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

Good morning. I'm Serge Belanger, one of the health care analysts at Needham. I want to welcome everybody to day 3 of Needham's 24th Annual Healthcare Conference. And for our next fireside chat, we're happy to have the BioCryst Pharmaceuticals team with us. We have the CEO, Jon Stonehouse; company's Chief Commercial Officer, Charles Gayer; and the Chief R&D Officer, Helen Thackray, with us this morning. Before we move on to questions, I just want to provide details on how participants can submit questions. For those listening in on the portal, that's where you can submit questions. We'll take those as they come in. And with that being said, I'll hand it over to the management team who will give us an overview of the company for those who may not be familiar with BioCryst, and then we'll jump to Q&A.

Yes. Thanks, Serge. Thanks for having us. Charlie, myself and Helen are going to make forward-looking statements. Those statements have risks and risk factors can be found on our website. I think BioCryst is a pretty interesting company to -- for investors to take a look at, especially in this environment. And the reasons for that are, one, we've got a growing product in ORLADEYO that is just growing at a beautiful trajectory over $0.5 billion this year and on its way to $1 billion at peak with IP protection on two composition of matter patents out to 2035 and 2039. So just really nice steady revenue growth over the years. The second is we've got a pipeline. And what's exciting about our pipeline is we have two programs in the clinic that we expect will have patient data by the end of the year that start to give us a sense of activity and dose. And so we believe we've got something beyond ORLADEYO that can, again, create sustainable revenue for the company and create value. And third, we're on a really nice path to profitability. We had an operating profit of over $60 million last year. The second half of this year, we're going to be at or approaching cash flow positivity. And next year, for the full year, we'll be cash flow positive. So there aren't many companies like that in our space that have all three of those. And I think in these uncertain times, it's even more important.

Great. And one of the topic du jour currently is tariffs. And so far, pharmaceutical products have been exempted, but I think most people think that's only temporary. So just curious, if you were going to see tariffs, what would be the impact to ORLADEYO and the company?

Charlie, do you want to?

Sure. Obviously, it's an evolving situation that we're monitoring. What we understand now, though, is it will have very little impact on ORLADEYO. Our current cost of goods are less than 3% of revenue. And the parts of the tariffs that could be -- could impact us would be on the active ingredient, the API. That's a small component of that 3%. So even with the impact of tariffs, it's not a material difference.

Got it. Okay. So let's talk about ORLADEYO. I think 2024 was a pretty exciting year for the product, kind of the fourth or fifth year of the launch depending on when you start counting. But you saw growth acceleration, which is not that common for that stage of a launch. So maybe just highlight what drove that acceleration and how that sets up 2025.

Yes. We had over $437 million in sales last year. It was over 36% year-over-year growth. And the #1 thing that drove that is just physicians and patients have learned through experience, they've seen our long-term data. They've experienced how ORLADEYO works in the real world. And they realize it's not just a convenient pill. That's obvious. But it's also a really effective product for most patients. And patients should expect to have competitive efficacy on ORLADEYO, and that's what the doctors and patients are seeing. So that we had more start forms, more new prescriptions in 2024 than we did in each of the previous years. And that rarely happens, and that's a sign of acceleration. The other piece, Serge, is we're just -- every year, we're doing a better job getting more patients to paid therapy. And we made some nice strides forward last year in getting just more paid shipments throughout the year, and that also drove some of that revenue acceleration.

Okay. And you provided guidance for 2025 in -- I believe it was in early January. And I think you're one of the few companies that has increased their guidance so far this year. So maybe just talk about why the guidance was increased, what drove it?

Yes. We started the year guiding to $515 million to $535 million. And we said the possible tailwind if it happens, is whether the Inflation Reduction Act being implemented would allow more Medicare patients on ORLADEYO to reach paid therapy because their co-payments would become more affordable. At the start of the year, when we guided, we didn't know whether that would happen or not. By the time we did our Q4 earnings in February, we had early signs that, that was starting to happen. Medicare patients were able to afford their co-pays thanks to the IRA. And so that's what caused us to raise guidance to $535 million to $550 million. And on top of that, in the early part of the year, we saw the same really strong demand that we saw last year. So all that together gave us confidence to raise guidance.

