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

Good afternoon. I'm -- sorry. Good afternoon. Thanks for joining us. I'm Salveen Richter, biotechnology analyst at Goldman Sachs. We're really pleased to have BioMarin with us today, for which Jean-Jacques Bienaime, Chairman and CEO; and Brian Mueller, CFO, have joined us. With that, J.J., I'm going to turn it over to you for introductory comments, and then we can jump to questions.

Okay. Thank you, Salveen. We appreciate the opportunity to speak with you today. So as you know, BioMarin is a fully integrated global leader in rare disease drug discovery, development, manufacturing, commercialization. Over the last few years, we've built a company designed for significant growth. Our global infrastructure incorporates a strong base business, delivering close to $2 billion of revenues annually, durable and scalable pipeline of innovative products and regulatory capabilities. And we have manufacturing and global commercial expertise, and we also have 2 near-term global opportunities in terms of new products in large indications. So taken together, we have built the framework for significant growth with the anticipated European CHMP decision by the end of this month, in the next few weeks or so, for VOXZOGO for the treatment achondroplasia, which is our next near-term milestone. Regarding VOXZOGO, with roughly 14,000 eligible children in Europe, the Middle East and the U.S. region, this is our largest opportunity to date. There are no approved therapy available today for achondroplasia, so VOXZOGO represents an important treatment option for this patient community. The treatment benefits and safety observed to date with VOXZOGO gives us further beliefs that starting as early as possible may provide the most meaningful outcome for children with achondroplasia. This will be facilitated by the fact that early diagnosis is typical in achondroplasia. Most patients are diagnosed before birth. This is in major contrast to the products we've been selling so far, especially the lysosomal storage disorder products, our enzyme products which have required, over many years, significant efforts to identify patients around the world. In the U.S., we have, in November 20, PDUFA action date also for VOXZOGO, which is on track. So assuming approval and launches in these 2 regions, VOXZOGO represents a $1 billion to $2 billion opportunity. So excitement is building as we approach these key regulatory readouts. Briefly on ROCTAVIAN gene therapy for the treatment of hemophilia A. Last month, we were pleased to have shared the news that the European Medicine Agency, EMA, Committee for Medicinal Products for Human Use, or CHMP, granted our request for accelerated assessment based on our plans to submit the European marketing authorization application with a 52-week Phase III results later this month. We anticipate the CHMP opinion in the first half of next year. We will continue to assume a base case of second quarter of 2022 for the CHMP opinion with the understanding that it could come sooner than that considering that we will be under accelerated assessment. So regardless, we are very pleased that European health authorities recognize the dramatic hemostatic efficacy and bleeding control observed with ROCTAVIAN and the transformative nature of gene therapy for people with hemophilia A. So in the U.S., we continue to expect to submit the 2-year Phase III results in -- to the FDA in the second quarter of next year in less than a year from now. So needless to say, we are encouraged by the durability of effects that we observed in the Phase II study, and we just got an update few weeks ago showing that at the high dose showed hemostatic control 5 years after treatment, and the low dose 4 years after treatment. And we're looking forward to sharing more data using an oral presentation at the upcoming International Society of Thrombosis and Homeostasis, ISTH, Virtual Congress in July. We have also many programs and early-stage products advancing in the R&D organization, and we are looking forward to sharing a deep dive on these at our R&D Day in November. So this is a very big snapshot of the pipeline and the business. I will turn it back to you, Salveen, for questions.

Great. Well, maybe to start here, if we could focus on the commercial business, how is COVID-19 impacting the business? And maybe you could talk about which product franchises have the most exposure and when you see kind of the return to new patient starts similar to what it was like pre-COVID.

Yes. So maybe I'll let Brian comment on this. Then I will have my perspective after that maybe. Brian?

