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

Great. Good morning, everyone. It is still good morning, at least in the East Coast. My name is Mohit Bansal. I'm one of the analysts here at Citi. And I'm happy to have today the BioMarin management team. We have J.J. Bienaimé, the Chairman and CEO of the company; Hank Fuchs, the President and Worldwide -- President of Worldwide R&D at BioMarin. You also have Brian Mueller, the CFO of the company. So we are happy to have the team today. Thank you for joining us today.

Thank you, Mohit.

Thank you for having us.

So do you want me to start with a few opening comments, Mohit?

Sure, sir. Just before that, just one thing. If anyone has any questions on the call, if you want us to address them, please feel free to e-mail me or send your question via the webcast, and I'll be happy to read them anonymously. And with that out of the way, I would turn it over to J.J. for any opening comments.

Thanks again, Mohit. So we appreciate the opportunity to speak with you today. It has been a very active few weeks for us. And now that the dust is starting to settle, we want to share our framework for the remainder of 2020 and early 2021. So to start with, BioMarin's fundamentals remain solid. They are supported by our global base -- business of essential medicines, our strong cash position and our robust pipelines of products moving through development. We expect to exit 2020 with approximately $1.4 billion in cash after paying the outstanding convertible volume in October. And importantly, we expect positive operating cash flows going forward in 2021 and beyond. The strong foundation allows us to simultaneously pursue approvals of ROCTAVIAN and vosoritide to develop the earlier-stage pipeline and to grow our existing commercial business. So before getting to our ROCTAVIAN update, I want to share our excitement over recent developments with vosoritide. Over the weekend, the full Phase III data from our global study with 119 children with achondroplasia was published in The Lancet. The Phase III results provide strong evidence of the clinical benefits of vosoritide. They demonstrated a highly significant -- statistically significant improvement in annualized growth velocity in treating -- children treated with vosoritide that participated in the study. Our marketing applications have been submitted to both European and U.S. authorities with the EMA having recently validated the application. We are very encouraged by results from our multiple studies with vosoritide given the tremendous unmet need for children with achondroplasia. Turning now to ROCTAVIAN. The pursuit of expedited approvals with 26 weeks of data from 16 subjects was driven by our PRIME designation in Europe and our Breakthrough Therapy designation in the U.S. And while the weak controlled data that served as the basis for these expedited approvals was dramatic for our patients, at the end of the day, health authorities wanted a larger data set given the highly innovative nature of gene therapy treatment for hemophilia A. Given our track record as pioneers in scientific research and innovation, we designed and executed a robust development program with ROCTAVIAN. So we are in a fortunate position to be 2 months from completion of our global 1-year Phase III study with 134 patients. We plan to share top line 1-year Phase III data from this study in early 2021. So this is a potential new catalyst. Given the depth and breadth of data expected from these Phase III results, EMA recently informed us that they would like to pace the approval and labeling discussion on the upcoming 1-year data, and this is information that we shared yesterday. As a result, we are now working with the EMA to enable submission of the full 1-year Phase III data and anticipate being in a position to submit the 134 subject data set designed to demonstrate superiority over standard of care at the end of the first quarter of 2021. So while we are disappointed in this delay, we believe the package at launch will even -- be even stronger with the full data set and the results from the 134 subjects, and it will better position us commercially in Europe and allow us to obtain better pricing and reimbursement than if we were approved only -- based on only 16 patients worth of data and 6-month historical data. So importantly, European health authorities have inspected and accredited our ROCTAVIAN manufacturing facility, and there are no outstanding manufacturing issues to be addressed. So we remain confident in the commercial potential and approvability of ROCTAVIAN in the U.S. and Europe. Our confidence in the potential outcome of the full Phase III study results are based on a few parameters that I would like to invite Hank to describe -- Hank Fuchs, Head of R&D, to describe to you in the next few minutes. Thank you. Hank?

