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

Great. Good afternoon. I'm Matthew Harrison, one of the biotech analysts here at Morgan Stanley, and thanks for joining us for our next session. Very pleased to have BioMarin with us. Briefly before we get started, I need to read a disclosure. Please note that this webcast is for Morgan Stanley's clients and appropriate Morgan Stanley employees only. This webcast is not for members of the press. If you're a member of the press, please disconnect and reach out separately. For important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. And if you have any questions, please reach out to your Morgan Stanley representatives. So with that, I'm very pleased to have 3 members of the management team from BioMarin. J.J. Bienaimé, who's the CEO; Hank Fuchs, who runs R&D; and Brian Mueller, who's the CFO. And J.J., I'm going to turn it over to you to make some opening remarks, and then we'll jump into Q&A.

Thank you, Matt. So we appreciate the opportunity to participate in your virtual conference today. As you know, we provided some business updates over the last couple of weeks on our framework for the remainder of 2020 and looking at 2021. Starting with financials, the foundation of BioMarin remains strong, supported by our global based business of essential medicines, solid cash position and a robust pipeline of products moving through development. We expect to finish 2020 with approximately $1.4 billion in cash after paying the outstanding convertible bond that's due next month. And importantly, we expect to have positive operating cash flow on a going-forward basis this year, in '21 and beyond. So this foundation enables us to simultaneously pursue approvals of ROCTAVIAN and vosoritide to develop the earlier-stage pipeline and to also grow our existing commercial business. The study with vosoritide for the treatment of achondroplasia, we were pleased to announce that the full Phase III data from our global study with 119 children with achondroplasia was recently published in the Lancet. This Phase III results provide strong evidence of the clinical benefits of vosoritide and demonstrated a highly significant improvement in annualized growth velocity in the children treated with our product. We are very encouraged by results from our multiple studies with vosoritide given the significant unmet medical need for children with achondroplasia. There is no approved drug for the treatment of the achondroplasia today. Our marketing applications have been submitted to both the European and U.S. health authorities, with the EMA having recently validated the application. So assuming a standard review time lines, followed by potential approval, we could be launching vosoritide by the end of next year in the U.S. and Europe. Turning now to ROCTAVIAN. The pursuit of expedited approval with 26 weeks of data from 16 subjects was driven by our prime designation in Europe and our breakthrough therapy designation in the United States. And while the bidding control data that serves as the basis of this expedited approval submission was dramatic. For our patients, health authorities in both the U.S. and Europe have requested larger data sets due to the highly innovative nature of gene therapy treatment for hemophilia A. Fortunately, with the completion of our global 1 year Phase III study with 134 subjects is around the corner, with the last patient out in November of this year. So as we announced last week, we plan to share top line 1 year Phase III data from this study in early Q1 2021. For our application in Europe, we announced that the EMA recently informed us that they would like to base the approval and delivering discussions on the upcoming 1 year data. As a result, we are now working with the EMA to enable submission of full 1 year Phase III data and we anticipate being in a position to submit that data at the end of the first quarter of 2021. While we are disappointed by this delay, we believe the package at launch will be even stronger with full results from 134 subjects. It will also better position us commercially in Europe and actually in the U.S., down the road, and it will also place us in a stronger position for pricing and reimbursement negotiations. Importantly, European authorities have inspected and accredited our ROCTAVIAN gene therapy manufacturing facility, and there are no outstanding manufacturing issues to be addressed. So for these reasons, we feel confident to see the future approval of ROCTAVIAN. And I would now like to invite Hank to describe a few things for the attributes of our Phase III study, that is the basis of our confidence, before we move to Q&A. Hank?

