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

Good afternoon and welcome once again to Cowen and Company's 41st Annual Healthcare Conference. Hopefully, our only virtual edition. I am Phil Nadeau, a biotech analyst here at Cowen. And it's my pleasure to moderate a fireside chat with BioMarin Pharmaceutical. Those of you who follow our research know that we've been fans of this business model for quite some time. So we're happy to have with us today, J.J. Bienaime, Chairman and CEO; as well as Brian Mueller, Chief Financial Officer.

J.J., maybe we'll start with you. Could you give a brief state of the company overview, biggest strengths, biggest challenges? And what has to happen to create shareholder value over the next year or 2?

Thank you, Phil. Thank you all for listening in today. Actually Phil, as I told you earlier, the last time I saw you in person was at your conference last year in Boston, which is the last conference I attended in person until today. So it's nice to see you on video today. So as you know, we reported Q4 and the full year 2022 results last week, and we were pleased with the strong growth and continued operating excellence that demonstrated the -- we demonstrated during the most challenging months of the global pandemic last year. So on our strengths, we have a solid base business that delivered positive operating cash flow of $85 million for the full year 2020. And it will continue to go on a forward basis. That really speaks to the essential nature of our commercial products, combined with our ability to manage operating expenses effectively. So BioMarin grew -- the revenues grew 13% in 2020 compared to 2019, excluding Kuvan contributions. And in '21 we expect solid growth of our lysosomal storage disease business as well as significant growth of Palynziq, or PKU. In 2021, we anticipate that PKU clinics will begin to open up, enabling new patient starts to gain momentum, as reflected in our anticipated 35% growth of Palynziq revenues in 2021 based on the midpoint of our full year guidance. We now have over 1,000 PKU adults -- patients in the United States that are being treated with Palynziq. And we have a tremendous amount of growth ahead of us given the 30,000 PKU adults in our commercial footprint. We -- continued growth of Palynziq is anticipated and the recent dose escalation in our Phase I/II study of BMN 307, our gene therapy candidate for PKU, we are optimistic that we will continue to grow our PKU franchise significantly over the near and the long term. On our challenges, we believe it's just a matter of time from our next large opportunities to move forward towards approval and commercializations depending on regulatory time lines. As you know, the Phase III results from our latest late-stage development program with vosoritide in achondroplasia and ROCTAVIAN for severe hemophilia demonstrated significant efficacy. We await U.S. and EU regulatory opinions for vosoritide this year, and we plan to -- for -- filing for ROCTAVIAN's also this year in the U.S. and in Europe. We believe it is a matter of when and not if, in our view, based on the clinical benefits demonstrated with these 2 highly innovative products as to when they will be approved. That presents a near-term timing challenge, but we are hopeful that things will look very different in 2022 once we have moved beyond the review processes. So regarding your question about our performance in the next 12 to 24 months -- will result -- they will result from the continued investment of the business across all components, financial, late-stage regulatory and early-stage pipeline development. We already discussed the financials, where we expect 9% top line growth, excluding contribution from Kuvan as well as positive operating cash flows for the first -- for the full year in 2021. So we touched on the regulatory catalysts for vosoritide and ROCTAVIAN already. On the early-stage pipeline, that includes: BMN 307, gene therapy for PKU; BMN 331, gene therapy for hereditary angioedema; DiNA-001, our collaboration with DiNAQOR for hypertrophic cardiomyopathy cardiomyopathies; and BMN 255, our small molecule for a chronic renal disease that we will disclose in the future. And we already have an active IND. It was approved late last year. We also have our DMD 2.0 project, BMN 351, our oligonucleotide that will move to the next level of development, in addition to our ongoing business development efforts. But taken together, we anticipate numerous important milestones this year, which we expect will result in pipeline investments and reaccelerate our revenue growth and earnings growth in 2022. So we'll turn it back to you, Phil, for questions.

And that's a great overview. Maybe turning to one of your key growth drivers, ROCTAVIAN. The 12-month data that you released earlier this year were quite impressive. For those less familiar, could you maybe review the highlights of those results?

Yes. Thank you, Phil. So compared to before treatment with ROCTAVIAN, before gene therapy, there was an 84% reduction in annualized bleeding rates from a baseline of 4.8 bleeding rates per year while the patients were standard of care with prophylactic Factor VIII therapy. So we didn't -- this drop was not as compared to placebo. It was compared to standard of care. So the patients went from 4.8 bleeds per year when they were on Factor VIII replacement to 0.8 bleeds per year after receiving ROCTAVIAN. So we showed dramatic p-values and superiority in this respect over standard of care. We saw a mean reduction in annualized Factor VIII infusions of 99% from 130 infusions to 2 infusions per year after treatment with ROCTAVIAN and median Factor VIII expression levels of 43 international units per deciliter at 1 year. So these results are obviously very encouraging, and they are dramatic for the people that participated in our clinical trials.