Okay. Maybe it would be useful to talk about where paid rates currently are across the various segments of coverage, commercial, Medicare and Medicaid?

Sure. We ended last year with an overall paid rate of 73.5% of our patients on therapy. It's high in our commercial segment, which is about 60% of the patients. Commercial ended the year close to 80% paid. Medicare, which is 20% of our patients, ended last year at 55% paid. And based on what I said earlier, it's not that plans were saying no for Medicare patients. It's just that the patients couldn't afford their co-pay. And so that's where the IRA kicks in. We're still in the process, the early reauthorization process really goes through April into early May. So it's too soon to give you an exact paid rate. But with the tailwind of more Medicare patients getting paid, we expect to be approaching 80% paid overall as we come out of the reauthorization season. So big steps forward and that makes obviously a big difference in revenue this year and in coming years.

Okay. I know in prior years, there was a significant step down from 4Q to 1Q and then a big bounce back as you got into 2Q. So with this level of paid rates, should we expect that difference to be much less than what we've seen in prior years?

What we've guided to for this year is in past years, like you said, it was definitely down. The reason it's down is as we're going through reauthorization, some of the patients have to temporarily go to free product while going through reauthorization. We also have a bigger hit on gross to net, particularly in the commercial space, where we pick up all the copayments. And so many patients' copayments are maxed out during the first quarter. With the tailwind that I described, this year, we could be closer to flat rather than down. So down a little bit closer to flat versus definitely down the last couple of years.

Got it. And I think in the last couple of years, in terms of new patient growth, you were hitting about 300 patients a year on average, a little higher than what you, I think, had guided us to. Should we expect that to continue going forward?

Yes. And just to remind everyone, what we guided to is peak sales we expect for the U.S. to be $800 million. Coming out of 2023, what we needed to average was at least 200 net patients per year in the U.S. through 2028. And in 2023, to your point, we were well above that. We're above that again in 2024. It only needs to be an average over that 5-year period, and we're well on track. So well above $200 million each of these early years. In the later years, maybe it goes below $200 million, but we're very much on track for $800 million in 2029 in the U.S. and peak sales globally of $1 billion in 2029.

Okay. And does the ease of access and this higher paid rate, can that influence the rate of new patients?

I think it can always help, particularly on the Medicare side, where physicians and patients, they want to get to paid. We've been very generous with free product because we want patients to have the good clinical experience. But for patients, confidence is really important, knowing that their insurer will pay for ORLADEYO or any HAE therapy is very important to them. And so I think this is just another thing that's going to increase the already strong high confidence in the product.

But I'd also say, remember that this is a space where people are controlled, right? So it's not like people are desperate for a new therapy. And so that kind of steady add is going to continue for some period of time until we start to hit a saturation point in getting of the 10,000 patients, some percentage that have tried ORLADEYO. So it's not a hockey stick. It's a steady climb like we've been seeing.

Got it. From our discussions with KOL, it seems like ORLADEYO is now kind of the de facto prophy treatment for any new diagnosed treatment. So I'm curious from the new patient adds that you've seen, are they coming -- are they newly diagnosed? Or are they still switch those switching from other treatments? Just curious where -- what the source of new patients is?

Yes. Well, I mean, we've been thrilled all throughout the launch and the percentages have stayed very consistent. We're getting patients from all three segments where we'd want to get them. So launch to date, 52% of the patients that have started ORLADEYO have switched from another prophy product. So that's great. Prophy is -- patients on prophy is the biggest segment, and we continue to get patients to switch. 32% switched to ORLADEYO from acute only. So they're coming to prophylaxis, this being their first prophylaxis product, adding it on top of acute only. And then the remaining 16%, 17% is patients best we can tell are either newly diagnosed or just newly treated with an HAE therapy starting with ORLADEYO. So we're getting new patients. We're getting experienced patients, and it's all because of the profile of the drug, one pill once a day with really good efficacy for most patients.