Thanks, J.J. By far and away the most critical step in the journey of ROCTAVIAN as a gene therapy for transforming the lives of patients with [ hemophilia ] is going to be the 1 year analysis -- the planned 1 year analysis of the Phase III study. And this was where we would have been all along regardless of the FDA's and EMA's considerations. And accordingly, we designed a very robust study to inspect a clinically relevant endpoint, mainly the annual bleed rate and a trial in which there was a prospective run-in phase, collecting annualized bleed rates on all patients who would be included in the analysis. And key to this trial, in terms of what the hypothesis testing is going to be, is to compare the annualized bleed rate after gene transfer to before gene transfer. And now that we are imminently around the corner, like in the next 3 months from beginning to unblind the trial, we are also -- we've also completed the analysis of the baseline run-in period. And the ADR of the run-in period has a lot to do with the study statistical power. So I want to give you a little bit more insight about that. We planned the study with feedback from the FDA to aiming for a high bar to beat, meaning they're consideration was that Factor VIII prophylactic gene therapy, when it works perfectly, should deliver an ADR of about 3 or 3.5. And so we powered that the study on that basis. And it turns out that the annualized bleed rate in the patients who ran in the study was actually 4.8. Now we're going to compare 4.8 to what happens after gene therapy. And our worst outcome after gene therapy of an ABR that we've recorded has been about 1.5. And in fact, in the 2 other cohorts and with longer time, you'll see our ABRs are actually under one. So using the sort of the real 4.8 versus the conservative 1.5, we've asked ourselves, we reasked ourselves, what's the study power now. And the study power is more than 99%. And for those of you not familiar with these statistical types of study terms, the power of a study, 1 minus the power of the study is the probability that the study would fail to detect the difference when there really is a difference. It's the false negative rate of study findings. So 1 minus 99-plus percent. There's less than a 1% chance that if the truth of ROCTAVIAN's control the ABR down to a level of 1.5 or lower, that this study will be positive. And since 1.5 is the worst that we've seen, we have pretty good confidence that the power is actually even better than 99%. So that gives us a lot of confidence in the 1 year data. I think from that you can see why we think the 1 year data is actually much more pivotal in the context of the discussions than anything else because of its robust design and its power. So with that, let me open it up to you, Matt, for additional questions.

Okay. Perfect. There's a lot we can discuss there. So Hank, just one clarification to what you said. I just want to make sure it's clear. So I understand that the baseline ABR was 4.8 because you've been able to analyze that. Can you just clarify that the -- what the FDA wanted to see or what their requirement was? Was it a decline of 3 or 3.5? Or what was the baseline number that they wanted? I mean, what was the treatment number that they wanted to see?

Well, when they accept the targeting of 3 to 1.5, they should be realizing that the magnitude of the difference of 1.5 bleeds per year could still be statistically significant with a lower number. So by agreeing to the design of the study, what we would hope to be the case as they understand that and that they would regard that as a clinically superior outcome. Now in their guidance document, they talked about -- you can also get there with a noninferiority study. For interesting statistical reasons, the power of our noninferiority study is substantially higher than the power in our superiority. So even were they to take some pedantic view about the clinical significance and superior outcomes, 4.8 versus whatever we find it to be 1.5, 1, at a minimum, we would vastly clear the noninferiority bar. So I don't think that's going to enter -- the minimum size of difference, I don't think is really going to enter into the calculus subject to, obviously, a lot of discussion with the FDA.

Okay. Okay. Thanks for clearing that.

There's been a lot of discussion with the FDA.

Yes. Thanks for clarifying that. So then second thing, you guys have talked about the EU plant inspection, I think a couple of times. We haven't really heard you talked about the U.S. plant inspection. Maybe just an update on what are -- what has or hasn't been done related to the U.S. plant. I mean, I realize it's the same plant, but impacted by different regulators.

Yes. I guess I probably can start in that. And we've had a lot of submission of the CMC package. When COVID hit, we thought that, that was -- we were led to believe that, that was the substantial issue of the review, was completing the U.S. inspection. And in fact, the U.S. inspection has not happened. And what they told us in the CRL was that the inspection didn't happen because of these clinical concerns. So they have yet to do the plant inspection. Obviously, we're very confident about the outcome of that plant inspection when it does occur because of the EMA and because of the huge experience that we have managing inspections in our Nevada facilities. And to support that, we actually -- when they were starting to talk to us about COVID, we created the how to manage a plant inspection in the kind of a COVID, kind of a playbook. And now that the FDA has published a guidance on the post-approval inspections in the time of COVID playbook, we see how similar it is to what we had been proposing them in June, July and August. And so we have a reasonably high degree of confidence. And that comes through having submitted tons of documents, tons of video, and tons of other ideas about how they can affect the plant inspection very quickly. We choose to rely on the EMA's inspection and a follow-up inspection. So I think we have that one last little hurdle to accomplish as far as manufacturing in the FDA territory, and we have a pretty good degree of insight about how to be successful with that.

