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

Good afternoon. Thanks for joining us. Welcome back to the Bank of America Healthcare Conference. I'm Tazeen Ahmad. I'm one of the Senior SMID biotech analyst here. It's my pleasure to have our next presenting company, BioCryst Pharmaceuticals, which, as a point of trivia, is one of my longest covered names, both as a lead and as an associate analyst. So I've known Jon now many years. Sitting next to me is, of course, CEO, Jon Stonehouse. Welcome back to Vegas, Jon. Thanks for coming.

Yes. I -- we were talking about how many years. It's probably too long to admit, but it's great to be back here.

Yes, we're always happy to have you.

Thank you.

So maybe for those folks who aren't as familiar with BioCryst, could you give us a quick 2-minute summary of the company and then we can go into Q&A?

Sure. So I will be making some forward-looking statements, and John Bluth would get angry if I didn't say that those have risks and the risk factors can be found on our website. Yes, we're in a really interesting spot. We have a product on the market that is an oral, once-a-day drug in an injectable market in a rare disease. And we've gotten off to a fantastic start in the launch of that drug, and we're now entering our third year. We expect no less than $320 million in revenue in the third year. For a rare disease launch, I think that's pretty impressive. And we're on our way to $1 billion at peak sales. And so that, by itself, is unique. But we also have a discovery engine at our discovery center in Birmingham, Alabama, and we believe that we can create another ORLADEYO in that discovery center. We weren't lucky. We believe that it was our second-generation kallikrein inhibitor. There's only been one plasma kallikrein inhibitor that is a once-a-day prophylactic therapy that made it to market. Five tried and failed. Our first one was one of those. And so we think we can do it again. And we think with the capital that we have through the growth of ORLADEYO, the recent refinancing of our debt with Pharmakon, and then the great science in the company, we have the potential to build a really valuable company.

Yes. So you have had a great launch with ORLADEYO. I think when you initially come out of the gate, meaningfully beating expectations -- expectations or that you just do that to perpetuity, but that necessarily can't be done at the same pace. So for those who may not have fully appreciated the first quarter's results on the -- I guess, the tenor of the rest of the year, maybe let's talk about what you saw in terms of uptake, where most of your new growth, let's say, in 1Q came from.

Yes. 1Q was a really good quarter for us. We crossed -- just recently, we crossed the 1,000-patient threshold in the United States, which is impressive, but with 7,500 diagnosed and treated patients in the U.S. with HAE, there's still a lot more to go, so that's exciting. The growth rate in new patients was 46% year-over-year. The net patient adds, on average each year, has been around 300 patients. That's a nice steady trajectory. And so we feel like there is no loss of steam, plenty of opportunity. And it makes sense in an injectable market where you can take an oral once-a-day therapy, why wouldn't you try it. So -- and this is a highly competitive market. There are 8 therapies that have come on to the market in the last 12 years. And so it's a well-served market. People's disease is controlled, so doctors don't see them as often. And then we got to convince them to switch. And that takes a little bit of effort, but we're making some great progress.

Okay. So we talked about the importance of your drug being the only oral available in the market. But as you said, this was -- even though it's a rare disease, it's a pretty crowded space when you entered. And it seems like other companies continue to explore similar or other modalities and all the way, including gene editing. And as you think about the future growth potential of ORLADEYO, what do you think needs to happen in order to reach that $1 billion target? It's not an unrealistic target given that at year 3, you're already at $320 million. But is it going to require that people stay on drug at a certain percent? Or is it going to require just a lot more throughput in terms of new patients coming on? Or is it both?

