BioMarin Pharmaceutical Inc. (BMRN) Earnings Call Transcript & Summary

All right. Good morning. Good morning, and Happy New Year, everyone. My name is Cory Kasimov. I'm the Senior Large-Cap Biotech analyst at JPMorgan. It's hard to believe we're back here already, but let me add my welcome to the 38th Annual Health Care Conference. With different biotech company kicking things off for us for the first time in a long time, and it's my pleasure to introduce BioMarin and the company's Chairman and CEO, J.J. Bienaimé. And please note that following J.J.'s presentation, there's a breakout just across the hall in the Georgian room. So with that, turn it over to J.J.

Thank you, Cory. Good morning, everybody. Bright and early here. This is the earliest time I ever presented at JPMorgan, but that's fine. So we're very excited about being here today. As usual, this presentation will contain forward-looking statements. You can find some details in our SEC filings, 10-Q, 10-K and 8-Q reports. As most of you know in the room, the company is entirely focused on rare genetic disorders, patients who live with serious and life-threatening and genetic diseases. We build the company on ultra-orphan disorders. We have 7 products on the market today that we have guided will generate in 2019 around $1.7 billion of revenues. As you -- if you look at the last 10 years, we went from slightly over $300 million in revenues to $1.7 billion. So we increased the revenues between five and sixfold. And we anticipate maybe to slow down a little bit and only do maybe fourfold, four or fivefold in the next 10 years, which would bring the revenues in that case to $8 billion to $10 billion. We believe we have the power to get there with the products that are about to be introduced, vosoritide for achondroplasia and valrox for hemophilia A gene therapy and then stuff that are coming up in the pipeline, including recently announced BMN 331 gene therapy for hereditary angioedema. If we look at 2019, we accomplished quite a lot. On the vosoritide front, we recently reported very positive Phase III data demonstrating 1.6 centimeters per year placebo-adjusted and annualized growth velocity enhancement as compared to placebo again. And we also updated our Phase II trial. We have 54 months of data now demonstrating a cumulative 9 centimeters of height that's added versus natural history, contemporaneous natural history matched patients. On the valrox side, gene therapy hemophilia A, we achieved last year the prespecified Phase III clinical criteria for expedited review in the U.S. and Europe for valrox. We submitted a BLA to the U.S. and Food Administration (sic) [ Food and Drug Administration ] and an MAA to the European medical agency (sic) [ European Medicines Agency ] and we recently announced that the MAA was accepted, [ slight validated ] by the EMA, and the product is under review right now. Also, on the R&D front, we submitted an IND and a CTA for BMN 307, our second gene therapy product for phenylketonuria, PKU, and we also announced this morning that actually both the FDA and EMA have accepted the filing. And consequently, we anticipate treating our first patient by the end of this quarter. And on commercial front, again, we anticipate 2019 revenues around $1.7 billion and a pretty significant increase in non-GAAP income, 65% year-over-year from $91 million in 2018 to $150 million in 2019 anticipated. So now what are the key milestones for 2020 on the valrox side? Well, this, we believe, is likely to be the launch year for valrox in the U.S. and Europe. And since the filing is being reviewed in Europe, and we should hear from the FDA whether they accepted the filing by the end of February. We also want to submit the global marketing applications for vosoritide for achondroplasia and complete the enrollment of our second study, our Phase II study, which is also called 206 Study, in patients under 5 years of age, and we have now treated a patient as young as 3 months of age. On the commercial, financial, we anticipate around $2 billion of revenues. We anticipate for the first time in the history of the company, breakeven or slightly GAAP net income positive with valrox approval. And on the R&D engine, again, I talked about the BMN 307 acceptance of the filings and the initiation of our Phase I/II study with 307 for gene therapy. Something else we announced this morning is that thanks to a significant improvement in productivity in our gene therapy facility in Novato, 40 minutes north of here. We used to say that this plant, this manufacturing facility, had capacity for about 4,000 to 5,000 patients. We are pleased to announce today that actually we believe the facility has capacity for up to 10,000 patients per year, which is important because we want to be able to supply the gene therapy market as quickly as possible and because first-mover advantage in gene therapy is fundamental in the sense that every time you treat a patient, that patient is off the market. So with 10,000 patients per year that we can treat with that plan, that means we could basically potentially -- that's not the plan, that's not our forecast, but we would treat the entire severe hemophilia A U.S. patient population in 2 years, which is faster than our competitors can get their product approved on the market. So that's pretty exciting. And also, I just want to remind you