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

Good afternoon, everyone. Welcome to Barclays Global Healthcare Conference. My name is Gena Wang. I'm a SMid-cap biotech analyst. It's my great pleasure to introduce our next presenting company, BioCryst Pharmaceuticals. With us today, we have Jon Stonehouse, President and Chief Executive Officer; Charlie Gayer, Chief Commercial Officer; and then John Bluth, Chief Communication Officer. So Jon, maybe before we dive into specific questions, do you want to give a high-level overview of the company?

Yes, I'd be happy to. And first, let me say thank you for inviting us to this conference. It's wonderful to see people in person instead of doing this through Zoom. So it's great to be here in Miami with you, and really enjoyed the day so far. So I'll be making some forward-looking statements, these guys will be too. And those will have associated risks and the risk factors could be on our website. We're building a great company. And I say that because we have a drug on the market, our first oral drug for a rare disease, ORLADEYO, that's off to a fantastic start and a great launch. And we're really excited about the progress that we've made with this, but future potential is amazing. We believe that it has the potential to be a $1 billion product for us and the market leader in the prophylactic space for HAE. And so with that as the first drug to market, behind it we have continued to invest in our pipeline. And we have an oral Factor D inhibitor that we might even be more excited about -- I don't even know if you can say that, but the potential is multiples of what we have with ORLADEYO. And -- we're in a pivotal study in PNH and a proof-of-concept study in 3 renal indications. And there's many more indications that we can pursue with this molecule. So it's truly a pipeline in a molecule. And then we have a discovery engine that produced all of this stuff. And why is that important? One, it allows us to come up with unique offerings to patients. This idea of an oral drug for patients suffering from rare disease is something way more than a small incremental convenience improvement. It's life changing for these people. And it differentiates us in the marketplace. And so we can repeat it over and over and over again with this fantastic team. We have a balance sheet now with a couple of financings we've done in the tail end of the last 2 years. with Athyrium, Royalty Pharma and OMERS. And so we're in a very -- probably the best financial position we've ever been in, in the history of the company. And when you couple that with the revenue we're generating from ORLADEYO, we're in a very solid spot. And then lastly, we have great people, and we continue to attract great people into the company. And people that are really motivated by bringing new therapies to patients with rare disease and the execution by our employees is amazing. So things are really good right now at BioCryst.

Thank you. Thank you. So maybe I would just start with a little bit uncomfortable questions because I got quite some investors asking why you provide peak guidance now since you just launched. So any thoughts there? How did you derive at that number?

Sure. I'll let Charlie do the math for you in a minute, but I will remind you that we gave peak guidance in the summer of 2019, I think, is when we started, where we said it was a $500 million plus global product. And back then, we put an emphasis on the $500 million. In the last 6 months, we put an emphasis on the plus because we're now in the marketplace, and we're seeing how the product is being received by health care providers and by patients. And so it was an old number, honestly. And that's why we changed it now, but I'll let you do the simple math of how you get there.

Sure. The simple math here is that in the U.S., we know there to be about 7,500 diagnosed and treated patients. It's a pretty mature marketplace. And so if we just get 25% to 30% market share, so about 2,000 patients, based on our pricing and an assumed gross to net of 15% to 20%, that gets us to $750 million, $800 million, and the peak of $1 billion. And then the other $200 million or so is going to come from the rest of the world. So this doesn't have to be a winner take all. We see this as a market-leading product, but that's a realistic market share as well. And so that's -- that, plus all the trends is what's given us confidence.

So when we look at the Royalty Pharma and the OMERS deal, and given how they decide at what point the rate would change and they are like after $500 million there's no -- they would not pay. So like does that indicating, do you have view on the market opportunity of $500 million and that different from your...

Yes, I think the operative word is they, I think we came to that agreement together because we basically said the more we generate, the less they get. And so it's 3 tiers. And $350 million, I believe, is the first one and then $350 million to $550 million, and above $550 million, nothing. And that was driven because we felt for the amount of capital that was brought into the company that there was a limit to what we'd be willing to give. And so that was our initiative, not theirs. So I think from what they've seen so far -- I don't want to speak for them, but from what they've seen so far, clearly, they came back and invested more capital into us a year later. And so I think we've done a great job of executing thus far and plan to continue.

Great. And then the other question also regarding the guidance to over $250 million this year when we look at using 4Q number quarter-over-quarter is only 15% growth. Do you think that that's a little bit conservative? Or you think -- where do you see that could change, will be up or down?