Thanks, J.J. The potential for the 1-year Phase III ROCTAVIAN results being supportive of approval are based on a number of key factors. First, the Phase III trial design is robust with a baseline prospective run-in to determine annualized bleed rate and the endpoint of the study is an endpoint that's been well recognized as supportive of registration. That's the annual -- the change in the annualized bleeding rate from before gene therapy to after gene therapy. And the results that we've observed after gene therapy give us a lot of confidence that the annualized bleed rate will be very, very low. And we have recently completed an analysis of that baseline run-in study further to what we presented at R&D day last year. We now have more reliable data on baseline bleeding. And so based on these preliminary annualized bleeding rates from the run-in study, the observed mean bleeds per year pre gene transfer were 4.8. This baseline annualized bleed rate is higher than what we had originally assumed. We had originally assumed the baseline ABR was, I think, 3 or 3.5, and gives us confidence that the 1-year Phase III study results will provide more than 99% power to demonstrate superiority annualized bleed rate compared to the baseline annualized bleed rate on standard care prophylaxis. Based on these parameters and notably the statistical power for ABR superiority, we are very encouraged the full Phase III results have the potential to support approval of ROCTAVIAN. As J.J. mentioned, we intend to share top line results from the Phase III study early in the first quarter of 2021. The plan in the U.S. includes a Type A meeting with the FDA, which we've not yet held, to discuss the contents of the complete response letter and to discuss steps necessary for approval. In light of the EMA's request for 1-year data from the Phase III study and FDA's request for 2-year data from this study, further discussions with FDA will be undertaken to assess if alignment on the data requirements between EMA and FDA can be harmonized and can expedite availability of the product. We're very encouraged by our discussions with the EMA and believe we can align on the efficient path forward for making ROCTAVIAN available for patients with hemophilia A. With that, Mohit, I'll turn the call back to you.

Great. Thank you very much for this introduction. So maybe -- I'm sure you are getting this question a lot. But the decision definitely came as a surprise to many and probably you as well, I'm sure. So -- and -- I mean going into that decision, I mean you did interact with the FDA multiple times. And last, we did talk about that. I mean you did show the data, you did show all the supplement data as well. What do you think you could not help FDA understand? And why this whole thing happened? So what is the bigger issue at this point here?

Well, it's going to sound funny, but the biggest issue that we had was to convince them to have a discussion with us of any kind. So we had a lot of interaction with them, as you said, before the design of the Phase III study was complete. We had a lot of interaction with them at the time of the interim analysis and before we had dosed the remaining 100-and-some patients in the pivotal Phase III trial. We met with them after the interim analysis to discuss the pre-BLA -- to discuss the BLA. That was the meeting in which they said, there are no clinical issues to discuss. You met all the criteria. All of us who had been at that meeting said, we've never been to an FDA meeting where there were no clinical issues to discuss. That's a bit of a surprise.

Right. We talked about that actually before, and I said.

Yes. And then we met with them at the mid-cycle meeting and they didn't raise any issues. And then a junior group...

And we asked them if there was a need for an AdCom, and they said no.

Yes. Well, they said no 3 different times. And then, not that we were asking. I mean they -- it wasn't that we were asking for an AdCom, they had the opportunity to bring an AdCom in if they wanted to. And then we had a meeting where they just communicated some issues of the review, principally the differences in the study results between Phase II and Phase III. Now that was apparent to them 15 months earlier when we had the pre-BLA meeting. So it was a little strange that they raised it out of context. There were no senior people there, and there was no discussion. And from that point to the complete response letter, there was actually no interaction with the senior FDA official until the day before the CRL, which was a performance more than it was a discussion. So the single biggest challenge that we've had in convincing them of anything is to have a meeting to discuss this.

Wow. Got it. And you would assume that there would be more meetings with the Breakthrough Therapy designation typically, that's the case, right?

Yes. Yes. And the odd thing about it was that the way it was presented to us during the whole time. This was all about inspections and COVID. So they -- it was very -- it wasn't apparent that there was any clinical issue that was going to affect benefit risk. We thought all of this was about labeling or something like that. But they never engaged and discussed, interest to discern what the issues were and where we might be able -- to get to your question, where can we help you understand better? And so that's the process that we have to undertake now.

Got it. And then -- so from this complete response letter that you have in your hand and you did disclose some part of it in the press release. So there are -- there could be a couple of ways to look at this. I mean FDA did not think that 20-patient data are enough here, or FDA was worried about the inconsistencies between Phase I/II versus Phase III data? Or I mean like your update thought that Phase III is robust enough in a condition which is good -- there are options out there. So why not wait until Phase III. So what do you think is the bigger issue at hand here?

