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

Good morning, everyone. My name is Gena Wang. I'm [indiscernible] biotech analyst at Barclays. Welcome to our Annual Global Healthcare Conference in Miami. It is my great pleasure to introduce our next presenting company, BioCryst. With us today, we have Jon Stonehouse, President and CEO of BioCryst. We also have Charlie Gayer, Chief Commercial Officer. Before I dive into specific questions, maybe Jon, you wanted to give a brief overview about BioCryst.

Sure. Well, first off, thank you for inviting us to your conference this year. It's good to be here in Miami. Charlie and I are both going to be making some forward-looking statements and those statements at risk, and you can find our risk factors on our website. Yes. I think we're in a unique position as a biotech company, especially in a pretty challenging environment. We have product on the market that's been off to a spectacular start in terms of the launch. We're now in our third year, and we expect less than $320 million in revenue this year on our way to $1 billion at peak. And so that's a position of strength, we believe, and it puts us in a really solid financial position. And then we have a discovery platform where we believe we can repeat this and bring another drug forward like ORLADEYO to a population of patients suffering from rare diseases. And we think it can be as big or bigger. And so we don't think we got lucky with ORLADEYO. We think that it's a part of our scientific platform and our capability, and we expect that we'll do it again, and we believe we have the money to get there.

That's very good. So maybe start with your guidance, less than $320 million this year. Maybe if you can elaborate a little bit underlying assumption. And what could be the upside opportunity there?

Sure. Yes. So the no less than 320 is a number we're very confident in first off. And that confidence stems from a few things. Number one is the very steady pace of new patient starts. The steady demand that we've seen quarter after quarter really since the start of the launch and no sign of that slowing down thus far. The other thing that gives us a lot of confidence is that patient retention now that we're 2-plus years into the launch, we think we really see the steady-state pattern of patient retention. And once we get patients to about 6 to 12 months on therapy, we lose very, very few of them. And so all of this means that we're just -- we're growing month after month, quarter after quarter. And based on what we see in front of us, that's what gives us the confidence for this year and then draw a line through what we've done the first 2 years in the 320 and this gets us out to $1 billion at peak.

Okay. And then 1Q, I think you guided it could be flat, maybe a little bit reason on the seasonality there.

Yes, absolutely. And so, what we said was that we expect first quarter to be flat to possibly slightly down, not because our patients aren't growing, but because of just the headwinds of the insurance reauthorization process. We have a lot more patients on therapy this year than last year. And so all of -- not all of those, but the majority of those have to go through a reauthorization. And so what that means is, for some of these patients, they temporarily step back to free product. And so that's the biggest driver of the flat to down. Then the other kind of pieces of that is that copayment assistance for commercial insurance. We have the largest hit of that in Q1 as well as the Medicare donut hole. So that's why we're setting that expectation, but it's, again, confidence in the noise 320 for the year.

Okay. And you mentioned that you maintained the retention rate and then you started -- when the patient beyond -- once they reach 6 to 12 months, they stay [indiscernible]. So the compliance rate, you maintain at [ 19 ]%, right? And then what will be the -- I think retention when we look at since the launch until now, we had some deterioration compared to initial was in the 70s, now it's around 60. So what led to that to help the slight decrease in terms of retention rates?

Yes. I think time gave us a better understanding of the pattern. So in the early days, it was just too early to see the settling out. We didn't have patients on for a year. Now we have patients on for 2 years or more in some cases. And so what we've seen now after 2 years is a really settling out and stabilization of the pattern. And the pattern is what you described the 50% of the patients that discontinue in the first 2 or 3 months. And then there's less between 3 months and 6 months. And then after 6 months, a lot less, and then after 12 months next to none. And so it's not like we have patients on for 2 years and all of a sudden, we're losing a bunch of those patients. That's very, very rare. So basically, once we have a patient on for 6 or 12 months, they're on for a long period of time.

Okay. Okay. That's very helpful. And then the -- what is the percentage of the current patients on free drug? And then how do you see this change for the remaining of 2023?

Yes. So first of all, by strategy, we put in a pretty generous free drug program because we wanted to make sure that patients had a chance to experience ORLADEYO, we didn't want the insurance process to be a barrier to that. And so that's worked very well. But what it's meant is that by the end of last year, close to 30% of patients were on longer-term free rent. Now most of that 30% actually has insurance and like most of it is commercial insurance. And so we believe that a lot of those patients, we can convert over to paid therapy. It's really then the reasons they're being denied, the main reasons are because the -- basically, the prior authorization was incomplete, with the physicians haven't provided all the information required, whether it's lab tests or a very complete patient history and justification. So what we're doing is we're really expanding our help for those physician practices to help them put patients -- get patients over to paid therapy. And that's part of our plan for this year. It's a smaller part of the no less than $320 million. But over the long term, we expect to get that free drug percentage down into the teens and maybe closer to 10% over the next few years.

