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

Good afternoon, everybody. Thanks for joining us for the next session. I'm Matthew Harrison, one of the biotech analysts here at Morgan Stanley. Very pleased to have BioMarin with us for the next session. Before we get started, I need to read a disclosure statement. Please note that all important disclosures, including personal holdings disclosures and Morgan Stanley disclosures, appear on the Morgan Stanley public website at morganstanley.com/researchdisclosures. So with that, I'm going to turn it over to J.J. Bienaime, the CEO, to make some opening remarks, and then we'll jump into Q&A.

Thank you, Matthew, and we appreciate the opportunity to speak with you today. So starting with our most recent commercial product, VOXZOGO, for the treatment of children with achondroplasia. We were thrilled to announce 2 weeks ago that the European Commission granted approval for children ages 2 and up. I would say that this approval unlocks eligibility for roughly 11,000 children in Europe, the Middle East and Africa, for treatment with VOXZOGO, which is the first therapeutic option approved in this indication. So our European commercial team is in launch mode. Actually, literally 10 minutes ago, I just got an e-mail from our team in France saying that we just got a request from a hospital in Nantes in France for 5 patients to get started on VOXZOGO. So we are very excited. For the remainder of this year, we expect France, Germany and Italy to be the drivers of VOXZOGO revenues with France and Italy coming in line in this month in September through the named patient sales channels, followed by commercial sales in Germany in October. In the U.S., the November 20 PDUFA date -- action date is on track. VOXZOGO represents well over $1 billion opportunity for BioMarin. It's likely to be in the short term, our largest product. And our commercial team is eagerly preparing for the launch of this significant new opportunity. So turning on to the news earlier this week, BMN 307, our investigational gene therapy for PKU, was placed on a clinical hold based on interim safety findings from preclinical rodent trial. It was a non-GLP pharmacology study in immunodeficient mice. While we do not believe that these critical findings with BMN 307 are suggesting a significant risk to humans, we are being prudent and investigating those findings thoroughly. These findings were specific to BMN 307 to this mouse model, and we do not believe that this suggests a risk to any of our other gene therapy programs. We are working with the FDA and other health authorities, and we will communicate next steps when available. So we will keep you posted as we learn more. Briefly on ROCTAVIAN, regulatory milestones are tracking to plan. We recently announced that the European Medicine Agency had validated our marketing authorization application and -- which will lead to an opinion -- a CHMP opinion in the first half of next year, under the accelerated assessment time frame, which is the one we're granted by the European Medical -- Medicine Agency. We are very encouraged to be on the path towards potential approval next year in Europe given the breadth of clinical evidence demonstrating, showing dramatic reductions in bleeding rates in Factor VIII utilizations and Factor VIII infusions rates following treatment with ROCTAVIAN. In the U.S., we continue to expect to resubmit the biological license application for ROCTAVIAN in the second quarter of next year. Assuming the supportive 2-year data, which we'll have at the very end of this year, early next year, it's positive, which I believe will be based on the [ serum ] analysis followed by the expected 6-month review procedure in the U.S. So of course, our value proposition reaches far beyond the strong base business and the large potential near-term opportunities of hemophilia and achondroplasia, and we're excited to share details of the next generation of early-stage pipeline products at R&D Day in late November. So this is a very big snapshot of where we stand today. So we turn it back to you, Matthew, for questions.

Great. Perfect. Thank you, J.J. Why don't we start on 307, but we probably don't need to spend a ton of time there. Maybe just for everybody's benefit, just tell them specifically what the preclinical finding was in the model and why you believe that is specific to 307 and doesn't have implications across the gene therapy portfolio.

Yes. Thanks for your question. So Lon Cardon, who is our Chief Scientific Strategy Officer, is on the call here, and I think he is in the best position to answer that question, Matt. So Lon?