Okay. Okay. Helpful. Second thing, it sounds like the -- and I'm going to paraphrase, you can obviously provide more details. This is -- the paraphrasing is off. But essentially, the regulator has asked for this, let's call it, hard clinical endpoint data or outcomes data because of the difference in the achieved factor levels between Phase I and Phase III. I know in the past, one of the things that you've talked about is sort of modifications to the prophylactic steroid regimen to potentially increase factor levels in Phase III. Obviously, the data cut you delivered to the agency was sort of before that happened. So I guess, any thoughts on doing a second data cut and looking at if you've been able to increase those factor levels or I don't know, just thoughts around your ability there?

Yes. So a couple of bigger picture comments and then we can get into the ongoing study. The bigger picture comments are what is the role of corticosteroids in affecting outcomes of gene therapy, in our case, with severe hemophilia A. And there appear to be sort of 2 different answers. There's an initial transduction phase over the first 6 months where the gene is going in and it's circularizing and it's starting to express and Factor VIII expression is coming up. And then there's a second phase in which the transgene is in there and then liver health or whatever modifies ongoing expression and there's some tilt downward in Factor VIII expression down to a level that we don't know what the -- where that's going to end up because we just haven't followed patients long enough. In the transduction phase, well, in our 3 cohorts of patients as 4E and 6E from the Phase I study and the 6E from the Phase III study, we've used on-demand steroids, prophylactic steroids and on-demand steroids. And looking across those 3 cohorts of patients, the hypothesis that we have is that the use of on-demand prophylactic steroids in the first 6 months informs the height of the Factor VIII peak that you get to. When we look past 6 months in the maintenance phase, what you have used is kind of irrelevant. What you use going forward is more similar than different between the on-demand and prophylactic cohorts. And the rate of change of Factor VIII expression is more similar to 6E and 4E, more similar between prophylactic and on-demand steroids. So we think where steroids play a role is in the height that's achieved during the transduction phase. Now to get to your next question about the ongoing monitoring of the study, as we talked about, I think it's actually at your conference that we -- I think, that...

Yes, a year ago.

That we had done an initial analysis of -- the interim analysis population versus the Phase I/II population, and we discovered that the investigators were a little slow on the uptake in terms of administering corticosteroids during the transduction phase. And so when we showed the results, the investigators are actually pretty alert to the issue and, like more or less, right away realized, we were waiting like 5 weeks after the ALT rise happened to start corticosteroids and we need to be closer on top of that when it occurs. And interim monitoring data suggests that the investigators have really done a good job of implementing corticosteroids early. Now what we -- when we think about that, we think about practices evolving kind of under our own feet during the course of a clinical trial. And that actually happens all the time in clinical trials as people learn and iterate. And sort of the best summary of all of that comes from the analysis of the full 134 patients that have been treated with ROCTAVIAN with the Phase III to be commercialized material. And then you can dice it up into bits like the last group of patients do meaningfully better than the first group of patients is that generate hypotheses about best optimal. So we don't plan an additional interim analysis to look at Factor VIII outcomes. We do plan in the final analysis to explore potential differences between sort of, if you will, assiduousness of steroid use. And the other thing to say here is the -- probably the most important question that really is on the table, is how long does this last? And to sort of sort out things, like as on-demand versus prophylactic steroids, inform how long this lasts, you have to have the appreciation of the context that it's going to take a lot of years before you get to an endpoint that's discernible -- that can make those distinctions. And the reason I say that is, is think about as ROCTAVIAN is, it provides a meaningful proportion of patients, incredible benefit. So what I mean by that is well, what's in every hemophilia patients dream, I think, to come true, and maybe there will be more dreams that come true, too, but it would be -- I don't have to take prophylaxis, and I don't have the clinical phenotype of hemophilia. I don't have to take prophylactic therapy and I don't bleed. And so when you look at the proportion of patients who meet that criteria, obviously, on emicizumab, by definition you have to take prophylaxis, even best current therapy requires prophylactic chronic administration and as a company by breakthrough bleeds. If you look at our 4 -- our Phase I/II results, at the end of 4 years, 6 out of 7 patients in that cohort were bleed and prophylaxis free. In the 3-year 4E cohort, 5 out of 6 of our patients were prophylaxis and bleed free. So we haven't reached median perfect state. It's like a cancer survival curve. We haven't reached median event. And it's probably, I don't know, 3, 4 years in front of us. So it's going to take a decade more to sort out things like what's the impact of upfront steroid use on long-term outcomes. So I think this question is going to sort of hang in the balance for a long time, we don't have a perfect answer. Not uncommon in innovative therapeutics. And we are taking back to is that's a huge amount of benefit for a really long period of time. So if we demonstrate comprehensively the impact on the ABR itself, the definitive clinical outcome variable, I think a lot of these is quite 134 patients, I think a lot of these questions start to move to very subordinate types of questions in the calculus.

