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

Hi, everyone. This is Eun Yang, a biotech analyst with Jefferies. Welcome to Jefferies Virtual Healthcare Conference. It is my pleasure to host a fireside chat with the BioMarin management: J.J. Bienaimé, Chairman and CEO; Hank Fuchs, President of Worldwide R&D; and Brian Mueller, acting CFO. Before we start the Q&A, J.J. will give us a brief opening remarks. J.J.?

Thank you, Eun. So we appreciate the opportunity to participate in your virtual healthcare conference today. As you know, this past Sunday, we shared highlights from 4 years of clinical data with ROCTAVIAN gene therapy for the treatment of severe hemophilia A. We are very pleased that at 4 years after treatment, patients on our study remained off prophylactic therapy and have experienced less than 1 bleed per year on a cumulative basis over the 4 years of the study. The clinical benefit demonstrated to date with ROCTAVIAN is a tremendous win for patients with severe hemophilia A. So just to give you some perspective, the 13 patients in our Phase II trial that have received either a onetime 6e13 per kilogram dose over 7 patients or 4e13 vector genome per kilogram dose, there were 6 patients, they have been spared over 9,000 intravenous infusions of replacement Factor VIII if one conservatively assumes a comparator of just 100 infusions per year on standard of care, and we know it's more than that. So -- and this does not include the presumed quality of life improvements and the savings to the health care system for treating bleeding episodes and -- among other things. But needless to say that we are thrilled with this outcome. And we look forward to Dr. John Pasi who'll be presenting the full 4-year data set on June 17 at 9 a.m. Eastern Time at the Virtual World Federation of Hemophilia Congress. We anticipate the U.S. approval of ROCTAVIAN, the first ever gene therapy treatment in any hemophilia indication, in the second half of this year based on our August 21 PDUFA date with the FDA. So turning briefly to our existing business. Even with the immediate challenges of the COVID-19 pandemic, we continue to expect to turn profitable on a GAAP basis for the first time in the company's history, having maintained both our full year GAAP net income and our non-GAAP income guidance despite lowering the top line guidance slightly due to COVID-19 impact. Demand for our essential medicines remained strong. And we have adapted well to the COVID-19 challenges by implementing mitigation strategies to ensure access to our therapies around the world. In addition to these achievements and the achievement of this important financial milestone and anticipated U.S. approval of ROCTAVIAN, we plan to submit marketing applications for the first potential approved therapy to treat achondroplasia, which is the first -- the most common form of dwarfism as well as starting the BMN 307 PKU gene therapy study. With the combination of these key regulatory and clinical events, in addition to the continued progress of our earlier-stage program, we expect all this will drive significant value creation in both the near term and the long term. So these are some of the highlights we anticipate in the second half of 2020. So I will pause here and hand the call back to you, Eun, for questions.

Thank you. So let's just start with the valrox, the preliminary 4-year data that you have announced recently. So question to you is that, this is a 4-year data showing bleed control without exogenous Factor VIII usage. How does that influence your thinking of pricing and pricing model for valrox?

So I mean, obviously, as we said, the 4-year update is a continuum of information when we had already the 1 year, 2 years, 3 years. Obviously, the longer we can demonstrate bleeding control, the greater the demonstrated value of ROCTAVIAN. So we assess it on a pure cost offset basis. We have now demonstrated so 4 year of efficacy. So 4 years of current standard of care being about $700,000 per year per patient, just for the cost of recombinant Factor VIII. We would say there is a cost offset of $2.8 million on the drug side only. That doesn't take into account the cost of the infusion administration, the fact that the patient is still, based on our own data, at baseline were still experiencing bleeding episodes, needing additional [ risk in ] Factor VIII, emergency room visits, treatment of bleeds.. There were some studies showing that 1 bleeding episode in the U.S. costs about $50,000 per bleeding episode to treat. So these are all the savings that are in the byline here that will position us well in our discussions with the payers regarding the reimbursement of valrox.

How about pricing model?

So pricing model, I mean, here is what I see. So we will be offering different modalities for the payers. If some payers want to pay upfront, they'll be able to pay upfront. If they want to be paying over time, we'll have some facilities to be -- for the payers to be able to pay over time. And we also have been working very diligently on a potential outcome-based agreement that we believe will make ROCTAVIAN even more attractive than it would be without it. For competitive reasons, we don't give too many details about it, but as soon as the product is approved and we have the pricing, we will communicate about that.

