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

Great. Good afternoon, everyone. My name is Jess Fye, I'm a large cap biotech analyst at JPMorgan, and we are delighted to be continuing the conference today with BioCryst. A little bit of different format this year from years past. We're going to stay in this room for Q&A. If you have a question at the end of the presentation, just raise your hand, somebody you'll bring you a mic or you can submit them electronically as well. So with that out of the way, let me turn it over to BioCryst's CEO, Jon Stonehouse.

Good afternoon. Thank you, Jess, for inviting us to this year's conference, and I was telling her before I got up here, I honestly can admit that I'm happy to be live in San Francisco. I didn't think I'd get to that point during COVID, but good to be here. I'm going to be making some forward-looking statements. Those statements have risks. The risk factors can be found in our most recent filings, found on our website listed at the bottom of Slide 2. So how do we create value at BioCryst? We do it by bringing oral drugs to patients that suffer from rare disease. And why is that important? It's important because not only are patients looking for a reduction in the burden of their disease to have control or have a drug that works, but if you're able to give them a reduction in the burden of therapy, by not injecting themselves, not having an infusion, but giving them a capsule or a tablet, you have the potential to change their life, and that's the value that we're creating at BioCryst. And we're creating that value today in the marketplace with our first oral drug ORLADEYO. It's a kallikrein inhibitor, and it's the first and only oral prophylactic for a rare disease called hereditary angioedema. And if you're looking for a reduction in the burden of therapy, I don't think you can get much better than once a day oral therapy. So does the drug work? Because nobody is going to take the drug because it's convenient, if the drug doesn't work. So if you look at the data from our clinical trials, APeX-2 and the long-term extension up to 96 weeks, we see an 86% reduction in the baseline attack rate, so that's real control. And 16 out of the last 17 months of treatment, the median attack rate was 0 per month. So again, very good control in our clinical trials. And then in the real world, so we've been in the market now for 2 years. And what are we seeing in the marketplace in terms of control. This is data we presented at the college meeting in November. And these are switches. This is a switch market. It's a mature market, and you see patients switching from prophylactic therapy that the therapies are listed in the graphic on the left. And then you see over the course of a little more than a year, the reduction in their attack rate, and again, there's control. The median attack rate over the -- little over a year is less than half an attack per month. So [ again controlled ]. Now ORLADEYO doesn't work in everybody, but it works in many and when it works, it works very, very well. No drug is perfect, and the most frequent adverse events with ORLADEYO are GI related. You can see in the table on Slide 7, the types of GI adverse events and the dose most frequently prescribed in the marketplace is 150 milligrams once a day. And so you can see the percentages that we saw in the clinical trial on the right-hand side of this table. But the good news is, that these GI adverse events tend to go away in a month or 2. And so this is data from our pivotal studies, and you can see that after the first or second month, that it gets down to close to what you're seeing with placebo. So let me talk a little bit about the marketplace, and let me describe the U.S. marketplace for you first. So there's 7,500 treated and diagnosed patients in the United States. About 70% of them are on prophylactic therapy and the other 30% are on acute. And I said earlier, there's been 8 drugs in the last 13 years that have been brought to this population, and a lot of them work really well. But most of them are injectable, and so the opportunity for BioCryst to get patients on the ORLADEYO, is they have to switch from what they're currently on. And that's no small task, but we've been pretty successful to date. And you can see since the start of launch, all the way through to October of last year, that a little more than half are coming from prophylactic therapy and the other half are coming from on-demand therapy, and you can see the breakdown of what drugs they're coming off of Takhzyro being the one that's most frequent. And then on the graphic on the right, we pulse the market on a quarterly basis. and get a sense of what is the physician's perspective on prescribing today and what do they plan to prescribe in the future? And we do a robust job of surveying physicians, and this is a survey from September of last year, 60 allergist immunologists that have, on average, about 7 to 10 patients in their practice. And you can see in the current prescribing, what percentage of their patients are allocated to ORLADEYO, but more importantly, we ask them, what do you see as you're prescribing in the future, and you can see that it's increasing. And this has been consistent with every quarter that we pulse this survey, and it's very encouraging for additional prescribing in the future. So what kind of value are we creating with ORLADEYO, we're pretty proud of this. I think by any measure, this has been an exceptional launch, and we believe it's on a path to $1 billion, The first year, we sold $122 million, first full year of launch. This year, we more than doubled that, with $251.6 million, and we're a quarter of the way to our path to $1 billion. And we've given guidance