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

Good morning. Welcome to the third day of the Bank of America Healthcare Conference. My name is Geoff Meacham. I'm the senior biopharma analyst here at BofA. And we're honored to have BioMarin Pharmaceuticals here on stage with us. And speaking on behalf of BioMarin is Chairman and CEO, JJ Bienaime; and also Brian Mueller, CFO. So guys, welcome. Good to do face-to-face. So I guess, JJ, just give us a few minutes of prepared kind of a background, and then we'll get right into some questions.

So I will make some very brief introductory comments. So thank you for having us, Geoff. It's a pleasure to be here. So we recently reported our first quarter financials. So we're off to a very good start for the year. Obviously, all eyes are on the VOXZOGO launch, which is our first full quarter since we were approved in Europe and the U.S. in Q4 of last year. Actually, we really launched it in the U.S. on January 2. And the launch is going better than we anticipated. We've raised the guidance twice already, launching grades in -- I mean, ex U.S. and in the U.S. Our revenues are higher ex U.S. than in the U.S. because there are more patients and because we started a little earlier, ex U.S., but the U.S. launch is doing great, too. We also -- the other, obviously, focus of investors for BioMarin is regulatory status for ROCTAVIAN. As you might know, we filed for ROCTAVIAN -- refiled for ROCTAVIAN in Europe in the summer of last year. We are gearing up to file in the U.S. by the end of next month. The interaction with the European authorities has been pretty positive. So we anticipate a so-called CHMP opinion, which is basically the approval, sometime this summer. Actually, it could -- there's a good chance to it actually happen by the end of next month, but we cannot guarantee that. And this is going to be our first year of sustainable GAAP profitability. We were GAAP profitable in Q1. We anticipate being GAAP profitable for the whole year. So again, we're off to a good start, and we have the largest preclinical pipeline we ever had in the history of the company. And we should have revenue solidly above $2 billion this year.

Great. Thank you. So let's talk a little bit about ROCTAVIAN first, Europe and then U.S. So as you have discussed the filing with the CHMP, the European regulators, any surprises in your conversations with them, just give us a sense for maybe the pace or the tone of those discussions?

So I mean, no surprises, again, we filed almost a year ago. So we've had -- for the European reviews, regulatory review is pretty qualified in terms of when you meet, at what time you meet, so we had several meetings with the regulatory authorities there following our filing. And at every meeting, they have questions, they divide them between major objections and minor objections as you go through the cycle at every meeting, and you knock down the major objections one by one. And I would say, based on the most recent meeting, we believe we have answered all their questions regarding major objections, and the interaction has been pretty -- I mean the regulatory authorities in Europe are very good communicators. They are pretty transparent. So you generally know where you stand. I think as we said in our conference call recently that we are starting to feel a little bit like the last few weeks of the interaction we had with them on VOXZOGO, which led to the approval last year. And I would say we also are somewhat optimistic because also we can talk about it on the recent genomic analysis of some patients that was presented on Monday at the World Federation of Hemophilia meeting, which is very positive for us. And so all this combined, and also the fact that we -- our manufacturing facility was inspected by the European authorities over 2 years ago, actually, they expected it like 1 week before lockdown. We feel lucky there. And so our manufacturing facility in California, gene therapy facility, is already accredited in Europe and once they inspect -- once they do the pre-approval inspection and approve, your facility is good for 3 years. So they don't need to come back and reapprove their facility. So assuming we get approval sometime this summer, we're in pretty good shape to launch here.

Perfect. Yes. In the U.S., the process has been a little bit more unpredictable. So...

So in the U.S., first of all, we are -- so we're behind in the sense that the difference between the U.S. and Europe, like Europe told us last year that we could file with a 1-year data because last year we only had 1-year data. And then knowing that by the time they would have to make a decision, the 2-year phase we did, would be available and became available in early January. So we knew it was a kind of pretty well organized in terms of the time lines. The U.S., as you know, in the CRL, they told us they would like to see 2 years of data. So obviously, we haven't been able to file in the U.S. last year. Well, one could say, well, how long -- why is it taking you so long to refile in the U.S. because you've got the top line 2-year data in January, but it's because it's a whole refiling in the U.S., and we have to do a very thorough analysis of the 3 year -- sorry, the 2-year Phase III data and consequently, that takes a little time. There is there is nothing extraordinary about it. And -- but now we believe we're in a position to do so at the end of next month. So of course, as compared to the European regulatory authorities, we've had fewer -- much fewer interactions with the FDA. It's going to start now as we get ready to refile and then there will be some significant interactions. That's why we have much less visibility at this time and predictability with the FDA, but hopefully, that's going to change over the next few weeks.