On your recent earnings call, you noted that the FDA has reviewed the Phase III data and reiterated its position. It still wants 24-month results prior to approval. Could you give us some color on maybe why the FDA insists on the 24-month data? And what is your strategy for refiling those results?

So as a reminder, the FDA actually requested the 2 years of data prior to seeing the 2-year data from the 17 patients that we recently shared with you. So we've had ongoing discussions with CBER, which is the Center for Biologics Evaluation and Research, which is reviewing our product. We've had discussion with the CBER leadership and the review division since the release of the Phase III ROCTAVIAN results. And in any case, the 2 year, that will be an element of the review, given the timing of the 2-year completion in November of this year. So the discussion is really about whether the review can start earlier than the 2-year mark. So we hope to engage the agency in discussions to align on our next step towards approval. For planning purposes, we continue to believe that the 2-year data will hit the mark and propel availability of ROCTAVIAN on the market, and we continue to presume as a base case that 24 months of data will be needed for approval. As we said in the Q4 call last week, we hope to engage the agency in a conversation about potentially submitting with 1-year data sometime this year and supplementing it with the 2-year results during the review, but that has yet to be vetted or agreed upon from anybody at FDA.

And in terms of Europe, what are the time lines there? And can you also discuss what part the 2-year data will play in the European filing?

So in Europe, we continue to plan on the second quarter of this year for resubmission, so next quarter, of the marketing applications, pending confirmation that we can do that in an upcoming presubmission meeting that we will have the -- with the European agency obviously, before the end of next quarter. So under this timing, we could potentially receive a CHMP opinion with -- in the first half of next year. And we are encouraged that the application review will be in progress as the 2-year data becomes available. We'll have the 2-year top line data in early next year as we did 1 year earlier this year. And we are prepared to share this data if it would be beneficial to supplement to the package that the European will start reviewing sometime this year. But given procedural consideration, it's likely that ROCTAVIAN will be approved after -- because of the timing of the review in Europe, it's likely that ROCTAVIAN will be approved after the second year of data -- when the second year data is available for the Phase III as discussed in very early next year. And therefore, our intention is to shorten the interval between the data availability and the regulatory action as much as possible.

What are your most recent thoughts on the value that ROCTAVIAN conveys? And how does that dovetail into pricing? And maybe more specifically, what role does the durability of the effect play in how you decide on how to price this?

So Brian, do you want to answer that question?

Yes, sure. Thanks. So importantly, the bleeding control that we've already shown in this large study now -- largest gene therapy study done, 134 patients at 1 year. And just a reminder, last year, we reported 4 years of data under the Phase II study where bleeding is still under control. And so while durability is still a question to be answered, we have seen that. We've been able to sustain the effect. Even in the Phase III study, we've got 17 patients that have reached 2 years of data with a similar effect. And so when we've had conversations with the marketplace and what uptake might look like with a new technology like this, a new therapy, there's going to be early adopters, and then there's going to be some folks who are going to be wait and see for more data, longer data. But what's interesting there is, even for those wait-and-see folks, we're always going to have more data than the competition and the larger data set to be able to watch. So whether there's an early adopter or a wait-and-see person, we think that ROCTAVIAN is going to provide the data over time that's going to enable those types of decisions. And another thing we think about with respect to durability, again, if the product does end up waning over time and you have to think about what type of person or when one might take ROCTAVIAN to get an effect for, let's just say, a few years, there's still a wide range of market potential there. I know out of some of the key opinion leader discussions that Hank Fuchs, our President of R&D, has shared with us, that some of the key opinion leaders expressed anecdotes of a family that has their son whose joints are "perfect" because they really managed his hemophilia A through his teen years and as a child very closely. But now that child is going off to college and the lacking effect or the remaining unmet needs of prophylactic Factor VIII could be achieved with ROCTAVIAN. And so going off to college could be one example. And then there's another anecdote of an older gentleman who lived with hemophilia A his entire life and says, "I want something different. I want to feel what it's like to not revolve my life around my hemophilia." So there's a wide range of potential market opportunities, and generating more data, longer data is the track that we're on.

