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

Great. Good afternoon, everyone. My name is Jess Fye. I'm a senior biotech analyst at JPMorgan and we're continuing the healthcare conference today with BioCryst. I'm joined on stage by the company's CEO Jon Stonehouse. He's going to give a presentation and then we're going to go onto Q&A right afterwards. If you have a question in the room, just raise your hand and someone will bring you a microphone, or alternatively, you can submit questions to the portal. With that, let me pass it over to Jon.

Great. Thank you, Jess. Good afternoon. Good evening to those there in the webcasts and thank you for inviting us again to your healthcare conference. I'm going to be making some forward looking statements so statements have risks. The risk factors can be found on our most recent filings, which can be found on our website listed at the bottom of Slide 2. We are uniquely positioned to create sustainable value at BioCryst and let me explain why. First, we have a growing marketed product in ORLADEYO. That's on a path to a billion dollars. Next we have a proven discovery platform that produced ORLADEYO, and we believe will produce more drugs that are going to fill unmet needs and create substantial value. Three, that discovery platform has produced a number of molecules in our pipeline that are either first in class or best in class. And four, we announced on Friday that our independence from the capital markets and an acceleration of our path to profitability. So let me go into each of these in a little bit more detail. Everything starts with ORLADEYO and the great news is we finished the year and preannounced 2023 revenue of $325 million. So you see on Slide 9, the pattern of growth from a prescription and discontinuation perspective, our new starts and discontinuation perspective, we've added the fourth quarter to this chart now, so you could see it through the end of the year. And the pattern remains the same. We're continuing to add a consistent number of new patients each quarter. The discontinuation rate has plateaued. And so, as a result, the net U.S. patients continues to grow quarter after quarter after quarter. And that's extremely impressive because when you consider that there were 7 competitors in the market before us to continue to be doing this in the third year launches, nothing short of amazing. And then the pattern of revenue you see on the right now through the end of last year, and again, you see a consistent pattern year-over-year. So first quarter of 2024 will be down slightly from fourth quarter of 2023 as a result of reauthorizations and reimbursement and patients having to go on free drug. But then you're going to see a pop in the second quarter, and then you're going to see modest growth third and fourth quarter, and we expect that to continue for the foreseeable future. Our path to peak is set around some reasonable assumptions. And that peak globally is $1 billion, $800 million of that coming from the U.S. The exit rate that we shared with you at the third quarter earnings for 2023 was around $310 million. It's actually a little bit higher than that. We expect that we will add on average about 200 net patients each year from 2024 to 2029. Right now, we're above that. And as we get closer to 2029, we'll be below that. But on average, it will be about 200 patients. That's another $300 million in additional revenue. We've got a situation where right now, we have in the low 70% of patients on paid drug. And we think we can improve that to around 85%, and that will occur more in the '25, '26, '27 timeframe, and that's worth another $100 million in revenue. And then with very modest price increases each year from '24 to '29, we expect another $95 million that gets us to the $800 million. So again, very reasonable assumptions to get to peak. So that's ORLADEYO. I'm not going to dive into the discovery platform in any great depth. But I think what's important to understand is our ability to see down to the atomic level is what makes us different and what allows us to discover drugs like ORLADEYO that others haven't. And I would encourage you to -- if you haven't, to go to our website and listen to the recording of our R&D Day. Helen does a fantastic job of describing what we do differently and how we're able to bring drugs that others have to market and to patients. That discovery engine or platform and those people that work on that have been incredibly productive. And as a result, you can see on Slide 12 that we have a very deep and diversified pipeline. And what's great about the pipeline that we have now is not only do we have many compounds, but they're going after a number of different targets, and we have a combination of both large and small molecule, which diversifies risk. And so, we're extremely confident that there's another really valuable product that we will bring to the market in this pipeline. So let me start from most advanced to least advanced, starting with continuing to invest in ORLADEYO. So there is still an unmet significant unmet medical need in the treatment of HAE with pediatric patients. If you're a parent and you've taken your kid for vaccinations or you've had to go to the emergency room and they get injected or the hospital, God forbid, you know the trauma associated with children getting injections. And we have a formulation at BioCryst that is granules. So small little bead like granules that can be sprinkled on applesauce or yogurt and taken very easily by pediatric patients, so it fills a huge unmet medical need. And I'm a big believer that enrollment in studies is a good indication of success in the market, and we're moving at a very good clip with enrollment