Yes. 15% quarter-over-quarter leads to a doubling in sales year-over-year. And I think that's pretty good for a second year of launch. And it won't go that way. It won't go 15% each quarter. We've already said that the first quarter compared to the fourth will be little to no growth because of the dynamics in reimbursement. That occurred with specialty products at the beginning of the year. But a doubling of sales is a fantastic, $250 million, no less than $250 million in revenue, our second year on our way to ultimately heading to $1 billion, we think is a really attractive profit.

Do you think you could have a potential even beating this number?

We've said no less than $250 million deliberately. And I think what we did last year is we said no less than $100 million when we first gave guidance. And then we said $115 to $120 million, and then we hit $122.6 million. So our goal has always been to be the accurate guider because we're the ones with all the data, right? We have 1 specialty pharmacy, we get the data, you can't get the prescription data in any other source. And so we want to be the ones that give you the best accurate guidance and that -- it requires us to not be too aggressive or to be too conservative. So right now, we think less than $250 million will -- we may adjust as the year goes on to give you more fidelity.

So when you see first quarter would be maybe a little bit flat. For the remaining 3 quarters, should we think about the linear growth or there will be any also seasonality there?

I think -- I would say that the growth from first quarter to second quarter will probably be meaningful because of the flatness in the fourth to first. Will it be linear? Probably not. At the end of the day, I think another piece that drives it is a bunch of the programs that Charlie and the commercial team have planned and when they actually kick in to drive in more [indiscernible] forms. And then how quickly the reimbursement takes place. Charlie has done a great job of getting the last big PBM. His team has gotten the last big PBM on board. And so that doesn't happen overnight, but the more that we get those patients converted from free drug to paid drug will affect the growth from quarter-to-quarter.

Okay. Very helpful. So then maybe a little bit more color on the, say, the launch metrics so far. I think at the 4Q earnings call, you said 70% retention rate. So I wanted to know, are these only applied to the patient that you follow a long time? Or does that also apply to more recent patients?

So that was of patients who started ORLADEYO for the first time last year, 70% of them remained on therapy for the year. And what you see as we dig in, we've presented some of these data, you look at the retention based on where the patients are coming from, injectable prophylaxis, switching from acute only. The retention is similar regardless of where the patients are coming from. And what it says is most patients do really well on ORLADEYO liberally we're pleased with the retention so far.

So do you see that trend consistent? And I'm pretty sure all those like -- with 1-year follow-up, you also saw them say, after 1 quarter, 2 quarter, 3 quarter, now 4 quarters follow-up, do you see when that discontinuation starts? Like the 30% drop, at what point they drop?

Most of the discontinuation when it happens, happens within the first 1 to 2 months. And so a big focus for us is setting expectations for patients and really helping them through those first 3 months. If we can get them to 3 months, the retention is much better. They get the efficacy. They just get the experience with the product. And so we're really particularly focused on those first 3 months.

Okay. So which means like first quarter, right? So now you have additional, say, 3 quarters patient. What is the retention rate for those patients? Like, a newer patient taking the drug? I don't know if I delivered clearly. Like, so the 70% retention is the -- obviously the first 1 year ago that you had a 1-year follow-up that retention is 70%. What about the patient on drug maybe for 1, 2, 3 quarters so far, what is the retention rate so far for these patients?

So what I'd say is what patients drop off, most of that happens in the first 3 months -- 1 to 3 months. After that, the retention is much higher. So what we saw some of the data that we presented is that once patients get through that first period of time, the retention rate is much -- it's closer to 80% long term.

I think what Charlie is saying is of all the patients that went on therapy in 2021, some of them started in January, some of them started in December, that we retain 70% of patients.

So that 70% apply to all the patients, even in 2021? That's the question I have.

Exactly. Yes.

So that's very helpful. So then also for the discontinuation, what was the main reason for those patients to discontinue?

The reasons are what we expected from our clinical trials. So the 2 main reasons are perceived lack of efficacy and side effects usually gastrointestinal. And what we know about the gastrointestinal effects is that when those happen, it's not with everyone, but those tend to go away early in therapy. And so that's why it's really critical to keep them on for that first 3 months or so. And then there's some other life events, reasons people may drop off, but those are the main 2.

Okay. So out of 30%, what percentage of these were lack of efficacy?

So I don't have the exact percentages, but what I'll say is the great majority of them were, and it's an even split between lack of efficacy and GI effects.

Okay. So like -- roughly like...

It's probably about 3/4 of them were split between those two and then about 1/4 of them with everything else.

I see. So like roughly 10% -- 10% to 15%?

No more like 35%.

More like 30% to 35%, 45%.

Yes. So if we think about the [ CLO ]...

[ CLO ].

Okay. Okay. That's very helpful. And then out of the patient that now you did see the switch over from sub-Q and also on-demand, and so maybe if you can give a little bit more color to break down the truly naive patients and then also the patient switch over from sub-Q drugs? And also patients switched from on-demand since you start to see patients there -- so if you can give the breakdown of the patients now on ORLADEYO.