now that, no less than $320 million this year, so almost 1/3 of the way in the third year. So we think we're well on our way and on our path to $1 billion. The math is pretty straightforward. You don't need crazy market share, like 50%, 60% of the market in order to get to the $1 billion. And you can see 25% to 30% in the U.S. gives us about $800 million at peak. And then the last thing that I think is really important, is you can choose -- you can draw a line through the 3 data points we have on this slide and decide where you believe we'll get to $1 billion at our peak. But we have composition of matter patent protection out to 2039. So it's not like we're going to have a couple of years of peak sales, but we're going to have many years of peak sales, and that's real value creation. And then just one last note before I leave ORLADEYO, and that's around guidance. Let me say this very succinctly and clearly, the only people with the data are BioCryst. We are a sole source specialty pharmacy. So the normal channels of getting information about prescribing are not accurate. We have the data, and so what we've been trying to do, is be accurate with guiding. And so you saw in 2021 and 2022, we started out with saying no less than, because these are numbers that we're confident in. But we put a greater than or equal to sign, because if things go a certain way over the course of the year, it could be adjusted upward. And then you see the results of what we delivered at the end of each year, and again, we're very accurate. So when we say no less than $320 million, what you should put in your model is $320 million for this year. So what's next? What if we were able to replicate what we've done with ORLADEYO and HAE, in another rare disease or multiple rare diseases. What if we had a platform, a discovery platform that allowed us to make more oral drugs for patients suffering from rare disease? We believe we can and we believe that can create significant value. So our platform is structure-based drug design, and this has been around for decades. Many companies do it. What's unique about what we do at BioCryst, is where we apply it. We go after validated targets, but targets that -- in order to get an oral drug for a rare disease come from large families like proteases. So it's not just good enough to have a potent inhibitor, you've got to have a selective inhibitor. And then, of course, to make it oral, it has to be bioavailable, and doing all 3 of those is hard. So let's start with potency, so in order to get a potent binder using structure-based drug design, you need to know the physical shape, so the pockets, the flat spots, the turns in the enzyme active site. You need to know the electrostatic charge. If it's a negative charge in one spot in the active site, you need to have a positive charge on the molecule to bind more tightly. And then you build it, atom-by-atom, chemical segment by chemical segment to fit tightly into the space, to create a potent molecule. Now wouldn't it be nice if the protein stayed the same shape when you put the inhibitor in it, but it doesn't, it has a confirmational change. And so one of the things that we've gotten really good at to deal with the confirmational change, in the protein shape, is we do something called 'crystallization.' So what we're able to do is, take the protein target and the molecule inside it and get the crystal structure and understand if any of the spots became less type binding, or other areas where we can make it an even tighter binding molecule. And so this is an important part of getting to a potent inhibitor. So selectivity is the next piece. And as I said, we go after targets that are more challenging, because they come from big families like proteases, there's more than 300 in the human genome and many or most of them are serine proteases. They're similar in shape and function, and so what is the trick to do, is to get it to bind to the target you're going after, but not bind to something closely related in the family. And so what we've gotten good at, is understanding the shape and charge of the other closely related family members, and we can specifically get it to bind to the target, but not the family members. So in the case of serine proteases in HAE, plasma kallikrein is the target, you want it to bind tightly to that, but you don't want it to bind to tissue kallikrein for example. And over the 30 years that we've been working at BioCryst, we built a really large database of other related serine proteases and understand the shapes to be able to be selective and specific to the target we're going after. And then last but not least, probably the hardest part of this, is oral bioavailability. And the reason it's hard, is because the things that make a molecule potent and selective, are the things that make it difficult to cross the gut and get into the bloodstream. So things like electrostatic charge and size and shape, make a drug potent and specific, but could get it stuck and not get it across the GI tract and get it into the bloodstream. And so again, our scientists over 30 years, have done a fantastic job of understanding the balances, of getting a potent molecule, a selective molecule, and having a molecule that can cross the gut as well. So the balance of all 3. And then the last piece is, have a long half-life, right? It's super important that not only is it oral, but that we can strive towards getting it to once a day like we've done with ORLADEYO. So this is what we're good at. This is something we perfected over the past 30 years, and I think it's something that's unique to being able to bring oral drugs forward for rare disease. The tools have improved as well in structure-based drug design, robust screening