Yes. Sure. Thanks. Yes. Great question. Thanks, Salveen. So important to note, our business has been resilient from the beginning of the pandemic. When we made our impact assessment over the course of 2020, we adjusted our 2020 revenue guidance by just less than 5%, driven by COVID, and that held up over the course of the year. Just a reminder, most of the base business is the enzyme replacement therapy business. Many of these are weekly infusions. In pre-COVID, many were done in the clinic. So the primary effort from the beginning of the pandemic was to pivot to at-home infusion or alternate sites for those ERT infusions, and that was successful throughout the course of 2020. We're maintaining that in 2021. We reaffirmed our 2021 guidance back in April. So, so far, 2021, COVID assumptions have held up. To your comment on which brands are most significantly affected, definitely, for us, it's our most recent launch and fastest-growing product in Palynziq, the injectable product for PKU. Because the Palynziq requires a relatively complicated dosing induction and titration phase that's typically done in the clinic, most new patient starts for Palynziq happen in the clinic. We did start a program that does allow at-home Palynziq induction, but by all means, not just PKU clinics being closed but also just the diversion of overall health care resources and hospitals and whatnot to COVID treatment and maybe folks staying at home throughout the course of 2020 and in the early parts of 2021 here, as expected, Palynziq, new patients starts have been on hold. But we do have a reason to be optimistic. We reported back in April that half -- we've observed that half of all PKU clinics in the U.S. were open again, and 85% were open via telemedicine. So that's a good sign. We'll be reporting on Q2 in just a few weeks, and we will give another update. But there's reasons to be optimistic with the vaccination progress and things opening up in the U.S. So the hope is that we'll get back to normal Palynziq new patient additions here soon. Hope will also be that there's some backlog of Palynziq patient interests. Perhaps folks at home surfing the Internet learning about how they can treat their PKU may have learned about Palynziq, and we'll see some bumps to new patient starts thereafter.

Great. How are you thinking about profitability? Maybe help us understand the underlying assumptions for the VOXZOGO and ROCTAVIAN launches that would help you achieve that at -- that -- on a GAAP basis.

Brian, again?

Go on, J.J. -- yes. so let's start with the current state. So J.J. mentioned base business today close to $2 billion. And while we did revert to a GAAP net loss this year because of some of the headwinds, including COVID and a full first year of U.S. Kuvan loss of exclusivity, we are still planning to be profitable on an operating basis, which, for us, is non-GAAP income where we're adding back to our GAAP net income mostly noncash charges like stock compensation. So anticipating operating profits in 2021, also anticipating positive operating cash flows. So we finished the year in Q1 with $1.4 billion in cash. So being able to run the business through this sort of holding pattern year without the need to do a diluted financing, we view as positive. We refinanced our convertible debt last year on more favorable terms where our next convertible debt maturity isn't until 2024. So healthy balance sheet. Operating cash flow positive in 2021 is the plan. And then from there, we're looking forward to the opportunities in ROCTAVIAN and VOXZOGO, larger patient populations for BioMarin, both potential billion-dollar opportunities. So if we're successful there and get those products approved and successfully launched, that's the growth engine for the future. And important to profitability is we'll be leveraging the base business today. This isn't our first product, and it's a larger product and we have to build global infrastructure. It's the same support system that supports the $2 billion in revenue today, roughly, that'll support ROCTAVIAN and VOXZOGO. That's why the story -- the leverage story from here with revenue growth is margin improvement and operating scale. Side note there also is that the base business today is made up of these complex biologics, ultrarare disorders, hence, higher cost of goods sold today in the low 20% range. We do expect lower cost of goods sold with both ROCTAVIAN and VOXZOGO that will push cost of goods sold as a percentage of sales down south of 15%, which is going to increase gross profit. And then with margin improvement across the rest of the P&L, it's a pretty good P&L prospect.

And with so many programs in the internal pipeline now, I guess how much of a role does BD play? Maybe you could talk about whether you're focused more on earlier-stage assets where you can shape the development path. Or could you bring in a later stage asset to kind of leverage what you're working on? And also therapeutic modalities, how are you thinking about that?

