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

Okay. Welcome to the afternoon sessions of the Virtual Vegas BofA Global Healthcare Conference. My name is Geoff Meacham. I'm the senior biopharma analyst here at BofA. Aspen Mori from my team is with me as well. And we're thrilled to have BioMarin with us. And speaking on behalf of BioMarin, we have CEO, J.J. Bienaime; and also CFO, Brian Mueller. Welcome, guys.

Geoff, thanks for having us.

Hi, Geoff.

Rather be in actual Vegas but we'll make this work. So we'll do some questions. But J.J., you want to kick it off with just a couple of high-level takeaways, and then we can get right into it.

Yes. Yes. Yes, okay. Thank you, Geoff. So we appreciate the opportunity to participate in your virtual health care conference here. As you say, we like the real Vegas better than the virtual, but it's better than nothing. So I would say that despite some headwinds of the ongoing COVID impact outside the U.S., we announced a very strong start to 2021 on our recent Q1 call, and we reaffirmed our full year 2021 financial guidance. We see that with the base business providing solid and predictable revenue, we turn the focus to our next potential commercial product VOXZOGO for the treatment of children with achondroplasia. This will be our biggest opportunity to date in the history of the company based on the market opportunity of 11,000 patients, eligible patients in Europe, Middle East, Africa and roughly 3,100 patients eligible in the U.S. It's a total of 14,000 patients with achondroplasia who could be receiving VOXZOGO in the future. Released label finished goods are expected to be available in key markets, including Germany, France, Italy and the U.S. and ready to ship to customer within 6 to 8 weeks of an approval, with potential European approval this summer, assuming a positive CHMP opinion. By the way, the EMA always follow a positive CHMP opinion from the -- in Europe with an approval 6 weeks to 2 months later. And then in the U.S., we now have, because of the major amendment with the 2-year data, we have a November 20 of this year PDUFA action date. So the commercial team is answers to -- for the goal time with VOXZOGO. The combined EMA and U.S. regions represents well over $1 billion opportunity, probably close to $2 billion. So excitement is building as we approach these key readouts. With ROCTAVIAN on the Q1 call, we turned our alignment with the FDA on providing complete 2-year data from our largest Phase III study, our large Phase III study with ROCTAVIAN in our BLA submission in the second quarter of next year. In Europe, the EMA is satisfied using the 1-year data from the basis of our filing, and we are looking forward to the submission of the MAA next month in June. We also look forward to sharing the 5-year results from our Phase II study with a high dose and 4-year results with a low dose in the next few weeks, which is going to be another important milestone. I will say that today, the B control demonstrated across all of our studies has been very consistent with an average of less than one bleed per year following an administration of ROCTAVIAN. And in our most recent update from the Phase III study, we observed a 98% reduction in Factor VIII usage, which is an impressive result when you consider the average Factor VIII usage of standard of care was 135 infusions per year. Also we have -- so we are really excited about the filing in Europe and the potential approval in Q2 or middle of next year. So we have definitely demonstrated dramatic benefits for those receiving ROCTAVIAN gene therapy. When you consider the cost savings that are associated with the significant reduction of Factor VIII usage following ROCTAVIAN treatment and put in perspective -- and to put into perspective the tremendous costs associated with chronic Hemlibra usage. We recently learned from some external research based on hundreds of claims of patients taking Hemlibra in the U.S. that's 60% of people who use Hemlibra for the full year in 2020. We're also continuing to use Factor VIII replacement, highlighting the ongoing infusion burden with Hemlibra and a meaningful freedom from constant infusion that ROCTAVIAN potentially represents and the very large cost savings for health care insurance companies. So needless to say that we are robust with our robust development program unmatched by any other gene therapy under development. We are going to implement the largest gene therapy trial ever done. We -- our enthusiasm and belief in ROCTAVIAN only strengthened with each milestone. Hemlibra has demonstrated that the hemophilia community is open to switching treatment options when a product offers benefits beyond standard of care. Hemlibra has been an important primer of the potential introduction of ROCTAVIAN as the next-generation treatment for people with severe hemophilia A who want to be unburdened from chronic injections and also Factor VIII usage. So we have more to talk about, Geoff, but those are the highlights from our near-term opportunities. So I will turn this back to you for questions.