And Hank, you want to mention that also the data we have that seems to illustrate the fact that steroids, early steroids use, doesn't have much of an impact on the long-term efficacy, the liver biopsy data and the peripheral blood mononuclear cells data that we have that is similar between Phase II and Phase III product.

Yes. This is a little bit orthogonal were independent of the steroid question purely. I mean, one of the questions that people asked us was, is the -- what is the vector -- is the Phase II vector and the Phase III vector performing in vivo similarly? And one of the challenges, if you think -- if you remember back to the scatter plots that we've been showing you, you have the Phase II patients in the 4E dose group, the Phase II patients in the 6E dose group. And then you have in the green dots in our previous charts, the Phase III patients. And there's quite a bit of scatter. And it's not crystal clear that there are differences in reality between the 2 studies. But to investigate that, we talked about steroids potentially playing a role in that, and we don't know how much of a role they play in that until we see the full unblinding of the Phase III study. Another aspect that we investigated was, is it possible the vector explains that. And we've looked at the vector ex vivo in a million different ways, 50-something plus ways, and we can't put our finger on the pulse of some material change in the quality of the vector that could explain. And in fact, quite the opposite. We gave 1 lot of vector to 6 different patients, probably the first time that's ever been done in gene therapy, and we get the full range of expression from that 1 lot in Phase III as we saw in our previous Phase II study. So the variability is likely to be human, not product related. To corroborate that, and this is why J.J. mentioned peripheral blood mononuclear, so we'd love to be measuring vector performance directly in the liver. And we've done that in some patients who are accumulating some information about that. But what we have done is to take a long-lived cell type that patients -- the peripheral blood mononuclear cell compartment is readily sampled and although the -- although the vector largely goes to the liver, it also goes to all the cells in the body and through advanced molecular techniques, we can fish those peripheral blood mononuclear cells out, quantitate how much of the vector is in the vector at a given time point and quantitate the physical state of the vector. And we can do that -- we can compare Phase I/II patients to Phase III patients. And when we do that, and actually, we showed this at R&D Day last year, the quantity and quality of the vector, Phase II versus the Phase III is the same. So it really strongly suggests that the differences between Phase II and Phase III are more random than real and that the durability that you would project, given for that time point on, everybody is getting the same steroid regimen, takes A4 on-demand prophylactic, that the durability of the vector post Phase III should be similar to the durability of the vector post Phase II. When we showed the durability trajectories to the FDA, we showed those same low spots that I was just referencing, and we were talking here about. Dr. Marks himself said, "So where do you think are the durability of the vector is going to be on the basis of all this?" And he goes -- he answers his own question, he goes, "That's got to be like 7 or 8 years before it's below 5%." And we said, yes, that's right. So I think the biological evidence here really strongly supports a story of long durability. And I think that plus definitive evidence on the annualized bleed rate is going to be a strong evidence package.