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

Okay. Welcome, everyone. My name is Gena Wang. I'm smid-cap biotech analyst at the Barclays. It's my great pleasure to introduce our next presenting company, BioMarin. With me on the call at the meeting, we have Hank Fuchs, President of Worldwide R&D; we have Brian Mueller, EVP and Chief Financial Officer. We also have Traci McCarty, VP, Investor Relations. Okay. So with that, maybe we will start. Hank, I know you won't have a slide presentation, but maybe you can start with a brief introduction about BioMarin, and we will dive right into the Q&A.

Sure. Maybe Brian and I could tag team the brief introduction because the company has quite a lot of strength, both in terms of R&D pipeline advancement -- recent history of R&D pipeline and advancement in new commercial products. So maybe, Brian, do you want to start, kind of give a quick thumbnail on...

Yes, absolutely. Thanks, Hank, and thank you, Gena. So yes, we just reported our third quarter earnings back a couple of weeks ago. So we'd encourage you to take a look at our press release and earnings call transcript, if you haven't. But we've got 6 approved products and a healthily growing base business revenues of over $1.8 billion are expected this year. And we did adjust our revenues a couple of times this year, early on in the pandemic when we reported our Q1 earnings actually back in April. We adjusted 2020 revenue expectations by about 5% for COVID impact, and we're seeing parts of the business stabilize on the COVID front since then, especially in terms of -- our drugs are usually a weekly infusion. So we've been able to pivot to home infusions or alternative clinics and stabilize largely that part of the business. We are still experiencing some delayed patient starts due to the pandemic, and so that's continuing to affect revenues this year and next year as well. And then we adjusted our 2020 revenue expectations for the ROCTAVIAN approval delays, which we're going to speak about on this call. But nonetheless, we're still earning a non-GAAP profit and positive operating cash flows this year, and we'll expect that to continue next year. So delays on some of the rapid growth we're expecting from ROCTAVIAN and vosoritide, but healthy base business, generating operating cash flow and still growing.

And from that adequate resources to invest in a growing future of BioMarin, next step is we're in review with the Food and Drug Administration and the European Medicines Agency for the application of vosoritide for the treatment of children with achondroplasia. We have the largest gene therapy study going on in hemophilia A with a data readout early next year that we think could propel the product forward. And we have early-stage projects that are advancing as well. So in all cylinders, I think we're doing really well as a business, notwithstanding the most recent setback that we had, but we're still very confident in the underlying business and R&D strategy of the company. So that's, I think, a good snapshot overview.

Great. So maybe I will quickly ask Brian, you mentioned the cash flow positive. And I think any thoughts regarding the S&P index listing? I think the criteria is like 4 quarters EPS positive. Any thoughts there could be sometime...

Yes. So no, it's a great question. And at the moment, like I said, we -- because of the delays in some of our growth as well as some of the revenue headwinds that we're facing just a reminder, Kuvan, our small molecule for PKU lost market exclusivity here in this fourth quarter of 2020. So we're going to expect some generic erosion within the U.S. Kuvan revenue business. That's a first for the company. So with some of these revenue headwinds that we're facing, we're focused on non-GAAP profitability, and we'll likely expect a GAAP net loss next year. So in terms of positive EPS, that's going to be delayed because of the delay in ROCTAVIAN and vosoritide. But we'll aspire to that for sure.

Okay. Great. So Hank, maybe I will ask you. I'm pretty sure you got asked quite a lot on ROCTAVIAN regulatory path. So sorry, I will ask again the -- regarding any additional color regarding the Type A meeting you had with the FDA after receiving CRL? And then what the comments from the regulator regarding ROCTAVIAN, what they are actually really looking for? How much leeway they have beyond what they initially said 2-year endpoint? What kind of data package they are looking for? And what could be changed or improved? And then the reason we are asking is, because we heard Pfizer basically restated likely so far, it's still 1-year endpoint, we saw a few other hemophilia B clinical trial also is the 1-year endpoint. So just wondering what exactly FDA is looking for and what could be the data package that convinced them that actually 1 year will be sufficient?

Oh, boy, that's a lot of questions in a question. So I'll pick a couple of them and then you can follow-up, how is that?

Okay.