that BioMarin is a global company. We are present -- we're actively present in 75 countries around the world. So we have the ability to get registered -- developed, registered, manufacture, sell our rare disease product in 75 countries. This is why we believe we can generate $2 billion in 2020 of revenues. And for a company of our size, actually, a lot of our revenues are outside the U.S., much larger proportion as compared to the traditional big pharma companies. So some news today also, we're pleased to announce that the Palynziq launch is going very well. So we anticipate in 2019, last year, $80 million to $100 million. We anticipate those revenues to more than double this year to $200 million based on the continued growth of the number of patients that are being started on Palynziq. And I just want to highlight on the right side of the slide here that actually, we're still scratching the surface of this market because if you just looked at the adult PKU market, U.S. and Europe, Middle East, it's about 30,000 patients. We only -- between, on the adult side, between Kuvan and Palynziq, we're only treating about 2,400, 2,500 of those patients. So less than 10% of the penetration of the market. And that is important because you can say, "Why are you developing PKU gene therapy?" That's because we believe that more than cannibalizing our current business with PKU gene therapy, we can increase the size of the business and especially treat patients that are not going to the clinics on a regular basis right now, not -- close to 20,000 of them, that might be interested in a very simple therapy with 1 infusion that could potentially be effective for many, many years and normalize their Phe levels. So back to valrox. So expected launch this year. So why are we confident in valrox based on everything we've done? Well, first of all, the clinical benefit is very clear. The regulatory authorities, one of them has accepted the filing. Another one, we believe, will do it by the end of February. We have strong evidence of bleeding control. There was a -- we announced earlier this year, there was a publication, second New England Journal of Medicine publication for valrox in 2 years or so, with a 3-year update just shows bleeding control with valrox for at least 3 years. We -- also something that maybe has not been understood by some investors that the data we've been communicating so far, whether it's the Phase II data or the interim Phase III data, is not as compared to placebo. Most companies they develop a drug, they compare themselves to the placebo. We compared our product to standard of care, which is prophylactic infusion of recombinant factor VIII 2 to 3x a week in those patients. And I will show you in the next slide how dramatic the impact of the drug is. And we also want to remind the audience that we powered the Phase III trial, which is completed in terms of enrollment, but ongoing instead of -- in terms of implementation. We powered the trial to show superiority over standard of care, not inferiority, and we believe we have a good chance to demonstrate that superiority. And we communicated last November, we enrolled all the patients in the Phase III, over 130 patients, which is more -- significantly more than all the other hemophilia gene therapy trials by our competitors ever completed so far. So this is a depiction of the results, the key results of the interim Phase III trial, which, by the way, we believe were negatively impacted by improper steroid management, and we have adjusted that. But even with probably suboptimal steroid management on the left, you have the number of factor VIII infusions, so this is bar in the middle. So on the left, this is before we treated the patient. This is what was going on with the patients when they were on the standard of care. Getting between, I don't know what the lowest is, 50 or so factor VIII infusions per year to over 328. Now we treat them with valrox and we look at -- in the following 6 months, how did they go? So we stopped -- they stopped the standard of care, we treat about 6 months later, this is what happens. Very, very few injections, factor VIII infusion as compared to before treatment with standard of care. And then the bleeds. At the end of the day, this is we're trying to resolve, the bleeding episodes. On the left, this was under the standard of care, and this is what happened within 6 months of treatment, after the standard care was withdrawn. So that is pretty exciting data. And also, as I said a couple of weeks ago, the New England Journal of Medicine publication of the 3-year update, so 3-year post-valrox treatment. So this is -- in red is the median, in blue is the mean. So you see that this is on the left, the annualized bleeding rate before treatment on standard of care. So these patients were receiving 2 to 3 factor VIII infusions per week, and they had, on average, 16 bleeding episodes per year. And 3 year after, so we take off the standard of care, treat them with valrox. 