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

All right. I think we'll get started here with our next fireside discussion. So my name is Derek Archila. I'm one of the Wells' Biotech analysts. Next up, we have BioCryst from the company. We have Anthony Doyle, who is the CFO. Anthony, thanks so much for joining us for the discussion.

Yes. Thank you for having us. And just as a reminder, we're making some forward-looking statements, and you can find our risk factors on our website.

Go through the disclaimers.

I got to put the disclaimer on in there. [indiscernible].

Maybe just to start out, you provide a little bit of background about the company, your commercial stage, and maybe a little bit about your pipeline, we can dig into some of the questions. .

Sure, sure. So we are based out of North Carolina, and we have a Discovery Center of Excellence in the Biotech Hotbed of Birmingham, Alabama. We have a commercial drug in ORLADEYO, which in its first year, did $120 million; second year, $250 million, on a path to now less than $320 million this year and onwards to $1 billion at peak. So a great launch thus far and strong trajectory from here. And then to your point on pipeline. So we have both pipeline in terms of our -- we're going to have a pediatric indication for our commercial drug ORLADEYO. We have an asset in which we are going after proof of concept in a PNH indication, which will lead us to renal diseases. And then we're really excited to have an R&D day planned for November 3 in Birmingham, where we will unveil numerous new molecules that we are looking to bring through the development cycle. So very exciting time for the company.

Indeed. Well, maybe I'll start with ORLADEYO. Sure, we'll spend a fair amount of time here. But as you said, launch going very well, continues to ramp. I mean what's kind of been the main driver you think of kind of the performance? And as you kind of start thinking about getting to peak, right? So you're almost like 30% of the way there. How do you kind of continue to push to get to that $1 billion peak sales number.

Yes. So it's a differentiated drug. So it is an oral once-a-day pill for patients with HAE in a market where at the moment, there are only injectables. So from a burden of treatment perspective, really, really well placed. I think the first year surprised some people. It didn't surprise us, right? We had done a lot of market research and ascertained where we thought we were going to be. So it was great to see that play out from a trajectory perspective, that's a little bit of a slower burn. What we have seen is continued steady growth for the product. Patients are generally going to get in to see their doctors maybe once, maybe twice on a per annum basis. So it's predominantly a switch market. We have seen about 50% of patients come from existing prophylactic treatments. And the remainder come from patients who are mostly using acute or rescue medication to treat attacks as and when they occur. It's been great to see the hypothesis that we had laid out prior to launch play out. I think in terms of the trajectory going forward, it will continue to be steady growth, right? There's absolutely some opportunities in terms of free drug transition to reimburse but the steady growth both here in the U.S. and then ex-U.S. as we get into more and more countries and territories around the world is what leads us to firmly believe that there's a strong path to get into that peak of $1 billion.

Got you. So maybe just kind of more on the market dynamics. So I mean, obviously, you said it's a switch market. But I guess, can you kind of frame for us, obviously, like also new starts and kind of like where are the buckets of most of the ORLADEYO patients are coming from? And again, also, which one do you kind of see as kind of the growth driver? I mean is it more about again, moving these patients who were taking acute meds maybe less frequently, not taking much unless they have some sort of attack and getting them more on protein type treatment. .

