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

All right. Let's get started. Welcome again, everyone. I'm Brian Abrahams, one of the senior biotech analysts here at RBC Capital Markets. Our next featured company is BioCryst. We're really pleased to have with us their President and CEO, Jon Stonehouse; and their Chief Commercial Officer, Charlie Gayer. So Jonathan, Charlie, thanks again for being here.

Yes. Thanks for having us.

Thanks, Brian.

So maybe we'll kick it off on the commercial side on ORLADEYO. And maybe bigger picture, what specific strategies or external factors have contributed to ORLADEYO's continued momentum now getting many, many quarters into launch, still seeing kind of that momentum persist. What are some of the key factors?

Before you jump in, Charlie, I think it was interesting last week, we were with an investor and he's like, what's the analog for what you guys have done? He goes, there isn't one. And I think what's really interesting is what Charlie and his team are doing is pioneering and blazing a new trail that others haven't done. And to see it 5 years in since approval and growing at a trajectory that it's grown at has a lot to do about execution and the original plan that the team set out. So with that, I'll let Charlie explain.

Yes. Thanks, Brian. I think it all starts with, obviously, the fact that patients would prefer to be treated with an oral medicine if they can. However, that alone is not enough. They won't sacrifice efficacy. And so over the last couple of years, both our long-term clinical trial efficacy became much more clear to prescribers that ORLADEYO doesn't work for everyone. But when it works, it works as well as other drugs. And so you should expect really high efficacy. And then the other piece related to that is we have generated a ton of real-world efficacy, and we've been able to do this because ORLADEYO in the U.S. is distributed through a single pharmacy. And that's, as Jon was alluding to, one of the things that we built at launch. We did this because, number one, we knew that it would offer patients a better experience, a more customized high-touch experience. Number two, we did it for the data. So it's data that our sales team, our commercial team can use. It gives them access to very real-time data that they can act on with customers. And then it's helped us build this body of evidence because every month, patients get asked how many attacks have you had in the last month. So we get a baseline and we get ongoing. And so we're now starting to present at medical congresses and soon in publications this growing body of evidence of how well ORLADEYO is doing. And so I think particularly over the last 5 quarters or so, this has been driving the kind of uptick in demand that we've been seeing.

I want to dig into this uptick in demand on a few different -- from a few different dimensions, actually. In terms of prescriber additions, you've noted really remarkable consistency in the number of new prescribers you're adding. I think the number is around 60 per quarter. As the market for ORLADEYO potentially matures, where do you see this rate going? Do you see this slowing? Or are there additional tactics to engage maybe untapped or lower-tier physicians that haven't yet tried ORLADEYO in the patients?

Yes. We actually have 2 -- we look at the market in 2 tiers. So Tier 1 is approximately 600 physicians that we know treat about 50% of HAE patients out there. At this point, 80% of those Tier 1 physicians have prescribed. The average Tier 1 physician also can prescribe to many patients because the average treats probably 10 or more HAE patients. So the strategy there is to keep getting more of them to prescribe, but really for them to go deeper in the list. And the efficacy that I described earlier is getting them to do that. Tier 2 is a continually expanding tier of physicians. And at the end of 2024, there were already over 1,200 prescribers of ORLADEYO between these 2 tiers. And so what we do with a lot of the data that we get, if we see evidence out there that a doctor might have an HAE patient, we will go and find them even if it's just one patient. And so to answer your question, will this continue? I think it will continue for a while. Eventually, the new prescribers will slow down, but we can still go very much deeper in all of these prescribers as they continue to gain experience with the product.

The other area where you're seeing improvement is on the paid rate, right? The paid rate for ORLADEYO improved sharply to 84% last quarter. Can you remind everyone what exactly happened? And how much more improvement do you think we'll see in the coming years? Is this a sustainable paid rate, something that may not require any active management? Or is there things you'll need to do to keep it where it is?

What in our world doesn't require active management? Nothing.

Yes. No, I do think it's sustainable, but yes, it does require active management. Our long-term goal, as you recall, was 85% -- to get to 85% paid across all of our segments. What happened in Q1 was a really large improvement in the Medicare segment. Medicare is about 20% of the patients on ORLADEYO. And in 2023 and 2024, the Medicare Part D plans were saying, yes, they will pay for ORLADEYO, but the patients were not able to get enough assistance to help them afford their co-pays. And this could add up to several thousand dollars per patient. And so rather than having them drop off therapy, we gave them free product for the last couple of years. So we ended 2024 with a 56% paid rate in that group. What happened this year is the IRA fully kicking in with the maximum co-pay being $2,000 per patient, it helped patients afford their co-pay. So the bill is doing what it intended to do to provide access for patients. And our paid rate in Medicare snapped back, it's now 89%. So just as quickly as we lost a lot 2 years ago, it came back very quickly faster than we expected. All the while, we continue to improve in the commercial space, which is 60% of our patients. And that -- by the end of April, that was up to an 84% paid rate, up from about 79% at the end of last year. So we will continue to make, I think, some incremental improvements in commercial. And then Medicare, I think, is very much sustainable going forward.