systems, databases that have all of the protein crystal structures, and then virtual reality to give you a better view of the 3-dimensional shape of an enzyme active site. We have access to all of these, so do others. But if you have the tools and you don't have the skills, you can only get so far. And if you have the skills and you don't have the tools, you can only get so far, and we have both, and we take advantage of both. So where are we applying this platform to get to the next oral drug for a rare disease or the next oral drugs for rare disease? And that's the complement system. And why are we going after the complement system; because it's rich with protein targets. And if you block one target in a pathway, you have the potential to affect multiple rare diseases. So that's what makes it really interesting. So the function of the complement system is to fight off the infection and be kind of a clearinghouse for damaged cells and tissues. And there are 3 pathways: the classical, lectin and alternative pathways. And when it's working, it removes -- it will tag pathogens and damaged cells and tissues and macrophage will come in and gobble it up. It activates or triggers inflammation by activating immune cells and then membrane attack complexes can get attached to pathogens and damaged cells and tissues and cause it to have poke holes in it and ultimately, these pathogens and cells break apart and [indiscernible]. So that's when it's working. When it's not working and it's dysregulated, it can create a number of rare disease problems in a number of different systems in the body. So rare neurologic diseases, blood and immune diseases, kidney diseases, skin and others. So we're going after the alternative pathway first. And you can see on the graphic on the right, the diseases that are associated with dysregulation of the alternative pathway. And the target that we're going after is Factor D, and I'll go over the data here in a minute, but we think we have potentially a best-in-class molecule. But we're also interested in other pathways in the complement system, the lectin classical pathway. And so we've come up, and you can see the disease is distinctly different diseases that we can go after for treating rare disease patients. And the target where we now have potent and selective molecules that are going into lead optimization in our discovery program are targeted to C2. And the binding affinity that we have to C2, is when C2 binds with C4 at the convergence of the 2 pathways select and classical pathways. And we think not only does this give us an opportunity to go after a bunch of other diseases, other than the alternative pathway, but it could be used in a disease like IgAN or PMN or lupus nephritis, diseases where 2 pathways affect the disease, we could combine our Factor D inhibitor and a C2 inhibitor, put it in one molecule and possibly be able to treat more patients. So we're really excited about advancing more targets in the complement system. So let's talk a little bit about the data that we announced yesterday with 10013. So we're still in a SAD, MAD, healthy volunteer study, but you can see from the slide -- this is Slide 30, that when you give a 110 milligram dose, you drop suppression of the -- or activation of the alternative pathway, and it stays at 0 basically through 24 hours on a single 110-milligram dose. And then the graphic on the right shows that there's, on average, at 110 milligrams at 24 hours, suppression of almost 98% of the alternative pathway. So we don't think that's the dose yet, but we think that this profile supports once-daily dosing, which could make it a best-in-class molecule. So far from a safety and tolerability profile, Slide 31 shows the treatment adverse events and any of the other tolerability safety summary data, it's still blinded. But what you see is there's no serious adverse events. There's no Grade 3, 4 adverse events, the most common adverse events in grade 1 and 2 are things like headache that you typically see in a Phase I study. And so far, we haven't seen any clinical abnormality. So, so far, so good, early still but looking good so far. So our goal is to wrap up the SAD MAD by the middle of the year and start a patient study in PNH to do dose ranging. And then from that -- the data from those 2 programs make a decision on what we believe is the best dose at the end of this year, so that we can go into a pivotal study in IgAN in 2024. So as rare disease programs go, this is pretty fast and then we're really excited about where we're at with 10013. And then lastly, in terms of cash, we're in a really solid position. We have -- at the end of third quarter of last year, $463 million on our balance sheet, where I told you we're expecting $320 million in net revenue this year. And if you take out the interest on the debt that we have, the net cash use is going down, because the revenue is going up and the cash is not going up as fast. So that puts us in a really solid position, especially as we continue to move towards the $1 billion in peak sales with ORLADEYO. So I started out by saying the way we create value is by bringing oral drugs to patients who suffer from rare diseases. We're creating that value in the marketplace today with ORLADEYO, and we believe we're on a path to $1 billion. and we believe we can repeat it over and over and over again. And that, we believe, creates meaningful value for patients and for shareholders. So with that, I'll invite some of my colleagues up to join me, and we'll take your questions. So let me just introduce who's with me, so that people who aren't in the room might know. Anthony Doyle, our CFO; Helen Thackray, our Chief R&D Officer; and Charlie Gayer, our Chief Commercial Officer.