Yes. It's both. So to date, it's probably been 50-50. And patients who are well-controlled on other prophylactic treatments are great candidates to be well-controlled on ORLADEYO. We've seen really a transition of those patients to successful patients of ORLADEYO with strong retentions into the year and then even longer than that, where if a patient is going to drop but it usually happens within the first 3-month time frame. But for patients who've been on the drug more than a year, the retention rates are really, really high. So I think it seems counterintuitive sometimes, but those patients who are well-controlled on a Takhzyro or Haegarda, they are the best candidates to be well-controlled on ORLADEYO. There's still a bit of a hesitancy in terms of if it's not broken, don't try and fix it, and these patients remember when there were no treatments available to them. So there is a hesitancy in certain regards to switch. Some of it will take time, additional evidence that we've been able to generate from a real-world perspective, but the switch market will continue to be important to us. And then on the acute side, Again, there's no more well-positioned drug from a burden of treatment perspective. [ Danozol ] in the market where if you are taking acute only and you're having attacks to move to a prophylactic treatment, and I think doctors, KOLs, et cetera, that would advocate for patients to use prophylaxis for the treatment of HAE. So if you're going to do it for the first time, then go into a once-a-day oral as opposed to an injectable, I think it's just the right play. The market continues to go that way. It was 50-50, 60-40. It's probably 70-30 now in terms of prophylactic-acute treatments. There's about 7,500 patients diagnosed and treated here in the U.S. So there's still a lot of room for us to grow in both of those regards.

Got you. And just going back to your comment in terms of like the discontinuation rate, it happens fairly early. Like you said, what's that kind of trended over since the launch. Like has it been pretty stable? Is it growing, shrinking, what?

I think it has been stable. And if you can bifurcate it into those patients who are new to ORLADEYO, what we've said is that there's a 60% retention. So if 40% of patients are going to discontinue within the first year, again, most of that's going to happen in the first 3 months or so. And we've been working on education and making sure that we can meaningfully move that down, about 50% of that is going to be due to a perceived lack of efficacy, and then the remainder due to other factors, including GI impact. And I think doctor and patient education to make sure that they know what to expect when they're going into it because if that's a surprise to you. It's a really bad surprise. And we've seen drop-offs where patients haven't kind of worked through some of those GI impacts. Others who have and have come out the other side and usually they're mild and can be treated and worked through. We've also seen some boomerangs where people have come back and kind of said, "Well, maybe I didn't give it in that fair try, because I've talked to somebody else who -- same thing happened and then they did work through it. So I want to see if I can get on to the other side of that. So that's the kind of first year. And then if you get through the first year, the retention rate skyrockets. And as long as you can be well-controlled on our drug, patients are having a great experience. And I think it's life-changing to patients who have been seeing the medication in their fridge and had some issues with travel and when do I go and how do I take it, et cetera. So the freedom that a once-a-day oral bring. I think really well received, and I'm hopeful that we'll continue to see strong growth into the future.

Got you. I guess from the learnings of the last couple of years since launch in terms of that mitigation strategy, maybe around GI or this perceived lack of efficacy. I mean, are you kind of arming docs with certain education things like what are you doing to do that to lower that rate? And then also, is it just that some of these patients tend to be like late responders, like would they eventually like actually start to see efficacy beyond 3 months if they actually start -- if they stay on the drug? .

Yes. I think the education first and foremost, as to what to expect. Again, if these things come as a surprise, I think we've had some patients not know if actually they were just having GI side effects or if they're actually having an attack -- gas or attack. And so making sure that people are eyes wide open as to what they're going into has been most important and then explaining how they can be treated, how long those GI effects might persist and highlighting patients that have worked through and come out that other side. I think in terms of the not giving up too early, that's been some of the primary education that we've needed to do. In terms of patients having a perceived lack of efficacy, one of the biggest drivers for having HAE attacks is stress. And moving from one medication to another medication could be a stressful event. And so there are some things that we've talked about doing in terms of maybe it's a co-prophy type approach at the start and then kind of leaning over into solo-prophy on our drug, there are some things that we can do to try and mitigate that. But at the same time, the drug is not going to work for everybody. None of the drugs in the space do. But for those who does work for it works really, really well. There's a really high efficacy rate from our long-term safety data. And so our approach is just to make sure that everybody have to give the drug a trying, everybody who wants to be treated with a once-a-day oral gives it a fair shot.

Got you. Like how do you like solve that anxiety from a patient like you said, like that you make that switch. Again, is it like that co-prophy -- are you putting it on top of other therapy .

Yes, we've tried to bunch of things. .

What are the types of things that position they're doing to kind of mitigate that anxiety.