Well, let me describe what it'll take mathematically. This might help you. So of the 7,500 to get to 80% of that $1 billion coming from the U.S. and 20% from the rest of the world, we need about 2,000 patients in the U.S. on our drug for a full year to get to the roughly $800 million. And so from a market share perspective, that's somewhere between 25% and 30%. That's very reasonable. So then the other questions are, will we keep these patients on? And one of the things we're finding is that -- and this pattern is really stabilized now going into the third year of launch, if you've been on ORLADEYO for a year and you're benefiting from ORLADEYO, the likelihood that you'll stay on ORLADEYO is really high. The attrition rate after a year is 1% to 2%. So if that continues to stabilize, and we keep adding more of those 7,500 to try it, we'll lose some because it doesn't work in everybody. But you can see the math, you can get to 2,000 pretty -- from a pretty straightforward perspective. And then with new competition, we've done, I think, more market research than anybody in this space, both before the launch and since the launch. And we spend a lot of time trying to understand switching, which is a switch market. And it's a sticky market, right? People -- if you're controlled, this was -- there's still a decent amount of Cinryze sales out there where you infuse twice a week. Why is that? Because it saved that patient's life, and they don't want to take the risk of going off that therapy. So what's the incremental benefit of any new therapy to switch off the old one? And with ours, it's the oral, right? If you're controlled on our drug and you're taking a once-a-day drug, what incremental benefit do any of the other therapies offer. And with regard to gene therapy, I just think there's a lot of risk. I talk to a lot of patients and physicians, and while the thought of a cure is appealing to a lot of people, the risk associated with what gene therapy could do scares them. And so we think we can hold on to share and build share over time even with competition, new competition.

Okay. So I think you might have made a comment about -- the $1 billion is totally reasonable. It might just take longer than people than had previously anticipated to get there. Maybe give a little bit of color on why that is.

There are 2 main causes. One is that this point of satisfaction with your current therapy. And we've got to work with every doctor and every patient on what is the benefit to switching to oral, and word of mouth is starting to spread and patients are saying the oral drug has changed their life. They're taking a capsule a day like their daily vitamin instead of looking at their medicine in the refrigerator, sticking themselves with a sharp needle every 2 weeks, once a month, whatever it is. And so they forget they're sick. That is a huge benefit. And then what's the risk? The risk is you go back to your old therapy if it doesn't work. It's not like there's not rescue therapy if you have a breakthrough attack. And so the risk is really low. So why wouldn't you try it is a really big piece. The second piece is because these people are under control, the doctor doesn't see them as often as they did 10 years ago. So they may make a decision that, yes, I'm ready to switch some of my patients over, but they might not see them for 6 or 12 months from now. So it's just -- it's a longer cycle time. And that's why it's not a hockey stick. It's more of a straight-line steady growth to peak.

Okay. Got it. Now what is your view about patients in the future that you will add? Are they going to be still mostly switch patients? Or are they going to shift more to treatment naive?

Yes. There are 2 populations of switchers, I would call. They're very few newly diagnosed that aren't on any therapy. Very small, like 100 or fewer patients a year. So it's a switch market, and they come from, either on-demand therapy where they're treating their attacks with injectable therapy, or they're on another prophylactic injectable therapy. And right now we're getting about 50-50 of the new patients each quarter. Half are coming from prophylactic switches, half from on-demand. But the on-demand population is shrinking. You have 3 companies, Takeda, CSL and BioCryst are all promoting prophylactic drugs. And so more and more patients are switching to prophylactic. And it's 70-30 now, prophylactic to on-demand. We think it could go to 80-20 or even 90-10. So eventually, it's going to be more prophylactic switches than on-demand therapy switches.

Okay. And where, in particular, would those switches be coming from? Like, what other drug are they switching?

I -- they come mostly from Takhzyro because that's the market leader. Those happen to be the patients that actually do the best on our drug, too, which makes sense. If you're controlled on am antibody that reduces kallikrein, why wouldn't you do well in a small molecule that reduces kallikrein. So -- but we get Haegarda switches as well, and then some Cinryze switches.

Okay. You also recently started a pediatric study. I think you called it the APeX-P for pediatrics.

P.

Why is it important for that ages 2 and above, 2 to 12 to be addressed?

Yes. It's really important, right. If you're a parent, you definitely know that your children don't like to be stuck with needles. And so it's traumatic for a 6-year-old or 8-year-old to have to get an injection every 2 weeks. And so we've been having parents chasing Bill Sheridan, our Chief Medical Officer, and I down at meetings saying, "Where is the pediatric formulation?" And we have a really interesting formulation that's -- looks like cake sprinkles almost. It's called granules, and it's in a little packet sachet that you sprinkle on yogurt or apple sauce and you can take it very easily for children, so a massive unmet need for this population. It's small. It's probably 500-ish patients in the U.S. But this is a patient for life. It's clearly a segment we should own. And there's a -- I don't know if I want to call it a halo effect, but a follow-on effect, where we've seen with adolescents, a 13-year-old does really well on our drug. And also on the mother or the dad who has HAE says, hey, maybe I should try this drug. My son or daughter are doing really well. So we think there's some carryover to the family, since it's a hereditary disease.