Yes. So last year, we did more early-stage deals than ever in the history of the company. We actually did 10 early-stage deals. Some of them, we haven't communicated any details about it because they were not financially material at the time of the deal. But -- so we do have a good track record here in licensing early stage that -- and moving them into the [ deal ]. Actually, ROCTAVIAN was an early-stage licensing product. And so we optimized the vector. We found the effective dose. We've successfully advanced it to the clinic. And so we developed this with a novel gene therapy platform. So we created a significant value over the last 7 years or so. So we have been very successful in leveraging our in-house R&D expertise to develop assets from an early stage. That being said, so we will continue to do so, and we are right now exploring several early-stage in-licensing opportunities. But I would say 2 things are about to change. One is that we anticipate generating some significant cash flow starting probably in the second half of next year and 2023, which, on top of our existing cash balance, might allow us to be a bit more aggressive on the business front with later-stage products. So, so far, we knew we'd have the ability to -- on the financial, the, basically, firing power to do so. And two, I will say the early-stage or biotech companies, financing was very generous in the past 3 to 4 years. Consequently, valuations were pretty high. This is kind of changing right now. We understand that most of the IPOs that happened this year in biotech are under water. And the secondary market is difficult, so that would potentially open some opportunities for us to make strategic moves in the future. And I would say, at the same time, we have 2 products that are large opportunities that are about to be approved. And consequently, it's not like we are super hungry in the short term for a late-stage product.

Any technologies you feel that could be useful or...

I mean -- so right now we have small molecules. We have gene therapy. We have obviously complex proteins. Now we also have second-generation oligonucleotides. We are actively working on preparing an IND filing next year for our second-generation oligonucleotide for Duchenne muscular dystrophy. So we have sort of platforms. I think we're looking always at something that's complementary. So it will cover the different -- we are somewhat agnostic in terms of modalities. Obviously, we have significant gene therapy development research and manufacturing expertise that we can leverage. But we're not planning on turning into a pure gene therapy company. So -- and however, we have -- beyond ROCTAVIAN, we have, as you know, PKU gene therapy that's in the clinic now. We should get HAE gene therapy in the clinic at the end of this year. And then we are very excited about the potential of gene therapy for hypertrophic cardiomyopathy based on our partnership that we signed last year with DiNAQOR, and we're going to give you some -- we're making great progress there, and we will give you an update about this at R&D Day in November.

So maybe moving to ROCTAVIAN. We got the update on data in January, and there's clearly been a focus on the expression levels and trajectory of the curves over time. I guess you've noted that the drug looks like it could have benefit for 7 years or so. What are the underlying assumptions you're using here? What -- I guess we're going to see the upcoming data for your -- for the, I guess, the other dose, not the pivotal stage program. But how are you thinking about the durability here?

I mean in terms -- I mean based on the existing data, I say that we spent at least 5 years of very significant bleeding control but a major drop in annualized bleeding rates as compared to actually patients that were not on placebo before treatment but on standard of care, 2 to 3 times a week infusion of recombinant Factor VIII. So dramatic bleeding control for at least 5 years. Based on what we're seeing, it looks like it's going to last -- I mean it's hard to tell for sure, but probably 7 to 10 years, maybe more for some patients, which we believe is a significant benefit for these patients because if they are -- for 7 to 10 years, they are free from recombinant Factor VIII infusions or Hemlibra injections. That's a pretty valuable benefit. And especially considering that these patients, if they decide to be treated with ROCTAVIAN, it's not like they're going to -- they have to forgo where they're starting to like -- they -- if ROCTAVIAN in the future stops being effective for those patients, they can go back to what they are doing today. They can go back to injections or they can go back to Hemlibra. And hopefully, in 8 to 10 years from now, we will have a solution for retreatment or someone else will. We're actively working on it. We're trying to figure out actually what are the reasons why a few patients are not responding, less than 10%, and why is it that some patients are responding, then the effect of ROCTAVIAN diminishes over time. We are, again, at R&D day, we'll provide some information about what we're doing in this respect. And also, just want to highlight that Hemlibra is a great drug. It might not be -- it doesn't appear to be the end-all and be-all. We have health insurance claims from about 100 patients on Hemlibra in 2020, and 60% of them are still taking recombinant Factor VIII. That means it costs a lot of money to the payers. So the average cost of Hemlibra for adult patients in the U.S. is about $700,000 a year. And on top of that, most of them were still taking recombinant Factor VIII. So my guess is the Hemlibra patients, on average, for a health insurance company in the U.S., costs about $1 million or more every year. So that gives you an idea about the pricing potential for ROCTAVIAN, and we have here at least 5 years of efficacy.