Yes. I think presentation of data in terms of what has worked previously in showing that the drug does work. Co-prophy be a good strategy. I've learned from my personal life telling people not to get stressed here, that generally doesn't work. So a lot of it is that real-world evidence and maybe getting them in contact with other patients who have gone through the same thing and have come out well on the other side and what are some of the lessons learned, what have they seen? . I think overall, just education and awareness, there can't be enough of it. And the more we arm patients and doctors alike with that, the better the outcomes that we've seen.

Got it. So maybe just talking about, I guess, the different geographic areas and kind of the opportunities you view for ORLADEYO, like again, U.S. and ex-U.S.?

Yes, U.S. is the biggest opportunity. And so for the $1 billion peak, about 80% of it will come here in the U.S., and about a 27%, give or take market share is what we need to get there, and we're on a strong path and trajectory to get there. Outside of the U.S., to date, the focus has been on Western Europe. So the U.K., France, Germany, Nordics, et cetera. Drug is already approved, and we've gone through the market access channels to get to a point where we're selling into those markets. We've also had approvals in places like Japan and Canada, Japan, we're licensing Canada, we're doing it ourselves. And then other markets like Latin America, Middle East, Eastern Europe will use distributor relationships. And overall, what we expect is we'll be able to generate about $200 million in sales out of those markets at peak. It will probably be longer to get there based on the markets that we're not even in yet, that we need to get the peak in order to make those numbers. But overall, our expectation is to get ORLADEYO into all the countries where patients are looking to experience the drug and need that type of treatment. Europe will get there faster. It's a bigger market. It's a more experienced market. I'm talking about the prophylactic versus a acute shift. Europe is still. And other places are still behind in terms of acute medication is more prominently used. There are still countries that are using androgens to treat the disease day, which I don't think should happen. And so we have an obligation to get into those countries, but more than anything for us. I think they have the opportunity to meaningfully move the needle in the midterm basis in terms of that revenue generation.

Like in terms of payers, like how much are they kind of shifted their thinking prophy versus acute? And in terms of coverage. And again, I think ORLADEYO has fairly good coverage, so maybe [ acute ] can do that as well. .

Yes, over 80%, and that doesn't mean there's not still work to be done, the raise, whether it's individual insurers, PBMs, most of the big payers are on board. Individual plans we might have to move the needle on. But if you look at health economics when people are treating on an acute basis versus when they're using prophylactic, the benefit is there in terms of a reduced number of hospitalizations based on those attacks, less fatalities, which is phenomenal for patients who can't get to rescue medications and might have a [indiscernible] attack on a timely basis. Internationally, there can be, once you have your approval, depending on the country that you go into, there are different [indiscernible] to go in. An example is the U.K. where a competitor, Takhzyro is approved for patients who have 2 attacks on a per week basis and for reimbursement by the NHS and we're approved for patients who have 2 attacks on a per month basis. So the volume element in ex-U.S. is far more important, price can be a much bigger impact in terms of the discount factors, but still a big opportunity for us to get into those markets and to see volumes increase. But I think well covered.

Got you. And then just in terms of like your thoughts on the peak opportunity and how does the pediatric kind of opportunity? Is that part of that? Or is that separate in terms of your kind of strategy there.

It would be separate. I think it has the benefit of being its own market. And so our product will be -- again, back to the idea of granules, it will be almost sprinkles that go on to food and kids can take. And so if it's that or an injectable. We didn't rest on our laurels and say, have your kid try and swallow this hail, and kids are neither good at injectables nor pills. So being dynamic in terms of how we move that burden of treatment, I think, is going to be well received. And there's a market on a stand-alone basis for that. I'm hopeful that there's a familial halo effect that we might be able to get to in terms of having multiple family members treated by the same drug. But that's not baked in to the $1 billion. If we can get there, and I'm hopeful that we can it will be on top of that.

Got you. Okay. And then just overall, in terms of like what you're seeing and how the HAE market is kind of evolving? Obviously, we've talked a lot about trip to oral, prophy versus acute, like what do we kind of think about in terms of the durability of the ORLADEYO franchise?