Yes. Perfect. Perfect. Well, let's keep it big picture. When you think about the overall impact from COVID, as you mentioned, J.J., we're starting to see some countries start to get back to normal, maybe slowly, but surely. Where are we in that cycle outside the U.S.? And then what are some of the best practices, either commercial or manufacturing, et cetera, that you could retain even post pandemic that are -- that could be helpful down the road from a business strategy perspective?

Yes. So I mean, we have a pretty good handle on where the challenges are in the different regions around the world. As you know, we do business in over 70 countries around the world and even order patterns, meaning Latin America regions, for example, is something that we have observed over many, many years, and we are used to it. The increase in the number of PKU clinics that are open for business in the regions that are hard-hit by the global pandemic will result in an upside, but it's still difficult to predict the [ degrees ] the clinics will open. Most of the U.S. clinics are now open, but many of them don't run full blast yet, probably some of them are 50%. But we see a steady improvements in the number of clinics that are operational and more operational in U.S., Europe, as you know, has been -- Continental Europe has been lagging behind the U.S. in terms of vaccinations. They are catching up and things are starting to open in Germany and France, actually like this week. So we want to be careful again about our forecast for this year because of still some uncertainty in some European countries and in Latin America about the COVID impact. But I would say, the use of -- clearly, what COVID-19 is doing is have been forcing us and other biopharmaceutical companies who use time medicine as an option that it is likely here to stay as well as accelerated the move towards home infusions. Most patients in the U.S. were already taking home infusions for enzyme replacement therapy that has a move towards from the hospital to the home has accelerated, thanks to the COVID-19 or because of the COVID-19 pandemic. So -- and also, I just want to highlight that over 60% of our revenues are ex U.S. So we're not like a typical big pharma company that -- which is more than 50% of the revenues are in the U.S. It's the opposite for us. So ex U.S. and dealing with government pricing, government negotiations is something we are very well used to, we have done successfully in the past. So that's kind of my update. Brian, do you have anything to add regarding COVID-19 impact through the balance of the year here or on the financials? You're on mute.

All right. Thanks. Yes. So thanks. That was comprehensive, J.J. Thanks. But yes, a couple of things to add. So on Palynziq and the impact of clinics being closed and then our optimism around how they reopen and when they reopen and we resume normal rates of new Palynziq patient starts. Just a reminder that Palynziq has that dosing induction and titration phase that takes a few months for new Palynziq patients to get to, for BioMarin, normal revenue levels. So that's why we were cautious in our guidance where even if we're able to add patients, it's going to take a few months to get to the meaningful normalized revenue for those patients. But it is good to know that we're hearing anecdotes of the Palynziq interest is still there. So it's just a matter of time until we can get the clinics back open and resume their normal rate from starting patients. And then on the COVID-19 impact and what may last throughout -- or beyond the pandemic, the other thing that comes to mind is the efficiency in the commercial operations. So not just the conversion to telemedicine for our patients and home infusions that J.J. mentioned. But our sales force is be able to reach out and communicate and engage with health care professionals in a much more efficient way than in the past. And so we'd hope to be able to leverage more of that, less plane strains and automobiles and more virtual meetings, virtual conferences as well. So that should last and have some efficiency in the business model.

Got you. That's helpful. Okay. Let's switch gears to ROCTAVIAN. And J.J., it seems like the FDA is pretty steadfast on the 2-year requirement. I mean they -- looking back, haven't been as predictable, but has the EMEA been more predictable? Do you expect any surprises with respect to the review cycle there? Or is there any sort of new information that they're expecting?

Yes. There's no question -- no, the collaboration with EMA has been very positive. We have highly pre -- pre MAA submission meeting with them a few weeks ago. So they are absolutely acceptive of our filing with the 1-year data, which we intend to do next month. They know the 2-year Phase III and the 5-year Phase II data are coming. But they have communicated that the 52-week data from the Phase III is what they need initially to determine clinical benefit. We will have these other data sets, actually the Phase II update is coming in the next few weeks. We'll have obviously the 2-year Phase III data available to EMA before they make a final decision on approval. They will be available early next year. So -- but these are our views is a gating factor for approval.

Got you. Okay.