Thank you, J.J. and thanks, Matthew. Just a very brief background on the study, the 307 study. Because distinct AAV gene therapies have shown variation and durability of transgene expression that we're all familiar with, we initiated a long-term study to explore the mechanisms that shape the expression of the PKU gene called PAH. And the mouse model we chose to study for this had 2 mutations. One was to induce immunodeficiency and one was related to the PKU gene itself. And the reason we did that is we wanted to study the therapeutic rescue of phenylalanine levels in the absence of a cellular immune response to a human gene in the mouse. And so that's why we did it on that background. We studied 3 doses, a low-dose 2e13, 6e13 and 2e14, a higher dose. And again, this was not a GLP study, not a safety study. It was a pharmacology study of durability. What we found after 52 weeks of taking down the animals is that 6 of the 7 animals administered in the highest dose of 2e14 had tumors on liver necropsy. Five of those had adenomas, 1 had hepatocellular carcinoma. And vector integration associated with those findings was observed in that high dose, and only in that high dose. Now all of these findings -- all of our preliminary findings, all of these are studies are on -- the study is ongoing and our analyses are ongoing. They've all been observed. All of these effects have been observed in other mice studies previously in other AAV trials. But we promptly took steps to mitigate the risk and share findings with the global health authorities as soon as we saw them. And they subsequently put us on clinical hold for our PHEARLESS PKU program, which has dosed 4 patients to date. We -- there are many reasons to think that these preclinical findings are not suggestive of a significant risk to humans, but we're being really prudent and investigating these findings thoroughly.

Okay. Okay.

If I may add here to what Lon said is that -- again, there was -- the timing is interesting and it was coincidental that last Thursday and Friday, there was an FDA Advisory Committee on AAV gene therapy. And I think the conclusion for most of the expert there was that there is limited data on the translatability of the toxic findings from mice to humans. Again, none of the larger animals, dogs, nonhuman primates and humans have experienced any tumors of the one -- like the one that was observed in that double knockout mice model. There was a publication in January of this year in Nature Genetics that reviewed more than 3,000 patients and were treated to date with gene therapy, AAV gene therapy, and no cancer is reported to emerge as a consequence. So we are really encouraged by the safety profile from real-world human experience, both with ROCTAVIAN to date and other AAV products. And Lon, I think you're probably going to have questions on the translatability to other gene therapy programs and Lon can answer that question, too. So back to you, Matthew.

Yes. No. No, perfect. Yes. So obviously, the 2 other questions are how do you get off clinical hold? What do you need to present to the regulators to do that? And then -- what does this mean -- what implications would this have or not have to some of your other programs?

Lon, do you want to...

So I'll take that one. The -- getting off clinical hold, Matthew, we -- as you know, we just got put on clinical hold, and we'll have the dialogue with the FDA. So we'll be informing as soon as we know exactly what their specific questions are. But there -- it is relevant to say, obviously, how this might or might not read through to other programs, ours and others, on gene therapy. We don't have definitive answers to share again because it's ongoing, but there are some obvious things that we are looking at. One is the mouse background. As J.J. noted, the recent FDA Advisory Committee highlighted on the higher risk associated with hepatocellular carcinoma in immunodeficient mice. So -- and that's the very background that we studied for reasons I described before. Properties of the vector are different, and this is very interesting, I think. The same advisory committee and a preceding ASGCT roundtable have highlighted that where the concerns seem to be greater are not features of the cargo itself, the PKU gene, PAH here or 270, the Factor VIII, but on promoters, enhancers, regulatory elements of those. And so we're looking carefully at that. It's interesting to note that the -- in terms of the mouse background, we haven't seen findings like this in any of our other studies on any other background of strain, only in this RAG2 combination knockout on -- for the PKU. And in terms of the vector differences, we -- several years ago, for the ROCTAVIAN program, we conducted a study in which we kept all the promoter enhancer regulatory machinery the same as it is in our 270 product. And we substituted inside that a gene that wouldn't induce immunological...

You might want to say that 270 is ROCTAVIAN. Sorry.

I'm sorry, ROCTAVIAN -- in the ROCTAVIAN product. So all the machinery that is -- that the AdCom has suggested maybe a higher risk for inducing hepatocellular cancer -- carcinoma is the same as the ROCTAVIAN program. And we studied that out to the same period of time, 52 weeks, with...

At the same dose, Lon.

