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

Hi, my name is Kennen MacKay, and I'm one of the Senior Biotechnology Analysts here at RBC. It's my great pleasure to keep our conference rolling and be -- and joined on the line with BioMarin Pharmaceuticals. From BioMarin, I have Dr. Hank Fuchs, the President of Worldwide Research and Development. Hank, thanks so much for joining us today.

Thanks, Kennen. We appreciate the opportunity to participate in your virtual health care meeting today.

Thank you. So obviously, an incredibly busy and a very functionally different time. Obviously, all of us are adjusting to work-from-home due to the coronavirus impact. Maybe we can just kick off the discussion with sort of your sense of where coronavirus, where the COVID-19 pandemic has impacted BioMarin the largest?

Yes. Thanks, Kennen. Despite the immediate challenges of COVID-19, we've actually never been in a stronger position to execute our growth strategy. And in fact, due to the essential nature of our approved products, we've weathered the pandemic pretty well for the MPS business. So largest markets that have well-established bases of home infusion patients have remained strong contributors in the face of COVID-19 challenges, and this includes the U.S. and Canada, U.K. and Germany. This has led to high compliance, especially in times like these, patients want to stay well. In other parts of the world where home infusion is not as well-established like Latin America, the pandemic has enabled us to ramp up the home infusion practice, and we're in the process of converting more patients to home infusion. So a little bit, it's been a silver lining that ultimately will strengthen our business in the long term. But then when you think about the pandemic, you also want to think about that longer term. On the horizon later this year, we're looking forward to the potential approval of ROCTAVIAN for the treatment of hemophilia A. Our PDUFA action date of August 21 is holding firm. In spite of the pandemic, everything is going quite well, in review with the FDA. And we recently received certification of our manufacturing facility from Europe. During the challenging times, we feel fortunate that the pivotal study has completed enrollment last year. And so it will be the largest to report our data set for heme A with gene therapy. So good progress on ROCTAVIAN. Vosoritide for the treatment of achondroplasia, another major product opportunity, we're looking forward to advancing in the third quarter and also not disrupted by COVID because of the phase of development that we were in. And maybe the final thing to comment that's not affecting BioMarin fundamentally is on the earlier stage pipeline, we were able to enter into a collaboration with DiNAQOR to jointly develop novel gene therapy treatments for rare genetic cardiomyopathies, and thus, expand our pipeline to go beyond hemophilia A and PKU and hereditary angioedema, now into the genetic cardiomyopathy, starting with a hypertrophic cardiomyopathy. We've been busy building this infrastructure over several years, and it's not the kind of thing that a COVID is going to blow away. And that combined with the gene therapy manufacturing expertise and a broad global footprint puts us into a great position to get into larger and rare genetic diseases. And I think, again, none of that has really been meaningfully negatively impacted by the pandemic. And then finally, on the financial side of the business, we have Brian here, who can answer more detailed questions, but we stay on track to transition to GAAP profitability, to introduce the first-ever gene therapy, to get into registration in achondroplasia and to undertake initiatives to continue the journey of sustainable profitability growth over years to come. So with that, let me pause there, Kennen, and pass it back to you for other types of questions.

Yes. No, that's a phenomenal overview. And apologies for not introducing Brian, if he is on the line as well. To your point, in a lot of ways, BioMarin is stronger than ever, operating much, much stronger than ever, not only despite COVID-19 but also despite some competitive developments. Maybe to that point, one of the pipeline agents that myself and The Street seems most excited about is obviously ROCTAVIAN. And some of the 4-year data coming up potentially mid-year maybe could help sort of inform some thinking around really the durability of this product. Can you maybe talk a little bit about any developments as it relates to how durability is developing here? And by that, I mean thinking around what is causing the expression to wane over time from ROCTAVIAN?