Are there any external factors, additional policy changes or payer behaviors that could influence these rates positively or negatively in the coming years?

I mean policy questions these days is a wildcard. I won't speculate on that. But from a payer perspective, there certainly are new products coming into the market. However, ORLADEYO, we've got so many patients on therapy now and the same efficacy data that I described earlier that's influencing physicians, we can also take that and are taking it to payers now. So payers have a very different view of ORLADEYO. Frankly, I think we've surprised payers with how much uptick there's been. And it puts us in a very strong position with them for ongoing negotiations even as new products come on the market. Okay.

How do you see gross to net for ORLADEYO evolving over the coming years, just given these improvements in the number of patients on paid drug and getting more of these Medicare patients on paid therapy?

Sure. One thing when we talk about gross to net, we've always said it's about 15% to 20%. That does not include free products. So that's 15% to 20% off of our paid rate. We've made some improvements there as well in kind of adjusting how we deal with commercial co-payment assistance and such without affecting patient care. And so this year, we expect gross to net to come in around 15% for the year. In coming years, I would expect that to gradually tick up. So a little bit gradually towards 20%. The main reason for that is Medicare Part D, we qualify for a small company exemption right now. So the 20% of the catastrophic phase, we would normally have to pay. This year, we only pay 1% of that, but it phases in through 2031. By 2031, we'll be paying 20%. So that will obviously affect our gross to net over time.

Got it. We get asked a lot about the competitive landscape really in the future because I think there's the injectables, there's the oral ORLADEYO, which seems to have -- they seem to be occupying somewhat separate spheres in the market, and you haven't seen erosion from any injectables really. How do you maintain growth in the U.S. and ex U.S. as well as additional competitors do potentially come on to market, maybe with longer-acting injectable profiles or even additional orals? What are some of the things that you will need to do strategy-wise to maintain your entrenchment and continue growing? And yes, I mean...

Let me first talk about the market and you can talk about the strategy. So we used to get this question constantly from investors about -- I talk to 10 KOLs and they say they're going to put everybody on XYZ drug when it comes to market, and you're going to lose all your share, they're going to take it from you. And we had all this rich market research that we had been doing now for 4 years in a row. And so we had this debate internally. I might as well show it to everybody so that they see it the way that we see it. And the goal of that market research is to get at the least biased view of how to predict the future because talking to 10 docs, you're going to get a ton of bias out of that. So we do on an annual basis, a conjoint analysis for preference share of 100 patients, 175 treating HAE treating physicians and over 50 payers. And we've shown the profiles of existing drugs and the profile of future drugs if they've got Phase II data or beyond. And so we give the companies that aren't on the market yet the benefit of their latest data, which doesn't always translate in later stage.

No. Well, we know Phase II to Phase III.

And we give them pretty aggressive timing in their favor as well. And that spits out this preference share, which we know is biased. People gravitate towards the latest, greatest thing. And then we put it through what is often used in consumer products is a market simulation. And it's Monte Carlo analysis that shows an interaction between a patient, a doctor and a payer factors in things like time, how often does a patient go see their doctor, it's once every year, not once every month. And it spits out an answer. And we basically show the patient share from what is it, 2024 to 2033. And what you see is it's a sticky market. And the logic makes complete sense here. If you're controlled on our -- and what Charlie said at the beginning is really important, nobody sacrifices efficacy for convenience. If our drug doesn't work for you, you go back to what you were on or you go on to something else. But if you're controlled on our drug, you stay on our drug. And if it's once a day, what incremental benefit are you going to get from another drug coming on the market? Nothing. And so you'll see that we hold share pretty steadily. And no surprise, in 2033, the 2 market leaders are TAKHZYRO and ORLADEYO, right? Because they were the -- we have the head start. Both of us have the head start.