I think it's a little bit of a combination of all of that, honestly. So COVID happens and their attention span is quite a bit lower. So their ability to engage sort of the more depth kind of scientific interaction that has to happen in rare disease approvals. They're getting increasingly comfortable with the availability of alternative therapies. And really, I think the big thing was the very large data set was around the corner. And so if you read FDA guidance documents on accelerated approvals, one of the first points they make is that accelerated approval is a useful option in which the time to a surrogate or an intermediate endpoint is short relative to time to the definite endpoint. And so when we set up the program, we had -- we thought there was about 18 months between when the agency would be deciding on the accelerated approval application and the full approval application. We ended up enrolling the study reasonably quickly because there was quite a lot of demand for the study. And I think it's just for all the health authorities, it's just too tantalizingly close to say, yes, this month, when in 2 or 3 months, that data will be known. And so I think that was really the key driver. Now we're working, for example, with the EMA to try to figure out how we can get that data to them as quickly as possible so that the impact of the request to wait the extra couple of months is as short as it can possibly be. And so we hope to be filing those data in the first quarter just as soon as they're available, but we are awaiting confirmation from the EMA about that. But I think that as much as anything was, you have some variability in the Phase III study, and you have this very large data set right around the corner. And aren't we all better served by looking at the large data set, even though we've reached agreements, even though the company met all the requirements.

Got it. That makes sense. So one question, I mean, I'm getting from investors is that, I mean you did disclose before that the manufacturing site was not inspected by the FDA. But you did mention that in FDA's discussion, there was no manufacturing issue. So I'm sure you're referring to the CMC package you submitted. Is that you mean by that?

Well, just to clear things up. J.J. mentioned the EMA doesn't have any CMC issues.

Okay.

The FDA didn't complete their review and they -- because they didn't complete all the CMC activities because they couldn't get confident in the clinical data. So they suspended. And like I said, during the review, the way it appeared to us, what they were telling us was the rate-limiting factor here is the pre-licensure inspection and we can't get out there because of COVID. So it turns out that what was happening was they were completing the write-up of their complete response letter on the basis of clinical data, and only then did we -- and only after we got the complete response letter do we realize they hadn't really done any work on the CMC.

Got it. That makes sense. And then with European letter yesterday, it seems like -- from the language, it seems like it was more about Phase III being a really robust trial, and it was not particularly a clinical or variability issue. Was that the issue -- what was -- this is how you read it, that Phase III is robust enough, 1 year -- let's just wait for 1-year kind of situation?

And the European process is a little bit different than the American process because there's 2 months on the back end for legal authorization. So even after you get a positive opinion, then there's 2 more months before Brussels authorizes the Marketing Authorization Application. So remember, I was talking about that 18 months, but it's really like 4 months because of the time of the decision and the time of the data. Well, the 2 of those months are the EC decision on the back end, and then they got started 3 months late because the original reviews came in late because of COVID. So they really lost 2 months on the front, 2 months on the back and that was all of the time difference really between the action date and the availability of additional data. I suppose you could say, we hurt ourselves by enrolling the Phase III trial so fast. But at the end of the day, that trial is the money shot trial. Great to get on the market for patients and -- who have a really, really, really urgent desire to have gene therapy. But all along, the real value driver for ROCTAVIAN's commercial presence was going to be the Phase III trial, where we could be talking about statistically significant reductions in bleeding, we could talk about a much larger sample size, et cetera. So if we're guilty of anything, it's enrolling our 301 study too fast, but that's the money study anyway. So...

I think -- so Mohit, again, sorry, here, we are 4 months away from -- or so from the top line Phase III data, which again is a study designed to demonstrate superiority over standard of care, which is prophylactic Factor VIII. As Hank said, the baseline ABR -- ABR is the endpoint, annualized bleeding rate was 4.8 in those patients. And just to remind you that the ABR observed in the interim Phase III with 16 patients was 1.5.

Got it.