A lot of complicated elements to the set-up in that question. Maybe let's just hit on some of the big ones. I think from a big-picture perspective, the 4-year data is, on some level, icing on the cake here already because ROCTAVIAN has already -- will have already -- has already demonstrated pretty substantial value benefit. And you're starting to see publications about what it really costs to have hemophilia in a lifetime or what the projected impact of ROCTAVIAN might be if we assumed a certain price of ROCTAVIAN. And I think most of those studies will establish a foundation of good ROCTAVIAN reasons from a payer perspective that have already been established in the 4 year's icing on the cake. But it's good for confidence in the clinical outcomes for patients, and it does kind of reinforce the biology that we've talked about. And I think people will be interested in the science and what does it mean for durability of demonstrable vector. I mean we have a lot still to learn. And so there'll be a lot of learning. I think there'll be some, I'm going to call it, scareless behavior trying to prognosticate what's going to happen in year 5, 6 and 7 based on what we've seen in year 2, 3 and 4. And we've done a little bit of that for scientific purposes. I think it's going to be very difficult. I talked about this from the get-go. The parameters are already relatively small patient population already. Some intrinsic variability that's human in origin, inter- and intrapatient variability. And the shape of the curve is not pure, it's not linear, so there are different extrapolation models you can apply to things. But as or more importantly, the relationship between a given Factor VIII level and a given clinical outcome has yet to be reestablished in a gene therapy context. So I put all of that in the category of scareless simply because the scientific aim of that -- to discoverers is real and pure, prognosing what's going to happen, I think, starts to move into a different direction. And then -- so -- and the reason I say that it's all back to the big picture. We'll have established a very positive benefit risk. At the time of PDUFA action, we'll have more than 3 years' worth of efficacy data, 4 years of efficacy data. Obviously, we haven't seen the data, so can't talk about what it is. And we'll have -- we'll be building an increasingly large data set of experience with ROCTAVIAN, and I think it's going to be attractive to payers and patients.

Yes. No, I certainly agree with you. And it's really incredibly optimistic there. One physician that we had talked to during our spring doc day series had said as much as 10% of hemophilia patients could either be requesting or be prescribed ROCTAVIAN within the first year of approval. Is that -- sort of in any way related to how you're thinking about this internally? Or is that just, again, sort of a complete divergence from the demand that you're anticipating?

It's not at all divergent. Qualitatively, I think it's a little hard for us to do. It's a little bit like cross-study comparisons. And so I find myself, for some reason, kind of not referring to the studies that other people did very much. Because for the simple reason that just because they validate what we believe, where they don't -- it's like a little bit of cherrypicking can be involved there. But I will say that qualitatively, we're seeing more and more market analysts reaching to doctors who are more and more familiar with the story, more and more aware of a segment of their patient population in whom the need is higher and the questions are fewer, and the expectations are more reasonable and as doctors start -- and we saw this, by the way, happen in the clinical trial, right? Because when we were starting the clinical trial, we had 7 patients' worth of experience for those dose group, right? And so now they're thinking about, okay, who really is at the higher end of the interest willingness curve, right? And that filled up pretty quickly, if you recall. So I mean, we basically -- the pacer on the completion of the study was really activating the sites in the countries. And we -- 300 patients signed up. And so now with this much more data, you're getting that much more acceleration of that same process. So you're seeing more and more respondents, cynical respondents, bare respondents, acknowledging that a meaningful fraction of their patients are asking about it. We've talked about our opt-in, our query line. We see activity crackling there as well. So yes, these numbers don't seem like, woo, to us at all.

Yes. And absent sort of in-person physician visits, that's online and sort of virtual effort seems that much more important. Can you talk at all about some of the educational efforts that BioMarin has been doing around ROCTAVIAN ahead of the approval or for even plans following approval after that August PDUFA you'd mentioned?

Yes. This is a little like the earlier question in a sense that for every slow adopter conversation, there's a faster adopter conversation that is to be had and the more we awaken -- for every COVID impediment headwind that we talk about, there's a benefit of the silver lining of COVID, which is people are getting quite adept at doing telemedicine and remote health care and remote monitoring that stay-at-home is a pretty good, effective way of controlling your exposure to risk for COVID. That recurrent dependency on the health care system is not really a particularly good thing for COVID. And so as many people -- as we here, ask the question about should we worry about doing gene therapy during the time of COVID? We hear people asking, isn't now the exact time to be doing gene therapy for hemophilia A to protect COVID? And I don't know exactly where the hedge tails kinds of things lands quantitatively in the market future, but we're encouraged. First of all, the agency is pushing very hard, very far in terms of into the -- we're on track in the PDUFA action cycle and feeling good about where we are. The medical community is -- has engaged even if it's telemedicine-wise. We're working around the barriers. And on August 21, and the midlevel seems around the corner and another level from a COVID time, there's still 3 months to kind of adjust and tune to get it right. We're having a lot of communication with our sites about how to be ready when the go goes. And the rest is going to play itself out.