Okay. And as we mentioned before, you're now in the fifth year of launch. So just curious what has changed in terms of the targeting or messaging for ORLADEYO and if you've changed your tactics on which tiers of doctors to target now to continue expanding the prescriber base for the product?

Well, from a targeting perspective, it's been really consistent. We've got two tiers of physicians. There's roughly 600 physicians now that treat about 50% of HAE patients. That's Tier 1. At this point, around 80% of those physicians have prescribed ORLADEYO. So we still have room to grow. And certainly, the average doctor in that Tier 1 has a lot more HAE patients. So there's opportunity to go deeper into their patient base. And then the bigger Tier 2 is patients or doctors who have even one or two patients. We call on everybody. Launch to date, we've had over 1,200 physicians prescribe, and it's been really steady every quarter, roughly 60 new prescribers of ORLADEYO come on board. So great from that perspective, we'll continue that. And from a messaging perspective, the messaging has been very consistent in the last few years about convenience of a pill, but the long-term efficacy in our clinical data and now our real-world evidence, we're building a real volume, huge volume of real-world evidence that we build into our messaging to increase health care provider and patient confidence. So as we develop new evidence, it's just reinforcing what they're already seeing that this is a really effective product for patients.

Serge, I'd say one other thing. The commercial team has done a fabulous job of interpreting data along those 5 years. or going into the fifth year of what's working and what's not. And there's these adjustments that Charlie's team has made along the way that just have gotten us better and better and better. Like the easiest example for me to describe is that free drug to paid drug, right? There were adjustments around people, responsibility internal, external. And we just got smarter because we understood the data, we made the changes, and now we're seeing the results. And it might look simple to the outside world. I can tell you, it's a lot of work and stability of team and improving the team are all things that go into making this execution what it is, which is, I think, one of the best launches in a crowded market in the history of rare disease.

Regarding awareness of ORLADEYO, is it at a point now where patients are going into their doctors and requesting the product or it's still kind of a physician-driven decision to put patients on ORLADEYO?

Some patients do request it, but that's more the minority. Most of this is the conversations tend to be more physician-driven. Physicians have a very high awareness of ORLADEYO now well into the 90%. What we try to do, though, is it still is a joint decision between the physicians and the patients. What we know is most patients would prefer to be on prophylaxis. They prefer to be on oral prophylaxis. But patients in HAE, as in any condition, patients tend to be a little more hesitant to demand things from their physician on average. But if the physician brings up options, brings up ORLADEYO, the patient is likely to respond favorably, and that's what creates a good conversation and a decision to switch to ORLADEYO.

Okay. And our retention rates stable now as we get into the fifth year? I mean.

Yes. Retention has been really strong the last several years. Patients who start on ORLADEYO, 60-plus percent of them get to 12 months. And once they get to 12 months, they're there because they're doing really well. And so most of them stay on then long term. And we've actually put out some data from claims evidence showing that ORLADEYO is statistically equal in terms of retention to TAKHZYRO, although numerically, it's ORLADEYO is actually slightly better. So very competitive retention, and it's because of the profile of the product.

Got it. Okay. And then how do you view the outlook for competition? As Jon mentioned, this is a very competitive market. And it looks like it's going to be -- it's going to get more competitive. There's more entrants. So how do you view the competition.

Yes. Let me start. And I think one thing that I think is really important for people to understand is what we're seeing in a competitive market already is only going to be worse for the people that follow us. It's not going to be better, right? People are controlled. They're seeing their doctor once a year. That's not going to get any easier. So I'll let Charlie describe the rest.