3 year later, they had a median of 0 bleeds, an average of 0.7, 96% reduction in bleeding. So I think we have some would-be competitors pretending they can do better on that. So they can do negative bleeds, also known as thrombosis, I guess. I mean -- but -- so we're getting a lot of calls from sales reps that have been selling this thing here for years. They all want to come work for BioMarin. I started in the industry as a sales rep. If I were a sales rep, I'd want to sell this than this. Okay. Again, that's the publication. Again, that was just in New England Journal of Medicine. No more prophylaxis, mean ABR of 0 and full resolution of bleeding in target joints those patients. Target joints are the joints that whereby the patients bleed on a regular basis and they destroy -- their joints get destroyed, they all end up with knee surgery, hip surgery and other problems. When you go to hemophilia meetings, you can see the patients from far away the way they walk because they all have a knee surgery. Another point that maybe has been misunderstood or overlooked by investors, we chose the AAV5 as our vector here for its many reasons, but one of them was the fact that it was a vector, the AAV vector, that apparently at the lowest percentage of patients with preexisting antibody due to the vector. Because most patients have existing -- preexisting antibodies to the vector. So these are our competitors that you see, AAV6, AAV8, so... So in the U.S., close to 80% of the patients have no preexisting antibodies to AAV5, I mean they will be eligible for valrox. Worldwide is around 70%, still lower because some countries have a higher prevalence than the U.S. That's got to be important because another thing, one of our would-be competitors is going around saying that they're going eat our lunch. So first of all, they have way more preexisting antibodies than we have. And if you actually look at the patients that are not eligible for valrox. The 30% -- the 20% -- sorry, the 21% or so remaining here, what do you think is a percentage of those patients that would be eligible for the Sangamo product? We did the calculations. I can check, it's 7.5%. So I would say, by the time they get to the market, there won't be much lunch left and they won't be able to get to the table because only 7.5% patients can be treated with our product. So let's move on to the next slide. Market is pretty large. Hemophilia markets in 2019 was close to $10 billion. Distribution, U.S. and Europe, we estimate, in terms of hemophilia A, population is about 121,000 patients in BioMarin territories, which exclude India, China and most of Africa. Also, despite the existence of the recombinant factor VIII injections and HEMLIBRA, there is still a pretty significant unmet need. The current treatment is very burdensome. The patients end up with knee surgery and other -- the destruction of their joints. The cost of prophylaxis therapy as we documented in U.S. to be around $700,000 per year. So we do believe that there is definitely improvement to be made here. Actually, there was a recent survey done in the U.S. by another bank, actually in late November, in 60 U.S. hematology, so regular sample. And they were asked, within a year of the availability of gene therapy for hemophilia A, how many of your patients, do you think, you will have treated with gene therapy? Let's say, 34% of the factor VIII patients will be switched to gene therapy and 29% of the HEMLIBRA patients within a year and 45% within 3 years for 38% for HEMLIBRA. And generally, the docs exaggerate a little bit what they're going to do, but it tells you still that the unmet need is real, and those docs are willing to treat -- switch the patients to gene therapy. So that pretty exciting. So we're preparing for launch. Our commercial team has already been very active in terms of managed market, managed care. We hired, trained a lot of representatives. We hired several basically all the sales management in the U.S., half of the sales force already. All of them have hemophilia experience, all of them have competitive background. If you talk to the National Hemophilia Foundation, #1 request that they get from patients is education programs, education, understanding of gene therapy. So we are very active in providing this. And we have received -- we have also a web -- internet program, and we have received hundreds of opt-ins from patients that are willing to receive educational program from gene therapy. So we are gearing up for launch. We're pretty excited about it and I say, we have no problems recruiting sales management and sales reps for the disease. We also have done a lot of payer research in the U.S. and in Europe. And I would say that, in the U.S., so we looked at prices between $1 million per therapy to $5 million per therapy. We're not communicating their price yet, but it looks like the U.S. payers are somewhat comfortable with a price around $2 million to $3 million per therapy. I just want to highlight again that by the time we launch, so we just published 3 years of data, but we're going to get a 4-year update in June of this year. So by the time we get approval and we launch and we actually have reimbursement discussions with payers, we'll have 4 years of data tell you, average cost of therapy right now in the U.S. with severe hemophilia patients, $700,000 a year. So 4 years will be $2.8 million cost offset potentially. Switching on to vosoritide, where we anticipate launch in 2021 and filing sometime this year, and this is the most common form of human dwarfism, no approved medical therapies available today. 