Got you. But there's nothing that you haven't done as part of the natural filing process to have data that you previously, as part of the package, you have already submitted, it's just maturing.

Well, again, remember, when we filed in late '19 and early '20, it was an accelerated filing. It was based on 18 patients with 6 months of data, mainly Factor VIII levels. And we did it because we had a pre-BLA meeting with them, and they were -- I don't know if you remember, they issued some guidelines in early 2020 about what were -- what was the hurdle necessary to be able -- for gene therapy, hemophilia A, I mean, there are published guidelines, you can check it out. They say, if you can do file for accelerated filing, you have, I think, 60% of your patient is about 40% Factor VIII levels at 6 months. We passed that hurdle and consequently, we filed. In retrospect, it was somewhat bold to do that with just 18 patients and 6 months of data. This is a much different filing here. We're going to file with 132 Phase III patients with 2 years of data, some of them 3 years, with a clinical endpoint of annualized bleeding rate. And also, we have also another 16 patients or so, 15, 16 patients of the Phase II that have almost 6 years of data and that value of data. So it's a much stronger filing in terms of definitely efficacy, clinical end point, and we have a lot of safety data that we didn't have at that time.

Right. Yet from a pricing reimbursement sort of access perspective, you guys had talked a lot about that prior to the last filing. And maybe any updates to that as you look to Europe and then the U.S.

Do you want to take that one, Brian?

Thanks, Geoff. That's one area where, while the response letter, of course, was disappointing and a surprise, the time since then has really benefited the market preparation and launch prep for this round. We were ready to launch that, that first time, whether it be in Europe or the U.S., we had done a lot of market research, engaged with the patient community as well as physicians and payers. So over the last 2 years to continue that market preparation, there's safe harbors in terms of what you can -- of course, we can't market ROCTAVIAN in the U.S. until it's approved, but you can do gene therapy education in the U.S., we can get access to the payers before approval. So that additional time, plus the additional data, as JJ mentioned, that the first filing was a relatively limited set of data, so to be able to now talk to payers with the Phase III data and now have 2 years of 132 patients of data, it's been helpful on the market prep.

And now you have the ICER commentary, too, which was helpful.

Yes.

Yes. And interestingly, the ICER analysis, which supported ROCTAVIAN being cost-effective at a price of $2.5 million was before the Phase III full size data was available.

It was 2 years ago, they did their analysis before we had any Phase III data. So -- and also regarding Europe because we are likely to get approved in Europe before the U.S. I mean 2 comments, I mean, first I think that, of course, U.S. investors and our is focus is always on the U.S. and U.S. is the largest pharmaceutical market in the world, so it's very important. But we're showing with VOXZOGO that actually ex U.S. market for us is larger than the U.S. market, so very important. And it will be the case for ROCTAVIAN, and there are significantly more patients outside of the U.S. The price would be likely a little lower outside of the U.S., but not half the price of the U.S. So where we've done a lot of payer research in Europe, so a little bit more advanced in Europe, because we're in a prelaunch mode basically right now in Europe. So we've had a lot of interactions with payers in Germany and in France and Italy. And Germany, which is where we're going to launch first, you might remember a few years ago, we thought that we were ready to offer a pay over time, so to help the payers alleviate the cost of therapy. They are not interested in pay over time, which was a surprise to us. But I think the reason is that they work on an annual fiscal budget, and they don't want to commit to a liability of having to pay us 3 years from now. And that's true in Europe and the U.S. So -- but what they are very interested, and Brian can talk about all the accounting and revenue recognition impact, is outcome-based agreement, so -- because it's very low risk for them. So that's something we absolutely are going to be offering in Europe and also very likely in the U.S., whereby -- so they're going to pay -- actually our price in Europe, we anticipate it to be at launch in Germany at around $2 million. So they're going to pay $2 million, but then you're going to have a guarantee that if we haven't quite determined yet, it's going to be 5 or 6 years, but if the patients go back to prophylactic Factor VIII therapy or Hemlibra, we would -- let's say a patient after 4 years doesn't respond anymore, doesn't have bleeding control, needs to go back to Factor VIII injection. We will pay the payers back for that. And we know based on the Phase II data and some emerging Phase III data, it's going to be a very small percentage of patients. So actually, there is no -- it's kind of a no-risk proposal -- proposition for the payers because they know how much these patients cost them and they're very expensive. So assuming -- so if you do $2 million, that's probably less than 4 years of current therapy. So that's kind of going to be our approach in Europe and likely the U.S. You want to talk about the U.S. a little bit and also the accounting treatment of this, Brian?

