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

Very welcome, everyone. This is Josh Schimmer from the Evercore ISI biotech team. Pleased to introduce from BioMarin, we have Hank Fuchs, President of Worldwide Research and Development; and Brian Mueller, Executive Vice President and Chief Financial Officer. So welcome, Brian, I think you have some interim remarks to make.

I do. Thank you, Josh, and thank you all for your interest in BioMarin. 2020 has been an eventful year for us. Developments this year have us set up for more significant updates in 2021. Our next potential product approval will be with vosoritide for the treatment of children with achondroplasia, which is the most common form of dwarfism. Marketing applications in both the United States and Europe are currently under review by health authorities, setting the stage for potential approvals in the second half of 2021. Vosoritide represents a tremendous opportunity as it will be the first potential pharmacologic therapy approved for achondroplasia, a condition that impacts roughly 20,000 children within our current commercial footprint. Year 2 of our global Phase III study, which includes 110 children, was reached last month, and we intend to share those results with you in the near future. Launch preparations for the U.S. and primary markets in Europe are well underway with a prelaunch focus on disease awareness to clinicians, caregivers and advocacy. The 3 pillars of our North American launch readiness plan include building the referral network of achondroplasia patients to appropriate key treatment providers, expanding the community of key treatment providers to who will provide the care plan for treatment with vosoritide and work towards developing partners and advocacy. Briefly on ROCTAVIAN gene therapy for the treatment of hemophilia A, we look forward to sharing top line 1-year results from our 134 subject Phase III study in early 2021. Based on the dramatic bleeding control observed to date with ROCTAVIAN, we're optimistic about the approvability path forward, but obviously, the Phase III results will be paramount to determining time lines. We plan to submit the marketing application in Europe in the second quarter of 2021 and share the 1-year Phase III results with the FDA as well. Concurrent with next steps for vosoritide and ROCTAVIAN and the continued commercial expansion of Palynziq for phenylketonuria, our early-stage pipeline is also moving forward. BMN 307 gene therapy for PKU is in the clinic with an efficacy goal of achieving normalized fee. We're also completing preclinical studies with BMN 331 gene therapy for hereditary angioedema, our third gene therapy product candidate, representing another large market opportunity. Moving on to the financial update shared in our recent third quarter 2020 results call. We tightened our GAAP net income guidance and improved our non-GAAP income guidance for 2020 and slightly adjusted our total revenue guidance for the full year, mainly due to the potential -- the delay in the potential approval of ROCTAVIAN. We anticipate earning meaningful non-GAAP income in 2021 as well as positive operating cash flows from our base business. Beyond that, based on the potential approval of vosoritide in the second half of '21, and hopefully, ROCTAVIAN thereafter, should longer term Phase III data be supportive, we believe that the growth in revenues and profitability would come back in 2022 and accelerate in 2023. That's a brief overview to bring everyone up-to-date since our recent Q3 call. So with that, Josh, I'll turn it back over to you for questions.

All right. Super. So the next big catalyst is going to come from Valrox. It's a good outcome. I mean we've seen a couple of slices of data, right? We've seen the Phase I/II data. We saw the interim look at the Phase III. What are you looking for? What do you want to see that will give you confidence in the profile?

Josh, statistically significant improvement in annualized bleed rate versus the run-in period when patients were on standard of care Factor VIII prophylaxis. I think that's 1 key thing. I think the trajectory of Factor VIII expression from week 26 to week 52 in the full population of 134 patients will be equally very informative also. Remember that the complete response letter highlighted a challenge of projecting durability beyond 26 weeks given the relatively small number of patients is -- patients and the differences in the studies, the Phase I and the Phase III study. So I think a good outcome there would be nobody falling off a cliff after 26 weeks, maybe that would be a minimally good outcome. And the flatter the trajectory is between 26 and 52 weeks, I think that's going to be very supportive. I think safety profile is going to be another important consideration. I think those are the key.

So you've talked about the trial almost as though they are kind of a couple of cohorts here, right? The first group of patients who went in and then those patients who followed after the learnings about optimizing steroid management, et cetera. How are you thinking about slicing the data, what you might be able to show us early on in terms of those 2 groups?