And we are absolutely -- sorry, so we're absolutely on track to file in Europe next month, in June.

Okay. Okay. Just over the course of the past couple of years, the durability of the benefit has been pretty validating. And I think that's going to set up a very predictable kind of cost benefit. How does that differ kind of between the U.S. and Europe, how they may see the product, a curative intent product? And then, just if there's any new updates from a payer perspective in the U.S. that you guys have gained of late that would be helpful to know?

Yes. Again, before -- as you know, before we even had the 1-year data, out of Phase III 1-year data last summer, I served a PDUFA report whereby they determined that ROCTAVIAN will be cost effective at $2.5 million a year in the U.S. And then they based that on the -- a lot of the Phase II, probably a lot of the Phase II data we had at that time. Now we now see the [ ISA ] report. We now have 1-year data. We're going to have 3-year data before we launch in the U.S. and Europe. In 2 weeks, we're going to have a 5-year update in the high dose. Before we update the [indiscernible] and the phase II. By the time we launch in U.S. and Europe, we're going to have 6 years on the high dose, 5 years on the low dose. And we're going to have 2 years of data on the Phase III. So I would say -- and we have some patients that are ready to be treated in the last summer before we got the CRL from the FDA. So I think based on the marketing research actually the enthusiasm from the patients is only increasing. I just want to remind you that when we gave the 4-year update for the high dose, 3-year update for the low dose, a little less than a year ago. The bleeding control, the annualized bleeding rate at 5 years in the low dose was 0.5 as of [ mid ] at 3 years. And our Factor VIII level so far in the Phase III, the one we observed at 1 year and 18 months -- and 2 years are reading between the high dose and the low dose of the Phase II. So in a sense, the Phase II low dose is kind of the worst-case scenario for durability. And I would say, well we're going to wait 4 years now, we're going to wait 5 years before launch. After that, I would say any additional years become less and less important because we're not going to be able to charge over 4 years of the cost of treatment today with Hemlibra or Factor VIII replacement, which would be over $2 million or $3 million. So the payers are still -- and they understand how much they can save. I told you in my introductory remarks that 60% of Hemlibra patients in the U.S. are still taking Factor VIII. So that's on top of the $700,000 per year of Hemlibra cost in non-inhibitor patients. So you can imagine how much can be saved here with ROCTAVIAN, when you go from [ 13 ] being episodes of standard of care a year to 0.5%.

I have a follow-up on that actually. So those patients that are still stuck on using Factor VIII on top of Hemlibra. Is that prophylactic on top of Hemlibra or is that...

No. We don't know what -- this is based on claims analysis of hundreds of patients that are -- have been treated with Hemlibra last year. This is recent data. So this is hard data. This is not based on asking patients. So we're going to do some additional research to find out was going on, but 60% of Hemlibra patients last year in the U.S. that were in the database in terms of clarity and at least one prescription of Factor VIII, some of them 2, 3, 4, 5.

Okay. Got it. And then I think on the earnings call, you mentioned that you didn't think that a lot of different buyers of ROCTAVIAN would be necessarily looking at a multiple payment kind of model. I guess what's your latest thinking there? Is it most likely going to be one and done? Or how are you thinking about it?

As soon as this become an issue, we would be offering. We would be offering pay everything upfront, and we'll sell for the insurance companies in the U.S. and in Europe, the governments that will be interested, we will be offering outcome-based agreements that will be basically based on pay for performance. We absolutely are willing to do it. We stand behind it. If you have less than a bleed per year as compared to 14 bleed per years for most patients. For us, the value of offering output-based agreement is pretty high.

Maybe just to add a couple of things, if I may. I'll just add on the payment model. We were prepared to be flexible with respect to the payment models as well. And that would include a pay-over-time or upfront. This is back before the complete response letter, of course. But when we had payer discussions, whether it be U.S. or Europe, there was more interest in the pay upfront. It's just more simple. And if that came with an outcomes-based agreement, that would give the payers some protection on -- against the durability of the product. And anecdotally, I'll just share that If you recall when Zolgensma launched -- part of their launch press release was a partnership with the specialty pharmacy, which was going to offer a pay-over-time model. We understand that there hasn't been a lot of uptake or interest on that model. So that sort of validates what we were hearing in our research.