Okay. So the -- usually how long when patients on free drugs, usually how long they will be on drug before you were able to convert it to commercial?

For a new patient starting, actually, the average patient would be on free drug for only about a month before we get them over to paid therapy. If they are denied by the insurance company though, that's where some of these patients end up on the longer-term free drug. So the majority of them do get paid. But as I was describing, we've got kind of this backlog of patients that we think that we can really improve that percentage over time.

So that 30% is a long-term patient on drug or...

Correct.

Okay. And then how would you -- like how kind of thinking like -- you did mention how that converted to their teams, but what extra steps you need to do like communicating with the...

How do we fix it.

Yes. The real steps, the most important steps are kind of what I was describing, which is having a very clear clinical justification of why this patient needs to be on ORLADEYO. And so that some of these patients are denied simply because all the lab tests have not been provided. And sometimes physicians get frustrated with that because it's a genetic disease and the lab tests don't change over time. but insurance companies still require that on a frequent basis. They require updated tests. So that's the number one thing. Number 2 then is writing a very comprehensive letter that describes the patient's history, describes if they bid on ORLADEYO, how they're benefiting from ORLADEYO and then resubmitting that to the insurance company. Sometimes it requires getting a peer-to-peer authorization or consultation to explain why this actually is necessary. So it's doing that hard work that for a lot of physicians, they're very busy. They don't always have staff to help them with this. And so we've added to our team to be able to help them get patients on to paid therapy.

Okay. Good. Like how frequent you interact with those like patients on free drug with the doctors like from BioCryst perspective, helping them?

Very, very frequently. And we have kind of 3 different touch points. The -- with our specialty pharmacy, the care coordinators are interacting with patients on at least a monthly basis. And then we have 2 teams on the BioCryst side. We have our market access team that is out there in the field, and they're working with the physician practices. And then in the last year, we've also added a patient access specialist team, and they work very closely with the patients and to some extent with the practices. But it's making sure that all of this is pulled together so that the insurance companies get what they require to get to the paid therapy.

Okay. And we discussed all different data points. What would be the important data point that you gauge the long-term growth potential? And then also what data point change can change the, say, 2023 guidance?

I think the data point this year to look for is revenue and particularly the no less than 320 at the end of the year, plus what we say about the consistency of demand. If we keep seeing what we've seen over the last couple of years, there's consistent demand, the good patient stable patient retention that we're talking about, that's what's going to get us there. Things that could change this. I think there's one piece of this launch that hasn't been -- where we haven't had quite the same drive that we thought, which is coming from patients, most of the prescriptions now the doctors are driving the conversation. If we can get more patients aware and asking about ORLADEYO, the doctors already prepared and ready. And so I think that's something that could add more of a tailwind to this launch.

Okay. So the main driver will be the more new patients come to this?

That's right.

Yes. What is your estimate of penetration rate for the protein market?

So we think in the U.S. at this point, based on our research that at least 70% of patients are on prophylaxis. That's grown from about 60% at the time of the ORLADEYO launch. It's been part of a long-term trend that was already there prior to our launch, and then I think ORLADEYO's accelerated. We see that in the U.S. growing to 80%, maybe even to 90% of patients. So out of the 7,500 diagnosed and treated patients in the U.S., we would expect that at least 80% of them possibly more, will ultimately be on prophylaxis.

And was your question -- what percentage of ORLADEYO [indiscernible].

On ORLADEYO, well, at peak, we would expect 25% to 30% of all patients, so not just a prophy, but that's -- when we get to the $1 billion, which would be $800 million in the U.S., $200 million outside the U.S. that would equal about 2,000 patients on long-term stable therapy with ORLADEYO. That's what would get us to $800 million. So pretty simple and achievable from a share perspective.

And in the fourth quarter, in our promotional material, we said that in the U.S., 1,500 patients have tried ORLADEYO so that gives you some sense as well. So about 20% of the market has already tried.

Okay. Good. Now Europe launch update.

