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

Thank you very much for joining us at the 2020 Virtual Wedbush Healthcare Conference. My name is Liana Moussatos, and I'm one of the senior health care analysts at Wedbush. It's my pleasure to introduce our next presenting company, BioMarin Pharmaceuticals, which is on the Wedbush's Best Ideas List. BioMarin is the first company to develop a one-shot-and-done gene therapy cure for hemophilia A and is years ahead of the competition. Today, we are joined by the CFO, Brian Mueller; and Chief Commercial Officer, Jeff Ajer. Thanks very much for joining us. We will start with a fireside chat and then transition to Q&A. If you would like to ask a question, please submit them through the chat window at the bottom of your screen.

So Brian, Jeff, let's start with ROCTAVIAN for hemophilia A. Can you describe the burden of the disease? And what is post gene transfer hemophilia patient experience?

Great question, Liana. Maybe I'll start with that, and there's other aspects about ROCTAVIAN that maybe Brian will take the lead on. But let's start with severe hemophilia A. So hemophilia is a lifelong genetic disorder. People are born with it, and it persists through their lifetime. These days, hemophilia A is a life-limiting disease, not a life-threatening disease, based on a development of a standard of care over many decades. That standard of care today consists of protein replacement therapy, essentially replacing the Factor VIII protein that is missing in patients with hemophilia A. So let's talk a little bit about what that standard of care is and how that impacts patients. So it is a standard of care and represents, as I said, decades of advancement, but leaves much to be desired. So patients need to take protein replacement infusions several times per week. And this is week after week, year after year, into a lifetime. You can do the math and figure out how many infusions these patients endure in any given year. And then these patients experience peaks and troughs of protein that are available to help in the bleeding cascade that defines hemophilia A. So if you're a severe hemophilia A patient, your life is defined by not only your hemophilia, but your hemophilia treatment, meaning protein replacement. You have to plan your life around several times per week infusions. If you are an active adult male, you need to choose your time, your activities, around your infusion, so you want your physical activities to be tied to peak levels of protein, not trough levels of protein. If you're traveling, you need to manage having enough equipment and protein to go with you. So as one patient advocate was speaking to me several months ago in Ireland, imagine you're a young man that just graduated from college and wants to spend a year in Australia and New Zealand. Forget it. You're not going to do it. You can't get access to protein replacement therapy. You can't carry enough with you to go. Those types of activities are out. If you're an avid athlete, just going out and being an athlete is not part of your life. You need to plan activities around your therapy. And moreover, these patients still bleed. So Brian may talk about this in his discussion about the 4-year results from our Phase II study, but patients still bleed even though they're taking protein replacement therapy. And they bleed spontaneously. They bleed into their joints. They have what is called target joints, where you have more-than-average bleeding. And those target joints essentially are damaged by the process of repeat bleeding and have a huge impact on quality of life. So life-limiting, better than life-threatening, but huge, huge unmet need here that ROCTAVIAN gene therapy can potentially address.

And illustrating the one-shot-and-done gene therapy cure of ROCTAVIAN, can you go through the recent 4-year data presented in June? And what should we expect from the data after 4 years? And what about a potential plateau?

Yes. Thanks, Liana, and thanks, Jeff, for those opening remarks on hemophilia A and its burden. I'll speak to the data. So just, again, reminder, ROCTAVIAN is a gene transfer, so delivered via a single infusion. So the patients that are in our Phase II data set for which we just released 4 years of data, those patients received a single dose over 4 years ago. And importantly, this -- we weren't -- this data is not compared to placebo, but existing standard of care. So as Jeff mentioned, the patients were already receiving this frequent prophylaxis and have been off prophylaxis, most importantly, in our 4-year data. So we were pleased to show that after 4 years of being treated with ROCTAVIAN, these severe hemophilia A patients experienced both significant reductions in bleed rates as well as prophylactics -- or I'm sorry, synthetic factor infusions. So the -- before, on standard of care, the subjects in the trial had an average of 16 bleeds per year. Again, that's on the standard of care. And we reduced that with ROCTAVIAN by 95% following that single dose. And that represents a cumulative average annual bleed rate of less than 1 in the 4 years. So really, really compelling data, again, versus the standard of care. And there was also a 96% reduction in mean Factor VIII usage to 5.4 infusions per year. So 5.4 infusions per year in the 4-year data compared to 136 infusions per year at baseline, again, on the standard of care. So those are, as Jeff discussed, the burden of the disease. Those are the clinical meaningful end points. And we do appreciate that the factor levels because, again, the mechanism of transfer here is via a viral vector. We're delivering a healthy copy of the gene that's mutated in severe hemophilia patients. And then in these patients, the liver then starts creating its own Factor VIII within the body. And so with Factor VIII being the clotting factor that's missing and a key part of reducing bleeds and prophylaxis use, of course, it is important to look at factor levels. But interestingly, that is the surrogate end point. What matters most at the end of the day to these patients, their doctors and their families are the clinical outcomes, which are going to be the bleed rates and how much supplemental factor they're using. So we are -- and so we're pleased with the durability of the 4-year data. And I would encourage you to look at our press release back in June, commensurate with the World Federation of Hemophilia presentation by Doctor -- Professor Pasi. That showed a bit more of the data, and you see the -- you do see the curves. And we are seeing slopes consistent with what we saw last year and within our expectations. So all very good stuff. And speaking of that WFH presentation, I would also encourage you, if you haven't, to look at some of the remarks by the clinicians in our study, both Professor Pasi and Dr. Pipe. They really -- I mean they're the folks that are treating patients and interacting with those patients. And to hear from them the life-changing effect on those patients and their stories was really, really fun and exciting to listen to. So I would encourage you to do that.