Maybe I'll start with just sort of a brief description of the Type A meeting. It was really well attended and very collaborative and open-ended discussion. And I think most reassuringly, there were really no surprises in terms of kind of what was behind the CRL. When we got the CRL, we conveyed what was the substantial element of the CRL, which was that the difference in the 2 trials, the Phase II and the Phase III trial resulted in differences in Factor VIII activity at an initial time point. And because of other differences in the trial, how they were conducted, the starting materials for the Phase I/II trial versus the Phase III trial and the use of corticosteroids, the agency felt them comfortable extrapolating the future trajectory of Factor VIII expression over time. And they essentially just repeated that. And that gave us a little bit more words around how the concerns that they had and how they came to the conclusion. But to your point about the 2-year data, and they recognized that we have a 1-year data snapshot coming up, and they recognized that we do have some patients who have been followed for longer than 2 years. And I think they're just making, at this point, the qualitative statement that if some is good in this coming snapshot, more around the corner again, next year is going to be even better with even more patients followed for a longer time. So we feel reasonably confident that the 2-year data snapshot will certainly scratch their itch and obviously, we're working to provide them a view of the 1-year data snapshot when it's available, and we'll just take it from there. As to the exact criteria, this has not been subject to an exact criteria kind of hit a p-value on this particular parameter. Obviously, we have the primary endpoint of annualized bleed rate, which is the single most critically relevant component of the story. And they are -- and they appreciate that. But some of the other aspects of how to interpret that 1-year ABR, I think, are coming into consideration for us and for them. And we don't have a very clear picture today of what's going to be required at the 1-year mark. So it's a bit of a wait and see. We look forward to the data being available in the early part of the year, and we'll share as much of that as we can at the time.

Okay. Good. And I have several questions. First, at the 1-year readout first quarter next year, and I think you have all the records of every patient when they enroll, based on our rough calculation because you took 2 years, it could be 50%, is that in line with your calculation? Like, how many patients should we expect to see, like, reaching 2-year follow-up by end of the 1 year?

I don't think we've given that number specifically, but I do not think 50%; it's less than that. As is typical for...

Less than 50%?

Yes. As is typical for clinical trials, there's an enrollment hockey stick kind of thing. And so the interim analysis population will certainly be past the 2-year mark. But as to the trailing portion of the study, it's not going to be 50% of the patients at the 2-year mark.

Okay. Okay. Just to get a sense, like 30%, 40%, is that a fair estimate?

It's not going to be enough of a -- the context to put this in is, somehow that -- this size of the population relative to the overall population is a consideration in the agency's request for 2 years. That is to say, they recognize, if it was 50-50, it might be 1 thing. It's not -- I don't -- again, I'm not giving the number. So I can tell you, it's a smaller number than half of the population. And then factors into why you should have the expectation that the agency would want to see 2 years' worth of data.

I see. Okay. Okay. So that makes sense. Hank, you also mentioned a little bit, but I wanted to ask you more. What was the reason causing Phase I/II data different from Phase III. You mentioned steroids. What about manufacturing? Any factors you can think of, if you can share?

Yes. I mean, the 2 leading hypotheses are differences in the material that was used in the trial and differences in the steroid regimen. We have a lot of data about the Phase I material versus the Phase III material, and we do not identify any factors that are responsible for differences in phase -- in the phase -- Factor VIII outcomes at 26 weeks. And the -- we have seen -- we used a -- for a group of patients in the Phase III trial, we used a single lot of the material, and the outcome in those patients actually encompassed the entire range of Factor VIII expression levels that we've seen in the whole program so far. So that says to us that intrinsic human biologic variability is much greater contributor to variability in Factor VIII expressions and product characteristics. So we don't think that product characteristics are explanatory. Obviously, the agency has raised the concern, but then it's not like they point to a specific product attribute. I think they're just pointing to the fact that these are complex bio mixtures, and you can't measure everything and you can't know everything, and the agency and its conservativeness likes to know as much as they can about factors that could inform a decision. So -- and in any case, because we plan to commercialize the product as the basis of the Phase III manufacturing, the results of the Phase III are really the definitive results anyway. The second speculated difference between the 2 results was that there were differences in the corticosteroid regimens. So to remind you on our Phase I/II study, all of the patients who received the 6E high dose material, received a corticosteroid prophylaxis early in the -- after transduction, whereas in the Phase III trial, patients were not prophylaxed. They had to experience an elevation of liver function tests before they receive corticosteroids. And that difference was accompanied by some observations that when we did the interim analysis that the patients in the interim analysis compared to the Phase III trial -- sorry, compared to the Phase I trial, that had gotten steroids later, had experienced more consequential fall in their Factor VIII expression after their ALT rise than the Phase I patients did. So this has led to a hypothesis that a difference in the steroids could explain the differences in the Factor VIII outcomes. I think our third hypothesis is embedded by the fact that we're talking about relatively small sample sizes in NF 17 in the Phase I/II and NF 16 in the interim analysis population that the differences that are observed, in fact, are not real differences, that they just ran them by chance. And I think that plays into why people want to see more data from a regulatory perspective because the sample sizes are still relatively small and there's no, if you will, smoking done as to differences and as to whether they're even real. So I think all of that mix is in with the considerations.

Okay. Okay. That's fair. And I think in the past, you gave the different -- the projection of simulation based on the current data and then projected durability. So are you -- do you stand on this projection for the Phase III 1-year ABR readout? Do you think the initial Factor VIII level, should we expecting, so we have -- now it's about like roughly 15% -- or sorry, like close to 20%. Is that roughly what we should be expecting?

And when you say 20%, what is that, a number -- what number is that about?

The Factor VIII activity.

At what time point in whom?