And maybe sort of shifting gears a little bit. Another real sort of focus is on PKU. And the -- both, I guess, offensive as well as sort of defensive roles that are going on there with risk to Kuvan from generic entry as well as Palynziq and sort of uptick there. Can you talk a little bit about, especially during the COVID era, the thinking around those 2 dynamics?

So -- the 2 dynamics are Palynziq and COVID?

Yes. Yes, exactly. Palynziq uptake and sort of efforts towards defending Kuvan from generic entry later in the year.

Right. Right. Right. So the biggest impact that we're foreseeing right now is going to be during the second quarter overall. And for Palynziq, in particular, that's kind of like new starts kinds of things. And if you make the assumption that there isn't a second wave, then things will wake up at some pace and business will resume and will be back to the fundamental consideration, the value proposition of Palynziq versus the value proposition of Kuvan. And so there, I think the fundamental dynamic is less dependent on COVID. The extent to which it's dependent a little bit on COVID is just in the upfront initiation of therapy. For Palynziq, it's a little bit more complicated. And so what we've been seeing is, overall, pandemic-independent is, first of all, Palynziq is only indicated for adults. And there is a quite reasonable interest level of current Kuvan adults to migrate to Palynziq for its superior efficacy and for the prospect of a more normal diet, remember that Kuvan is still indicated for -- as an adjunct to dietary management of PKU. And when the genericization hits, it will be a big benefit -- big potential benefit to children who have no choice because there is no Palynziq in that space. And then the question is what magnitude impact will it have on the Palynziq and the overall PKU business? My -- I think our view is, over time, the PKU business is going to grow while patients switch from Kuvan to Palynziq, which patients will do ultimately because it's not about just being cheaper, it's about -- which is what the generic offers, it's about what's being more effective. And one color comment that I add to this, that just a little bit humble and tense not to talk about this, but it's actually hard to get Kuvan responsiveness. He's done a really good job. His team has done a really good job. You have to be very careful with the medical and dietary management. So generic companies, will they be able to do that? We'll be able to undercut the price to a degree that they need to, to win business in the absence of that ancillary care, that's a big experiment. And so a little bit up in the air with the overall impact. You've heard us talk about, will this follow the exact genericization ritual? We say probably not behind that. Some of that is just the experience that we have in phenylketonuria. All that said, what we know about PKU patients is they want better Phe control. We know that Palynziq offers better Phe control. Ultimately, the current Kuvan market, regardless of generic or not generic, is going to be more of a Palynziq market than it is today. Much, much more.

Got you. And what about in the EU versus the U.S. How do you sort of see dynamics unfolding abroad versus -- again, versus here domestically?

As regards Palynziq versus Kuvan. Kuvan, the genericization issue is a little bit of a later thing. Kuvan doesn't have as deep roots in the EU community. It was kind of mislaunched by the prior occupants. I think we have a really good opportunity there to step in and fill a big void with Palynziq. It takes a little time to launch in the EU because you have all the countries, you have all the reimbursement things and all that. But eventually, we'll get there. The reason, the fundamental reason why Kuvan genericization in Europe is a much less big issue, aside from the fact that it's many years from now, is that what people in Europe and what people everywhere has normal Phe, normal diet. And there's not very much prospect of that with Kuvan, but it does happen with Palynziq to a meaningful degree.

Got you. No, that makes sense. Maybe then shifting back to gene therapy. This, I think, in the coming years, is going to be an increasingly critical part of BioMarin's business mix. Can you maybe talk a little bit more before we dive into specifics about the recent gene therapy deal with DiNAQOR and plans to develop some cardiovascular candidates there?