Yes. Just a quick follow-up to that. When you think about the potential for retreatment, is there any R&D effort, J.J., to explore this using a different viral system or infection or expression system? Just trying to think down the road if there is a retreatment cycle here 5, 7 years from now?

Yes. No, no, we are actually looking into that. We have early stage research going on. But at the same time, and so we try to actually better understand what is the biological reasons why some patients are not responding, which by the way, is a small minority of that, less than 10%. And also we try -- because we try to understand why because those patients that, depending on what is the reason and the retreatment might not make any difference. Maybe those patients will be refractory to any kind of gene therapy for whatever reason. So is that under your question of coming up with a different vector that will allow these patients to respond to gene therapy. We are doing a lot of exploratory work to find out what is the reason why these patients are not responding. Also, by the way, this also depends on how you define response. Because even our patients who didn't respond very well to ROCTAVIAN, most of them -- see, very few of them less than 5% of them. There are some of them back to prophylactic therapy. They are back to prophylactic therapy with a regimen that's much more, much lighter than the one they had before. So this is already a benefit also you can have even for those patients, even if they need to go back to a Factor VIII therapy. And that's a very small minority of them so far.

One more follow-up for me on the payment model. So if you look at a value-based arrangement for ROCTAVIAN, I guess what does that look like to the extent that you've kind of done the research for that? Is that -- if a patient has 0 or less than 2 bleeds 3 years from now, then it's -- they've hit the mark for the value-based arrangement? Or maybe just walk us through how you're thinking about...

No, when we announce the price and the approval, everything, we'll give you a lot more details about this. But it's something similar to what you were discussing. Because by then, we're going to have data on 130 -- I mean between Phase III and Phase II, we're going to have 150 patients, historical data. So we can be able to do some kind of actuarial analysis to determine how many of them will come back to prophylactic therapy. And as I said, some of them will come back with much lower level than where they were before. So we can enter all this in the pharmacoeconomic calculations to determine the formula for the [indiscernible].

The same types of questions that we talked about for ROCTAVIAN, some of them apply to vosoritide. I wanted to ask you, J.J., maybe at a higher level. Should we think about this product more in line with one of your traditional ERT type of therapies? And from a pricing standpoint, maybe just remind us how the -- sort of the bookends of how we should think about that. Obviously, there is an unmet need. There's a huge audience. So maybe the trajectory of the launch could look different versus prior history.

So again, I want to say, so we are in advanced enabling discussion with the European authorities on VOXZOGO approval, yes. So we shouldn't say we should -- we're anticipating a positive opinion next month. So it's really around the corner. The -- in terms of the pricing, we say this is going to be -- so it's chronic therapy, but it's not chronic therapy for life. For the patients who wants their growth plate fuses or closes, they won't be eligible for therapy anymore so likely to be therapy for the maximum of up to 18 years of age. So -- and if you look again at the patient populations in Europe, Middle East, Africa and the U.S. with that, this eligibility criteria is over 14,000 patients. So it's a pretty significant market. We are thinking about in terms of pricing, again, it's chronic therapy for now 15, 18 years, whatever, between $150,000 and $200,000 a year. That's kind of the price range that you can use for your model. So if you do the math on 14,000 patients, that's a $2 billion large market. So it's a pretty large market. No approved therapy today. We'll be the only approved therapy for many years to come at least 5 years, maybe 6, maybe more because of what happened to our future competitors. In terms of your question in terms of penetration, I mean, the ramp of the launch. The good news here is that these patients, as compared to our enzyme business, these patients are diagnosed before birth, who is ultrasound. So the parents know because -- by the way the parents will be making the treatment decision, not the kids with achondroplasia. The parents are very aware that they have an achondroplastic kid. So that's very good in terms of acceleration of the launch. However, we want the others to know that these patients today, they don't -- they're not treated with one specific specialty. Some of them are treated by pediatricians, some of them by orthopedic surgeons, some of them by pediatric endocrinologist. So our goal right now, we started our sales organization is trying to connect the patients with the appropriate doctors, try and make a home for the patients so that -- and the drug so that once VOXZOGO is approved, they can get prescribed with VOXZOGO. And we believe that the probably the most likely dominant specialty that will be using VOXZOGO based on marketing research is going to be pediatric endocrinologists. These are very well used to actually using pharmacotherapy for patients with those disorders today because they are the main prescribers of VOXZOGO. These are the docs that we're going to connect the patients to if they are not already connected to them. So that will take a long time.