Exactly at the same dosing that we are testing in the clinic, the higher dose that we have been studying now for 5 years. And no findings whatsoever in that study. So that's the mouse background, and the vector properties are a key point. And the third point is the one J.J. noted is the advisory committee did -- has noted, the number of people noted that while mice are useful for evaluating proof of concept, their translatability and safety is of uncertain generalizability, and that's been seen broadly by a number of different groups. And that may be the case here, and we'll explore it deeply.

And as you know, Barrie Carter was one of the parties in cell and gene therapy, used to work at BioMarin, he's retired now. And one of his most favorite saying was mice lie and monkeys don't always tell the truth. So next question.

You touched on this, but I just want to make sure anything else that you wanted to mention from the 2-day advisory committee outside of some of the findings that you said were potentially related to 307. Anything else you guys heard there that was important that you wanted to highlight for people?

Lon, do you want to answer that?

Yes. The key points especially relevant for today's discussion that we took out, I've touched on it a little bit. Hepatocellular carcinoma has been observed in mice. Integration has been observed for many years at a low frequency, but it has been observed in mice. The points about the promoter and enhancer parts of that vector, that's emerging in several context as being maybe contributing to higher risk. But none of this has translated. None of -- and people want to know how do we understand translation to higher primates. Well, it hasn't been observed. So it's hard to know what -- how to improve our understanding when it just hasn't -- we haven't observed it at all in nonhuman primates ourselves or others. And so that's where the questions are for -- that we thought were the most salient for us out of the advisory committee.

Okay. Okay. Good. Good. All right. Well, thank you for that. Maybe we should move on to VOXZOGO. J.J., as you mentioned in the beginning, right, launching in Europe, and you gave us some idea around how you're thinking about timing here. Maybe just -- I guess the real question is, how should we think about the early opportunity, right, in Germany as an example, where you've got prepricing and some of the early access programs you've got versus the sort of time line to achieve broad reimbursement.

So yes, as mentioned, we expect France, Germany and Italy to be the early drivers of revenues. Germany because, as you said, there is prepricing there. And actually, we will have -- we're going to be able to start selling commercial product in Germany on October 1. That's when we're going to have the official reimbursement. The price is anticipated to be similar to the French early access program price, which we said was slightly north of EUR 300,000 per year. That price will likely -- as you know, the way it works in Germany is that you have a few pricings for a year or so, and then you negotiate and you generally get a discount from your original price. We don't know yet what the discount will end up being. But we assume that in our models that after a year, the discounted price in Europe would be around EUR 200,000 per year. And then you get a discount generally from that price with the German pricing and other discount in France and Italy. So France and Italy are starting now, I mean, because of the ATU, the early access program, I would say we have several patients already getting started. Although our revenues in September and Q3 are going to be very limited because patients are barely starting on therapy and -- but in Q4, we should have started to have some revenues because of -- because Germany is going to come in line and then patients will have several -- some of them, several months of therapy. So -- and then the second wave of launches in Europe will begin early '22 and cascade from there. And actually, interestingly enough, something also maybe people don't realize is that once you get European approval, you can sell in the majority of 80%, 85% of the world market because you can use the European approval filing around the world, except in China, the U.S. and Japan. And actually, we had our very first commercial prescription already last week in Argentina, thanks to the European approval. Patient is not treated yet, but the doctor ordered a prescription. But it tells you that it's got -- this European approval has got a lot of positive impact on the global launch here.

Okay. And historically for your products, just given the global nature of rare diseases, right, U.S. hasn't been the leader in revenues, maybe the leader for the first few years and then that changes. Just how are you thinking about the overall mix here again for this product? Will it ultimately be similar or would you expect it to look a little bit different?

Yes. I mean I'm going to say a few words. I'll let Brian expand on this. But the U.S. is only 20%, 25% of the opportunity here. The majority of the opportunity is outside of the U.S. So Brian, do you want to say a few more words about this?