So BioMarin is pioneering this cure for hemophilia A, and so you're creating hurdles for the competition as you release data. So based on the 4-year data, a competitor has to show 100% prophylaxis-free survival at 4 years. Can you talk about the importance of 4-year data from a commercial standpoint? How does the data play into the pricing model for ROCTAVIAN?

And maybe I'll take that first, and Brian, if you've got anything to add. So the durability is super important, Liana. As you mentioned, BioMarin's program, ROCTAVIAN, is far out in front of the other competitors. So I'll remind you that when the competitors are coming out with their initial data, the standard or the bar to hit won't be our 4-year data anymore. The bar to hit will be from our 130 patient-plus Phase III program, which is a very robust program and 5 years from our Phase II study. So the competition is always going to be years behind us. That's the first thing to note. As it relates to the importance of durability, it's been a key question. I don't think -- we've been careful not to overuse the word "cure" because cure implies that something lasts for a lifetime. That might be too ambitious a bar. And indeed, the commercial audiences, whether patients, patient advocates, the physicians that are caring for these patients or payers, they're not expecting a lifetime cure, but durability matters. And having 4 years of data, as Brian said, at 4 years, patients aren't infusing. Relative to their baseline, they're really not bleeding, and they're not, for the most part, infusing. So at 4 years, people are already looking out into the time horizon and saying, well, what about 5 years, what about 6 years and beyond? The answer is nobody knows. We're going to find out together. But it is interesting that, as I said, the commercial audiences, physicians, patients, advocates and payers, there's nobody in the commercial audience that says, well, you guys have got 4 years of data, great, we won't believe that there's a longer duration of therapy until we actually see it. People are starting to project out in their own mind and they're saying, well, there's risk around durability. But if patients aren't bleeding, they're not taking factor, they're not on prophylaxis at the end of 4 years, it's reasonable to assume that there could be some extended durability out there. How long, we're going to find out together. There's been some independent modeling on that, that projects a number of years of benefit beyond 4 years. And if you think about what's important in a commercial landscape, the promise of a durable onetime treatment, big for patients and advocates; for payers, the additional benefit of getting out from underneath what is a gigantically expensive standard of care treatment for hemophilia A. So the standard of care treatment for hemophilia A is a global market of $6 billion to $8 billion per year. All of the patient -- all of the payers are paying attention to their book of business with hemophilia. All of them understand that this is a very expensive therapeutic category for them to manage. And all of them are looking forward to an opportunity with ROCTAVIAN to perhaps have some long-term savings over time against that gigantically expensive standard of care therapy. So this is a really great opportunity for BioMarin, not only to come up with a clinically important step forward in the standard of care of hemophilia, but also an opportunity to save payers money against that therapeutic category.