And Hank, so from the 4-year data, what do you -- how do you think of -- how should we think of a fifth year data? I think in the past you alluded that there --

And then sixth year data.

Plateauing effect. And also from the preliminary comments in your press release, will it be reasonable to assume a median Factor VIII levels in year 4 to be around 15% to 17% of the normal from about 20% in year 3?

That's not very far off. I think we said commensurate. But as I think about the establishment of a therapy as a potential standard of care or a transformational standard, I'm starting to think that the coin of the realm isn't any longer what your Factor VIII level is at any time. But we see phenomenal hemostatic efficacy actually down, even though relatively low Factor levels. In fact, that's one of the really cool things about the 201 data, that even the group that launched a little lower because of the lower dose, they're still in hemostatic efficacy. Even those 2 patients who are at the bottom of the chart remain off prophylaxis. So they're experiencing clinical hemostatic efficacy. And as I was going through the data over the weekend, what's occurring to me more and more and more is that what we should be talking about is like the equivalent of a prophylaxis-free survival rate, which is like 100% in 4 years. So from a development perspective, if you were to think about how of chase BioMarin competitively, you would have to be 100% -- who cares about [ effect overall ]. You have to be 100% prophylaxis-free survival at 4 years before you're even in the discussion of therapeutic effectiveness. So I think the 4-year data put durability into a much different context and really hammered home how hard it is going to be to displace ROCTAVIAN when it's approved.

You also mentioned that you guys are on track for FDA's inspection in second quarter, and we have less than a month left. So has the date been set up?

Hank?

Yes. We have a schedule. And in fact, the agency has been quite collaborative. They -- inspections are part document review and part inspection on site. And so they accommodated a suggestion that we made, which was to start the document review already. And so we shipped them a whole bunch of documents, and they've begun their reviews. And I think that will make their on-site inspection just that much more efficient. Now we have to pay attention to travel and stuff like that. And our working belief, and the agency has signaled strongly that they intend to maintain their PDUFA action date. And so far, the kind of flexibility we've seen from the agency would suggest that whatever problems are experienced, they're going to work around.

All right. So does the FDA want to see 4-year data prior to approving valrox?

We talked about that at the time of the initial submission, and it was not a requirement of the initial submission. So -- and the industry is usually reluctant to have interval information informed decisions because there's all kinds of -- their view is the application has to be robust enough in the first instance and it's got to get across the finish line without depending on additional data. They're aware of the data, and we can say it's pretty encouraging.

But there is no requirement for you to submit 4-year data? Okay.

No. Not a requirement. No.

Let's move to vosoritide. So you are on track to file for approval in the U.S. and EU third quarter of this year. So can you talk about your current thinking of pricing? And what has been the feedback from payers?

Yes. I mean we have all the time to make a pricing decision on vosoritide. I think what we -- we are initiating some payer research. What we say is -- I mean, obviously, this is not a ultra-orphan disorder, unlike MPS IV or MPS VI. So we're not talking about this kind of pricing, probably more like Kuvan range. At the same time, this is a product that will be used probably about 15 to 18 years maximum by the patients, but will have a benefit over the lifetime of the patient, so that does enter into a pricing decision. But there are about 24,000, 25,000 achondroplasia patients in the world, I mean, excluding India and China, that have -- that are under the age of 18. So these are target population. So if you want to make the math very simple, you say let's take $100,000. That's not the pricing. I am just -- if we charge at $100,000 a year, this would be a $2.4 billion market opportunity.

Okay. So the opportunity you have. So obviously, vosoritide is well ahead of any competitor that you consider. But there are FGFR3 direct inhibitors, TKI or ligand trap, whichever they may be. And but BridgeBio, who was developing TKI against FGFR3, said that although clinical data remains to be seen, they think that as a direct inhibition, they could potentially double the AGV gain of 1.6 centimeter per year with vosoritide. Do you have any comments on that?

Yes, I think Hank can comment on -- that's kind of a scary thought, but Hank?