I mean to more directly answer your question, Phil, regarding the pricing, so based again on the data we have so far, including the Phase II 4-year data out of high dose and 3-year data out of low dose that showed dramatic bleeding control, with ABR at 1 or under 1 in the Phase II trials -- well, actually, in the Phase II low dose of Factor VIII levels at 3 years were lower or significantly lower than where we are right now in the Phase III with the patients that reached 3 years. So our anticipated pricing is consistent with our prior guidance, in the range of $2 million to $3 million in the U.S.

Sorry, I meant to come back to that. Thanks, J.J.

I'm sorry, Brian.

And then the other factor there is the ICER study that was released last year, which -- this was based on the data that was just available at the time. This was even before our Phase III data, but that ICER study supported pricing in the $2.5 million range.

That's very helpful. As we start to think forward to that launch, what impediments to the launch does BioMarin perceive? In particular, do you think reimbursement is going to be limiting? And is there any way you can work with payers in order to license you to ensure access?

So we don't anticipate significant impediments based on our payer research, which was done -- a lot of it was done actually before the Phase III results, the 1-year Phase III results, and we are implementing some additional research right now. And that's related to the fact that the Phase III bleeding control data is very consistent with the Phase I/II data. Payers are aware of the costs associated with the lifetime of replacement factor, the bleeding events that are treated in the emergency room. The cost of bleeding -- of treating 1 bleeding event, on average, is about $150,000. So meaning bleeding events has a lot of economic value. The cost of joint replacement surgeries, which all those patients unfortunately have to undergo. So -- and as Brian said, ICER issued a report last year. That was before, actually, the Phase III data was available, that concluded that ROCTAVIAN will be cost effective at $2.5 million per treatment. And that was again before the very positive Phase III data. So while we cannot formally engage with payers -- in payers' discussions until ROCTAVIAN is approved, we have gotten feedback again that the risk/benefit profile of ROCTAVIAN is very compelling to payers at this time.

Great. With that, we'll move on to the next growth driver that I mentioned, vosoritide. Congratulations on the positive Phase III extension study results released earlier this year. What are your perspectives on the magnitude of increasing growth velocity that was shown? Do you think that's sufficient to drive utilization of vosoritide?

Yes. We absolutely think so for several reasons. First of all, again, now we showed in a Phase III randomized trial that the cumulative increase in height gain over the 2 years of treatment period was 3.52 centimeters over 2 years, about 1.7 centimeters per year compared to untreated children. So -- and that's the sum of the first 2 years, 1.73 centimeters in the first year and 1.79 centimeters in the second year. So -- and in part in consideration in the growth studies is the status of the bone growth as -- which is measured radiographically and in comparison to the subject's chronological age. And that's very important. There are some agents that have been used before or that are used in other indications like growth hormone, they promote very rapid growth that precipitates and thus demonstrate early closure of the growth plates. So it [ precludes ] gain from adding up over time. In contrast with vosoritide, measures of bone maturation in patients treated with vosoritide confirm that vosoritide is promoting bone growth while maintaining and not [ considering ] maturity. And that's the extremely important points for long term -- the long-term benefit of vosoritide. So this bodes well for accumulating treatment gains over time as growth plates are not expected to close prematurely. So vosoritide is working at the rate that will be the most optimal for children without rapidly overgrowing their bones. So if you look at -- even assuming that the effect is linear over time, like -- and actually, it's not. It's probably going to be more effective in the first 5 years of life. If you take 1.7 centimeters times 15 years of treatment, those patients are treated -- are diagnosed before birth. So they could be treated for about 15 years, and we have -- we just concluded the enrollment in the trial of patients as early as -- basically treated as early as a few weeks after birth. So 1.7 centimeters over 15 years is 25 centimeters. And I think the benefit is likely to be greater than that. And this -- because, again, this data is based on children treated over only 5 years. So 25 centimeters will be dramatic for those patients. It's a little less than a foot. And so we basically bring the kids back to a normal growth curve, which is the best we want to do and the best we can expect. And just want to highlight again that the median age in the Phase III study was approximately 9 years, which is relative to the general population's about 15 centimeters of height position that is lost during the -- only the first 2 years of life and almost 23 centimeters lost during the first 5 years of life. But again, so far, we don't have any data in the [ patients under 5. ] We just completed enrollment, but we will have that data in about a year or so, which we believe, hopefully, will show a dramatic improvement in those patients. Actually for boys, which is more dramatic than girls, there is a 33% total height deficit at adulthood that occurs during the first 2 years of life and about 51% in their first 5 years of life. So the ongoing study is evaluating vosoritide in infants and children that we just -- which at the moment, again, we announced was completed yesterday, is very, very important. And finally we now have evidence of increase in final adult heights based on the patients that we treated in our Phase II trial. There are some of them who are reaching or close to final adult height as compared to age match historical controls, and that is data we will be presenting in the coming weeks and months in scientific meeting, and that is very exciting.