And then you've guided to resubmitting the data to the EMA in June. What steps are left to be done here? And then where does the EMA stand in terms of launching the 2-year data?

So yes, so we are obviously in the final, final stage of preparing the filings and so -- the end of June is in less than 3 weeks. So we are on track for filing before the end of the month. And as I say, we have accelerated assessments. So the EMA is sort of actively -- going to actively review our filing. The EMA knows that before they have to make a decision, which is, at the earliest, Q1 of next year, the phase -- the 2-year data on the Phase III will be available, but they are not asking us to wait for that to file for sure. And they're not overly anxious about that 2-year data since the 17 patients that we had that reached 2 years of treatment -- after-treatment, when we reported the 1-year Phase III data in January, still showed major bleeding control. So obviously, this will be another element of information, but they didn't tell us -- but once you have the 2-year data, you have to file a major -- another major amendment. It will be information that will be available, but they are going to do their review based on the 1 year now.

And based on your conversations with physicians and any surveys of patients or advocacy groups, has a delay in approval impacted the interest in ROCTAVIAN or payers willing to support a premium price?

No. If anything, it's better now because we have more data. Remember, last year, we would have had to launch without even the 1 year for Phase III data. Now we have established there is very significant efficacy in terms of bleeding control at 1 year. And with the Phase II data, we now have 5 years of bleeding control. So if anything, the interest has increased. The interest from payers is still there, has increased, too. But ICER, as you know, did a cost-effectiveness analysis last year -- about a year ago, without even the Phase III data whereby they showed that they believe that ROCTAVIAN is cost-effective based on a $2.5 million per treatment price. And as I said earlier, recent marketing research have shown that there's still major interest in ROCTAVIAN and that there is still an unmet medical need even for Hemlibra patients.

And then you are running other studies looking at prophylactic steroid use in patients and patients who have preexisting antibodies to AAV5. Can you just remind us when we may understand this -- these data sets?

Yes. Brian, you want to cover that?

Yes. Sure. Those are major components of life cycle management. We're launching into this severe hemophilia A market with the certain eligibility criteria that we know -- believe we can expand upon over time with more studies. So we've got those studies starting up. Some have started. Some will be starting soon. It is fair to say that COVID and just overall delays in early-stage studies like that have -- or study start-up has had an impact over the last year. But we're currently going through processes to view how to -- investments or strategies to catch up on any of that time and get back on track. So stay tuned. We'll share more as those studies enroll, and then we'll be able to -- as they enroll, we'll be able to project better when we'll be able to read out data. But I'd say we'll be able to learn more on those and talk about those more over the next year.

But again, the objective is to significantly increase the eligible patient population over the next 4 to 5 years. So we're going to start with patients under 18, patients who don't have inhibitors to Factor VIII, severe hemophilia patients only. But again, we were -- and we were planning on expanding this, as Brian said, over the next 4 to 5 years to ensure continued growth of ROCTAVIAN revenues over the next 5 to 7 years.

And for VOXZOGO, maybe switching to that, do you believe the current data set that you've submitted will be sufficient to meet that desire to see the 2-year data?

So you're talking about the FDA? The EMA, we...

Yes. Sorry, the FDA.