I mean, I'll believe that when I see it, let me start with that. And I'm not sure of the physiologic rationale for super speeding growth. In fact, one of the things that's problematic with growth hormone in pituitary disorders, for example, or in nongrowth hormone deficiency disorders is potentially somewhat relevant in the sense that with growth hormone, you get a lot of growth very early and then the growth tails off. And that early growth is not necessarily healthy bone growth. And one of our opinion leaders, who is an original on the growth hormone field, pediatric endocrinologist, when he was addressing the FDA on the topic of the magnitude of the benefit and the durability benefit, pointed out that the effect of vosoritide in restoring physiologic growth and maintaining physiologic growth is unprecedented in the growth disorders world. And he said, I find that actually to be the most impressive thing. So I don't know that it's a good idea to overshoot and what happens after you do that. Interesting thoughts. These things are so -- almost -- when you're talking about competitors, by the way, I have to point out that of all these competitors, I think there's been a single-dose healthy volunteer study for all of these things. But it's getting increasingly hard to talk about a study with a p-value of 10^minus 13, 5 years of accumulated height data, near or around the corner from worldwide submissions and preclinical data. They just seem very far apart from each other in terms of ability to compare with any kind of validity, other than to say we're way ahead.

Fair. Let's move on to PKU gene therapy. So in the animal's mouse model, you show sustained -- you have a few corrections in the lifetime of the mice. Have you measured -- what was the enzyme activity levels of treatment within the mouse model from baseline? The reason why I'm asking that question is, if we assume that in humans, enzyme activity levels would decline over time similar to Factor VIII levels, then I'm kind of wondering what you -- what would you think about the minimum PAH activity levels required in the liver for [ Fe ] correction in humans?

Well, I think while the Factor VIII level declines in humans over, now, a relatively longish period of time, the clinical significance of those declines is unclear given the ADR rate that we see. And similarly, I think with phenylketonuria, what we're going to care about mostly is the blood phenylalanine levels. And here, we have a bit of an advantage, that is that you can overshoot an enzyme expression without apparent toxicity, will cause clinically relevant hypophenylalaninemia from having too much phenylalanine hydroxylase in your liver. And I think there are some other things that are going to make comparison between ROCTAVIAN clinical data and PKU clinical data a little bit more difficult than just the fact that we're measuring, in one case, the transgene product, in another case, the substrate of the transgene product. I think also just the state of liver health has the potential to be different between the 2 populations. And so I think we should approach the 307 data with an open mind as to durability. The ENU2 mice data are very encouraging and very consistent with what you see in the field in general.

But have you measured the enzyme level activity in the mouse liver?

Yes. I'm sorry, I should have -- we have. I don't know those data off the top of my head. How far in advance of a third -- I mean, how far above therapeutic efficacy do we get enzyme levels, I think pretty far. But I don't know off the top of my head the full kind of dose response results.

In Phase I and II PHEarless trial slated to start in second half of this year, I don't think you have disclosed the details about the trial. The question to you is that, are you designing the trial as a potential registrational -- registration-enabling study?

Yes. So there are 2 elements of that. So the first-in-human study has a dose-finding phase, and then there's an expansion phase, which could be registrational. So the study was designed with registrational endpoints, registrational monitoring, registrational run-in periods, all those details agencies like to see. We've had scientific advice with the EMA, and we've had FDA input in the design of the program and agreement on endpoints. So all of that registration advanced planning is done. And in addition, in our technical operations group, the material that we'll be using will be fully representative of the to-be-commercialized process. So there will be no necessity for a process for switching material during the program. And so the early data that we get will be pertinent to the commercial product's registration decision. So for those 2 reasons, the program could be registrational right out of the gate.

Right. And then in terms of valrox uptake, well, we talked a lot about a number of patients that you could have treated based on Phase III trial enrollment. But another way to look at is Zolgensma for SMA, although it's a completely different indication. But nevertheless, Zolgensma was the first systemic gene therapy of its kind there in the U.S. and then valrox will be the second. So when you look at Zolgensma commercialization, in the first 6 months of launch, they actually treated about 200 patients commercially. So do you think that they will give you a good reference for it, for valrox?

