saying nothing about androgens, which had been a previous therapy. So they're ignoring androgens. And they're basically saying anyone with 2 attacks a month or more, ORLADEYO is a drug that is available. And what we hear from physicians is that they're going to use that on a lot of their patients.

Okay. So that's great. I think we definitely look forward to the next update on the U.K. side. So maybe just stepping out of the U.K. Can you just talk about the dynamic that you're seeing in EU? Can you talk about how different -- maybe just on the market itself, how different is the EU market compared to what we see here in the U.S.? And also from the commercial side, how are you approaching it differently perhaps in the EU as well?

I'd say there are really 3 big differences that we're working through. We just talked about market access. I mean that's -- each market has its own access process that we have to go through. So that's one. The other one is that prophylaxis historically has not been widely used in Europe, but it's starting to change there as well now that there are more modern prophylaxis therapies being approved. And so we see use of prophylaxis growing quite a bit. And then the third difference is just that European treatment centers tend to be more concentrated. So we talked about the Tier 1 and Tier 2 in the U.S. The Tier 1s in Europe are just a lot bigger. There are Tier 2 doctors, and we're reaching them as well, but we have very efficiently sized teams. We just don't need as many people in Europe relative to the market size to reach all those physicians. So I think those are the big differences.

Okay. And maybe just switching gear to your pipeline. Bill and Helen, you guys have been working very hard on the pipeline front. So any updates on your preparation for the REDEEM-1 and REDEEM-2 that you disclosed earlier for the Factor D inhibitor in PNH?

Bill, do you want to take that?

Sure. Very busy is a short answer, with country regulatory ethics committee sites, contracts, investigator meetings. We're on track to start our pivotal studies in PNH this calendar year before the end of the year. So it's very exciting. And we -- because it's such a rare disease, of course, we're going to a lot of countries. So there's a very busy team implementing those studies right now. And as you'll recall, the protocols were finalized with regulatory interactions. The primary end point for both studies has changed from baseline and hemoglobin, and there's a lot of excitement about getting this done.

And what about the kidney side of things? And I think you're starting -- you're planning to start the early kidney study sometime later this year as well. So can we expect any early interim cut of the data in 2022? And if you can just give us some color on how we should think about the development path beyond 2022, that would be great.

I think the most important thing to remember about the nephritis diseases that we're studying is that none of them have any approved treatment. So the medical need here is really big. So the study is designed as open label, with cohorts of 14 patients for each of the 3 diseases we're studying: C3G, IgA nephropathy and primary membranous nephropathy. And as the data evolves, we'll want to see what does the treatment effect look like and how consistent is that, what type of end points might be good to study in a pivotal trial. It's hard to know exactly when we'll reach the point of understanding it. But when we do, we tend to let people know, of course, because we want to go and see regulators and negotiate pivotal studies.

Okay. So we'll definitely look forward to your next update, hopefully, in the very near term. So maybe just switching gear on capital needs. I think that has become one of the focus for a lot of investors in the past month or so. So can you just kind of give us some insights on how you're thinking about the capital needs? And for your Factor D inhibitor as well, how are you -- how are we thinking about potential partnerships? Are you looking for any potential partnerships for the Factor D funds?

Yes. The short answer is no because we believe we'll create greater value by doing it on our own. I'd much rather have Charlie's team launching this drug than choosing somebody else, right, especially when it's a switch market from an injectable drug to an oral. And I'd much rather have Helen and Bill's team doing the development with the quality and the speed at which they move. So we just -- we haven't found anybody that can do it better than us. If we did, I guess I'd change my mind, but we haven't. And so I'll let Anthony answer the rest of it in terms of where does the capital come from. But it's all about investing money back into 9930 to create even greater value than we're getting from ORLADEYO. That's -- that is -- and that's significantly greater than ORLADEYO.

Yes. So Jon laid out pretty well what we're investing in to create value in terms of how we're doing it. So listen, we are in a strong cash position. So at the end of last quarter, we had about $223 million in cash. We have access to another $75 million through the deal that Jon talked about that we did in this last December with Athyrium. And most importantly, we have revenue coming on a global basis. So with all of those things in play, we have cash into 2023, and we have access to cash in a number of different ways. So whether it be through equity, whether it be through cash or royalty or convertible, like the access that we have and the optionality that we have in terms of how we would raise funds puts us in an even better position. So I think we're well positioned to invest in those key areas that Jon talked about.