And those numbers, interestingly, are quite similar to HAVEN 3 adult non-inhibitor patients treated with emicizumab where the baseline ABR was in the high 4s, and it was reduced to the mid 1s with emicizumab. So we're right on track in regard to what is reasonable to expect for best available current therapy for hemophilia A. And the difference, of course, being with gene therapy is that there aren't -- the frequency of breakthrough bleedings is very low and, obviously, the advantage of compliance is much, much higher. And that's where current hemostatic efficacy regimens fall short because they involve a regulation of your activity and a chronic administration of a therapy. And that's more complicated than people appreciate. And that results in more morbidity than people appreciate. And that's why gene therapy is a great -- is going to be an important breakthrough for patients with hemophilia A.

Got it. So in terms of -- so you did talk about that you plan to meet with the FDA and probably try to find a middle ground here, like they have taken an extreme approach with the 2-year data. Would it be prudent to meet after you have data? Or how you're thinking about the timing of that meeting?

Well, I think you have as much interaction with them as you can because you want to avoid surprises. And in a way, the standard way of doing that is to have more interaction than less interaction with them. So we'll be planning on meeting them before the Phase III data, and then we'll meet with them again after the Phase III data. I think it's an important opportunity to try to close the gaps in understanding. Review -- the typical regulatory review, there's a lot of back and force. And there's a lot of exchange. There's a lot of challenge and understanding. And that just didn't happen for the reasons we talked about. So we want to fill in those pieces where we fully understand how they're looking at the totality of the evidence.

Got it. That makes sense. So in terms of variability that -- I mean FDA did talk about the Phase III and Phase III (sic) [ Phase II and Phase III ]. And -- I mean there is obviously hemophilia in it. So the disease itself is variable. And then there was one thing you were trying to arrest, which is the early steroid use as well, not wait till 10 weeks. So could you help us understand what you are doing in the Phase III trial after those initial few patients that could actually arrest -- help arrest that variability? And maybe help us set expectations here when we see the data next year because it becomes an important catalyst for you at this point.

Yes. So to the extent that there's a hypothesis about steroid use, it's the impact of early steroid use on the initial level of transduction. If you remember, in our Phase II results, the 6e13 dose group, the week 52, week 26 Factor VIII activity, roughly similar to each other, in the 60s for the chromogenic assay versus in the high 30s for the -- like 36, 37 for the Phase III trial. So that difference may be related to prophylactic versus on-demand steroids. When you look at the past 6-month time point in the Phase II study, which is where we have the most long-term follow-up data in the Phase II study. And you compare the steroid use between the 6e group and the 4e group, the 6e group had gotten prophylactic steroids, the 4e group had gotten on-demand steroids. But from 6 months on, everybody was on steroids. So from 6 months on, everybody is essentially on an on-demand steroids. And the rate of change of Factor VIII expression between the 6e group and the 4e group is more similar than it is different in those outer years. So the argument is that there really is no impact of on-demand or on prophylactic on durability. And so actually, it was an interesting discussion that we had with the center director, Peter Marks, who we were looking at the plots of the Phase II data and the Phase III data. And if you remember these plots, there was sort of a yellow line that represented 6e13 group, and then there's 4e line that represented -- there was a black line that represented the 4e group. And then we put in the 6e line, which was intermediate -- I mean the Phase III data, which was intermediate between the black and the gold. And what Dr. Marks observed was his projection that it would be 7 or 8 years before you're above 5%. And so I think that...

Even with Phase III...

[indiscernible] it sounded early, but it's unlikely to confound the durability story.

I mean the steroids probably have an impact on the early Factor VIII expression levels, but not the late ones. I mean the first 6 to 12 months, yes.

Got it. Got it. But then you are actually moving the uses of steroids from 10 weeks, which was seen in the initial trial to more like 5 weeks, right? I mean so that should get some impact.

Yes. I mean we figure that the more responsive you are to ALT rises, which are accompanied by Factor VIII expression decreases, the more likely you are to have long-term good Factor VIII outcomes. And that's been our strategy in Phase II and in Phase III, regardless of whether you're on steroids prophylactically or not.

So in terms of -- as investors thinking about how should we look at the data when we see the data. So from what I am hearing is that basically getting to 1, 1.5 in terms of bleed rate is probably going to be good data, similar to what we see with other agents, HEMLIBRA and all. And the real -- so that puts you at par with other therapies. And then the implemented benefit is...

Mohit, it puts us as superior to standard of care.

Yes, it does. And it does put you as a superior as well as the thing is the benefit of just onetime treatment as well for a quite long time.