Yes, sure. Thanks, J.J. Thanks, Matthew. It's a great question. So you need to know, this is the first time that BioMarin has the EU approval first, and we'll be launching throughout Europe. And as J.J. mentioned, that enables the rest of world launches as well with hopefully the U.S. to follow. But we're equally excited about the opportunity in both regions, Europe being much larger and the U.S. being smaller, but more straightforward to navigate upon approval. Just a reminder, because of the pricing and reimbursement and market access in Europe, again, it's essentially just this one large market. Whereas in Europe, as J.J. touched on, we're going to prioritize those markets that are easier to access early. But after that, it's country-by-country pricing, reimbursement and access negotiations. Some of which require pharmacoeconomic dossiers that go through a lengthy review process. And so that's why Europe tends to be the slower ramp early on. But as we've seen with Vimizim and Naglazyme, Europe ends up being the larger, longer source of growth for our products. So interesting to have Europe up first here with U.S. to follow. But the level of market preparations that we're doing in both regions in terms of establishing achondroplasia as a serious disease, trying to create that treatment home since achondroplasia patients are seen by a number of different types of physicians. Some see their local pediatricians. Some may see a geneticist. We think that pediatric endocrinologists are the right place because those folks are familiar with other growth disorders. Some of them have already prescribed growth hormone. So we think in terms of priority treatment centers for VOXZOGO prescribers that, that will be the right treatment home. But we need to establish that network, mobilize the community. And we're starting in Europe, and we'll look forward to starting hopefully after November's PDUFA date in the U.S.

Okay. Okay. All right. And good segue to the U.S. as well. Look, I know we've probably talked about this a lot, but obviously, investors still focused on the PDUFA, given the comments the FDA made about 2-year data. So maybe just remind people about your confidence heading into the PDUFA and why you think the data you've delivered is sufficient.

So because we have pretty active interactions now with the FDA, the FDA division reviewing the VOXZOGO filing. So we believe that they are on track for a decision by the PDUFA date. We are in packaging and labeling discussion with them. We're really at a point that we never quite reached with ROCTAVIAN. So it's a different division that is somewhat more communicative than CBER. So that's why we feel optimistic about the approval in late November in the U.S. So that's all I can say at this time. And also because of the strength of the data, the fact that our 2-year data was very positive, the fact that the Phase II 5-year data is also showing continuing improvement and the fact that there is no safety signal of any concern with this product and the fact that now we have patients that have been on the drug for over 5 years and the compliance to treatment extremely high, like 96%. So all this combined makes us confident that there will be a positive decision by the FDA. At the same time, we were -- it might be a little different from the Europe because we were very pleasantly surprised to get a 2- to 5-year old on our label. I don't know if we're going to get this in the U.S. or we'll get it later because our 2- to 5-year old study was reenrolled in March of this year. So we have the data in the middle of next year. But that's all I can say at this time. So we are gearing up for the launch in the U.S.

Okay. No. Perfect. That's very helpful. And then I guess, you've given us a decent amount of detail on pricing in Europe. Are your expectations, obviously, similar pricing in the U.S. given the [indiscernible]

Yes. The U.S. price should be similar to the German price. And we'll announce that officially when we get approval in, hopefully, in late November.

Okay. Good. Maybe since we only have a few more minutes, let's just turn to Valrox to make sure we cover that and ROCTAVIAN as well. I guess the -- so we know the time lines here, given that that's pretty clear. I guess my question would really be around the evolution of the competitive market and what you're seeing going on there, and how you think the sort of delay in coming to market could impact your view on the opportunity in the market.

I mean we still believe that we are significantly ahead of any of our competitors. I would say, at least 2.5 years ahead, maybe more. It will depend on what they find and when they file. We also have the -- we will always have the largest database to the efficacy of safety compared with any of our competitors and the one with the longest duration. It's always a question about durability of effect with gene therapy and especially hemophilia gene therapy, and we're going to have -- we already have 4 or 5 years of durability data that was pretty positive, as we reported this past summer. So we're going to be way ahead of any of our competitors in this respect. From what we've seen so far, we don't believe any of our competitors appear to have any superior clinical data. So all in all -- and we have the manufacturing capacity ready to launch. So all in all, we are not overly concerned. And we believe that there is a -- definitely a first-mover advantage in this market, considering that once you treated the patient, they are no longer in the market anymore. This is not chronic therapy.