Yes. Thanks, Jeff. That was well said. I might just touch on or elaborate on a couple of points. And that is I talked about the 4-year data and the improvement in the quality of life for those patients with the reduced bleeds and reduced supplemental factor. But -- so that's very important to the patients, their physicians, their families. But to payers that, yes, that 4-year data, when you think about ROCTAVIAN as being -- its value being a cost to offset with these very expensive existing standard of care treatments, that fourth year data -- or that 4-year data really helps solidify that commitment to payers. And then the only other thing I would mention, since you started with competition, is, yes, the wealth of data that we're gathering when -- if we are fortunate enough to get ROCTAVIAN approved and launch it in the U.S. here, those early adopters that are going to be interested in gene transfer for hemophilia A are going to be able to rely on the data sets that we already have, and we're pretty far ahead of that competition. And then, over time, for the folks that may be more cautious, may not be an early adopter and want to see more data, when you're -- when those patients are ready, if you can imagine the wealth of data that we're going to have, not just from our Phase II, but over 130 patients in the Phase III and then whatever commercial patients are experiencing ROCTAVIAN, that wealth of data is going to dwarf whatever competition is coming that's years behind us as they're starting to build their clinical database. So both early adopters as well as folks that may watch and come in later, I think, being this far ahead of the competition is going to help.

Do you think for your data that you guys produce is creating an FDA requirement for the competition later?

Well, we -- at our -- so we've -- our filing for accelerated approval was based on the predefined FDA criteria for filing, and that did not include the 4-year data. I haven't had discussions with our regulatory team as to how our data may affect filing clients for the competition. It's a good question. I'm not sure the answer to that.

Liana, practically speaking, if you're a competitor and you're developing another gene therapy to treat hemophilia A, you must be looking at the robustness of BioMarin's Phase III and saying, well, if we come in with something less robust and we've got less durability data, and while we've been working on our Phase II program and trying to get into Phase III, BioMarin is proceeding to gather more data and working on life cycle management initiatives that would potentially unlock additional patients beyond those available at launch. You have to be thinking that you're in a really distant second place in terms of commercial relevance, never mind the regulatory relevance.

Yes. So can you talk about the commercial launch plan because August 21 is coming up quick? Have you already hired reps, managers, how big of the sales force? And what are the plans for Europe?

So I'll start with addressing our U.S. readiness. We've been really fortunate to have a number of years while ROCTAVIAN has been in development to introduce BioMarin to the hemophilia community. That started at kind of an investigator and scientific level. That was a really good entrée. And more recently, we've had the opportunity to introduce BioMarin and gene therapy education more broadly to physicians and patient advocates. And this whole notion of gene therapy education is hugely important. The hemophilia community has been looking to the promise of gene therapy for decades, and now that it's kind of right on the horizon and potentially a reality, there's been a huge, huge demand to learn more about gene therapy, not necessarily ROCTAVIAN-specific, but tell us about how gene therapy works, gene transfer works, tell us what are some of the important nuances about this treatment that we will need to understand to make informed decisions. So that level of interest has been a great opportunity for BioMarin to introduce ourselves to the physician and patient community. In terms of launch readiness, organizations do well what they do often. BioMarin has had a number of launches in recent years in the rare disease space. Starting with Vimizim a few years ago, Brineura, Palynziq, most recently. So we've been launching drugs and very successfully, including into payer audiences, with really high-priced therapeutics. So we feel like we've got kind of our game on with respect to preparing for launch. As it relates specifically to ROCTAVIAN, we've created a dedicated hemophilia team in the United States. It's fully staffed out, has been fully staffed out since earlier this year. I can't tell you the size of the organization for competitive intelligence reasons. But what I can tell you is the hemophilia treatment centers and hematologists that we need to reach in the United States is a relatively compact group. And we our sized to reach that audience. And our team has been out there building relationships for months. We are going to be challenged in the COVID-19 situation. We've had to rely on virtual methods of connecting with people and promoting. And we've really had to rely on our digital assets during this period of time. That's been challenging. There's been some upsides, too. For example, when we do gene therapy education virtually, it allows us to cast a broader net than we would be if we were doing a live event with a local patient association group on a Saturday afternoon, for example. So there have been some bright spots, and we're getting better at this. In terms of Europe, I'll remind you, Liana, the rate-limiting step for a launch in Europe is navigating price and reimbursement approvals. And those have proven lengthier over the last several years, in general, for innovative, high-value therapeutics. I mentioned, again, we've got a lot of experience launching these high-value therapeutics over the last few years. So our team is ready. They're experienced. They're ready to be game on. So that's the rate-limiting step in Europe.

All right. So you have another exciting product coming up, vosoritide. Do you -- so you recently submitted the MAA and the NDA filings expected in Q3. Do you anticipate Priority Review? How should we think about pricing for vosoritide? And what's the market opportunity and competition?