On your earnings call, you disclosed that you're going to file with the extension data -- or filed the extension data to the FDA. Can you discuss why are you going to do that? And what is the likely impact on your PDUFA?

Yes. So again, we have chosen to provide the 3-year data, Phase III data to the FDA given the durability of treatment benefit in larger number of patients and the fact that they are -- made noises that they would be interested in seeing that kind of data. So we believe that data is compelling. With this, we -- as we announced in our earnings call, this may result in a major amendment, pushing the current PDUFA action date 3 months to late November of this year in the U.S. But we will proactively make this new data available regardless of the potential delay in approval of timing -- in the approval timing, sorry.

Can you discuss your strategy for satisfying the FDA's request for 2-year placebo-controlled results in addition to the extension data? How else do you answer the FDA's questions about durability of benefit?

Yes. Again, so we're hopeful that our large 4-pronged development database, which includes 2 years from our Phase III study, which excludes the Phase II trial out of -- out to over 54 months now; the natural history that we have analyzed over 600 patients; and the now completed 0- to 5-year-old study will demonstrate the durability of effect. And the fact that we're demonstrating that there is no impact on -- and no acceleration of bone maturity, all these data combined will -- we believe the weight of the evidence will be clear that vosoritide is effective in this patient population.

On the earnings call, you've had some interesting figures on the patient population, the size of it, the geographic distribution and how motivated the patients are. Could you maybe recap those? What's BioMarin's most recent understanding of the patient population? Who could be appropriate for therapy?

Yes. So before -- I'm going to let Brian answer that question. But if you go back, to complete actually my answer to your previous questions, so I would say, the FDA's 2 years randomized data wish has not been literally met here. We know that there is consistent treatment effect across the Phase II and the Phase III, that there are ethical considerations in implementing a randomized, placebo-controlled Phase II trial with daily subcutaneous injections in children. And the fact that now we are fully enrolled, again, placebo-controlled, randomized Phase II study in 70 infants between the age -- or young patients between the age of 0 and 5 years of age and also the distinction between vosoritide, which addresses the underlying cause of achondroplasia versus growth hormone, which accelerates bone maturity, that could push definitely vosoritide over the line. So Brian, do you want to talk about the market opportunity and maybe the pricing anticipated per year?

Yes, sure. Yes. Thanks, J.J. So firstly to note, especially compared to the ultra-orphan rare diseases that BioMarin grew up upon, and we've got roughly $1.8 billion of revenues on that base business, achondroplasia and vosoritide represent a significantly larger patient population, roughly 22,000 patients in our commercial territories, which is vastly larger than our existing product portfolio. And then you get down to -- and those are -- those would be treatable patients, so under -- youths under the -- as teenagers are below -- where their growth plates are still open would be -- and treating early is another key. So much larger patient population. Also important is the diagnosis for achondroplasia often happens much earlier in age and often in utero, which, again, is different from how we created the market for -- just to use the MPS franchise as an example, we spent most of our sales and marketing efforts through the launches of Vimizim and Naglazyme doing disease education and patient identification. With vosoritide, we should get that patient identification much earlier. So those are just a couple of ways to think about the market dynamics. One of the things we're working on in terms of market preparation is establishing a medical home. Achondroplasia patients are often seen by a variety of physicians, whether it be geneticists. We think ped endocrinologists would be the appropriate medical home. So we're working on that as part of our premarket preparations. So that's a few attributes of the way to think about the market and the launch. And then on pricing, we said that we believe we can price vosoritide similar to the price of a U.S. Kuvan adult, so that's roughly $175,000 to $200,000.

Yes.

Think about it that way.

Right. That's very helpful. Maybe one last pipeline question. On PKU gene therapy, when could you release the first data publicly from BMN 307? And I guess the question that we've been getting consistently since your earnings report is what did you mean when you said on the earnings call you hope for a steep dose response in the second dose...