Okay. That's good to know. And then maybe just on the earlier-stage pipeline. So I know that you have an FOP program. You also have galidesivir. So if you can give us some highlight on how we should think about the next step for FOP, I think that would be great. And more importantly, what's the gating factor to start your next step for FOP? I think I recall that last December, you had an update on FOP with the early study. What should be -- what should we think about as a next step for that program?

Helen, do you want to take that?

Yes. So what we know with the ALK-2 inhibitor is that we've seen the safe profile so far as far as we've tested it. We do need to manufacture and to complete tox studies to allow us to go into a patient program next. And so that's where we're investing now. We had some decisions to make earlier and advanced our Factor D program and focus on HAE. We're now investing in the FOP program and manufacturing and preparing for that tox work. So our next step will be completion of those and then preparing for a program that will involve assessing patients with this ALK-2 inhibitor. And it's one that we are committed to moving forward. It is a terrible disease, and we have a drug that we have confidence in. And so we'll be looking forward to evaluating that.

Okay. Will that be a 2022 catalyst? Or how we should we think about the time frame to get an update on this front?

I think it's hard to predict from where we are today. Getting started in the trial is a 2022 event, certainly not this year. I mean we're playing -- honestly, we're playing catch-up because we invested all of the capital that we had when capital was tight in 9930. And we've got 9250 to a point, but then had to invest in tox and manufacturing afterwards after we got this great data last year. So -- but as Helen said, it's a high unmet need. It's a really hard target, and we believe we've got a shot.

Yes, I do agree. So maybe just looking at your entire portfolio. So you have -- ORLADEYO really already starting to ramp up with continued revenues flowing in. You have the 9930 now heading into pivotal studies. You also have 9930 tapping into nephritis as well. You also have FOP in the background and galidesivir. So based on your conversations with investors, which area or assets do you think is the most underappreciated in your story today?

All of them. I mean the value of this company, there was a really good article in Barron's this week by some really smart Wall Street people. And one of the things that they talked about was companies that have a platform that start to show success can create significant value in the biotech space because they take what they did and they repeat it over and over and over again. And that's exactly what we're doing. Only the one behind ORLADEYO is significantly -- it's like 6 ORLADEYOS or 10 ORLADEYOS. I mean it's way bigger, right? And so -- and then the discovery engine is going to keep pumping out more and more molecules for more rare disease targets. And because we bring these oral drugs forward, we're differentiated, right? And so I think when people really dig in and really understand what we have and that we can repeat it, they're going to see that the value today isn't anywhere near where the value should be.

And maybe just to wrap up our fireside chat today. So can you just give us a quick highlight of the key catalysts that we should focus on in the next 6 to 12 months? Anything that investors should really keep an eye out on for BioCryst?

Yes. Obviously, revenue for ORLADEYO will continue to be a really important piece. And next year, it will be equally important because you'll know the trajectory we're on in terms of what kind of future investment we can make as well, and we think it'll be meaningful. So that's one piece. Getting approval filings and approvals around the world and more and more countries coming online to launch and getting pricing approvals will be a really important piece because that just keeps adding on top. It adds to the plus. And then the progress we're making in our clinical trials, right? The REDEEM-1 and REDEEM-2, getting that started, making progress in the enrollment process and then reading those out, we can't predict when that will happen, but that's pivotal studies that we will then file for approval with an oral Factor D inhibitor. And the proof-of-concept data just means this pipeline and our molecule is really starting to come together. So a lot of exciting milestones for BioCryst.

Yes. No, I do agree. So maybe just one last one to wrap up. I guess should we expect additional early discovery pipeline that could come out of your platform in the next 12 to 24 months? Like how should we think about the next big thing after ORLADEYO, 9930 and also the FOP program?

Yes, there's more. Yes.

There's more to come. Okay. So we'll definitely look forward to that. So I think that's the end of today's fireside chat today. Jon and team, thank you so much for joining us today at our Cantor conference, and we look forward to seeing you guys again at the 3Q call. Thank you.

Thank you, Brian.

Talk to you soon, Jon.

Yes. Take care.