Sure. We have by virtue of having a commercial facility, by virtue of having a lot of process development experience on the back end, have a lot of leverage in terms of the gene therapy competency, and we've been picking up speed and capability as we've been going along. And biologically, in the research community, we tend not to talk publicly very much about what we're doing, but we had, had an interest and we had showed you some hinting data about some of these things about how we can get higher degrees of expression than other people can get. We can get tissue tropisms for unusual places. We showed an experiment in which we showed great muscle delivery instead of pure liver delivery, that same capture turns out to deliver to the heart even better. And so we had started to have a burgeoning interest in cardiac gene addition. And so when you double-click on kind of severe cardiac, genetic in origin, amenable to gene additions, there are actually quite a few indications but one of the bigger ones that we had been focused on were the genetic hypertrophic cardiomyopathies. And in particular, some specific subtypes of that. And lo and behold, 2 friends/former colleagues had started a company to deliver cardiac genes for -- to deliver genes to heart muscle for gene therapy. And they had reduced -- they had -- this is a group that had been working in the field for decades, scientifically. And had gotten to a place where we were convinced that they had taken a step past where we were. And so the deal was to leverage the building blocks that they had established in terms of initial vector constructs, initial animal test systems, initial cell-based screen assays and to really BioMarinize and build that out. And it really is a nice collaboration because these are people we've known for a while and worked with for a while in different contexts. And they were exactly where we were. They were just a little bit ahead of us by virtue of concentration. Now where we make -- where we add to the -- and go back to the robust infrastructure that we have for final vector optimization, characterization, regulatory support, execution in clinical trials, manufacturing scale-up, et cetera, then this becomes a 1 plus 1 equals way more than whatever. So that was the sort of the spirit and the basis of the transaction. And there are a lot of genetic-based cardiomyopathies, by the way. So getting good at this will serve us through a lot of different indications.

And is that technology exclusive to the sort of cardiovascular or cardiomyopathy indications? Or is that something that can be leveraged and put to work much more broadly?

Things tend to be kind of very bespoke. So it's not like there are shelf animal models lying around for C3 deficiency in which 100 compounds have passed through, and we've got the knowledge of the positive predictive success and the negative predictive success. You've got to build it as you go. And so that is really more with the franchise -- where this franchise is and it's in the early stages of building up the building blocks. But the nice thing about biological systems that are tight like this, and when I say tight, I mean, where the molecular etiology is precise from the get-go, is that you can really build those test systems pretty quickly and get into a more reliable zone for things like dose calculation, comparing things for bio-distribution purposes, et cetera.

Okay. And then again, thinking about sort of the deeper gene therapy and sort of gene therapy pipeline, really, what part of it are you most excited about either as it relates to new vectors, new constructs or potential to target new tissue types?

This question is always like which of your children do you love the most? And I mean, I love a late-stage regulatory process that we're going through ROCTAVIAN. I mean these people are seriously committed to human health. They want to make a difference. I love that part of the process. I love the sort of breathless anticipation of first in human, did we get the dose right that we're about to experience with 307. I love that early design phase where somebody from the lab comes up to you and goes, we just got expression level that's 30x higher than any group has ever reported, and we got it consistently. That's exciting. I love the part where somebody sees and what's really cool about where we're going with the cardiomyopathies is these pathways, these recessive disease pathways are reasonably prevalent in the larger population and have a reasonably severe phenotype associated with them, and there's nothing for these patients. That's also pretty exciting. I love them all. What's not to love?

No, absolutely. Well, we are running up towards time, and I would be remiss if I didn't ask about vosoritide. Wondering really, when we could expect Phase II data from infants and younger children, potentially given some of the delays from COVID-19, is that still very much on track?

No. It -- unfortunately, it did hit the pause button. Fortunately, not a very consequential pause in the overall grand scheme of things because the agreement that we reached with the health authorities was that we would file absent complete efficacy data on those patients and that we would just seek an initial safety. And they had been prepared for that. And they have been preparing for that. So no regulatory wrinkles related to this. The -- we have some options that we can consider. The original plan was to compare the groups pooled by age, that was the original design of the study. We can think about different designs of statistical plans. We haven't really kind of zeroed on, on this. It's still a bit of a flux. It depends a little bit on, okay, so when is the restart? How much longer do we have to go? How much of a delay are we looking at? Well, if we truncate the sample size, what does that do to us? So a little bit of works in progress, but not to worry because it doesn't really change achondroplasia vosoritide regulatory pathway, particularly, or even really meaningfully the initial adoption. Most people would be willing to extrapolate.

Yes. That is wonderful news, and we are very much anticipating that Q3 filing. And with that, we are running out of time here. So I want to thank you very much for joining us today and participating in the conference. And thank everyone else on the line for joining as well, we really appreciate your time today.

Thanks, Kennen. Take care. Be safe.

Thank you. You too. Buh-bye.