Yes. So the -- yes. So I mean again, based on the weight of the evidence that we have accumulated, the fact that we have now some Phase II patients that have been treated over 5 years ago where we show continuous improvement in annualized growth velocity. We have great biomarker data, great clinical data, and our 2-year updates of the vosoritide study was pretty positive. And the fact that since we filed the 2-year amendments with the FDA, they have been actively reviewing the data and asking a lot of questions, which is a good sign. So I would say, based on this, we -- and the fact that it's likely to be approved in Europe this summer, we are so optimistic that the FDA would make the right decision at the end of November.

And any update you could give us on prelaunch activities and how you're thinking about pricing here?

Let me start with the pricing, and then Brian can cover the prelaunch. So pricing, we've guided to about a -- and based on extensive payer reimbursement research in the U.S. and Europe, we're anticipating a price between $150,000 and $200,000 per year. And we believe that's the price that will allow access for all patients. As you know, it's likely we will launch in Germany a few months before we launch in the U.S. The German price in the first year is anticipated to be pretty close to the anticipated U.S. price. So stay tuned on that. We will communicate what the anticipated price is when we get the EMA approval this summer. So Brian, do you want to talk about the other launch preparation?

Yes. Sure. Market preparation has definitely been a priority for the last year in anticipation of the VOXZOGO launch. Not different from some of the historical BioMarin products. Achondroplasia and VOXZOGO is an example where we're actually establishing the market. This is a severe disease that has had no pharmaceutical treatment historically. But important to note, different from the business that we grew up upon with the MPS disorders and the ERT franchise where most of the marketing efforts early on and actually through the launch and beyond were spent identifying patients and educating physicians to help diagnose MPS. We don't have that situation with achondroplasia because the disease is diagnosed so early on, often at birth, if not shortly after birth or in utero. So with more -- earlier diagnosis, larger patient population where we've spent our market preparation efforts is twofold. One, disease education. Achondroplasia is often only associated with short stature, but it comes with a number of other comorbidities. There's permanent sway of the lower back, bow legs, spinal cord compression, sleep apnea, so understanding the full burden of illness. And we've recently gotten access to some studies that demonstrate that full burden of illness over the full life cycle of an achondroplasia patient. So we'll look forward to sharing that at a conference soon. But -- so establishing achondroplasia as a disease with physicians in the full burden of illness, and then payer interactions within the safe harbor laws in the U.S. J.J. mentioned price. That took a lot of payer research. We've got an excellent data set in terms of a long-term safety and efficacy. So getting that in front of payers so that we can be ready to launch with a compelling story for VOXZOGO.

And again, in terms of, I mean, unmet need, I mean just talking about Europe, to give you an example of the intensity of the unmet need here, 90% of patients in Italy that are achondroplastic patients have one or several limb-extension surgeries, which is expensive, painful and some are risky in terms of infections. So that tells you that they really care about height as an end point. About 75% of -- same thing in Spain. So -- and also, as Brian said, we have done extensive study of the burden of disease, which we're going to publish in the next few months, showing that most of these patients, they not only do extension -- the limb-extension surgery, but they have a lot of orthopedic surgery to treat the secondary aspect of the disorder, which also are painful, debilitating and expensive.

And who will you be initially targeting within this population?

In terms of the patients? I mean just...

In terms of the patients and the physicians.

The physicians. I mean I can do that but Brian's on a roll with his [indiscernible].

Yes. Thanks. Good follow-up because I should have mentioned this as part of the market preparation. So I mentioned diagnosis and identifying patients is going to be less of a challenge with VOXZOGO than it was for our previous brands. But where we do have some work to do is establishing a treatment home because achondroplasia patients see a number of different physicians for their disease. It could be their home pediatrician. It could be a geneticist or where we think a good medical home could be is a pediatric endocrinologist. For example, they already have experience with treatment -- treating with diseases with -- or disorders with growth hormone. So that's the other part, is establishing that medical home as we identify patients and as they engage with VOXZOGO, funneling them to that medical home. Those will be the big efforts early on in the launch.

Do you have a sense of the, I guess the total number? I guess like pediatricians would be a much bigger target area than like the other 2, I guess [indiscernible]...