What percent of the HAE population is pediatric?

It's about 500 patients in the U.S. So it's pretty small, less than 10%.

Are they easily found?

Yes. The diagnosis -- most parents that have HAE get their kids tested, I think, within the age of 2 years. And it's a C2 test, C4 test and...

And are there breakthrough attacks similar to what adults get?

It depends on the child. I would say, in most cases, kids don't start having attacks until puberty and hormonal changes are taking place. But I know some families that have really young kids that are 5 years old that are having multiple attacks per week, so it can be awful.

Okay. And what are they mostly on right now?

Takhzyro's -- I think, has approval now down to 2. And Cinryze, of course, is available as well, but they're injectable therapies, right?

Okay. All right. So maybe let's, like, move to the pipeline for a few minutes because there's a lot going on there.

Sure.

Maybe with 10013, can you talk about why you chose to prioritize this particular molecule in your pipeline?

Yes. So let me just back up just for 30 seconds and say, what we're trying to do is, what I said at the beginning, which is show that we can bring forward another ORLADEYO. And so we believe serine proteases are something we're good at, and the complement system is full of them. And so -- and we believe there's a lot of rare diseases with one pathway that we could go after. And so the alternative pathway is where we started. We had early discovery efforts years ago in Factor D, and we started that back up again and came up with 9930, our first generation. That didn't work out. Didn't have the profile that we wanted. And so we switched to 10013. And the reason we really like the potential of 10013 is it could be a once a day drug that controls disease in the alternative pathway. And so we think that could be a best-in-class molecule. It's early. It has risk. But if we get there, we think it could absolutely be another ORLADEYO.

So complement system has now become pretty popular just because of some other companies that have gotten data, positive data in diseases of the eye, for example. As you look at the different potential targets within the complement cascade, both the classic and the alternative, how are you deciding on what you would want to focus on at BioCryst? And what part of your science is best suited for complement-mediated development?

Again, I think small molecule serine proteases is something that we've shown we can do. But that -- and C2 is another target that we're really interested in, and we have program going right now where we're trying to optimize a lead for an oral C2 inhibitor. And then the other idea is the terminal part of the pathway. We think there are some really interesting serine protease targets there as well. And then lastly, combination therapy. One of the things we're hearing in renal diseases is that you got to hit both the classical and lectin and the alternative pathway. And so how do we address that? And so we're looking at all of that. And because there are multiple diseases with one target, there could be lots of opportunity to help there.

Have you talked about what particular diseases you think you'd want to target nearer term?

I think the renal diseases are most interesting to us. We're going to -- in the dose-ranging patient study, we're looking at PNH because you get an answer really fast. You look at the hemoglobin, you look at the LDH levels and you can get an answer if it's effective or it's not effective quickly in a small number of patients. But diseases like IgAN, where there's actually a really interesting subset of the total population that the alternative pathway plays a bigger role, could be really interesting with an oral once-a-day drug.

Yes. You mentioned PNH, which, similar to HAE, is a pretty crowded space. So is it your view that the same formula that you use for HAE, it would be an established market where you could find the patients, but you'd provide the oral option, that would be the same reasoning for wanting to pursue PNH? Or do you think that you could also provide an efficacy advantage?

I think PNH is one of those that really gets us a near-term answer. I think things like IgAN, C3G, aHUS are all indications that are probably more attractive for a once-daily oral. We got to have -- so yes, we want to replicate the ORLADEYO commercial success by having something that there's an incremental benefit. We think once-a-day dosing and similar efficacy could be that incremental benefit.

Right. So Factor D is something that we've talked about before. As a target in the complement cascade, I think other companies have tried to look at it in various different ways. What are you doing differently that gives you confidence that this should be one of the areas of the cascade to focus on?