Yes. So all signs that we see in Europe gives us confidence in this $200 million at peak for ex U.S. sales. We haven't broken it out yet. We may do that -- we will do that at some point when revenue reaches about 10% of ex U.S. reaches 10% on a steady-state basis. But we've launched in Germany. We've launched in the U.K., we've launched in France, the Nordic countries and the uptake that we're seeing looks really good. There's a trend in Europe more towards prophylaxis like in the U.S., probably won't ever reach that 80% rate, but we see it growing north of 50% in Europe and ORLADEYO is contributing to that.

What is the price in Europe the average? I know each country will be different relative to U.S.

The best way to think about it is -- it will take about 3 to 4 ex U.S., European patients to add up to 1 U.S. patient. So it's 25% to 30% of the U.S. price is about the average net price for Europe.

Okay. Will you share U.S. ex U.S. revenue breakdown at some form?

We definitely will. And that could happen this year, but once we hit about that 10% of all global revenue, we'll break it out as ex U.S. versus U.S.

Okay. The pediatric patient sNDA and update, maybe.

So our trial is underway. It's a relatively small trial that we need to have, so about 20 patients, open label, and we've developed for pediatric kind of -- it's a granules formulation, so it's easier for kids to take. You can just put it in yogurt or other soft food and makes it very easy for them to take. And so it's a few years off before we have the sNDA, but we know that patients and particularly their parents are really looking forward to having an oral option for the kids because doing injectables for kids. And fortunately, most children with HAE aren't as symptomatic, but when they are, they really need prophylaxis. And to be able to do it with an oral will be a huge benefit for them.

Yes, we're really excited about this because talk about unmet need. I mean, if you've ever had a child that you've had that have an injection given and think about that every 2 weeks or every 4 weeks, it's pretty dramatic and to have something that's so easy to take. I mean, families are really excited about this. And it's a patient for life that we get with this formulation, and it's a hereditary disease. So the carryover effect to possibly other members of the family, we think could be great. And it's just -- but the best part is it's a high unmet need.

Yes. And maybe one last question on ORLADEYO regarding the $1 billion peak revenue assumption and given all the competitive landscape, new therapy comes seeing or less frequent dosing [indiscernible] and oral possibility and maybe in the future a gene editing once and down, how do you see the alley regarding reaching the peak revenue and maintaining like what certain market share can maintain?

Yes. So I'll go back to what Charlie said earlier, that we need about 2,000 patients in the U.S. to stay on drug to get to 80% of that $1 billion and then the rest comes from outside the U.S. And so that's not crazy market share, right? That's 25% to 30% market share, and we think it's very doable. In terms of the competition, it's really interesting, right? The real competition with orals is in acute or on-demand therapy. If there's a -- if you have a breakthrough attack on ORLADEYO and you can take an oral, I think that's a really interesting option. So that's not a threat that might even be a help. And then I think on the injectable side, what we're excited about is if those companies start talking about convenient dosing and less frequent dosing, we're going to say, what's more convenient than a once-a-day capsule, right? Try ORLADEYO before you try these others. And that could break through some of these docs where they're like, "Oh, this patient is controlled, I don't want to switch them.” And they're all pretty far off. The first injectable -- next injectable comes late next year, and the rest of them are many years out, that gives Charlie and his team a lot of time to get patients to try our drug.

Okay. Good. We switch gear to your oral Factor D program. So maybe are you able to disclose what were the dose related finding in nonclinic chronic tox study?

Yes. So let me be clear on what we've seen. So it's observations in the ongoing chronic tox study. So it's a study that's not completed. We're continuing to run the study. We'll run the study, and we'll do the work to figure out what the answers are with regard to what we find in that study. So it's observations in a chronic study. What's perplexing to us and makes it more challenging to understand is that we also did a 13-week study in the same species at a similar dose. And in this chronic study in a time frame within the 13 weeks, we're seeing this observation where we didn't see it in the 13-week study. So in the earlier study, we didn't see it in this study we did in the same time period. So that could be law of small numbers, but that's unusual in toxicology study. So it's not something like the longer we study it, the more we see these [indiscernible] so that's an important distinction.

Which species is that?

We haven't said, but you need 2 species in chronic [ tox ] 6 to 9 months, and we haven't gotten into that detail because it's an ongoing study, and we'd like to know more about...

Usually loading [indiscernible].

We haven't gotten into which species that is.

But you saw in the same species and then 2 different studies, same period, the first one you didn't see in second you see.

Correct. Which makes it more complicated. So our view is we've got enough out of the sad and had healthy volunteer study to get an idea of where we could start on dose and then do dose ranging. And so at the end of the day, clinical data trumps nonclinical data with regulators. And so being able to go in and study this in patients where the benefit risk is probably more important is really the strategy to move forward. So we expect that we'll go into a study like PNH in a country where there aren't a lot of options for other therapies and be able to dose slowly upwards. So the key to our disclosure was all around the speed at which we can get to finding a dose at this point in time. We'll have to go a bit slower.