Great. And as a reminder, if you want to ask a question, just raise your hand or send it to me in the portal. I will start with ORLADEYO, coming off a really strong year in 2022, what are the factors that you were considering when you put out your guidance for 2023?

So I think just the biggest factors is -- the biggest factor really is the consistent demand. So looking at, are we still driving new patients in the same way, as Jon described, patients switching over. So that's a big piece of it. Then patient retention, which we saw in 2022 really stabilizing. And then what percentage of the patients are we getting to paid therapy. So those are the real -- those are the 3 big pieces looking at, as Jon mentioned, we have access to all the data, and so that's what points us to no less than $320 million for the year.

And I think for '22, you came in slightly below the -- essentially like a point estimate you had given us with 3Q results for the full year number. Can you just walk through kind of what happened with the fourth quarter that led to that number not lining up?

There were 2 factors. So first of all, we ended the year, we ended the fourth quarter at the number of patients on therapy that we expected. What we didn't achieve quite to our expectations, is getting the number of paid patients. So we have a higher percentage on our long-term free goods of patient assistance program, than we'd anticipated. We think that's solvable because most of these patients are actually insured. And it's really just about giving the insurance companies all the information that they need to approve ORLADEYO for these HAE patients. The other somewhat lesser part of it is just, how many patients took shipments in -- particularly in December, and we're at the point where every ship day is about $1 million, right, where we are with the current number of patients. And so just 2 or 3 ship days made a difference at the end of December in terms of how many people took their shipments late in the year. So none of this has anything to do really with the underlying trends, which we see as being really strong.

And now that you've been in the market for a couple of years with this product, I know you kind of flagged some 1Q dynamics. Maybe you can talk a little bit about what those are and also whether there's any other seasonality or other variables to consider, as we think about the quarterly cadence in the year?

Yes. So the biggest thing in the first quarter and for those experienced in rare disease is no surprise. But most of the patients have to go through a reauthorization in Q1 from their insurance companies to get it reapproved. What that means is for some patients, as we're helping them through that process, they're going to step back to free product for a month or 2 before returning to paid therapy. So that -- the revenue we would expect to be similar to Q4, but the patient number will still grow. So what that means is for the year then, Q2 will have a higher growth. We'll sort of have the highest percentage growth in the year, and then small more regular growth in Q3 and Q4.