Yes. Again, it's a differentiated product in the market. Going after oral was a very defined strategy for the company. It's a hard target. And we ourselves had a failure in our first-generation drug for HAE. So we know and have seen them from other competitors in the market that it's a hard thing to do. I think in terms of durability, we're well placed, right? A lot of the new drugs that are coming in are either injectables or there might be RNA or there might be gene therapy. What our focus is on is getting to as many patients as quick as we can. Making sure that they are controlled on a once a day such that when new competitors come into the space, what is the impetus for those patients to move to any other medication. . And if it's to go to a burden of treatment where it's less frequent injectable, I believe that there is no burden of treatment that's less pervasive than having a once-a-day oral. So I think getting there as quickly as we can and then maintaining it, there's a strong place for us in the market regardless of what happens, I think, from a competitive perspective.

Got it. And then maybe just shifting over to the pipeline a little bit just in terms of maybe just frame up what you guys are working on? And then I know from a complement perspective, there's been some fits and starts there. So maybe kind of just give us a little bit of a history there, and kind of how you guys have maybe learned from those experience. .

Yes. So 10013, we are moving forward into avenues. One is we've announced that we're going to be recommencing SAD/MAD in additional cohorts just to get PK results in additional and increased doses. At the same time, we're going to be moving forward with a PNH trial, where we're looking for probably we have 15 patients worth of data. And what we're looking for is, do we have safety? Do we have efficacy? And efficacy akin to both what is in the market and what we think will be in the market. And then do we have a once-a-day drug, and if we do have a profile that if we have all of those things, we'll look like best-in-class, how do we move forward as quickly as we can in likely renal indications? PNH will use to get the biomarkers necessary to give us that AP inhibition best-in-class profile. And if we don't, then we'll stop. . Like our job is not to get to as quickly as we can in approval, it's to be competitive also within that space. And so first or best, and we're not going to be first. So we're looking for a best-in-class profile. Probably next year is when we'll know if we have that. And if we do, we'll move forward as quickly as we can. And if we don't, then we feel like what we'll announce in November in terms of the pipeline that is behind that is worth the investment and that's where we'll focus capital allocation.

I guess just in the history of like kind of targeting Factor D, I mean definitely, I mean, and just I guess, targeting complex in general, has been fairly tough. We've seen some successes. But I guess, is there anything in terms of like how you view this molecule relative to the previous molecule and kind of the differences in terms of making sure that maybe again, you're going to be kind of closer to a best-in-class type of profile? .

Yes. So we've learned lessons from prior failures. And when we pulled 9930. We did so because at that point in time, from a competitive perspective, we didn't think it was going to be either of those 2 things. We had some safety challenges with 9930 around increases in serum creatinine due to crystallization. And so we've done work with 10013, while it's same backbone. It's a different unique molecule. And so as much as we have been able to do to make sure that we don't have those same issues in 10013. Still an early phase molecule. But the work that we've done in the preclinical side and repeating some of the bench work that showed that crystallization, it's different. And we don't have those same issues. And it's once a day whereas 9930 was going to be a twice-a-day drug. So if we have this competitive profile that we think we can get to, then we will move just as quickly as we can. But at the same time, if we don't have that, we're going to be very disciplined in terms of our capital allocation, and we will move forward with other assets.

Can you just share with us like preclinically what you've seen with this molecule? And again, is there any, again, not necessarily like red flags? But seemingly, it's pretty clean and it's got the right profile.