And could you touch on the durability data a little bit more? Obviously, we've seen factor levels continue to come down. But as part of that, right, you've seen bleed control continue to be very strong. So I guess the question is, what does that data -- how do you use that data? How do you think about that data influencing pricing given that you had previously engaged payers and sort of know what they're thinking?

No. I mean that's a good question. I think -- again, I mean, I think it's clear that ROCTAVIAN, actually, we see -- all of the hemophilia agent therapy programs that are currently in development are not lifetime cures. But if you have ROCTAVIAN, we'll provide at least -- we've demonstrated 5 years, but slightly to be more than 5 years of efficacy. We were never intending to price of ROCTAVIAN more than 3 to 4 years of the current cost of therapy. So consequently, even if we say -- actually, by the time we launch, we'll have hopefully 6 years of demonstrated efficacy. But I think we still have enough data to convince the payers that they are going to be saving some significant amount of money using our drug as compared to what's currently available, whether it's Factor VIII injections -- prophylactic Factor VIII injections or Hemlibra, which both of them cost in the U.S. between $500,000 and $700,000 a year per patient. So we believe that with the current data, we can support a significant pricing. ICER did a publication last year before even we had the 1-year data that demonstrated as per their analysis that ROCTAVIAN was cost effective at $2.5 million per patient. So it's why we -- and we've done all -- we continue to do a lot of marketing research and payer research since the availability of the 1-year data on it is still very positive. The interest in the product is still very high because even 5, 7, 8, 10 years of freedom from injections we factor in our ROCTAVIAN -- or in Hemlibra are very valuable for those patients.

Good. Thank you, J.J. I guess 2 other questions I wanted to ask about. And hopefully, we can get them -- through them in the last couple of minutes. Pegvaliase, I think you faced some headwinds just because of COVID and other factors. Maybe just give us some commentary on how that's playing out. I mean I think the hope would be before Delta, maybe we're going to see more uptake. I don't know if Delta has slowed that down again. So maybe just some comments there.

Brian, do you want to take that one?

Yes, sure. Thanks. We're watching this closely. One of the silver linings of the COVID impact on Palynziq new patient starts is that we are keenly aware of some pent-up interest in demand in Palynziq. However, also -- because of the Delta variant but even prior to the Delta surge, many of the PKU clinics were still closed to in-person visits. And because many -- most Palynziq new patient starts happen in the clinic, that has been the delay in new patient starts, both in the U.S. and Europe. So while many of the clinics are using telemedicine, and we do have a start-at-home program that took place that we're trying to promote, we do -- we are still waiting for some of these genetic centers to open up the PKU branches within their clinics.

Okay. Okay. Good. And then, Brian, maybe just sticking with you. You've got 2 products you're hopefully going to launch over the course of the next couple of years that have $1 billion potential each. How should we think about margins and just sort of the long-term outlook for the business and cash generation? Yes.

Yes, thanks. It's my favorite topic. So just a reminder, this year, expecting roughly $1.8 billion in revenue. A bit of a flat year because of the COVID impact, first full year of Kuvan U.S. generic competition. But importantly, we built that business of close to $2 billion in revenue on these 6 ultrarare brands. And while we're planning to earn a GAAP net loss this year, we are planning to earn non-GAAP income and positive operating cash flow. And so also important is we've built this business for growth. So it's this same infrastructure, this world-class global commercial footprint of sales in 75 countries, boots on the ground in 50 countries, that will launch these next larger market opportunities that could double the company's revenues over the next several years. And so with that leverage will come margin growth across all the line items. We're expecting some higher gross margins from VOXZOGO and ROCTAVIAN. We'll get SG&A leverage again because the infrastructure is largely built. We're going to maintain substantial R&D because we want to really fuel the early-stage pipeline and generate approvals beyond ROCTAVIAN and VOXZOGO, the rest of the decade. But by all means, seeing profit margin growth over time.

Perfect. Great. Brian, thank you. J.J. and Lon, thanks for being here. Appreciate it.

Thank you, Matthew. Good to see you.

Thank you.

Thank you.