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

Good morning, everyone. Thank you for joining us at the Goldman Sachs CEOs Unscripted Conference 2022. We're really pleased to have Jean-Jacques Bienaime, Chairman and CEO of BioMarin, J.J., thank you for joining us this morning.

2022 looks to be an inflection year for BioMarin with the launch of recently approved VOXZOGO and potentially submission and approval for ROCTAVIAN, 2 blockbuster drugs. As you look to this year, where are you focused? And is there anything that you are doing differently that is unique to these 2 products?

Thank you, Salveen. So as you highlighted, indeed, we believe that 2022 will be a transformational year for BioMarin. Our most recently approved product, VOXZOGO, for the treatment of children with achondroplasia is expected to drive us to sustainable GAAP profitability this year. As the only therapeutic treatment available for patients with achondroplasia, this opportunity is very significant with roughly 20,000 children eligible in our commercial territories. The global launch is off to a great start. So we are very optimistic about the prospects of VOXZOGO's contribution to our business. So our first blockbuster is launching very well with key new markets expected to come online this year, including Japan and Australia. For our second anticipated blockbuster, ROCTAVIAN gene therapy for the treatment of hemophilia A, we are cautiously optimistic about the upcoming 3-year data results. We will see and share these results very soon. We are optimistic because the data to date out to more than 5 years has shown consistent and significant bleeding control. And this is what matters at the end of the day is for patients and for payers. So should the data be supportive, we remain on track to share the 2-year results with both the EMA and the FDA in the first quarter of this year and submit our -- resubmit our BLA in the second quarter with anticipated 6-month review procedure. So regarding Europe, we expect a CHMP opinion in the first half of this year with potential approval and launch in the second half of the year. So based on this time frame, we could have both European and U.S. approvals by the end of the year should the data be supportive. The second key difference in 2022 is that irrespective of the timing of ROCTAVIAN approval, we expect to be sustainably GAAP profitable this year and future years. VOXZOGO's solid revenues and solid contribution from our base business, also our continued expense management, all aligned in 2022 to support this important milestone. So the transition we made a few years ago to pivot the pipeline to focus on transformative medicine that addresses a larger population has now been achieved and the subsequent growth and profitability is expected to progress accordingly.

And how would you describe the business development strategy for the company? Has this changed at all as you've moved towards larger indications?

So as you know, a little bit because we try now -- we're staying focused on what we know best, which is genetics. We want to address larger populations that are most of them still orphan diseases but much larger than the ultra-orphan diseases, with which we built the company. So for instance, we did that transaction which, I think, was Skyline Therapeutics. And what attracted to us was -- is cardiovascular disease, gene therapy, which we believe has great potential. And what attracted to us here was the talented scientific team there, the ability to leverage their entrepreneurial spirits, the one that is emerging in that region of the world. And the ability to perform high risk, high-reward investigation while staying on track to corporate commitments around our P&L.

And J.J., you talked about the return to GAAP profitability this year. Can you remind us on the assumptions around the products that would allow you to achieve this? And how your short- and long-term margins would change with these new product launches?

Yes. As I stated in my earlier comments, regardless of the approval timing of ROCTAVIAN, we anticipate returning to sustainable GAAP profitability this year. Again, based on the contribution from VOXZOGO and maybe also in addition to ROCTAVIAN, but just VOXZOGO alone will allow -- will be sufficient. And the continued solid growth of our base business and our focus on managing and controlling operating expenses. So in the very near term, contributions from VOXZOGO during our ramp here, which is 2022 with the first we see on the market, this will modestly impact margins, but it will. And while we expect significant revenue contribution from VOXZOGO in 2022, we continue to incur R&D spending in the ongoing clinical trials and the filings for global approval. So in 2023, however, we would expect to see a more meaningful margin improvement and expansion as VOXZOGO's contribution increases globally. So if we layer on top of that, meaningful revenues from ROCTAVIAN, potentially beginning in 2023, we expect margins to improve even more substantially. And in the longer term, as revenue from these larger opportunities become a larger percentage of our overall revenues, we would expect optimized leverage from our operating infrastructure and margins similar to our larger peers; no reason why we would be that different.

And at these levels, what do you think is underappreciated by investors? And do you think you're vulnerable to potential M&A here as a target?