Yes. I can start with that one, Jeff, and then feel free to color in. So yes, so vosoritide for achondroplasia. Achondroplasia is the most common form of dwarfism. And also similar to hemophilia A, for BioMarin, at least compared to our legacy products in the way the company grew up, achondroplasia is also in that category of a larger rare disease. We estimate that there's approximately 20,000 patients in the countries where BioMarin does business. And one interesting thing, just while we're talking about the market size and the opportunity, as many of you know, I've been around BioMarin for a long time and one very compelling aspect of the prospects for vosoritide is that achondroplasia is so widely diagnosed very early within the typical health care systems, often diagnosed in the womb, when you're doing an ultrasound and they're measuring the bones, because some of the proportionality of limbs is an indicator of the disease. It's looked at very early. And that's incredibly different from the MPS franchise that we've grown into a really large business over the years. But when Jeff was launching Naglazyme and then Vimizin in the early part of the last decade, the mission and the hard part was to go find patients and to help physicians diagnose these ultra-rare orphan diseases. So really interesting to me to have achondroplasia, from a diagnosis standpoint, be more prevalent and widely known. In terms of the filing, yes, I'm really excited to have filed in Europe and expecting to file for approval in the U.S. with the FDA here in the third quarter. We have filed for Priority Review. So we don't know yet if we have that, but we will be looking for that. And then I think you mentioned competition. And yes, there's other -- the other folks doing early-stage research and development of compounds for achondroplasia, but we haven't seen a lot of data from those companies. We're not aware of anyone that has started a pivotal trial in achondroplasia. So particularly, in a COVID environment, to start a trial, where we are -- not just have our full Phase III data set in hand, but our filing with regulatory authorities, again, that feels like a very substantial lead over any potential competition. So we're watching closely, of course, but haven't seen anything that we can actually compare to yet.

So what do you think about margins for ROCTAVIAN and vosoritide? Short and long term and with launches coming up over the next 12 months, do you anticipate a quick uptake? And how much of the $5 billion goal in 2025 will be ROCTAVIAN versus vosoritide?

Yes, that's a great question, Liana. Thanks. And I'll let Jeff comment on uptake, but I will speak to the margins and some of our goals. So we don't give long-term financial guidance, but we do have goals. We're hopefully close to launching these 2 potentially much larger products than our historical products with ROCTAVIAN and vosoritide. We said that we've got a goal of $5 billion revenue by 2025, and that is with ROCTAVIAN and vosoritide approvals and launches. And the way we get there, you could probably extrapolate a bit of your own math, but the base business, being almost $2 billion today, we were -- we initially guided to $2 billion in revenue, which was a great milestone for the company, but that was before the pandemic. So back in April, we adjusted our 2020 total revenue guidance by about 5% or $100 million, so a bit under $2 billion. And we did just reaffirm that in our earnings call last week. But you could think of us as a $2 billion -- roughly $2 billion business. And that business is continuing to grow. We're still finding new patients, getting into new territories, as each is still relatively early in its overall life cycle. So when you think about that goal of $5 billion in revenue by 2025, you could think about it as roughly half of the base business with some continuous growth and then roughly half, ROCTAVIAN and vosoritide. That's how we get there. And yes, we're optimistic about margin improvement as well. We're absolutely thrilled to guide to GAAP net income guidance for the first time in the company's history. We've had a solid record of non-GAAP income growth, our non-GAAP income measure, which is an adjusted EBITDA over the last few years. But GAAP profitability is a very meaningful milestone in the company's 23-year history. So we look forward to, with ROCTAVIAN and vosoritide, GAAP net income continuing to grow. And along that journey, we would expect to see margin improvement as well. We think ROCTAVIAN and vosoritide will have slightly lower natural cost of goods sold as compared to our base business today, those enzyme replacement therapies for the MPSs are complex; recombinant human enzymes made in a mammalian cell culture process, very costly small patient populations, and that's where our COGS is 20-ish percent today. So with ROCTAVIAN and vosoritide, we would expect to -- our margins to drift down into the mid-teens over time for cost of goods sold. And then the rest of the business, and I'm happy to go into more detail, but I know we're running short of time. But I would just say, on the operating expense lines, again, we -- it's a story of leverage. We built this business that can support $2 billion in revenue today. Those operations, that infrastructure that we've put in, whether it be R&D, sales and marketing, G&A, will be what we leverage in the future with ROCTAVIAN and vosoritide revenues, and that's all margin improvement falling to the bottom line.

Well, BioMarin is in a great position, and you're even targeting GAAP profitability this year. It's just impressive, and that's why it's on our Best Ideas List. We are about out of time. So Brian and Jeff, many thanks for joining us virtually. And with that, we'll conclude the presentation. Thank you very much.

Thanks, Liana.