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

Welcome, everyone. My name is Jess Fye. I'm a biotech analyst at JPMorgan, and we are continuing the 43rd Annual Healthcare Conference today with BioCryst. First, you're going to hear a presentation from the company, and then we're going to open it up for Q&A. [Operator Instructions] With that, I will -- let me turn it over to the company's President and CEO, Jon Stonehouse, to present.

All right. Good afternoon. Thank you, Jess, for that introduction, and thank you for inviting us to your health care conferences here. It's nice to be in sunny and warmer San Francisco this year. So thank you for the weather. With me today is Charlie Gayer, our Chief Commercial Officer; Helen Thackray, our Head of R&D; and Anthony Doyle, our Chief Financial Officer. We are all going to be making some forward-looking statements, and they have risks, and they can be found in our filings under the Risk Factors section. So we're coming off a fantastic year in 2024, and that has put us in a very different position as a company. And what it's led to is we are now building a company that has durable, profitable growth and a pipeline that gives investors optionality, and so let me explain that a little bit further. So with the growth, we have a growing marketed product with ORLADEYO. We put up a number of $437 million last year in the fourth year since approval, and we have guided to over $500 million this year. So we are on a path, growing at a steady rate towards $1 billion at peak. In addition, last year, at this conference, we announced that we were accelerating profitability, and that would provide us financial independence. Well, what we found in the course of the year is, not only were we accelerating it, but we're doing it at a pace and at a magnitude that really made a difference. And Anthony will talk to us a little bit more about that. And then lastly, we were in very early stages with our pipeline. We are now moving into the clinic with our KLK5 inhibitor, 17725, for Netherton syndrome. And we're about to move into the clinic in patients with avoralstat in DME, and we're really excited about that as well. And so we can do all of that, make those investments and, at the same time, accelerate our profitability and continue this durable profitable growth. So with that, I'm going to go a little bit deeper with each of my colleagues. And I'm going to start with Charlie. And I'm going to, Charlie, have you explain to the group that we had this fantastic year in 2024 and what drove it.

Yes, Jon. In 2024, we had 34% year-over-year revenue growth. To put that in context, as Jon said, that's in the fourth year. In the third year in 2023, it was 30% year-over-year, so really good progress in the fourth year. And it was driven, really, by 2 things. The first is very strong patient demand and, in fact, increasing demand. So our U.S. new patient prescriptions were actually up 6% over 2023, and we had the exact number of new prescriptions in 2024 as in the first year of the launch in 2021. The other thing is that ex U.S., our patient growth was about 40%, and in the U.S., our patient growth was about 20%, so really strong. The other key piece of 2024 was, in the U.S., we captured more of the potential paid prescriptions ahead of our expectations. And so number one, we did really well in the first quarter during reauthorizations, getting patients reauthorized quickly. So we use less free product, and we also converted more patients from long-term free product to paid product. So you put both of those things together, that led to the 34% growth.

Okay. Thank you. And then this year starts the first year of new competition coming into the marketplace. And can you describe to us how you see that market evolving both this year and in years to come?

Yes, absolutely. So if you could go on to the next slide. Oops, sorry, go back 2 slides. So real quick, we've generated a lot of real-world evidence, and so this is the first part, heading into 2025. Physicians and patients are seeing that ORLADEYO is not just convenient, but highly effective. You can see from this, Type 1 and Type 2 patients are getting down to a median attack rate of just 0.2 per month. That is very good efficacy. So they're getting efficacy and convenience. Next slide. We're also seeing this in patients with C1 normal inhibitor. This is a patient population that struggled for effective therapy in the past, and they're getting it with ORLADEYO. So on that base of really great efficacy, we expect continued patient growth. And the other piece, if you could go on to the next slide, we have some new competition launching this year. So it's an exciting year for HAE patients. For us, that creates the opportunity. These new drugs are going to be talking about switching, and that creates more of an opportunity in 2025 for patients to try ORLADEYO before even trying another product. Longer term, every year, we do a very comprehensive market research exercise, where we do a conjoint analysis with 100 patients, 175 doctors and over 50 payers. And then we run their results through a market simulation model to predict what's going to happen in the future. In this survey, we show every potential future product. We give them the best case, efficacy, timing of launch, and then this survey helps us figure out what's going to happen. So if you go on to the next slide, what it gives us is a prediction of market share. We've done this analysis 4 times, launch to date, and it's been very predictive of our market share growth up to this point. And what you can see is in a growing market over the next 10 years, today, there are about 7,200 prophy patients in the U.S., we see that growing to 9,300, ORLADEYO is going to grow to about 25% market share and then hold that in a growing market, even as new products are coming on to the market. This is the growth that's going to get us to $800 million in the United States and $1 billion in global revenue by 2029.