Yes. So again, we treated 2 patients already. We have definitely observed a significant pharmacodynamic effect. So there is -- there was a drop in Phe levels for those 2 patients, which -- who are classic PKU patients that had blood Phe levels at baseline over 1,200 micromolar. And also we treated them -- we treated those patients at the 2e13 dose. That was the plan we had from the beginning. And then we always planned that if we didn't -- because our objective here is Phe normalizations, to get the Phe level to normal levels in those patients. And obviously, actually, we were not even -- we're not hoping to see actually that much of an effect with that first dose, but we did, which is good. But based on our ROCTAVIAN experience, when we went from 2e13 -- remember, we went 2e, 6e and we did 4e so -- because we thought actually 6e was too, I don't know -- if you go back 4, 5 years on ROCTAVIAN, when we went from 2e to 6e, I mean, you might remember that the Factor VIII levels went up through the roof. And people are getting concerned that it would be [ for the body, bad. ] So we actually tested the 4e, that's why we did a mid-dose, a 4e dose, remember, in the Phase II? And because, again, there was a huge acceleration of pharmacodynamic effect between the Phase II -- between the 2e13 and 6e13 dose. So here, we anticipate, based on our animal models and based on what we saw with ROCTAVIAN, that indeed -- that we have a good chance of hitting our target, which is normalization of Phe levels in those patients with the 6e dose. So we should have the data. We're going to treat the patients probably in the next month or 2. So hopefully, we'll have some data we can communicate in, like, Q3. It's hard to tell right now. But again, with COVID-19, it's not always [ CD2 case speeches, sorry. ] So I got to be careful.

In the last couple minutes, maybe we'll talk about some financial questions. First, on the base enzyme business. Your 2021 revenue guidance projects revenue just below 2020. What are the key drivers of that revenue, the key risks? And maybe in particular, what does the guidance assume about the duration of COVID?

Brian, you want to take that one?

Yes. Thanks, Phil. Great question. So most importantly, when you think about 2021 revenues, especially compared to 2020, are -- the couple of big headwinds that we're facing, one, of course, was expected with Kuvan loss of exclusivity in the U.S. That was in October of 2020. So our Q4 Kuvan results reflect the initial effects of the generic competition. We do expect the effect to be significant, and this is included in our 2021 Kuvan guidance. There's not many great analogues for an orphan disease product distributed in the same fashion that Kuvan is distributed to have a generic competition. But we did our best to look at the analogues that were there as well as our own anti-generic competitive strategies that we're not going to share details of, but we'll hold the line best we can there. But it is a significant decrease year-over-year, especially looking back at the growth that Kuvan enjoyed over the years. And then, of course, the other headwind is COVID. We adjusted our guidance over the course of 2020 by just about 5% at the top line for the COVID impact, and we're able to meet that through the end of 2020. We're expecting a similar impact in 2021. The one difference in terms of how we're viewing COVID is we recognize that we're experiencing the effects of COVID now. And while we might be optimistic about herd immunity or the vaccine rollout, we don't want to assume a rapid recovery or rebound from COVID and this significant return to normal quickly. So we've assumed in our guidance consistent levels of demand, both weekly infusions for the enzyme replacement therapy business and this consistent level of new patient starts that we experienced last year through the end of this -- through the end of 2020 into '21. So -- and we are still adding patients. So back to the beginning of your question, those are the 2 headwinds. The base business is still growing. Naglazyme revenues are largely flat, but we added 5% more commercial Naglazyme patients in 2020, so in a COVID world, with that drug being in its 15th year on the market. Vimizim patients, we added 9% new commercial Vimizim patients in 2020, again, in a COVID world, it's 7th year on the market. So the base business is still growing healthily. Palynziq is still launching in Europe, again, impacted by COVID, but if the pandemic does subside a bit and PKU clinics particularly open up and we can start adding PKU patients at a higher rate, we'd be optimistic about 2021.

Maybe last question is just on business development. You've had a productive business development effort in the past. What's your current strategy? What types of partnerships or acquisitions would you be interested in? And how much capacity do you have to do?

So I mean, again, actually, last year, we signed more early-stage deals than ever in the history of the company. We signed 10 deals. Some of them we communicated, some of them, we actually kept to ourselves all this time. So we've been very active, and we believe that the best way to generate shareholder value is actually early-stage deals that you grow and move into the clinic, and we will continue to do that. So that's going to be still our focus. Actually, we start generating some significant cash flow, hopefully, starting, let's say, late '22, [ early ] '23 with ROCTAVIAN and vosoritide revenues, then we can look at potentially larger transactions, but that's not in the works at this time.

Well, that's perfect. It looks like we are out of time. So I'd like to thank Brian and J.J. for a very interesting discussion and thank everyone who's watching online.

Thank you for having us, Phil. Take care.

Thanks, Phil.

Great to see you, guys.