of this pediatric trial. The design is on the bottom of Slide 14, and we are positioned to submit the U.S. sNDA next year. Next in our pipeline is our Factor D inhibitor BCX10013. So this is a program that's in a proof-of-concept study currently in PNH patients. But we showed you earlier -- or late last year, excuse me, the Phase I data, where you see on Slide 16 that we basically knock out the alternative pathway activity with 160 milligram once-daily dose, and there's a very nice dose response. So where are we and what are we shooting for? So as I said, we're in a proof-of-concept study in PNH patients and the profile that we're shooting for is a once-daily, efficacious safe and generally well-tolerated drug. And we believe that we have the potential to reach that profile. And we announced on Friday that if we're successful in achieving that profile that we will seek a partner to take it the rest of the way. And the rationale for that is with the Factor B data in IgAN and C3G late last year, we believe that the application of inhibiting the alternative pathway is validated now clinically. And we need somebody that can go broader, bigger and faster than we can. And we have spent some time talking to other companies already this week, and there seems like real interest in this program, again, assuming that we meet the profile that we seek with this proof-of-concept study. So more to share with you the target is to have that data in the middle of the year and to secure a partner sometime later in this year. Next in the pipeline is one of our first protein large molecules or protein therapeutics for a disease called Netherton's disease, which is a horrible skin disease. Again, I'd point you to our R&D Day to learn more about this disease, but children are born basically without skin or malform skin and is so traumatic for patients and for parents and there's nothing to treat these patients. And so we have a KLK5-inhibitor BCX17725 that we expect to get in the clinic this year and start a proof-of-concept study next year. And what have we seen so far? So far, nonclinically, we have great drug characteristics. The PK profile you see in the graph on the right on Slide 19, it's bioavailable to be able to give as a subcutaneous injection. The PK looks like it's no more frequent than every 2 weeks and maybe even less frequent than that unlike a small molecule where you worry about off-target toxicities with large molecules, the only real safety issue that you've got is antidrug antibodies. And you can screen for that now. And we believe that and we've done that, and we think there's a very, very low risk of immunogenicity with 17725. And probably most exciting, and again, you can see how we built this molecule from the R&D Day. It's a million times more potent than the natural ligand and tenfold more potent than the competitor that's currently in development from Daiichi. So we're really excited about that. That's PK levels in plasma but it's a skin disease, as I mentioned. So it doesn't matter what it looks like in the blood, you got to get it to where it needs to work, which is the skin. And so what you see on Slide 20 is skin samples in mice, where you see before dosing on the top row in blue and then 4 hours post dosing where you start to see the brown or drug levels in the skin. And so, we're really excited about this program because we think we have a very potent conveniently dosed and gets to where it needs to go to help patients suffering from Netherton's disease that really have nothing to treat that disease right now. So stay tuned, more to come on this program. Next is a drug you may have heard about in the past of avoralstat. It was our first foray into HAE as an oral drug, turns out had pretty poor characteristics in terms of solubility and permeability, and so it failed in a pivotal study, but it was extremely -- it was an extremely or is an extremely potent kallikrein inhibitor. And so we found another place where we think the drug characteristics are well suited for the disease, and that's DME. And so we're in wrapping up the tox program this year, do an eye tolerability studies, and we expect to be in a proof-of-concept study at the beginning of next year. So DME, if you know this disease, it's -- there's been a great advance in anti-VEGF therapy, and patients see significant benefit in retaining visual acuity and not having lack of a decrease in their visual acuity. But it doesn't work in everybody, and there's estimates that upwards of 40% of patients are not adequately treated with VEGF therapy. So we think this is a perfect second-line therapy with a kallikrein inhibitor. And we think it's a significant market even in second line. So it starts out with the right target, and we believe that kallikrein is the right target for people that fail on anti-VEGF therapy. And the data on Slide 23, we believe supports that. And then the other piece is the biology. It makes a lot of sense because like we see with HAE contact activation plays a role here and so plasma kallikrein is the bad actor. Only instead of it occurring in the skin and in other parts of the body, it occurs in the back of the eye and affects the retina and with leaky blood vessels and so, a kallikrein inhibitor is great for this disease, we believe. And so then it's right target. Next is get it in the right place. And so we were really excited to share with you at the R&D Day that we had signed a license agreement with a company called Clearside that has a suprachoroidal injector to get the drug in the back of the eye where it needs to be to work and so we're really excited about this. You can see from the picture on Slide 25. I certainly would much rather have the Clearside injector versus