J.J., did FDA provide any other feedback? Was there any other notes that they, when they officially accepted that or I guess, issued that 3-month extension to the review?

No. I mean, the only thing -- well, that was our decision to submit the 2-year data. They didn't request it. We decided to do it because we believed we could make our case stronger and also be better to have that in the labeling for reimbursements and all that kind of stuff and commercial success. No, no, actually, when we say we would be filing the 2-year there, we told you have -- I mean it was very likely that would be a 90-day delay because it's a major amendment. Obviously, it was more than a 2-page report. The good news is that they're actively reviewing the 2-year data based on the questions that are [ asked U.S. ], so the U.S. then -- so again, so Europe approval anticipated this summer and U.S. at the end of the year, the new PDUFA date is on November 20.

Okay. And then for the young -- sorry, for the younger children population, I guess is that learning of the FDA preference for 2 years, is that kind of change the way you're thinking about the development of that program? Is it an eventual Phase III...

That's an interesting question. I don't think so. This is more of an extension of the label because I think with over 5, we have already, we believe, demonstrated a long durability between not only the 2-year data for the Phase III, but also the 5-year data for the Phase II. And we have radiographic evidence that there is continued growth, annual data, biomarkers. So no, so the under 5 years of age study, which would have the top line data out probably in March of next year. It's mainly for a label extension under 5 years of age. We already have some safety data for those patients showing that [ approximately ] safety in this patient population. But the first evidence of efficacy will be in Q1 or Q2 of next year. Yes. By the way, that study, by the way, is a randomized placebo-controlled trial in 3 cohorts, 2- to 5-year old, 6 months to 2 years and under 6 months [ of age ].

All right. So beyond ROCTAVIAN and vosoritide, I wanted to ask you, Brian, if you think about the M&A and kind of the sort of track record of BioMarin, I guess, it's been mostly on earlier stage. Is that still the case? And then when you ultimately do have VOXZOGO and ROCTAVIAN approved, is there the capacity or the potential to do bigger scale type of transactions for you or for J.J.?

Yes. It's great. Thanks, Geoff. Great question. And yes, I think that's right in the near term. Our focus or priority would be earlier stage. And that's because with ROCTAVIAN and VOXZOGO being relatively near term and with such large market potential, we don't feel the obligation to buy near-term revenues. And on top of that, it would be very expensive to explore those type of assets. And importantly, we've had really good success in developing value from early-stage licensing. ROCTAVIAN is an example of that. We announced just a few of our early-stage in-licenses recently last year. But we actually did 6 deals and brought in over 10 assets in 2020. And so those are hopefully the future INDs and early-stage clinical programs for the company, which should fuel a robust pipeline. And then to the second part of your question, if we're successful in launching ROCTAVIAN and VOXZOGO with those revenues and that margin improvement, we should be able to fund our innovation engine and grow R&D further. So we'll see where the M&A strategy goes in that environment. Of course, with growing profits and building cash, we could afford more. But we'll keep our eyes open. But I'd say the strategy at the moment is our internal innovation because we're viewing what we've built as more of a platform now instead of just these individual assets.

And also, I just want to add and in addition to ROCTAVIAN like short term in VOXZOGO, we should have the first efficacy data at the high-dose gene therapy for PKU before the end of the year. And we are reviewing exciting DMD, second-generation oligonucleotide that we're going to file IND for early next year. And hopefully, if [ we could file it ] by mid next year. We've shown 30% to 50% dystrophin expression in the quadriceps in the DMD mouse model, which is so far best-in-class.

And that, would you say, J.J., that's been a minor part of your investor conversations? I don't think you get a lot of value for that.

Well, we're going to give you some more details on R&D Day in October. Hopefully, we'll get you excited.

Sounds good. All right. Well, thank you guys a lot for the time. This has been really helpful, a great dialogue and appreciate the insight.

Thanks for having us. Thank you.

Thanks, Geoff. Thanks, Aspen.

Take care.

All right. Thanks, guys. All right. Bye.