So strategically to get a patient to switch, you need something really differentiated. We've got that now oral versus injectables. As we see this year, we do expect 2 new injectables to launch that look like they have really good efficacy, so -- but no better than existing injectables on the market. So what do they have as a differentiator? They've got once a month, maybe once every other month dosing. So we expect that's what they're going to be talking about as switching from a drug like TAKHZYRO to a drug like garadacimab, for example, because it's fewer injections. We also know that patients on average would prefer an oral prophylactic product. So what we're going to be doing is stepping into that conversation and saying, if you haven't tried ORLADEYO yet, and at the end of last year, about 3,000 out of the 11,000 patients in the market have tried ORLADEYO. So lots of room to grow. This is your time. This is a great time to try ORLADEYO. It will probably work for you. If it doesn't, you've got these other great options to move over to. So we're going to use additional competition as an opportunity because, again, we think we have the most differentiated product.

But what's great about that strategy is the #1 obstacle that we face from doctors like this, what is it, almost 200 docs in the top tier that still haven't prescribed is my patients are controlled. I'm not going to switch off. I'm not going to go through the hassle of getting -- going through insurance reauthorization, all that stuff. And -- but if they -- if we now start to see the noise causes them to change their mind to open their mind to switching, we're going to say, but of course, you would try ORLADEYO before you would try anything else to see if they can be controlled on a once-daily oral. And we're rolling out that campaign as we speak, and I think it's going to be pretty effective.

Anything you need to do in terms of sales force expansion to implement that campaign?

No, we really don't. We think we've got a 40-person team out there. They cover the market. They cover all tiers really effectively. The thing we do is we continue to put out more evidence. And so we keep evolving our story in a positive way. And so that's kind of the expansion. But it's not an arms race. It's more of a quality of message. And we've got people now who've been on our team for about 5 years, and they've built really good relationships with their customers, and I think that gives us an advantage as well.

What's interesting, though, in your question is you don't have to keep investing to keep getting more revenue, right? You kind of hit a plateau of what investment is necessary and the revenue keeps going up. And so the profitability gets better and better and better with every year. And on top of that, our royalty -- blended royalty rate goes down and down and down because the tiers get lower and above 550, it's 0. And this year, we will be above 550. So it just gets more and more profitable each year.

And so when you think about the longer-term picture, taking into account the market research, simulations, kind of what you've seen now in terms of the acceleration of free-to-paid drug, the expectations and plan with the sales strategy, what's the latest in terms of your goal guidance for long-term revenue opportunity for ORLADEYO? And the breakdown, U.S., ex U.S., how that maybe has changed how you get there?

Our -- what we've said previously is we expect to hit $800 million in 2029 in the United States, $200 million everywhere else. And so it's $1 billion in 2029. We still see that same goal. But with the acceleration of the paid rate, what it means is our path from here to there is just more profitable. Because we've gotten almost 85% paid, we're just -- we're making more this year, more next year than we originally expected. The peak at the moment is still the same.

So does the peak come sooner since you've accelerated?

The thing that would make it come sooner is if we keep seeing the same kind of demand that we've seen over the last 5 quarters. If that continues for the next several quarters, we might see that move sooner. But right now, 2029 looks like our target.

Yes. I can't remember the year we put out the waterfall chart that got us to $800 million in the U.S., but we're multiple years into it, and the evidence is only pointing to us being ahead of schedule, not behind schedule. So confidence in that number should be going up and up and up.

Pediatric population. You've completed the study, you're in the filing process. Just tell us a little bit more about that, about -- have you had any FDA engagement, any kind of changes there with some of the new personnel? And I know it's not a huge market opportunity, but it does kind of further and where does it fit in?

I'll let Charlie talk about the market. But so far with the FDA, so far, so good, right? We made our submission. We got it accepted. We got priority review. We have a PDUFA date of September 12. So, so far, so good. Everything has been kind of working on the clock that is normally set for this.

And for the market opportunity, first of all, it's not -- we have not baked it into the $800 million and $1 billion that I just described. So this would be incremental. In the United States, we've identified about 500 patients that are diagnosed under age 12. We think that about 200 of them are in the prophylaxis zone at this point. But we think that there's an opportunity that could -- with an oral prophy product that could actually grow. We also know what's probably intuitive to everyone is when you have a child, a parent and a health care provider, none of those 3 like injectable products. And so the opportunity to switch to ORLADEYO, I think, is very strong. And then we're excited about the halo effect of the indication as well. So the 20% of the Tier 1 doctors who haven't yet prescribed, most of them treat kids as well, and we have confidence they will prescribe for the younger kids. So that becomes a new entry point. And then it's -- for most people, it's a genetic inherited disease. And so there's an opportunity to introduce ORLADEYO differently to many families that may be using other therapies. So we think there's a lot of different opportunity in that new indication.