an intravitreal needle stuck in my eye to get to the drug to the back of the eye. And then the last part is right drug, and I told you avoralstat is a very potent drug, and it's poorly soluble and permeable. So what do you want in an injection in the back of the eye, you wanted to stay there and almost like a depot effect. And so this is data on Slide 26, showing you in a preclinical model, the drug levels with the dotted line being the target. And you can see that up to 160 days, we still have drug levels either at or above the target. And you see a plateauing, which is even more encouraging to us where we believe that the dosing interval here could be possibly best-in-class. And so we're really excited about that. And then the rest of the pipeline is around complement-mediated diseases. And I will be bold enough to say that we are shooting for being a market leader in the treatment of complement-mediated diseases, and let me explain why. There was a point in time in our company's history where we focused on the alternative pathway with Factor D inhibitors and would go after multiple indications with a Factor D inhibitor. Now we've -- as the field has evolved, we believe that hitting other pathways for other diseases in the complement system and possibly even hitting multiple pathways can help many, many more patients and position us to be a market leader, and you can see that on Slide 28. And so the 2 programs that I'll talk about briefly are our oral C5 inhibitor program and the bifunctional fusion protein. So let me start with the C5 program. So this one we're really proud of because we believe that our team in Birmingham has cracked the code on protein-protein interactions with a small molecule. And so we've got characteristics with this drug that we believe could be the potential for an oral therapy in injectable markets like myasthenia gravis. So we think that could be -- it's a really nice analog. It's a different disease, but a really nice analog to HAE where the symptoms are similar to attacks like HAE, and the field is full of injectable therapies. And if we bring an oral drug to patients, we think we can make a massive difference. And so you see on Slide 31 that we have PK data from 11 compounds, you see potency that's single-digit nanomolar. We've got selectivity, bioavailability of up to or greater than 40%. You can see the PK. It looks like it might be a once-a-day drug. And then it's not a huge molecule to break up this protein-protein interaction. The molecular weight is less than 500 daltons, so similar to other small molecules. So we're really excited about this program. And we're in lead selection this year, and we expect to get into preclinical tox starting next year. And then last but not least, is our bifunctional complement inhibitor, which is another fusion protein that again is in lead selection and we expect to move it into tox and then into a Phase I sometime next year. And here, what we've found is that there are a number of diseases where inhibition of a single pathway for patients is not enough and that other pathways play a role. So for example, just inhibiting the alternative pathway for IgAN patients is not enough, and you may need to block the lectin and classical pathways as well. And so our team has built an antibody or fusion protein that binds to C2 and the alternative pathway. And we have data on the fusion proteins we've made thus far, looking at assays in the classical, lectin and alternative pathways and then combinations. And what's really interesting is we've compared them in these assays, head-to-head with Soliris/Ultomiris, and then investigational programs that people are pretty excited about. And in every assay, we have the most potent inhibitor. So again, very excited about this program. And then finally, with regard to guidance and actions that we've taken to shore up our financial future, the revenue guidance for this year for ORLADEYO is between $380 million and $400 million. The operating expense will be less than revenue, and we expect it to be somewhere between -- and flat from 2023, $365 million to $375 million and R&D expenses have been reduced from what we presented at the November R&D Day, down $45 million to $55 million. And that's because we made the decision to partner 10013 or terminate the program if we don't get the profile. We've restructured the R&D organization with the folks that were in advanced development and reduced jobs by almost 60% or 10% of the company, and we postponed plans to expand the Birmingham Discovery Center until we're in a better position to afford it. So what does that lead us to at capital markets independence that I mentioned to you before. So in this year, 2024 full year operating profit, that's not including noncash stock comp, 2025 approaching quarterly positive EPS and cash flow in the second half and then 2026 full year positive EPS cash flow. And our expectation is that we won't need to go back to the market to raise additional capital, and we don't intend to draw the $150 million of debt that's available to us from Pharmakon. So capital markets independents. So let me wrap up where I started. I think you'd be hard-pressed to find a company that's our size or even bigger 1 or 2 times bigger than us that has a growing marketed product headed towards $1 billion, a discovery platform that's proven, that produced ORLADEYO, and we believe produces more a pipeline like I just shared with you of first-in-class or best-in-class molecules and capital markets independence on our way to profitability. So with that, I will open it up for questions, and I'm going to invite Helen Thackray, our Head of R&D; Charlie Gayer, our Chief Commercial Officer; and Anthony Doyle, our CFO.