I mean I think what's underestimated is the potential of VOXZOGO to start with. I think what's underestimated is the -- also the potential of ROCTAVIAN. So -- and we know that given the sentiment, relatively negative in the past year or so of the biotech sector generally, some investors seem to have a wait and see attitude. But the great news for BioMarin is that we have meaningful catalysts like again, growing VOXZOGO revenues, potential ROCTAVIAN approval, we can have some clinical readings of some products in the clinical trials today. And we expect again to be GAAP profitable in 2022. We already -- we are cash flow positive in 2021; we generated substantial cash in 2021. So there is no financial risk left for BioMarin. We don't need to go back to do a dilutive financing. We have over $1.4 billion of cash and we're growing our cash balances. So we expect that this cashable cow in 2022 will be appreciated by investors as they come to fruition.

Got it. So maybe just jumping into the products here. To start, how has COVID impacted the business in 4Q? And how are you thinking about the 2022 impact?

I mean I think the main impact of COVID was in 2020. There was some impact in 2021, but things are definitely getting doing better. I mean, obviously, there is some uncertainty about the Omicron variant and what it's going to do to the overall economy. But I would say even our Q4, our things are still moving forward. We have -- again, we believe, a very successful launch in Europe. We just started shipping in the U.S. VOXZOGO after Christmas. So we will have much -- in 2021, we won't have VOXZOGO revenues, but -- in the U.S., but we're going to -- we have some in Europe, and you'll see that when we report our Q4 results. So we're not overly worried because we believe based actually on what's happening in South Africa that the Omicron wave is going to pass relatively quickly and apparently, most of the people who are effected with the virus have relatively mild symptoms compared to the original molecule -- the original virus, sorry.

So maybe moving to ROCTAVIAN here. As you noted earlier, the 2-year Phase III ROCTAVIAN data is expected imminently. Can you help frame for us what we should look for when you announced the data previously? Last year, you had given us 17 patients out to 2 years. Is that pretty much the bar that we're looking for here? And what is clinically meaningful?

Well, I mean, again, this study, again, is designed to show superiority over standard of care, which is still recombinant factor infusion. And we demonstrated superiority at 1 year with a p-value with 13 zeros up to the decimal. So we anticipate -- we think -- it did however tell us that we are optimistic that indeed we're going to be able to show superiority over standard of care again at 3 years, which is critical. So we're going to say we're going to provide updates on factor VIII levels at 2 years for all patients, annualized bleeding rates, calculate usage and also an update on this, as you mentioned, the 17 patients who had 2-year data a year ago, now you're going to have 3-year data on those patients. So we will communicate also factor VIII levels, ADRs [indiscernible] for these patients. And as you know, bleeding control is the most meaningful thing for patients and also the payers because that's what the episode is and lack of bleeding control is what costs them a lot of money. So we anticipate -- we are optimistic that we will achieve statistical significance on the primary endpoint, that might not be 13 zeros after the decimal, but we're pretty confident that we should show efficacy here. So that's kind of where we stand. And based again on the Phase II data, remember last summer, we reported data on 5 years at the high dosing, 60/13 on the Phase II, 4 years on the low dose, 40/13, which showed very significant bleeding control for both doses even for the 40 when the factor VIII levels were not that high, the bleeding control was very, very significant. So I would say, assuming that we are at about the same level as the 40 factor VIII levels were at year 2, I think we're at pretty good shape to convince clinicians, patients and payers that it's -- the drug efficacy is going to last at least 4 to 5 years and very likely more than that.

Got it. And your MMA -- MAA submission is under evaluation based on the 1-year data with the CHMP opinion expected in the second quarter, but you look to provide the 2-year data. How confident are you that they won't require an extension here to review that data?

The way the -- I mean when we submitted last summer in Europe -- resubmitted, it was clear that the 2-year data would be coming during the review. So we don't anticipate this is going to create a significant delay here in their review. It might and other things might make us fall off the accelerated pathway -- accelerated -- assessment pathway, which as -- if we stay on this pathway, we could have a CHMP opinion in late March, early April. So we don't anticipate staying on this pathway, not only because of the Phase III data, but also other reasons. So but still, if we go back to the regular pathway, that will still need to be -- yield to a CHMP opinion in the second quarter.

And how has the conversation with physicians and payers and advocacy groups evolved as more of this ROCTAVIAN data has emerged?

I mean so we -- again, we've demonstrated now with the Phase II study and then the first 1-year study, Phase III durable bleeding control out beyond 5 years with ROCTAVIAN in the Phase II, which has been transformational for the patients in our clinical trial. I can tell you that. The community -- the hemophilia community is watching very closely, especially as potential competitors that face their own challenges are on clinical holds are our leading competitor. So I think all this support -- the support of ROCTAVIAN obviously, has only increased as the program has progressed based on our marketing research. We even have patients -- we ask the patients that are not on HEMLIBRA. They're planning on moving directly from factor VIII infusions to gene therapy and skip HEMLIBRA, for instance. So having more -- we have more and more data now that demonstrates the safety and the efficacy of ROCTAVIAN. And this will provide more confidence when we are potentially on the market.