Well, just to set expectations, there's a lot of interest in the study. I think probably the largest gene therapy study conducted to date. And there's good -- I think there's a pretty significant consideration by the scientific community that they want the data to be presented in scientific spheres. And so that doesn't usually happen overnight, as you know. So the initial announcement from BioMarin will probably be a little bit more top line-ish. But over time, I think we'll be able to coalesce around the whole data sets. And I think cutting it into groups post hoc analyses are always a little tricky in terms of interpreting them with caution. I think in broad brushstrokes, say you just outlined the 2 most significant -- through the interim analysis, I think those are the 2 main subgroups to think about looking at because as we've talked about, the investigators had a little bit of a more relaxed attitude toward the implementation of steroids in the Phase III study than they did in the Phase I study. In the Phase I study, everybody got corticosteroids starting at week 3 of therapy, whereas in the interim analysis population, it was quite a bit later, it was week 10. I think when the Phase III interim analysis result came out and the median Factor VIII expression at week 23 to 26 was about 36 or 37, investigators wondered whether that delay in the initiation of steroid therapy contributed to a slightly lower steroid -- to a slightly lower Factor VIII outcomes. So they, and we got a little bit more aggressive about monitoring in terms of responding to Factor VIII decreases or ALT responses. And so that before or after, I think, is going to be the big broad brushstroke question.

Would you expect that approach to now go back and replicate more closely or very similarly what the Phase I/II population of children? Is there any other reason why kind of Phase III setting patients may not quite be as robust as the Phase I/II in terms of factor expression and durability?

I don't think there's enough biology data to really greatly inform the answer to that question. The plain truth is -- is that we and others are still learning a lot about what that initial inflammatory response to vector is. And there's been different vectors and different transgenes have had different initial toxicity, some medium they complement. And so I don't know that we know exactly what we are treating with steroids. And therefore, what to expect in terms of what a great approach to steroids, what a medium approach, what a poor approach to steroid management is. So I think we're still all in the hypothesis generating phase about that stuff.

So you said you have had some discussions with the FDA since the CRL. And I guess 1 thing that I find a little puzzling is the magicness of 2 years. Like what do you learn at 2 years that you wouldn't have learned at year or 18 months? And why do the extent of actually recommending that as the primary endpoint at 2 years specifically?

Well, they haven't said this explicitly. I mean we had more discussion with them since the CRL and get a little bit more clarity about what led them to go -- the same in the CRL was because of the differences in initial Factor VIII expression, changes in the manufacturing, changes in steering pattern, we're unable to project the trajectory of future Factor VIII expression based on the 23 to 26-week data. The clarification that we got about that kind of is in -- is colloquially, I'd say it is -- we're no hypothesists. And so our working assumption is that everything is going to fall off a cliff until you show that it doesn't. And so I think that fair enough, I mean no hypothesis, not a gold standard of clinical research. So -- and so where does 2 years come from? They didn't state this, but they have expressed -- I mentioned the differences in steroids. So they wonder what's going to happen when the steroids are withdrawn in the context of on-demand versus prophylactic use of steroids. So I think that their wonderment is, to some extent, driven by the fact that there was a meaningful change in Factor VIII expression at the end -- between the end of year 1 and the end of year 2 in the initial Phase I/II population. So they kind of like our, let's make sure we get through the tunnel of that before we make a judgment on relative benefits and risks.

What's going on kind of in the background of the Phase III in terms of whether you're exploring redosing, novel constructs, novel immunosuppressive regimens, new patient populations? What do we have to look forward to in the year and years to come?

Quite a lot going on. I mean I'd say the build-out of the ROCTAVIAN portfolio is obviously the Phase III results, 1-year mark or 2-year mark. Sort of building the knowledge of durability as time goes by. We have a study in sterile-positive patients that's been slow to enroll. It's interesting the uniQure data, I think, are interesting on that, and so it gives us an opportunity to revisit our thinking about just the influence of preexisting immunity. We also have a study in the field for patients who have inhibitors to Factor VIII. We're also doing an additional study looking at prophylactic corticosteroid administration on a small group of patients treated with ROCTAVIAN. So that's a lot of development work for ROCTAVIAN, but then we also have, as you mentioned, preclinical work, trying to identify novel capsids for potentially redosing. We have some internal strategies on identifying other ways of redosing people. We have a lot of work on the translational biology to better understand issues of consideration, like, for example, about durability and sustainability of expression. So there's a lot of research work on that. We presented some biopsy data in that regard. So it's a pretty fulsome expansion of the Valrox portfolio, fortifying behind the Valrox portfolio as well as just general scientific knowledge that's informative of optimizing patient use.

In terms of dialogue with the FDA, as you get the Phase III, have they left the door open to approach before the 2-year data is available or...

A little early.