Yes. But the pediatricians are the referring physicians. I mean most patients will be probably treated in terms of the prescription -- the prescribing physician are likely to be pediatric endocrinologists, which is a much smaller patient -- physician population. And some of them will be orthopedic -- pediatric orthopedic surgeons, but most of them will be treated by ped-endos, which are familiar with pharmacotherapy for growth disorders since they are the main prescribers of ortho around the world.

And we'll get some overlap with some of the base business commercial support as well. Vimizim for MPS IVA, our largest product, is often viewed as a skeletal dysplasia. So there's already outreach to some of that community, physician community.

And J.J., you mentioned the EU didn't ask for 2-year data, but they are aware of the 2-year data?

You talking about VOXZOGO or ROCTAVIAN here?

VOXZOGO with the...

Yes. Of course, they're aware of the 2-year data. Yes. Yes. But that was not a request. We filed for VOXZOGO before the 2 year that we [ built ] and they didn't specifically ask for it, but they're aware of it.

Got it. And then how -- I guess when can we see some data from the studies in other genetic forms of short stature?

Yes. Good question. This study has just recently started. We treated several patients now. So I mean it's unlikely we're going to be able to see some clinical benefits in terms of height improvement for at least a year or so from now. But it is very exciting because of -- VOXZOGO, in a way, is the first product where we might have more than one indication. As you know, when you're in rare -- genetic rare disorders, you develop a drug that's very specifically targeted for a specific genetic disorder and mutation. But here, in the case of VOXZOGO, we have the possibility of substantially expanding beyond achondroplasia because even a subset of short stature -- idiopathic short stature patients, it will be much, much larger than achondroplasia. And there's a lot of excitement about trying to drive there where CNP regulations and growth regulation is involved here.

Perfect. And then with the U.S. Kuvan market, just given the generic entrants, how is that looking currently?

I mean actually, the erosions -- we anticipate erosion and actually the erosion we're observing is basically according to what we anticipated. In theory, the erosion seems to be already stabilizing a little bit. And I would say, based on the fact that, hopefully, the COVID-19 epidemic is behind us, we anticipate that the growth of Palynziq next year will more than compensate for the loss of Kuvan, and our PKU franchise globally is going to grow again next year.

Perfect. Maybe one last question here on the PKU franchise with the gene therapy trial that's ongoing. What gives you confidence the third dose could be the dose you advance into registration-enabling studies? And what time frame are you seeing where you kind of reach fee normalization? Just curious how you think this is going to change the landscape.

So yes, so even before we had any [ deal ], the trial was designed whereby we would treat 2 patients at 2e13 and then we'll do 2 patients to 6e13. So we have treated already 1 patient at 6e13 -- or maybe 2. We're about to treat the second patient. And we were not expecting that 2e13 would be the dose based on our experience with ROCTAVIAN. But we did see some impact of the 2e13 treatment on fee levels with that -- on that low dose. And actually, with ROCTAVIAN, we didn't see any impact on Factor VIII levels, by the way. And we saw a huge dose response curve here when we move from 2e to 6e, as you know, with ROCTAVIAN where we went to from no effect to a very, very large effect, at least in the first year. So consequently, based on the ROCTAVIAN experience, we anticipate that we have a good chance to get close to fee normalization with a 6e13 dose. So based on the fact that we have just treated the first 2 patients at 6e13, we should be in a position to give you some data in late Q3, early Q4 and determine definitely before the end of the year whether 6e13 is a dose expansion -- is the dose that we're going to use for the pivotal trial. So we'll know that less than 6 months from now. And [indiscernible]...

And just to add, another positive attribute about PKU gene therapy is that we started this clinical program with material made in our commercial plant at commercial scale. So not only will we have to slow down to make a switch or scale up, but that should also bode well with the regulators when we get into review.

Perfect. Great. Well, with that, thank you so much. Really appreciate the time today, J.J. and Brian.

Same here.

Thank you. Yes. Great to see you, Salveen.

Bye. Thank you.

Talk to you soon. Bye.