80% of the patients born with achondroplasia are from normal stature or average stature of patients -- and parents -- sorry, and those parents generally when they're told by the geneticist they're going to have a dwarf kid, the first thing they ask is, what could we do about it? They would say until now, not much. But hopefully, with the approval down the road of vosoritide, they will be able to do a lot. And this is more than just being a short stature disease. There are a lot of serious medical manifestations of the disease, including foramen magnum compression which compress the spinal cord of the patients, sleep apnea, permanent sway of the lower back, spinal stenosis and obesity. So they are around -- so there are over 100,000 patients with achondroplasia in the BioMarin territories today. Only 22,000 or so of them are children because they couldn't -- vosoritide is unlikely be effective in adults. So this is our target market, 22,000 patients. So again, we had this Phase III study that we reported. We had a very, very significant results. The p-value, we -- says 0.0001, but actually, there was 13 zeros after the decimal point. We treated 121 patients from 5 to 15 (sic) [ 18 ] years of age. It was a randomized placebo-controlled trial, so the effect is pretty impressive here. We also have some extensive natural history data, where we can compare our results to what's been happening in similar patient populations that are not being treated. So we're getting ready for filing NDA/MAA in the, hopefully, the middle of this year. We are still implementing Phase II trials, and it's continuing. So we reported 42 months of data in The New England Journal of Medicine and 54 months of data in November of last year. And we are -- so all the patients -- and most of the patients so far have been treated over 5 years of age. We have an ongoing randomized trial, Phase II trial, separate from 0 to 5 years of age, with 3 cohorts. 2 of them are basically fully enrolled. The third one is starting to enroll. As I said earlier, I think we have treated our patient as young as 3 months of age right now. Again, this is a highlight of the Phase III trial that was recently presented. In addition to the efficacy, it was pretty dramatic. The product was very, I mean, generally well tolerated. The majority of adverse events were mild, and there were no serious adverse events reported that were study-related -- drug-related. And this is the cumulative improvement that was observed over 54 months, around 9 centimeters. That means that actually if we treat the patients from birth to about age 15, 16, I mean, we can likely, while we haven't demonstrated that yet, but it is likely we'll be able to show about a foot increase in height, which would be -- have a dramatic impact on the quality of life of the patients. Being 5-foot tall instead of 4-foot tall, you can drive a car. You can do a lot of things you would not be able to do otherwise, and this is what we're looking forward to. I talked about the Phase II trial already, the under 5, so I won't spend much time on this thing. Talked about that. So just a few words about our, again, next PKU -- I mean next gene therapy in PKU products, BMN 307, gene therapy for PKU. We just announced today that U.S. and the U.K. cleared the path to start the clinical trial. So we are implementing 2 study. The first one, the 902 study, the PHEnom study, which is an observational study in patients with PKU, which started a few months ago. And now we are about to start the 201 or PHEarless trial, which is going to be a dose escalation, dose selection study with a Part B expansion anticipated in the second half of this year. This study could potentially be the registration enabling Phase I/II study. And something we also want to emphasize that none of our competitors are able to do is that we are doing our first-in-human trial here for PKU gene therapy at commercial scale with a commercial facility. So there won't be any need to do any kind of bridging trial between early Phase I/II trial, the pivotal trial. We are right away starting with commercial scale, which I said earlier, can right now generate up to 10,000 patient doses per year. Finally, on the financial outlook. So we -- in the past 4 years, we say we're going to be improving our non-GAAP profitability, and we have done so. From minus $30 million in 2016 to over $150 million anticipated in 2019. Our revenues have been growing low double-digit over the past 5 years. R&D as a percent of revenues peaked in 2016 at around 60% and we are now down to slightly over 40%. We anticipate over the next 4 or 5 years to go down to 25%, while absolute R&D spend is going to be flat to slightly increasing. And then we also announced that for the first time this year, we anticipate to be GAAP breakeven or better, thanks to the continuation of the growth of our existing products, and hopefully, the introduction of valrox. So finally, in terms of 2020 milestone summary, again, we want to launch valrox in hemophilia A this year, second half of this year; submit a global marketing application for vosoritide in the middle of the year; complete an enrollment of the under 5-year study by the end of the year; generate around $2 billion of revenue this year, breakeven or GAAP better net income; and initiate 307 gene therapy trial for PKU, our second gene therapy product achieved by the end of this quarter. 45 seconds left, so I think we have a breakout session in the Georgian room. So you are all welcome to attend. Thank you.