Early. Was the supply in the Phase III trial the same as the commercial supply? If not, were there any changes in them?

No further changes. No. No further changes.

Got it. All right. So maybe on vosoritide, almost kind of a similar line of questioning around, well, what is 2 years or 3 years get you that, that 1 year might not get you? And maybe you can talk about how you're able to address the questions that the FDA might have around durability?

Yes, I'm glad you asked. I mean there's a substance to that conversation, and there's maybe a little bit of context about that conversation. And if you don't mind, I want to address the context of the conversation first. And it's actually especially important because I was just reading your note about our relationship with the FDA post Brineura, wondering if the agency thinks of us as a corner cutting agency. And I think that's -- I think about that a lot. Like, Josh, and make sure I think about that. And as I look back -- when we -- when I joined the company 10-year-plus years ago, the largest study that we've ever done was a 39-patient study for the approval of Naglazyme. So the first NPS study that we did when I arrived was a study of 176 patients with 2 active dose groups. And then the Palynziq application -- well, the Brineura application, the families asked us to go as fast as we possibly could. And I think, years later, we're really glad that we did because the treatment benefit there is really pretty substantial and holding up, a condition of dementing illness of childhood, in which children are dead in early childhood. So -- but back to the theme of being conservative, when we submitted the Palynziq application, you had 800 patient years' worth of data, it's a huge data set for working condition. And the sort of ROCTAVIAN, as we launched a 134 patient, fairly -- largest gene therapy study ever. So we've been on a trajectory to try to be increasingly more conservative and try to meet the agency at every specific turn of the road. The early application for ROCTAVIAN was -- it was a well worth it effort, especially in the context of the agency issued a guidance document that articulated criteria for registration, all of which we met. But nonetheless, we have the main plan still in place, which is the 134 patient study that we just talked about. So now when you come to vosoritide, there, again, I think we've tried to be as conservative as we could possibly be, and there's a judgment call about how long of a study you can and should do. So now getting into more of the substance of your question, the subject really is durability treatment benefit. And the reason it comes up for this division of the FDA in particular is because they have a lot of familiarity with growth hormone. And growth hormone for non-growth hormone disorders, idiopathic short stature, SHOX, Turner's, is fairly well described to have an initial effect of sort of catch up growth, followed by a waned -- substantially waned effect. And so the agency has always been very keen to ensure that families understand what the real benefit, not just the 1-year benefit, but a more sustained benefit is going to be. And so they bring that same curiosity for the vosoritide situation. They brought this issue for a discussion. They brought the whole question of the optimal development to a pediatric and endocrine advisory committee in 2018. That was sort of an unusual move for the FDA to bring -- setup an advisory committee well before an application is on file. And at that committee meeting, we checked all the boxes. And the 1 box that isn't pristinely checked is they asked the committee to discuss 2 years versus 1 year of durability. What do you get with 2 years of study versus 1 year of study. And their answer to that question is -- some is -- more is always better. But -- and the agency's own emphasis presented, there are ethical considerations with the duration of placebo. And this was a public discussion. It wasn't a BioMarin-specific discussion. The other side of the coin that was raised by the committee was, think about the biology. And so Dave Cooke from Hopkins, who I think is a pediatric endocrinologist, gave a very thoughtful perspective on this, said, I think we can think about durability being addressed by a 2-year study versus a 1-year study. Doesn't fully address all of our -- the real long-term durability questions, but I think the issue of is it still working can be addressed on the basis of preclinical data, biomarker data in humans, long-term evidence of effectiveness, even from open label studies. We reviewed all of that with the agency prior to the filing decision at a pre-NDA meeting. And I think they came away fairly impressed that while we didn't exactly hit the 2-year button, we come very close with the totality of evidence. And then the final thing to mention is that the 2-year mark on that 1-year study is coming up imminently. And so if during review, that's of interest, that clinical dose data could be made available. I will also say, by the way, in a larger context, not an issue that's been of predominant focus for the Europeans. So this is a more uniquely American issue.

Got it. I'm surprised that the filing got a standard review. Is that a reflection of the agency's not seeing this as an important unmet need or a modest clinical benefit from vosoritide or something else?

Degree of morbidity of the underlying condition in the population that's being addressed. I think if we were addressing the 0 to 5-year-old population, it might have been a different story, but because of the circumstance of development, we had to develop it in older children first.

Got it. I think we're at the end of the time. So thank you so much for that.

Sure thing. Good to see you, Josh. Take care.