Yes. As a person who started my career in sales in the pharmaceutical industry, albeit a very long time ago, one of the things you love when you're a salesperson is new data or a new indication or a new population. And when you think about a kid, a little toddler getting injected every 2 weeks versus sprinkling these granules into a glass of water or on soft food, I mean what a difference we're making in the family's life, right, as a result. And so for a salesperson, that's spectacular.

A lot of macro factors are on top of mind for folks today. Can you talk about BioCryst's exposure to potential tariffs, if you -- where your IP is domiciled and where manufacturing is? And then most favored nation policies, if those should come to pass, I think there are some differences in your pricing in the U.S., ex U.S. as there always have been in HAE markets. So just talk a little bit about what your strategy might be to offset that and...

Why don't you start with tariffs, I'll take...

So tariffs, we feel like any tariffs that come to pass, we're in a good position. We use contract -- outside contract manufacturers. Our API, we have redundant manufacturing. So we have a site in Europe and a site in the U.S. and then finished goods are made in the U.S. So we have an ability to move around within that. That said, our cost of goods is low, less than 3%. So it's not super material. And then -- and all of our IP is in the United States. So we feel in a really good spot with that.

Yes. And most favored nation, I just don't think there's enough detail to really go anywhere with it, like what are the comparator countries. I can't answer your question on the difference unless you ask me a specific country, right? And so -- and then how will -- if you look at the burden on the cost of health care in this country, it's not a lot of products. It's a small number of products that are used by a lot of people. The products that are used by very few but are more expensive really don't make a big dent into health economics in this country. And so it's just too early, Brian, to make a comment on where that's going to go. I'm hopeful that especially for patients suffering from rare disease that companies are spared some of the stuff that goes on this, but we'll see. No clear path on that one that I can see. And then one other thing that I would add in all the kind of administrative stuff and budget cuts in that category of what's going on macro is also cuts to things like stockpiling and that. And we have, of course, as you know, the RAPIVAB procurement contract, and it's an option agreement and one option has been exercised, 4 more are up to the government. And we've said, don't put that in your model. That's not in our forecast. That's not in any guidance that we're giving because the likelihood that, that gets cut is high. And in fact, we heard this week that they have no intention of exercising the remaining option. So glad we gave that guidance. Okay.

I know we've only got like 2 minutes left, and there's a whole pipeline to talk about. Maybe you can just talk in Netherton in the last 2 minutes, just -- how is enrollment going in the healthy volunteer portion of this Phase I? Any key safety biomarker or PK/PD metrics that you're going to be most focused on to guide next steps? And I guess, what other activities and milestones should we anticipate this year from that program?

Yes. The healthy volunteer portion of the study is pretty plain vanilla. It's a sad, mad study. Recruitment is easy because it's healthy volunteers, and it's been going relatively well. But it's -- in this case, what it's going to give us is PK data and tolerability and safety and no news is good news on that front. And so nothing really to share because we want to bundle it all together. We don't want to put it out in piecemeal. What matters and what's exciting about this program is what do we see in patients. And so in Parts 3 and 4, we're going to start to look at Netherton syndrome patients. And what are we going to look for? In Part 3, a handful of patients, we're going to study them for 4 weeks' worth of treatment, 3 doses every 2 weeks and follow them out to 8 weeks. And we're going to see does the drug get to the skin. If it gets to the skin in patients and it binds to the site and it stays there, that could be very interesting because remember, it's 1 million fold more potent than the natural ligand. And we believe we have the opportunity to completely change the course of the disease by restoring the normal function of skin turnover.

Are you looking at skin penetration in the healthy bowels?

We are, but because the site is occupied, the drug is not going to be there, so it's not going to be super helpful. It's -- the missing protein is where you get to measure whether or not your drug binds to that location where it's missing. And so that's going to be way more valuable. But if we're looking for restoring normal turnover in skin, in a month's time, even in the first part, we might see some interesting clinical results. Now having said that, we don't know the exact dose yet. We'll get a sense of that as well. But we're really excited to get that data. And then in Part 4, we're studying them out to 12 weeks. And there, we should actually see in a couple of handfuls of patients, real clinical benefit if it's getting to the skin. And so we're -- one of the things that people have asked us is, what are you looking for in terms of improvement? And it's not like you've got a patch of your forearm that's scaly and you want it to shrink by 20%. You want to see it gone, right? And if you're really restoring normal skin turnover. Now will we see that in these studies? Maybe not. But if we're getting an inkling of activity and a sense of dose, that will get us really excited.

Good. Well, with that, we're out of time. But Jon, Charlie, thank you guys. It's great to catch up...

Yes. Always great, Brian. Thank you.

Thanks a lot, Brian.