Yes. And that's what I've been describing with the efficacy that we're seeing with ORLADEYO. If you are doing really well with your attack control on one pill once a day, what else do you need? You're basically living your life where you can just about forget that you have HAE. That's what patients are looking for. So some patients will move on to other therapies if ORLADEYO turns out not to be the drug for them. But the patients who stay on is because this is solving their problem with HAE. So that's -- intuitively, we're going to hold on to those patients. But we don't just take our intuition and rely on that. We do a really big study every year. We've done it 4 years now that's been very predictive of the growth of ORLADEYO, where we show 100 patients, 175 HAE treaters and over 50 payers, the profile of every product on the market today plus everything that's coming in the future, and we give those future products their best case scenario. If they good data in Phase II, we assume that, that's what they look like on the market. And we get patient and physician preference share and then run it through a 6,000 simulation Monte Carlo analysis to predict, as Jon said, patients typically come in one time a year now for their HAE. So what happens in that one visit? What happens this year, next year, 5 years from now as more products come on to the market? And what the simulation predicts is that ORLADEYO will grow to about 25% share in the market. And then we'll maintain that share even as new products, even new oral product comes to the market, we will maintain that share. So that by 2029 into the 2030s when ORLADEYO was at a peak of about $1 billion, we may be growing more slowly, but we'll be maintaining that share long term. So we'll keep doing this research every year, but it's given us confidence in that our intuition is right, what we're hearing from our customers is right, and we have a very bright future.

Okay. And it looks like you're going to get some company in terms of -- on the oral treatment side. We are expecting on-demand treatment to get approval I think late June.

Looks like June. Yes.

Yes. So do you view that product as a potential competitor or one that could provide some tailwinds for more adoption of all-oral HAE treatment?

Yes, really the latter. We're looking forward to it. We think it will be great for patients to have an all-oral option. As I said earlier, what we know from patients and doctors is prophylaxis is the backbone of therapy. So patients want to prevent their attacks. But nearly every patient, whether you're on ORLADEYO, TAKHZYRO, any other product, you have occasional breakthrough attacks. And so you need a rescue medicine. And to be able to do that with another oral could be a great benefit for patients. So we look forward to that.

Okay. I think you you've been running a trial with a pediatric formulation of ORLADEYO. I think it's fully enrolled now. Just can you tell us when we could see data? And I guess, there's some IP implication with this trial, but also kind of an expansion, a small expansion of the market opportunity?

Helen, do you want to talk about the trial, and I'll talk about the opportunity.

Yes. So think about an oral option and the difference that an oral option could make. This is an oral option for pediatric patients instead of injectable prophylaxis. What we have is oral granules that are simple for parents to use to sprinkle on food or put a drink, and that makes dosing easy for pediatric patients and prophylaxis, therefore, easy for parents to give to their kids. In terms of the trial, we have completed the initial portion of the trial. We've actually reported the interim analysis for the trial that is the data set that's necessary to take this for registration. That analysis reported at Quad AI recently. And this is a look at safety, a look at PK exposure and those are the parameters needed for registration. It's also look at efficacy. And what we saw was 29 patients enrolled, 25 patients still on drug at the interim analysis. So doing really well. The safety profile that's not only consistent with adults, but looks really good in pediatrics and pediatric patients doing well in terms of their attack rates, having excellent control of attacks while using this oral formulation for prophylaxis. So we're really excited about this program filing this year to be able to bring this oral option for prophylaxis to kids.

And, Serge, as far as the opportunity in the U.S., Helen talked about the need for patients, but we've identified about 500 diagnosed HAE patients under age 12. And we think that at least -- well, a growing portion of those could be appropriate for prophylaxis. So a couple of hundred patients could be the opportunity here. And an oral therapy is going to be the market leader for kids. And so it's a great opportunity for those kids, and also families, because it's a genetic disease. It's another way that families can get exposed to ORLADEYO and another way that some physicians who maybe haven't adopted ORLADEYO yet can get a first experience with the product. So we're really looking forward to -- we're on track to file with the FDA this year, and we're looking forward to bringing that to market.

Okay. And maybe just to finish off our conversation on ORLADEYO, if we can talk about the ex-U.S. commercialization efforts. I forget how many countries you're in now, but we're really seeing some growth there. Maybe you can just give us an update. And I guess, if you're seeing the same level -- if you're retaining the same level of market share ex U.S. than in the U.S.