Okay. So now we're going to switch gears, and we're going to move to the pipeline. And Helen, it's exciting to see real progress in the programs in 2024, but tell us a little bit about what you're most excited about in 2025.

So in 2025, we have 3 programs with high-impact milestones. That's what I'm excited about. There's 3, so let me go through all 3. First, ORLADEYO, which you just heard about from Charlie, we'll be moving into pediatrics with an NDA for pediatrics. So this solves parents' dilemma for children under 12. There's no oral prophylaxis available to treat and prevent these HAE attacks. There's just injectable peripheral access, which means they either have to inject their child at home several times a month or let their child be vulnerable to the potential of ongoing attacks. And we aim to change this with pediatric granules. Submitting NDA this year, this is easy oral formulation, just sprinkle on food or drink, and that allows prophylaxis. So milestone 1, NDA for pediatrics. Milestone 2 in Netherton syndrome. BCX17725 is our first protein therapeutic, and it's in the clinic. That's a big milestone for the company. It's also a huge step forward to understanding this disease better and perhaps bringing a disease-modifying treatment. What you see here is an image on the right. This is a toddler with Netherton syndrome. I think every parent in the room can understand just how miserable that child is. That is how that child experiences Netherton syndrome, and that's what it's like throughout life. This infant -- this toddler has scaling skin. You see large pieces of scaling skin. Skin is red, it's thick, it's itchy. He's really unhappy. His hair is thin and brittle, and you can't distinguish any eyebrows or eyelashes. Patients with Netherton syndrome have this condition, even when treated with the best sort of care using ointments and creams multiple times a day. We aim to change that. There's no targeted treatment, and we are delivering 17725 now to patients in clinical trials this year. And it's intended to be a functional cure, delivering a protein where one is missing. So the milestones, patient data this year and including activity in the skin and some early clinical outcomes. Milestone 3, avoralstat. This is our potent plasma kallikrein inhibitor that we're advancing for treatment of diabetic macular edema. Patients with DME experience loss of visual acuity, and that leads to loss of independence. VEGF inhibitors is a standard treatment. They're injected intravitreally into the eye every month, so up to 12 times a year. That -- the 2 unsolved issues there: one is that 40% of patients don't improve on VEGF inhibitors, an alternative is needed; and two, the frequency of injections with VEGF inhibitors. Avoralstat, we believe, could do -- could give a significant step towards both of those. Next slide. We have new data that we're sharing this week. This is preclinical data, but this is indicative of what we think we'll see in the clinic. This is an animal model. On the left is before dosing and on the right, after dosing. This is a model that's well established to test VEGF inhibitors that are in the clinic and on the market. On the left, you see retinal vessels, but you also see that white haze. That's leaking of fluid into the edema. That is edema in the retina. On the right, 6 days later after a single dose suprachoroidal of avoralstat, we see clearage of that leakage. And that is what we're going to be looking for in the clinic. So milestone 3, new data going to patients this year and new data coming end of the year, early next year for avoralstat.

Thank you. Last, but not least, Anthony. And so I've mentioned that we've made some commitments last year, maybe talk about how we did last year. And then we made commitments for this year and next year, and how do you see that [ following on ]?

In short, we are ahead of plan. We are at a point where we have additional confidence in achieving what we set out to do in terms of profitability. And to your earlier point, Jon, not just profitability as a goal and not just to eke out a profit, but to make substantial profits to the point where we can talk about, from a capital allocation, how we can meaningfully move that forward to generate a substantial amount of value for the company. So Charlie talked about percentages. I'll use absolute numbers to kind of set the table for it. In 2023, we had an operating loss, not including stock-based comp, of around $50 million. In 2024, that number turned into an operating profit of around $60 million. And with the guidance that we just gave of revenue for 2025, about $540 million to $560 million and OpEx of around $425 million to $435 million, that number goes up yet again. And not only did we give guidance for 2025, we gave guidance through 2027 in terms of the CAGRs that we expect for both revenue and operating expense. So through 2027, on a 3-year basis, we're looking at a CAGR on revenue of around 20% and, on the operating expense side, a CAGR of around 5%. What does that mean when you look at 2027, for example? You're talking about a revenue that's north of $750 million, an operating expense that's in and around $450 million and thus an operating profit, not including stock-based comp, around $300 million. For a company like ours, that is a phenomenal number. That is indicative of, again, not just getting to profitability, but it being meaningful in terms of what it allows us to do.

And so I talked at the beginning about how it's just put us, the company, in a completely different position than we've been in historically. Can you talk a little bit about this financial strength and then what flexibility it provides us in terms of capital allocation?