Thanks so much for the presentation. [Operator Instructions]. I guess maybe first question on 10013. I think you indicated that pending data you would partner in order to realize its full value. What's the optimized -- the optimal structure you would want to see there? Is that like a royalty deal or would you sort of sell it out, right?

Yes. I think like any partnership, getting a good partner is probably the highest criteria. Sometimes people worry more about upfront payments and milestones and things like that. In this case, we want somebody to do a great job, right, and be competitive with Novartis that have the resources and the knowledge base to move it in multiple indications and to go fast and care like it's really theirs, right? And so I'm not going to tell you exactly what that looks like because I don't know. The more competitive is, the better it will be. But I think we'd be open to sharing in back-end economics if we feel like we chose the right partner.

Great. And maybe turning to the guidance you provided, a lot of it, it looks like it was well received by the Street. The commentary on flat OpEx in 2024 relative to 2023. It seems like that's basically due to not having to kind of push ahead with 10013 in the clinic, correct me if I'm wrong there. But also, how should we think about that kind of OpEx budget changing in 2025 as much of those sort of early stage assets you just outlined start to kind of move toward the clinic.

Yes. So flat year-over-year, predominantly driven, like you said, by the changes that we're making in 10013, both in terms of not needing to move forward in terms of development of the pivotal trial, also the restructuring that we made. And then overall, just kind of a disciplined approach to capital, so making sure that we're cognizant. Jon talked about the expansion that we were going to do in Birmingham and delaying that until a later time period. For years thereafter, if I break it down into its 2 main components, SG&A and R&D. From an SG&A perspective, we may well see some growth as we expand on an international basis, but much more on a kind of gradual incremental perspective in order to support the growth that we'll have less so the stair approach that we have this year, where Charlie's team invested in expansion predominantly here in the U.S., which is really kind of paying dividends, especially like we saw in Q4. So some increase is there to support growth but more margin accretion overall from an ORLADEYO perspective. And then in R&D, you've got a couple of offsets. So in 2025, there will be little to no expenses related to 10013. But for the pipeline, like Jon talked about, specifically avoralstat and 17725, which are more near term in terms of entering the clinic, there will be some incremental expenditure there. But overall, I don't think it's going to be kind of large and therefore, supports what we're talking about in terms of getting to EPS positive and cash positivity at the end of 2025 and then been able to achieve it in 2026.

Maybe turning to ORLADEYO and kind of the kind of elements of the revenue outlook. Can you talk a little bit about how persistence looks currently and how we should think about that changing, if at all?

Sure. So persistence looks really good. So to put it in context, in 2023, we had fewer discontinuations than 2022 on a much larger base of patients. And so what we still see is that when a patient starts on ORLADEYO, 60% of them get to 12 months. And then what we're seeing is after that, we really lose very few patients. So we're very confident in the persistence at this point.

And I guess maybe just to unpack it a little bit, what are some of the things that you've done, if any, to kind of reduce the discontinuation rate?

I think it's 2 things. One is for the last couple of years, we've been really focused on setting expectations for patients. And so what that means is we do it when we can through our patient services, but it also means for health care providers, letting them -- telling them that you need to tell patients what could happen if you have a breakthrough attack, for example, early on, keep going and to see what the real profile of the drug is going to be. You need to try it for at least 3 months, and that's working. And then I think the other thing is now 3 months of experience -- or 3 years of experience, the physicians, the other health care providers and patients are seeing how well patients are doing, and so they have more confidence in the drug. And I think that, that reflects in how they describe it to patients, and that leads directly to better persistence.

Another element I feel like we've talked about a bunch is the PAP program. How should we think about the proportion of patients on PAP kind of evolving over the next few years? How do you drive that lower?

We -- so as Jon explained in our PAP to $800 million in the U.S., we see it going to about 85% paid. And the #1 thing that we can do is make sure that for new patient prescriptions that the whole -- all the information is complete. And so one thing we did in 2023 is rather than rush to get a patient on drug really quickly, we slow things down a little bit to make sure that all the information is complete, the lab test, the clinical history, the family history, all of that, that leads to more likely the payer approving the first time around and that overall has a benefit to our paid rate. So the progress we saw in 2023 gives us confidence we're on the right track, but it's going to take 3 or 4 years to get to that 85% rate.

What about the -- you continue to add new starts. I'm curious kind of where the new starts of today are coming from if you're getting kind of switches from other appropriate agents or picking up treatment-naive patients?

It's been remarkably consistent since the beginning of the launch. So it's been about half of patients coming from switching from other prophylaxis products. The other half mostly switching from acute only moving to prophylaxis. So the mix of patients has been very similar, the products where they're coming from. And the types of prescribers who are prescribing the drug has also been very consistent. So we get a lot of -- a little more than half from larger prescribers who treat about 50% of the market, and then we continue to get new prescribers coming in the long tail of doctors who have maybe 1 or 2 HAE patients, but we're constantly getting new prescribers there as well. So very consistent patterns in year 3 as we saw in the previous 2 years.

And where do you see in the -- I guess maybe starting with the U.S. market, where do you see the proportion of HAE patients on prophylaxis today?

We see it in around 70% and our forward-looking market research tells us that, that's likely to grow to 80% or more in the U.S.

And what about in Europe?

In Europe, probably at least 50 -- a little less than 50% now. We see it growing to at least 50%. Some markets will be more and a lot of that is market specific, really depending on market access rules. And what will the national payer accept in terms of patient clinical criteria.