Yes. ORLADEYO is now commercialized in over 30 countries. We're really excited in Europe. We've gotten market access in every country in Western Europe, short of the Netherlands, which we expect this month or in May, and then we'll have a complete set, which is phenomenal for a rare disease product like this. What we're seeing is the same trajectory of growth. The big difference is that it takes about five ex U.S. patients on average from a pricing perspective to equal one U.S. patient. And of course, price doesn't go up ex U.S., it tends to go down. So the growth ex U.S. is about volume, and we're seeing really great uptake. So at peak, we expect similar to what we do in the U.S. peak share is in the mid-20%, depending on the given countries. But the same trend towards prophylaxis being the backbone of therapy. We're seeing in Europe. We're seeing it in Japan. We're seeing it in Canada, and we expect to see it in other countries around the world.

Great. Okay. I'll ask Helen to talk about the pipeline. I feel it's an underappreciated part of the BioCryst story, but one that I think will increase in focus as -- well, probably starting this year as we get data from the first pipeline asset. So BCX17725, I believe, is the first one for Netherton syndrome. I'm not sure everybody is familiar with that indication. So, Helen, if you can just give us an overview and what we should expect from the first trial later this year.

Yes, sure. So our pipeline has two products that are or will be in the clinic this year, and both of those will have data coming this year. So we're really excited that our pipeline is in the clinic and moving forward. The Netherton syndrome program is one that could be transformative for patients with Netherton syndrome. This is a disease that is a serious skin disorder. It's one that has a mortality rate associated in infancy from the results of dehydration through the skin, and it affects patients through life. So it's very serious. There's no disease-targeted therapy available. And it's one in which patients live with skin that is red, inflamed, itchy and peeling in large pieces from head to toe. It also affects hair and they have very brittle hair. And it affects the -- they have food allergies, affects the GI system and they have food allergies, they also have asthma. So it's a really serious disease. Patients with Netherton syndrome are generally treated with supportive care used for the larger category of Ichthyosis, which is bad skin disorders. And so this is an opportunity to bring a targeted therapy forward in trials to patients and potentially really transform how they live with their disease and move their skin towards being more normal so that they can live with normal skin and normal hair in a way that the rest of us take for granted and these patients just do not have. So this program is -- we have a protein therapeutic. It's a fusion protein. It's a KLK5 inhibitor. It is a very potent molecule, and it has very high affinity. What that means is that this molecule can be delivered in a small concentration. We believe it could be subcutaneously delivered. And once it hits the target, it sticks there for a long time. We think that means it could be dosed about every 2 weeks or longer. So for this drug, we are anticipating and our goal is several different things. One, bring a functional cure for the disease with a targeted treatment to replace the missing protein function; two, do it in a simple package, a subcutaneous treatment that could be dosed every 2 weeks. And three, do it in a way that patients really experience tremendous difference in their disease and near normalization of their skin. The program today is in the clinic. We are in Phase I. That Phase I trial includes both healthy volunteers and patients. So at the moment, we're dosing in healthy volunteers. We started this last year, SAD/MAD, single ascending, multiple ascending dose study. That needed to initiate to get the initial data to show that we are translating exposure levels to -- from preclinical to humans as we expected. And as that continues, we're also moving to enroll patients now in this Phase I study. This year, we'll be enrolling patients while in parallel continuing the SAD/MAD program. And we'll be looking in patients for all the signs of the drug working in the ways that I'm describing. So one, we're looking for basic outcomes like getting to the skin, drug can penetrate the skin, which we expect to see. drug that has on-target activity in the skin, biomarkers. But more importantly, we are also looking for the drug to have the effect. And we believe we're dosing in a range where we can see that this year. We're dosing in patients, and we will be giving patients a small number of doses over a period of about a month so that we can then observe for their skin to see if we are observing those changes, that healing of the skin as measured by the physician, as measured by the patient and their experience using endpoints that could become our pivotal endpoints and in the course of this year, having a small number of patients for whom we have data on all three of those, drug in the skin, drug activity on target, the biomarker and then clinical observation of healing on outcomes that could be the same as the pivotal endpoints. With that data this year, we'll be in a good position then to move next year into continued exposure, more patients and trials settling on the dose and preparing for a pivotal program. And as a program in a rare disease with no targeted therapy, this is one that could have a streamlined path to registration.