And what are your internal expectations now for duration of benefit and how much you believe is necessary to show or to gain widespread adoption?

Yes. So I see the treatment burden of severe hemophilia and the quality of life for those patients is pretty bad. So the opportunity to receive a onetime infusion of ROCTAVIAN and have at least 5 years of bleeding control is transformational for many of those patients. And this is the way they perceive it. So based on the bleed control observed to date for 5 years, where bleed control improved to 0.7 bleeds per year following ROCTAVIAN in the Phase II trial with a 60/13 dose, we are optimistic that it could last for many, many more years with a commercial drug. But we have to see the data before knowing, for how long. So we see, however, some analysts have projected 7, 9, 10 years potentially of efficacy. But in any case, I would say the current product profile is very attractive, importantly, providing -- now we'll have 3 years for some patients that you mentioned, the 17 patients who have -- in our Phase III trial, 3 years of data for our submission in the U.S. and for our discussion with EMA. This would be very supportive, and it provides further confidence for patients seeking treatment with ROCTAVIAN.

And previously, you've spoken about treating 300 to 500 hemophilia patients within the first full year of launch. Do you still consider this to be the case?

I mean so we had the idea that there were some patients in the U.S. that have -- were seeking information on gene therapy. And the U.S., it was like at least 300 to 500 patients. That was like 2 years ago. So the interest is still there. Now are we going to be able to treat those 500 patients the first year? I don't know. That would be a pretty significant revenue shift, as you can see. But the first full year, again, it's -- we'll provide some guidance when we are about to get the first full year of revenues. This is not totally out of the possibility, so stay tuned on this. But I would say the interest in the drug, even since the FDA turned us down, has only increased. So we are pretty optimistic on this launch.

And then turning to VOXZOGO. How has the initial launch been proceeding both in Europe and in the U.S. as well?

So I mean, it's mainly European experience right now because as I say, we only started shipping in the U.S. around Christmas. So I mean we have very little revenues in Q4 in the U.S. So we're going to have some significant revenues in Europe. I would say the early launch experience has been very encouraging in Europe. We have strong prescription demand. We have a substantial number of patients who are running on commercial therapies in France, Germany and a few other European countries. We have prescription demand and interest in main patient sales in a number of markets that are outside the U.S. and Europe, like in South America and in Asia. So this will take time to translate to commercial patients, but we have a track record and experience to do it. As I said, the addressable market worldwide is about 20,000 patients in our commercial territories, excluding China, India and most of Africa. And if we get an average of about $150,000. If you can get your $150,000 per year per patient here, this is actually a $50 billion market. So Obviously, we're not going to penetrate the whole market, but we -- this is why we believe VOXZOGO is going to be a blockbuster.

And where do you stand in Europe right now in terms of reimbursement and access agreements?

So we experienced a difficult process of seeking reimbursement on a country-by-country basis. So we are currently studying commercial VOXZOGO in 8 countries: Germany, France, Switzerland, Austria, Israel, Singapore, U.S. and Argentina. So -- and as we get new countries coming in line, we pursue those. And we have more under new patient sales, we do actually, Portugal is about to start [indiscernible].

And you have -- just going back to the EU specifically, you had talked about how the demand had exceeded your initial expectations here. How should we think about the trajectory on the forward?

Yes, we're going to give you guidance when we report Q4, but this is likely to be our most successful launch in the history of the company.

And then in the U.S., could you speak to your initial target prescriber base and how that may change over time as you capture the entire eligible achondroplasia population?

Yes. So in the U.S., we have a good amount of overlap currently with geneticist and skeletal dysplasia clinicians, which are treating some of our products like Vimizim for instance. So we are focusing for this launch on pediatric and endocrinologists as another key touch points in the launch. So we've been, in the past few months and we are right now in the process of building a referral network of VOXZOGO prescribers and establishing a treatment home for families to ensure rapid access to therapy. So in the absence of -- so far, of a pharmaceutical treatment for achondroplasia, we -- these patients have been treated by different kind of specialists. But so what we try is to leverage our existing relationship with geneticists and skeletal dysplasia clinic to provide care for eligible patients as soon as possible. so they can initiate treatment with VOXZOGO. But pediatric endocrinologists are the growth disorder specialists. We believe they will constitute an appropriate treatment home for VOXZOGO. So our next priority is to strategically establish a referral network for eligible patients that are interested in VOXZOGO treatments. This is a new and addressable call point for BioMarin. Our experience to date with pedi-endos indicates that many are interested in achondroplasia and VOXZOGO. So our confidence in this experience and highly prepared U.S. team is pretty high.