Yes. We announced earlier this year that we had slowed down the development of the asset due to some preclinical findings that we had, and there was some inconsistencies between when you're doing your preclinical talk, you're going to do some short-term works and midterm work in some longer-term work. And so in the midterm work, the kind of 39-week data, we saw some things come up in the first 13 weeks that we hadn't seen come up in the 13-week [ Clin-Tox ] trial that we ran. And so it took some time to make sure that we were understanding what we were seeing. And since then, we've gone back to regulators with that work, with the PK/PD data that we saw in the SAD/MAD data, and gotten to the point where we could move forward with inpatient trials to try and improve or disprove the hypothesis of best-in-class once-a-day oral. So enough we're not the lowest on both enough now to move forward with regulators to get into patients. And ultimately, the in-human data is going to trump anything that we have on the animal side. And so that's what we would use to move forward into pivotal.

I guess why choose the renal area in terms of targeting with Factor D. And obviously, this is actually an area that's kind of heating up in terms of development, but why you guys feel good about pursuing that?

Yes. I think from a scientific validation perspective in terms of AP, Alternative Pathway inhibition, and how it translates from PNH and those biomarkers into Renal. Renal, yes, it's a competitive market, specifically IgAn. But I think from a validation perspective, we've seen some early validation and then if Novartis gets good data, I think that will only enhance that validation further. But it's a good sized market. There's a lot of opportunity for multiple areas or multiple ways that you can treat IgAn from a disease state, we think alternative pathway, inhibition is one of those. . And then knowing that if you can get there from an IgAn perspective, there's definitely economies of scale in terms of how to go into some of those other renal indications. And the likelihood of the validation working in some of those other indications, not to mention the benefit that you would then get from a commercialization perspective in terms of calling on nephrologists not needing kind of multiple large armies to go after those same diseases. So for a company like us, I think it makes total sense.

I mean how do you think about that competitive landscape, not only just within renal and other mechanisms, but even which is other complement inhibitors, oral complement inhibitors, like obviously, you have to hit that profile. But what does that need to look like? And have you seen other kind of the competitor data from other oral competitors.

Yes. The first one for us is to get the data in PNH. And so from a complement inhibition perspective, if we can be as good or better than what is currently out there, including the Novartis molecule, given that we'd be looking for a once-a-day profile, we think that's going to translate well into competing in that space. Is this monotherapy within some of the renal indications, we'll see, I think, IgAn depending on the diagnosis of IgAn and what some of the underlying factors are, I think there's the opportunity to use multiple treatments to go after IgAn. And we've said from the get-go as much as we'll go after the alternative pathway, there's other opportunities for us to go after the classical pathway, the lectin pathway, the terminal pathway. Eventually, I think the market is going to self-combined. There might be opportunities for us to combine them ourselves. But the opportunity on a stand-alone basis for us to go into IgAn and other renal indications, it gives us the opportunity to have potentially another ORLADEYO behind. ORLADEYO itself and there's not a huge amount of companies out there that have commercial stage assets little on multiple commercial-stage assets, and that would be our goal.

Got it. And then maybe we could talk about the R&D Day a little bit. So obviously, excited about that. I mean, you guys have really kind of focused on kind of your expertise in medicinal chemistry and small molecule development. Maybe is that something that you're going to showcase at the R&D Day in terms of your expertise there and developing new molecules, so that's maybe question one. Second, how should we think about -- is this going to be kind of a reveal on like areas that you want to go that you haven't been yet like in terms of like because you kind of focused on like almost eye on eye and kind of rare disease, is this going to bring you into a whole new therapeutic area? Or is this going deeper in the areas that you already are commercializing and developing drugs in?

Yes. No, our continued focus is going to be on rare disease, right? We are a rare disease company. We see value in that both in terms of the expertise that we have and the ability for a company like at ours to be competitive on a longer-term basis in terms of trial enrollment and then on a forward basis in commercializing the asset? What we will talk about during that are assets and molecules that we haven't yet discussed with the public, so we will be an unveiling of newer things. If we have an update to provide in terms of any of the things that we're doing. Maybe. But that's not the intent, right? The intent is to talk about new molecules the company and how they fit in a company like BioCryst. How do we develop them, why do we choose the targets that we go after? What are the indications that they can treat? And to make sense of that in terms of the overall investment then that we have for the Birmingham team. So you had the R&D Day, I'll be down in Birmingham, Alabama on a Friday afternoon. We've got some questions around it during a heavy earnings season....