Sure. So take that same example of 2027. At that point where we're generating those types of margins, we're also generating EPS positivity, cash flow positivity at that point. Those numbers play out, and we'd be sitting on a cash on hand of north of $600 million. The following year, we have some debt that would come due. It gives us tremendous optionality as to how we handle that. Do we pay it down? Do we pay it down in advance? We don't need to necessarily wait. Do we start to utilize it for BD-related activities, such that we can get a second product in-house with commercialization, either similar time line or ahead of the time lines that Helen talked about for both 17725 and avoralstat? At the same time, we could look at -- looking at reducing the cost of capital that we have and all while advancing this tremendously exciting pipeline that we have, both in the kind of 3 assets that Helen talked about and then the earlier phase pipeline that we shared this time last year, so optionality and confidence in terms of how we invest and what we invest in.

All right. So reminder of what we just covered: so growing product, $500 million plus this year, on its way to $1 billion with IP composition of matter that goes up to 2039, so that is durable growth; profitability, and not just a little bit of profit, but a lot of profit in just a couple of years; and then third, the option on the pipeline where we're going to be able to advance it and understand if we've got another product, and you're going to start to see some of that data towards the tail end of this year. So I said we're in a different position. We are now playing offense instead of defense at BioCryst, and we're really looking forward to sharing more of our updates over the course of this year. So Jess, I guess we're ready for questions.

Great. We started out with ORLADEYO. So maybe we can talk about, in the context of the guidance you provided, what the key drivers are kind of underpinning that ORLADEYO growth.

Jess, the #1 key driver is just that continued patient demand that I described. The fact is that physicians, in particular, are really seeing this as a different kind of product than they did a few years ago, and that's led to the uptick in prescriptions that I talked about, so we expect that to continue. And then the other piece is just continued improvement in the rate of paid patients. We -- as I described, we made a big jump forward next year. We don't have as big a jump. We made so much progress last year, we don't have as big a jump. However, there's the situation with Medicare patients where affordability has been an issue in the past couple of years. With the full introduction of the IRA this year and the maximum $2,000 out of pocket, that could improve. We haven't assumed it in our $515 million to $535 million guidance. But if it does improve, that could push us into the upper end of guidance.

And what's the right way to think about ORLADEYO's revenue mix geographically U.S. versus ex U.S. this year? And which are the international regions that are kind of driving additional growth?

As I mentioned, the ex U.S. patient demand is going really well. Market access has also gone really well. So for example, Europe is the biggest driver right now. In Western Europe, we have now got market access and launched in every country, except for the Netherlands, and we expect to get that at some point in 2025, so really good growth there, the same kind of dynamics of physicians seeing this product differently, so prescribing more. Things are also going great in Canada and Japan with our teams. And with our partners in Eastern Europe, in the Middle East and now with Latin America, things are starting to pick up there as well. And so what we see is and we would expect is, every year as we go forward, the percentage of ex U.S. revenue will start to tick up, up to the point where that peak around the end of this decade, we'd expect it to be around 20% of the $1 billion.

Okay, so smaller base but growing faster.

Growing faster and going really, really well. More and more -- not just -- there's not just recognition of ORLADEYO, but recognition of modern prophylaxis as the growing standard of care.

Where does persistence currently stand?

Persistence is really good and really stable. So we actually put out -- presented a poster at the college meeting, College of Allergy Meeting, in October, where we looked at claims data of patients who are newly starting ORLADEYO, TAKHZYRO or HAEGARDA. And what it showed is the 1-year persistence was indistinguishable between all of them. But actually numerically, ORLADEYO was the highest with about 61% 1-year retention. That's what we've long seen in our internal data. And once we have a patient to a year doing that, well, the vast majority of them stay on because they're getting great attack control with just 1 pill once a day.

Has the mix of ORLADEYO patients coming from switches versus treatment-naïve evolved over time? Or do you expect it to change in '25?

It really hasn't evolved. I'll tell you what, maybe we've started to talk about differently. So the -- ever since launch, it's been roughly 50% patients switching from other prophylaxis, 30%, 32% going to prophylaxis from acute only, so starting prophylaxis with ORLADEYO. The new thing we've started talking about is the remaining 17%, 18% of the patients are naïve to therapy. Back in 2021, we did not expect that segment to be as big. We thought that more of the patients were already found. What we're seeing is the market is growing, though, and starting prophylaxis with an oral makes a lot of sense. We get about 50% of those patients newly prescribed. And we see that as all 3 of those segments as durable, I would expect the same percentages this year and for the next few years.

What's the current proportion of patients on paid drug? And how could that evolve? And what can you do to impact that rate?