And avoralstat is now going back into the clinic or maybe it's already in the clinic at this point?

Avoralstat is going back into the clinic this year. This is now for treatment of patients with diabetic macular edema, where we understand from previous experience and our own data now that plasma kallikrein is an alternative mechanism of action for treatment of diabetic macular edema. The preclinical evidence suggests that we'll be moving into the clinic to test that. We'll be doing that with avoralstat, which we believe is really ideally suited for use in this indication, and I'll explain how. Avoralstat is a drug that -- for which we know from a systemic perspective, we know that it has a good safety profile because it has been evaluated in randomized Phase III for oral administration. Here, we'll be using one of its physical properties, which is poor solubility to deliver it into the back of the eye using suprachoroidal injections to deliver a suspension of avoralstat into the back of the eye, and that will slowly solubilize over time to deliver avoralstat in its soluble form to the retina. What we're looking for here? We're looking for improvement of retinal vascular leakage. That is the source of edema in the eye. That is the source of the retinal edema that leads to poor visual acuity and loss of visual acuity in patients with diabetic macular edema. What we want to do with this program is evaluate avoralstat's ability to both deliver exposure over a long period of time with few injections for patients and then an alternative mechanism of action to treat retinal vascular leakage and to improve diabetic macular edema and improve visual acuity. This year, we do -- we'll be dosing in patients. We'll have our first few patients on drug this year. It's a trial that will go into next year, but we are going to be looking at patients one by one to observe for safety and tolerability in the eye, of course, that's standard. But also then on scan of the retina, are we seeing a reduction in retinal thickness that indicates a reduction in edema in our first few patients this year and then continuing enrollment and dosing next year to increase the sample size before making decisions about later trials.

Great. So maybe to finish off, we can talk about financials. Where you are in terms of cash and your profitability time lines? And also maybe address, I think it was about a month ago, it was announced that your CFO was departing. So just kind of an update on where the search is at this point.

Yes, search is going great. Anthony gave us a nice transition period and actually is going to be helping us sporadically even in the coming month or 2, which is great. So he's been really wonderful about helping us in the transition. And the search is well underway. And so confident we'll find a very qualified, excited CFO to join the company. And then financially, we ended the quarter with $343 million -- or end of the year, I should say, last year with $343 million on the balance sheet. The guidance we've talked about with revenue already of $535 million to $550 million and then expense or $425 million to $435 million. So what's most important is where are we going to end up profitability-wise? And if you put this compound annual growth rate that we gave at the beginning of the year on revenue of 20% and 5% on expense, you end up with generating cash after interest and royalty of $200 million in 2027, positive cash flow. And so that ends up giving you a balance of over $600 million on the balance sheet and puts us in a really solid financial position. So especially in times where you don't want to be dependent on your shares for bringing in more capital.

No, not in this environment. And then maybe just to wrap things up, Jon, I'll ask you to -- what do you feel is the aspect of the story that remains the most misunderstood or underappreciated by investors. And we only have a couple of minutes, so...

Yes. Listen, I think it's ORLADEYO, right? I mean here's a drug that's going to do over $500 million in revenue this year in its fifth year launch. It's growing at a steady rate. That's undeniable what we've done so far. And all the indicators we've given you have been spot on in terms of where it's going. And so it's on its way to $1 billion. And yes, there's competition coming, but we've explained to you in the most robust way, I think anybody has explained it, of how we see the market unfolding with new competition. And then IP, as we had talked about before, between 2035 with one patent and 39 with another. And so the value of that alone is significant. And we're happy if investors are spooked by oh, there's more competition. There was competition ahead of us that made it challenging and look at what we've done, sit down with us and let us walk you through how we see the future with the robust analysis that we do and see if you come to a different conclusion because you might be missing out.

Yes. All right. I think on that note, we'll end our session here. So I want to thank you all for joining us this morning. Appreciate your presence at Needham's Healthcare Conference and on the BioCryst story, pretty appealing in these times right now.

Thanks, Serge.

Thanks, Serge.