Okay. And Jon, if we take one step back, the modification that the next-gen 10013 versus the previous 9930. So what are the exact modification that if we're just talking about once-daily dosing versus twice-daily dosing, I think that that's not sufficient. It should be something also more safe, like the efficacy parties also should have a significant improvement, so that this next gen will have opportunity there? And can you share a little bit more color? I know the technical detail never share but what will make us confident this next gen will not face the same issue, safety that actually preventing the first gen to be able to dose higher to show better efficacy. So how will we be confident this next gen would not have the same issue?

Yes. It's a complete same backbone, but very different molecule I mean, so you said it 9930 at a dose of almost a gram and it was dosed twice a day. This 10013, we're looking in the hundreds of low hundreds of milligrams, maybe 100 and something. And so -- and once a day dosing. So clearly different pharmacokinetics in terms of the 2 drugs. So there are absolute differences. And I think what we should all have confidence on, including BioCryst is can we find a safe and effective dose. It's not good enough, as you said, to have once daily dosing, if you don't have an effective drug, that's not what we're shooting for. We're shooting for similar or better efficacy with a once-daily dose. And we think that is a differentiated molecule and option for patients. And if we get there, then it will be a huge success. If we don't, we'll move on to something else.

And when we say similar to better, we mean similar to what else is out there, not similar to 9930...

Novartis [ so they stay ] in the bar now, yes.

Yes, we were hampered by how high we could go in the dose, and we were already at 400 milligrams twice a day. We don't have the same issue with 10013, but we still -- it's an early program and there's still risk associated with that program.

Okay. And was this [ NMO ] finding, like how long do you think that will resolve or like what kind of data points you want to collect to make comfortable so that you can move forward?

So completing the tox study is an important piece of figuring out what's going on. But I also think that the clinical data I referred to earlier, getting into patients and seeing if we can get to a safe and effective once-daily dose is more important. And so that -- I think if you're looking for what are the next key steps it's our ability to get into that study and announced that we started dosing patients perhaps in PNH with 10013, -- that will be an important step. And then the data coming out of that will be even more important step.

So for that 13-week data, thinking what dose is that like if we translate that to clinical relevant dose is much higher than the therapeutic like within the therapeutic a much higher dose or...

So the observation that we have is dose dependent. So you can imagine that at higher doses than at the lowest dose. But we haven't gotten into the specifics around the human equivalent. But you can imagine, that's why it's important to do the dose ranging in patients is to find out what dose is effective and safe. So that's why that's the next step.

Okay. So maybe I will ask it differently, like what kind of data or condition you would discontinue 10013?

Yes. If we believe we can't get to a safe and effective, once daily dose will kill the program. Okay. That's helpful.

But that will be based on the [ NMO ] data or you will still try to go back to the [indiscernible]...

I think going into patients is the key. If something goes south in the nonclinical study beyond what we've seen so far, that could be a reason to stop. But I think right now, we believe that getting data in patients is the most important next step.

Okay. Good. Maybe one last question, cash runway and maybe I'm glad you don't have exposure, but now it's all [indiscernible].

Yes, so no Silicon Valley Bank exposure just to make everybody comfortable. Yes, we have $440 million in the bank as of the end of the year, last year. And we're generating less than $320 million in revenue and our expenses -- operating expenses are flat. So the cash use is shrinking every year. And it's only going to get better as we keep increasing the revenue and stabilizing the expense. So I can't predict when we'll get to profitability, but we're in a much stronger position than most companies.

I think there's some investor thoughts on profitability part, so why focusing on the oral factor D when we have actually strong competitors out there, you’re a little bit behind why not focusing on turning company into profit -- profitable? Like what would be your thoughts on the vision for the company in the future?

Yes, we want to be really profitable, right? And so you can do that when you have more than one molecule. And I think we've shown the discipline around stopping programs when we don't think we have a competitive profile. So we'll be very focused and careful in the spend. And I think our dependence on the capital markets is decreasing every year. And so we feel really good about it. ORLADEYO by itself is profitable as we speak, it was profitable last year, but it's going to keep getting better each year, and we'll be very thoughtful about where we invest that can create another ORLADEYO.

Okay. That makes sense. Well, I think we are running out of time. Well, thank you very much and look forward to the update later…

Thank you for having us.

Thank you.

Thanks, Gena.