So this is something we're really pleased with what we're seeing because we -- of all the market research we did before launch, what we expected is at least half of our business would be switches from other prophylaxis therapies. And that's exactly what we've seen and it's really consistent in every quarter. since the start of the launch. So about 50% to 60% of the patients are switching from other prophylaxis therapies, most of that from injectable or infused prophy therapies. And then of the other 40% to 50%, most of that has come to patients switching from acute only. The U.S. market is pretty mature. So we don't have a lot of brand new diagnosis naive patients. That's not -- that's not our expected growth driver. We get some of those that comes in naturally, but that's a small portion of the patients coming to ORLADEYO.

Yes. And if I can, I'd add one more point. I think what's really important and what Charlie just said is that we're seeing people that are controlled on prophylactic therapy, it's not like they're having breakthrough attacks and the doc doesn't have another option for it. These are people that are controlled and they're switching from that therapy to ORLADEYO and having success on ORLADEYO. And that's the most encouraging part of what we believe will be the future for this product.

Okay. I think I forgot to ask 1 more question early on for the compliance rate. Yes. So -- did you see any variability, say, the 2021 -- like patient enrolling in 2021 -- that patient starting the beginning of the year versus the end of the year? Any differences in terms of the compliance rate?

No. And so I think if you're defining compliance as when they're on -- are they taking the drug...

Yes. Yes.

It's been really high. And so it's high in our clinical trials in the 90 percentile. Since launch, it's been consistently above 90%. And I think that's because patients know why they're taking the drug. It's to prevent attacks. And then the patient services program that we put in place is really high touch, white glove service. So every month of patients are getting a contact. And so they're taking their medicine. I think that's part of the reason that they're doing well on therapy.

And for the 2022, 2023, do you see any of those, say, retention rate and the compliance rate, any -- anything could affect those rates? What are you seeing so far?

I think compliance, we would expect to stay high. The retention rate, it's something where it will never be 100%. But we're always looking for how can we improve it even incrementally because it's -- we want to make sure that patients, if they drop off that they're not giving up too early. If they give up too early, they've missed a chance to treat their disease with 1 pill, once a day. And for patients who get to that point, it's really -- it can be transformative because they almost forget that they have HAE. It's just so easy to take, and the drug works well for these patients, so they can kind of not worry about their disease at all. We want to make sure no one, who could have that experience, misses it by giving up too early.

Okay. And then another question regarding the free drug program. Maybe can you give a little bit more color when did you start it? And then for each patient, how long initially last and before they convert it to the commercial product?

You might want to talk about why we did it.

Yes, absolutely. So the free drug, what we heard so much as we prepared for the launch is that there have been multiple products that have come on the market in the last several years. And the whole starting process, the insurance process was burdensome and it's something that for both the doctors and the patients they worried a lot about. So we wanted to take that off the table as much as possible. once the clinical decision was made, get started right away on our Quick Start program. So that's free. Pretty much everyone starts with free drug right from the beginning. And then in 2021, with -- as we were getting better and better with the insurance process, there were some patients we needed to keep on drug longer, though we have their [ insurance ] covering -- by the end of the year, we're now at a point where about 80% of the ORLADEYO patients should have access to coverage through their plans. So right now, the average patient starting is going to get on to paid product very quickly within a month and the great majority of patients are going to move to paid products within that first month. But we'll still do the Quick Start because we still want to have that first experience to be very rapid and focused on the drug rather than the insurance.

Yes. So the number of patients on free drug will also be affected by how many new patients we're putting into the funnel.

Yes. And then now average you see, between 1 month. And that 20%, which means in 1 month, we should expect those 20% patients convert into the revenue-generating patients? And then the new patient comes...

There are always going to be some patients. We won't ever get 100% of insurance to cover anything else. But the portion that are reimbursed continues to increase and it's going a lot faster.

So what percentage of patients you think would not be able to get insurance coverage?

So the one thing we've said is that Q3 and Q4 of last year, about 1/3 of patients were on free drug. -- we expect over the course of this year that, that's going to move to closer to 20% and may even, over time, get a little bit better than that.

Okay. Do you think as we move forward, like 1 year from here, where do you think that percentage stabilize?

It's hard to say. I think that's the kind of update later this year, we may be able to give a little bit more color. I'd say that there's always going to be the new patients coming in on free drug, and there are always going to be some patients, employer-sponsored plans and others that may just not cover drugs like HAE therapies. So that's why it's never going to go to 100% but we want that not to be a worry for the doctors and the patients. The important thing is getting the patients on drug first.