And you guided to providing launch metrics in your quarterly calls. What metrics do you think would be most meaningful?

We're going to give you some patient numbers -- number of centers who are using VOXZOGO, but of course, revenues will be the most important for them, and we will be providing that.

Okay. And you mentioned you're going to provide guidance on the revenue side?

Yes, when we report Q4 in February, yes.

And can you remind us on the post-marketing requirements here and what the FDA is looking to understand with additional data?

I mean they are -- and we knew it from the beginning. I mean it's also back to the growth hormone story that they are interested in seeing the long-term durability of effect until the growth plates of the patient closures between year 8, 15 and then 18. And then they want to see the impact of the drug on the [indiscernible] on adult like. And this is it. So the good news here is that the trials, the fecal trials, this is area to demonstrate is already fully enrolled and ongoing. Obviously, our Phase III -- Phase II trial, Phase III trial, we continue to observe the patients and we'll observe them until they reach final adult height. And this also would be the case in the going under 5 years of age trial, we will be doing here the same thing. So by the way, this trial -- so we -- this is one that's a little bit under the radar, but we have a randomized placebo-controlled trial going on right now in patients from 0 to 5 years of age, and we will have the top line results in the beginning of Q2 of this year, so not far away. So as you know, we got approval in Europe for patients from 2 to 5 and not 0, not from birth. In U.S., we only got approval so far for patients over 5 years of age. But this data will allow us, we believe, to actually obtain approval for -- from birth -- treatment from birth basically in U.S. and Europe and the rest of the world.

And when could we see that initial data from the each of the 3 cohorts looking at infants' intolerance?

I would say probably around April, top line.

And then if -- could you briefly walk us through the other use cases for VOXZOGO that are being explored?

Yes. As you know, when we talked about it at R&D Day, Dr. Andrew Dauber is conducting a Phase II trial, which includes people with 6 different short-statural conditions including hypochondroplasia, CNP deficiency, RASopathy, just to name a few. And he made a comment at R&D Day, according to his comment that he's seeing very impressive results here. We will -- he will communicate those results at a scientific meeting in Q2 of this year, next quarter and which will then allow us to decide which indication to pursue. So I would just say that's also something that's underappreciated by investors that other genetic short stature conditions could dramatically increase the commercial potential of VOXZOGO beyond where we've been talking about so far in achondroplasia.

And then moving to the commercial business here. How is the Kuvan-Palynziq balance playing out with the genetic or generic competition to Kuvan? What you've been seeing in terms of erosion thus far in the U.S.?

Yes. I mean the erosion has been basically as we anticipated, no more, no less, pretty much on target. So prior to the loss of exclusivity in October of last year -- sorry, of 2020, we have identified and taken actions on a number of measures to protect our business from a catastrophic loss of share to generics and we've been successful. For competitive reasons, we don't want to disclose the details of those actions. But empirically, we can say that we have been effective in allowing Kuvan to maintain a mature share of the business in the 5 quarters following the generic introductions. That said, I think the erosion will continue, but probably slowing now and through this year and the next year. But -- and then Kuvan, especially with the launch of VOXZOGO and the development of Palynziq and continued growth of Vimizim, it's going to become less of a strategic product for us. And the Palynziq launch is -- continues to be indeed impacted by the pandemic in some regions of the world, but we have seen a steady quarter-to-quarter revenue growth through 2021 that -- for Palynziq that we expect to continue through 2022. So the pandemic has definitely slowed down the launch, but the demand -- the underlying demand is still there. and there's a lot of excitement about this drug. And also when clinicians get hands-on experience with Palynziq, they become enthusiastic about the drug. I can tell you that.

And on the pipeline here, what are you most excited about?

So there is much to be excited about, as you saw at R&D Day. So we are transforming -- sorry, translating the genetic discoveries into transformative medicines. We believe we are in a strong position to leverage our expertise in discovery, development, commercialization and manufacturing of products, and they will drive our pipeline and allow us to continue to address large [indiscernible] indication. There is -- so there is unmet need across all of the therapy areas we are developing. But it would be -- I would say, firstly, it would be gratifying to develop a really effective treatment for DMD. And we think we have a winner there in BMN 351, and we anticipate being in the clinic this year. Again, going back to DMD with, we believe, a very important molecule based on preclinical data in mdx model, that is the critical animal models for Duchenne muscular dystrophy. We also are still very excited about PKU gene therapy, BMN 307. As you know, we had this advance in critical data in some rodents. So the clinical trial was put on clinical hold. We believe -- we're confident that actually -- we hope and we're confident that we'll -- the clinical hold will be lifted this quarter because we have no evidence to suggest that the [ critical ] signal that we saw in rodents, and that actually all those have seen in rodents, will translate into humans. And we are about to push the button to send our official response to the FDA, but -- and the FDA has not required any additional studies. So we're confident that -- we are optimistic that the clinical hold will be lifted. And we believe that this is a potential really exciting product because Palynziq is pretty effective, but doesn't bring P levels to normal levels. We hope with 307 gene therapy to bring the P levels across normal levels for these patients.