I mean, obviously, we have the ability to treat even more than 200 patients in the first 6 months. We can probably treat easily 500, 600 with it. Eventually, we could have it launched. I mean, it is indeed a very different indication for basically infants, and it's kind of a life-threatening disorder that they are treating, so I'm not sure it's comparable. However, I mean, you've done some surveys yourself that you published interviewing hematologists in the U.S. and Europe. And I think they say that in the U.S., they anticipate treating 1,000 patients. That's your own data. 1,000 patients by the end of '21 and -- sorry, by the end of '22 and -- in the U.S., and 1,000 patients by the end of '22 in Europe. So we're doing our own marketing research. There have been other surveys. We've done some marketing research that show that the docs anticipate, even within the year, to treat about 30% of their patients, severe hemophilia A patients, that will be eligible for ROCTAVIAN, with the product. So we believe there's going to be some significant demand, and we're ready for that demand. We also have, in addition to the inventory we're going to have at launch, we have capacity for 10,000 patient treatments per year with our current facilities. So I think it's -- if we do have capacity, it will be a very good problem for us, but we don't anticipate that in the first couple of years.

I think on the first quarter earnings call, you mentioned that at launch, by the time of launch, you would have about 400 patient doses, but then your capacity is up to 10,000. So when you think about next year, how many patient doses would be available for valrox?

Significantly more than 400, but it depends also on when we get approved, U.S., Europe. Remember, there is also Europe, it's not only the U.S. And then the speed of the uptake, we're ready for it, we're flexible. If need be, Hank and I and Brian will go and work in the facility to make some product. Robert, our head of techops, told me that we might need a little training. I said, okay, we'll go through it.

In terms of hemophilia, it's a new kind of therapeutic area for you, and then you are going against -- although slightly different modality, you are going against the Roche and other Factor VIII replacement therapy sponsors that have been in the market for a long time. So can you talk about your commercial structure for valrox?

I mean we don't want to give too many details, again, for competitive reasons. But we have -- we -- our sales organization, commercial organization to launch valrox to the U.S. is in place, has been in place for a few weeks. We have hired very experienced sales representatives and sales managers from other companies that have established relationships with hemophilia treatment centers that have been working in the hemophilia field for years. So we believe we are ready for it. And in Europe, we aren't quite as advanced because Europe always take a little bit more time to launch. So -- but we have the emerging infrastructure of a sales organization in Europe, and we can accelerate the hiring very quickly. But we, already in the U.S., launch next week. Brian?

Yes. I was going to say, importantly also is the payer engagement. So under some of the safe harbor rules, we're able to engage with payers before approval. So we've been doing that since last year. And the payer enthusiasm is high. We've sat across the table from executives from health care plans that represent large number of covered lives saying that they are acutely aware of how expensive their current severe hemophilia A patients are in their system and they're looking forward to ROCTAVIAN. Another data point that I think is interesting when you think about the commercial launch prep is the number of hemophilia treatment centers in the U.S. is roughly approximate to the number of PKU clinics. So from a scale standpoint, that's the type of environment that we're comfortable and already operating in from a size and scale standpoint. So like J.J. said, we're ready to launch.

I have one question for Hank and one question for Brian. So Hank, should we expect vosoritide for priority review at the FDA?

Will it be a priority review? Well, it's too early to predict. And there's a lot of stuff going on at the FDA right now. So too early to predict.

Brian, so with the valrox and vosoritide launches this year and next year, how do you think about -- what do you think about would be the achievable profit margin target by 2023 from about 10% in 2019.

Yes, it's a great question. So thanks. From an operating margin standpoint -- so first of all, we haven't given long-term guidance. And 2023 might be too specific, if we think about ROCTAVIAN and vosoritide revenues ramping up over the next few years. But our goal over that period of time, as that revenue ramps, by all means, is significant margin improvement. We'll see more favorable COGS from both ROCTAVIAN and vosoritide, which is going to help bring our historical legacy enzyme replacement therapy higher cost of goods of around 20%, 21%, down into the mid-teens. R&D expense will continue to grow, but start to shrink as a percentage of sales. All of that drops to the bottom line. And then SG&A, the infrastructure has been largely built. We support up to $2 billion in sales today and are ready to launch these next 2 products. So we haven't given specific numbers, but if you do the math on overall margin improvement, with sales and marketing getting into the teens as well, we're in that 30%, 40% range. So pretty healthy margins, especially as revenues are hoped to ramp up significantly.

I think we have to wrap it up. So thanks very much. Thanks, J.J., Hank and Brian. Thank you, and thanks for joining us today.

Thank you. Thanks for having us.

Thanks, everybody. Good to see you.

Thanks.