Can you tell us what ORLADEYO's penetration is in the U.S. market right now, and kind of what your guidance implies for how much higher that means you're going to go this year?

One of the slides, I forget which number it was that Jon showed in his presentation is, from market research that we do regularly every quarter with physicians, ask them what percentage of their patients are on all the different products. That survey is, I think, a pretty good approximation of market share, and our latest survey showed that ORLADEYO was at about 20%. With our sample that may overstate our actual market share a little bit, but I think that's pretty representative. The other number that we put out at the college, the Allergy College meeting in November, is that at that point, over 1,500 U.S. patients have been prescribed ORLADEYO. So they're not all still on therapy, but that was our penetration number across the whole patient base of -- as Jon was saying, about 7,500 diagnosed and treated patients.

So one of the questions I get sometimes, investors are trying to reconcile that market research number is. I think one of the slides talks about to get your peak U.S. number, that sort of implies 20% or 30% share. And if the current market research says you're already at 20% share, kind of how do how we get there?

Yes. I think that's where -- we always try to do big robust samples, but what's going to end up happening is more of the respondents in those surveys tend to be larger prescribers. So that's where I think the shares actually have been overstated. And so I think we will regularly do those surveys, and I think it's more a direction of where we're headed. The other key part of those surveys is, what do they intend to do over the next 12 months. And what we see at this point is that, consistently ORLADEYO is the product that they see growing the most. But you're right, to get to peak, if we get 2,000 patients on ORLADEYO stable, that's what gets us to about $800 million out of our peak sales estimate of about $1 billion. The other $200 million would come from ex U.S. markets.

And I think it was mentioned in the presentation that the persistence has kind of stabilized. What does it look like currently, and what percentage of the patients who start on ORLADEYO stay on it?

So what we see in our data is that if we can get patients to 6 months and particularly a year, then the persistence is really strong. So when we lose patients, we lose about half of those -- half of the discontinuations that we have, happen within the first 2 or 3 months. So the 1-year retention is around 60%, a little bit higher than that. Then once we get them to 12 months, that means that the patient has really got -- is having a good experience and most of them stay on long term. So our goal is, to get as many patients in the marketplace to try ORLADEYO and really trying to show both patients and physicians that that's a very low risk for potentially tremendous benefit of being able to take one pill once a day to control their disease.

And if half are coming off and half of those who come off or are coming off in the first couple of months, is there anything you're putting in place to kind of support patients in their first couple of months to kind of help them stay on therapy in the beginning and kind of turn them into one of those long stayer honors?

Yes. And the #1 thing that we can and are doing, is to make sure that the appropriate expectations are being set. So you saw in some of Jon's slides that there are really 2 things, 2 main reasons for patient discontinuation. One is breakthrough attacks, perceived efficacy and the other is GI side effects. You saw that from our clinical data, the side effects tend to go away within the first couple of months. So if it happens, we want the patients to know that this is possible, but if it happens, it tends to go away. And if you have a breakthrough attack, that's normal. If you're having persistent breakthrough attacks after 3 or 6 months, maybe this isn't the drug for you. It's not for everyone, but we want to make sure that no patient gives up too early, and that's where we think we can have more of an impact in those first few months.

So what's the current split among new starts between treatment naive patients and switch patients?

It's been remarkably consistent since launch. So again, you saw on the slide through -- I think we had data there through October. Roughly 50% of the patients have been switched from other prophylaxis therapies. The other 50% is switching mostly from patients who are diagnosed, but they were just treating their attacks acutely and then are coming over to prophylaxis, now that they can do it with 1 pill once a day. The smallest portion of that is, patients who are -- were treatment naive or newly diagnosed. In the U.S. market, it's pretty mature. So most of the patients, we believe, are already diagnosed and treated.

Yes. So that percentage is less than 10%.

Okay. What about the patients who are staying on injectables? Do you guys understand what their main reasons are to not go to oral?