And with the PKU gene therapy program, could you just share what data you are submitting or did submit to the FDA? And is there any read-through to other gene therapy programs for the capsid or any other aspect?

So [ waiting for ] just any clinical data on whole genomes and so gene analysis of the tumors in the mice that demonstrate that we believe that this is not related to treatment with 307, and it has no translation to humans. So your question is on the other capsids. So yes, we have generated a large library of diverse capsids that are not [ cross-neutralized ] in response to Valrox. We have investigated their ability to transduce in higher species, non-human primates and then hopefully humans. We're also investigating nonviral approaches to gene delivery, like if it's nanoparticle for instance. We are investigating mechanisms which control transient expression to maximize what's present to avoid the need for redosing. At the same time, it's not clear to us or the field how significant or urgent the need for redosing will be because right now, the vast majority of our patients are responding very, very well. So I think it's true that it's not unlikely that ROCTAVIAN will be a lifetime cure. But I think we have many, many years to fix the problem. And we would like to -- I mean you figure it yourself that if look at redosing or joining the patients with something totally different. And we are actively working on this. We don't have anything yet to -- substantial to communicate, but I think that is something we're looking into. And we believe we can remain leaders in the field in this respect. And also that would be useful for exploring gene therapy for other indications outside of ROCTAVIAN anyway.

And as you look to HAE, which could be your third gene therapy product here, where do you see similarities to the prior indications? And what makes HAE attractive as a candidate for gene therapy or other...

So yes, I mean there are -- because it's a relatively large orphan indication, that's what makes it attractive for 1 and 2. There are other products on the market, but there are still issues for those patients and those products are relatively expensive. So I would say that one key -- the key word here is unpredictable. The attacks that are caused by HAEs are unpredictable. Unlike [indiscernible], actually, if you look at hemophilia it's all different. Patients, they can feel when you're going to [indiscernible]. HAE attacks aren't like this. They come out of nowhere. So the patients are still finding themselves between a rock and a hard place. So rock is the fear of potential unpredictable attacks that can happen at any time. And the hard place is the burdensome of chronic therapy today. So the current HAE therapies reduce, but they don't prevent life threatening and emotionally impactful episodes of angioedema. So I think we still believe there is an unmet medical need here. So we do believe that BMN 331 could transform the lives of these patients by preventing those attacks and allowing them to live without fear and constant fear of having a potential attack even when they are on current therapy today. So we have, as you know, opened an IND, and we are just starting to treat our first patients.

And there are some other modalities out there that could work in rare disease, including gene editing. Just curious how you're thinking about that balance here as you look to partnership?

Yes. So that is something that we are looking into. We have had several discussions with potential partners there. Because this is clearly adjacent and related to gene therapy. So it's likely in the future, we'll get into that. But already, we've done -- in the past 18 months, we've done more early-stage partnerships than ever in the history of BioMarin. There were like 12 or 15 of them. And so none of them are truly genetic, but they could lead to genetic. As you know, we have this deal with Deep Genomics that is pretty exciting looking at applying artificial intelligence to accelerate the development of molecules. So stay tuned there. We might get into this space, something we are definitely considering but we have nothing trangible to report.

As a last question here, J.J. Anything that I haven't asked you that you want to highlight here as you look to 22 outlook.

I think we've covered a lot. And also the fact that we -- again, we have -- our manufacturing assets and manufacturing know-how are a key asset of BioMarin. So there are a lot of other companies that are in the gene therapy field are stumbling here. We believe a lot of that because of CMC and manufacturing issues, which -- where we believe we are ahead of the competition here, including some pretty large pharmaceutical companies that have been having some issues recently. So I think that's something that should not be overlooked the know-how and the strength and the depth of our manufacturing abilities for complex biologics and gene virus.

Okay. Well, with that, thank you so much, J.J. Really appreciate your time today.

Thank you. Always a pleasure.

Great. Happy New Year.

You too. Bye-bye.