Okay. And -- good. And also maybe another perspective is also your long-term projection, $1 billion, can you elaborate a little bit regarding what your expectation for the on-demand patient converted to prophy and that will be essential for the peak revenue, right? So if you can tell us what makes you feel comfortable that in certain years, those prophy percentage will increase to a certain level?

So the -- particularly in the U.S. market, and I think we're going to start to see more and more globally, the movement has been towards prophylaxis. So in the U.S. at the time of our launch, about 60% of the patients were on prophylaxis. Today, we believe that to be more like 70%. We see that going to 80%, maybe even more. So the acute-only portion of the market is shrinking, and we're moving into a situation where our acute therapies will always be there for when patients have breakthrough attacks, but the primary treatment is going to be prophylaxis. In Europe, prophy is probably 20% to 30% today, but that -- we see that definitely growing above 50% in the coming years.

Okay. Very helpful. We have a few more minutes. I wanted to touch on your Factor D program, which is all very important as well. So I think in the past, maybe the main pushback from the investors is LDH level. That when we look at the other candidates, you were able to bring down to 1.5 up a lipid norm and yours a little bit higher. I think the last time when we discussed, one possibility could be the measurement variability. So maybe like, can you elaborate a little bit on how you started with a typical study. Anyway to address that measurement arrow issue? And then also any concern that we should have for the LDH level.

Yes. It's anemia. So what do you measure when you have anemia? You measure hemoglobin. And we're fortunate to have a drug that has an effect on both intravascular and extravascular hemolysis. So you don't need a surrogate end point like LDH, you just measure hemoglobin and we see spectacular increases in hemoglobin with people that are anemic, whether they've been on C5 and not responding or they're naive to any treatment. And so I think the field has moved. When you couldn't control all of hemolysis, absolutely, you had to get to surrogate markers now, you measure what's important, which is hemoglobin, that's the best marker for the hemolysis and the anemia. And then in addition to that, the other really important endpoint is transfusions, and rate of transfusions and the ability to decrease transfusions. And so you affect those 2 things, you've covered anemia. And it will measure LDH as a secondary endpoint, and we see dramatic drops in LDH, but it's all about what really drives the disease in the markers that directly affect it, not surrogate.

But wouldn't that be -- if you already addressed direct, then wouldn't the surrogate endpoint should actually be reflective of those underlying issue was resolved? I mean like LDH should be lower.

Yes. I mean we do see a reduction in LDH. So is -- I think the bigger point is what's magical about 1.5 or 2.

Maybe I rephrase this, like, why we see pretty impressive hemoglobin level, but we did not see the LDH level bring down the similar level as others?

Because I don't think the target of 1.5 is any magical place to be.

Or like maybe just say like not as low as the others.

Yes. What matters more, though, do you get 4-milligram per deciliter increase in hemoglobin or do you try to target for 1.5 or 2. And if you talk to the people that treat this disease, they'll say, "I want more -- I want a bigger increase in hemoglobin." LDH is, I think, a marker of the past and I just don't think it's as important. And again, I'm not saying that we don't decrease it, we do in a meaningful way. But hemoglobin is what matters to doctors, regulators and patients at the end of the day.

Okay. Okay. Good. It seems we are running out of time, maybe Jon, if you wanted to -- you also have other pipeline, anything you want to highlight?

Yes. It's too early to -- other than our ALK-2 inhibitor for FOP, which we're moving it through toxicology and drug supply work, and we hope to get into patients sometime next year, there's a bunch of other things that we haven't even told you about yet that are really exciting, but too early to talk about. And that's the beauty of having this great science and great discovery engine is we can go after really hard targets like serine proteases and -- but validated targets and bring oral drugs to patients with rare disease. So stay tuned because there's a lot more coming from our discovery group.

Okay. Great. So -- maybe going back to Factor D, when should you -- I know you said you did not want to guide a specific time line, but any big picture, at what point we will start to see that the -- or you are willing to share the data?

Yes. We put a backstop for all the clinical data. So by the end of next year, we expect that we'll have the data from both pivotal studies in PNH, and that will be in the process of pulling the file together to submit for registration in multiple countries. By the end of next year, we expect that we'll have all the data from the proof of concept for 3 renal indications, and we'll be moving into pivotal studies. We'll be doing the work to move into pivotal studies. And by the end of next year, we will also be moving into other proof-of-concept studies in other indications. And so will they all come in December of 2023? No. But that's the backstop that we have. And so over the course of time between now and the end of next year, there's a lot coming from BioCryst Factor D program.

Okay. That's great. Well, thank you very much. Thank you. And I think we're running out of time. And looking forward to the update later this year.

Yes. Thank you, Gena.

Thank you.

Thank you. Thank you everyone.