We ended 2024 about 2 percentage points better than the end of 2023. So it was about 73.5%. What I would point to is the commercial patients who are about 60% of our patients ended the year at about 80% of them paid, and that's up from about 70% just 1.5 years before. So the things we're doing to make progress is, overall, first is getting a really complete prescription, so having the physician put in all the patient history, the lab tests, family history, everything else that has been done that the payers demand. We've gotten really a lot better at working with our customers to do that. That makes a difference. Number two, just all the evidence that I've described. We get about 1/3 of our patients are HAE with C1 normal inhibitor. Historically, those patients have not been reimbursed. We get them reimbursed at a fairly comparable rate to classic Type 1 and Type 2 patients because we're providing more and more evidence. And then the last piece is the Medicare that I mentioned earlier.

So it sounds like you didn't bake it into the guidance. But to the extent the IRA continued implementation this year is a tailwind in terms of kind of improving the proportion of paid Medicare patients, can you quantify that a little? Like, how could it be?

Sure. Yes. Well, Medicare is about 20% of our patients. The Medicare plans themselves agree to pay for ORLADEYO at the highest rate of all of our segments. So that's over 80%. But at the end of last year, only about 55% were paid. And the difference, that 30% difference is because patients couldn't afford their copayments. If they're able to do more of that this year with the IRA, that -- reverting back to that 80-plus percent, would be about a $30 million annual revenue at our current patient base. And of course, it would keep growing as our patient base grows. So it's a potentially significant tailwind that is not at all baked into this year.

And so it is baked in when we gave the CAGR from '24 to '27. We have included significant growth in that period because we think it might take us longer to do it. If we can accelerate, then it would most significantly be a positive impact to 2025, but we keep in line with that same growth through 2027.

And maybe last one on commercial, but you mentioned competitive entrants. How are you thinking about the evolving competitive landscape in HAE prophylaxis? And what would you tell investors to watch out for this year?

I think the #1 thing that we've learned -- well, a couple of things that we've learned is when patients are doing well on a therapy, it's a really sticky market. Once they've solved for their HAE, preventing of attacks, they don't look as much in the future. So you need something really significant, really differentiating to get the patient to think differently, to get their physician to think differently. We have that now as the only targeted oral therapy. Other new injectable therapies that are coming look like very good products, and they provide incremental benefits to patients with going to once a month dosing, for example, maybe every 3 months dosing. That could be great. But what our research tells us is it's not enough to move most of those patients once they're already well satisfied on a drug like ORLADEYO.

Yes. I think one other thing is we had these abstract conversations with investors about, well, there's a competitor coming, it has this kind of reduction in attacks in Phase II and why wouldn't it take share from you? And so what we've tried to do with the data that we've shown you with the market research methodology and -- I don't know if any company has ever shown the results of their market research forecast out 10 years is instead of having this abstract conversation, this is what the data says that we've generated with the robustness of the methodology that we've used, so let's have a conversation around that. If you have that kind of robust data and you get a different outcome, let's talk about that. And what we're trying to do is remove bias from the conversation. We all have our past experiences with new competitors coming into the marketplace. But if you spend some time with us trying to understand the market like we have and you have, Jess, and so you get it, I think investors will have a different view of the competition.

Questions from the audience?

Yes. So you talked to the 1-year persistence rate of 61%. Could that go up? And if it were to, would that inform your market share projection model in any way? I mean, is that meaningful? Or it's just around the...

Yes. Certainly, if we can -- and we're always trying to improve that. As I described, we're doing well relative to the competition. So we're happy with the stability that we've seen. But sure, if we could move up even 1% or 2%, that would make a difference to our long-term revenue. So we're constantly trying. What we find is the #1 thing to do is for -- is to educate health care providers to set expectations for their patients. So a breakthrough attack can happen early in therapy. You could get a GI adverse event. The attacks will tend to stabilize over time. One does not make a pattern. The GI tends to go away. So if you react too quickly, you're not going to get the experience. So it's really about setting expectations, giving it a good 3 to 6 months' try. As we do that with more and more customers, it's conceivable that could get better. We're going to try to make it happen.

I think one other thing is we are about to start a trial Phase IV study we call APeX-T, which is APeX transition, and the whole goal of that study is to talk about what's a good switch look like. And I think with that data, we're going to start -- stress is a trigger in HAE. You have to have low C1 inhibitor level and then some sort of trigger and stresses the #1 trigger. And so if somebody is really worried about, "Oh, my god, I'm controlled on my previous therapy. What if this doesn't work?" You start to have thoughts that can trigger stress. It could trigger an attack. We've actually had people overlap TAKHZYRO and ORLADEYO in a period and have a breakthrough attack. So that tells you what stress can do in terms of the swelling. And so we think we're going to learn a lot from this, and we're going to be able, through this data, to help physicians have a better chance of a good transition switch.