Football season.

Well, there's football match after as well. I think Alabama are playing LSU. So we'd be hopeful to bring some people to that. But I think being there and seeing the expertise that the team brings to, again, not only molecule indication selection, but how the team has differentiated in terms of how they take not only the molecule, but then the atoms and how they fit them into active sites? And what's the secret sauce, right? What is it that differentiate? Or some way we think that we can bring a high probability of success into these indications, I think it will surprise people. I think we're excited to do it. We're impressed with the work that the team has done, and we're excited to share with people.

Got you. Maybe 2 questions to follow up on that. One, in terms of funding these newer programs, I mean, is this something that generally you can kind of take from basically concept here, preclinical potentially all the way through with kind of what you're generating from ORLADEYO and existing cash? And then second, just in terms of is this going to be -- it sounds like this is going to continue to be in your comfort zone, potentially of like maybe complement or something related to that. Is that kind of like a fair assumption at least? .

Yes. Second question first. We'll do what we're good at. right? We're not looking to throw spaghetti out of wall and see what sticks. We know what we're good at. We know where to focus. We are focused not only on the discovery side of the house, but again, can we develop it? And is there a market for it? And if it doesn't fit all of those 3 things, then it's not going to make it into that discovery effort. So we've already talked about there's an opportunity that we're going into C2. Again, we've already talked about going after multiple other areas in that complement pathway. So that will be a focus for the company. What was your first question? .

The funding strategy.

The funding, yes. I see if I should know that. So given that the earlier phase, the requirements that we have from a funding perspective to get into what are those next stage gating elements, how do you derisk the asset. The earlier phase, so they're cheaper, right, cheaper than going through proof of concept or Phase III pivotals, for example. So massively cognizant from a capital allocation perspective that we're not going to do more than we can. And it's our job from a success perspective to only bring those assets forward if they continue to generate the potential for additional value. So if we get to the point where I think now they're fundable based on what we have. If we get to the point further down the line where we have to need more funds, knowing that we can go into multiple areas of our cap table and do multiple deals. We haven't done an equity deal since the summer of 2020. And since then, we've utilized debt, we've utilized royalty. We've utilized debt again with Pharmakon and refinanced our existing debt at the beginning of Q2. I would never say never. But given where the market is at the moment, it's really not a good time to do it. And the only reason we would need additional funds is if we thought we had the opportunity to somehow supercharge one of those assets. and go faster into the development cycle than we could without is. And then there's 10013, which will get a definitive answer as to whether we're moving forward next year into pivotal. So company has done a really good spot from a capital perspective, north of $400 million on the balance sheet. We have the option to take down another $150 million through third quarter of next year. And again, we would do that if we thought doing that provided value to us and investors alike. The company has never been in a stronger spot from a financial perspective to make these investments.

Got it. And maybe last question. So in terms of the programs that you kind of unveil and the targets and things like that, do these have kind of tried and true regulatory path? Or are you going to be kind of like paving your own way in terms, again, are these like kind of more novel indications or novel targets that again, there's maybe not a well-trodden regulatory path. I'm just kind of curious like what level of risk do you guys have to look to take with kind of the pipeline? .

Yes. I think we'll balance it. right? We're looking for a strong scientific validation that the areas that we're going to go after are going to work. We're also not trying to do something that's going to put extra risk on the asset just to do something novel if there's the opportunity to work with the regulators to accelerate these molecules in diseases where unmet need is high, then as long as regulators are good, and we have a line of sight to get there, but we're not going to roll the dice and take undue risk just to do something novel or try to chase our tail or catch up with another asset. Again, our focus is first-in-class or best-in-class or both. And as long as we have one of those 2 things, then we think we have a strong competitive dynamic to bring a drug forward. So that's going to be the focus.

Well, we look forward to it. And be down in Alabama.

Perfect.

Thanks, Anthony. Good to see you.