Yes, sure. Thanks, JJ. So yes, so first of all, it was interesting, a few years ago, when we and others were talking about launching gene therapies, these higher-priced, single-dose administration therapies, it was -- pretty much everyone went in the discussion to the pay-over-time annuity model. It sort of made sense, match the financials to the period of time over which patients and payers are realizing the benefit. But we realized, as J.J. noted, that systems are not set up for that, payers aren't interested in it. We observed that in the Zolgensma launch, even in their launch press release, they pointed to, here's our specialty pharmacy, if you're interested in pay over time, we've heard that there hasn't been a lot of uptake on that. So taking the pay-over-time model off the table, if it's pay upfront, it's really important to us to stand behind the value of ROCTAVIAN. And so by offering these outcomes-based agreements, which we think we have some novel structuring to these agreements, so we're going to spare the details until hopefully we're actually launching. But you could picture a model where it's a very structured financial arrangement, where whether it be a patient resuming prophylaxis on year 1, year 2, year 3, year 4, having a structured reimbursement model that is going to give essentially the full value protection for those payers. So while it's an expensive therapy upfront, they've got confidence in the value. Now, what's interesting, as JJ mentioned on the accounting side, is that we can use -- our expectation is that we will use our actual experience in the clinical trials to estimate sort of the reserves for these potential liabilities. And we've had a very low failure rate, if you will, less than 5% of patients resume prophylaxis in these first couple of years. So if that's the basis for our reserves, if you will, this will all be accounted for in the existing gross to net that we have that we'll report. So you'll see just the net sales after these estimates, which again, we imagine would fit in the range of our typical gross to net for our other products, which is in that 10% to 15% range. So we'll set up these liabilities. And then to the extent we have to fund any of these outcome-based agreements that will come out of those liabilities, you won't see the volatility in the revenue line because we'll be providing for those liabilities as we recognize and report revenues.

Makes sense. So we talked about the regulatory. We talked about the reimbursement access. What about the sort of physician and patient reception? Have you guys done sort of surveys over time? Like what could -- what do you think, year 1, maybe year 5, like what is the kind of the potential trajectory with respect to patients?

Yes. Obviously, that's a difficult model to put together. So there is a lot of variability because if this patient -- each patient is about $2 million, you imagine the range of availability here when you just add another 50 or 100 patients. So -- but we've done marketing research after the 1-year Phase III data last year. We just completed an update of the marketing research with a 2-year data. There's still major interest in the product. I think whether it's hematologist or patients, I think there have been different surveys. And I think the most recent one, I think, hematologists say, they would put 30% to 40% of their patients on gene therapy over the next 3 years or so. So we know the interest is there. But the question is how quickly is it going to take off? That's very difficult to model. But we are ready with -- we have an ample supply here. I can give more details later on that. So the interest is there from physicians and from patients. We have some data from Europe. We have the data from the U.S. It varies a little bit between Europe and U.S., but overall, there's major interest. So the issue -- a big picture, they are over 130,000, 20,000 patients with hemophilia A in what we call it BioMarin territories, it's U.S., Europe and some countries around the world, but that exclude India, China and most of Africa because that would be double that number. So over 250,000. So if you take 120, about 50%, 60% of them are severe hemophilia, which is going to be our initial target, which is about, let's say, 50,000 patients. And then initially at launch, later, we think we can address the larger segment, but at launch it would be adult patients only, severe hemophilia A patients and patients who have no preexisting antibody to our vector, which is [ AAV5 ]. And when you do that, you end up then with an initial commercial target of about 30,000 -- I mean 25,000, 30,000 patients. So that's still a very, very big market. So let's say, we can get to 30% of those in 3 years, that's a very large number of patients, especially considering the anticipated price of the product. So I'll get back to manufacturing capacity. Do you want to add anything to this, Brian?

Yes. No, I would just -- again, that's an area where the passage of time, while we've had this delay over the last couple of years, it's been continued opportunity for patients, physicians to get educated on gene therapy. There's been a lot more media and public discourse. So I think that is helpful for us. The only other thing of note perhaps is people think about this -- if it's a onetime dose that you'll get all these patients early and then what happens to the revenue curve. But as J.J. mentioned, between the dynamics of potentially expanding the label over time in getting to those other hemophilia A patients and the dynamics of a global launch country by country, over time, we model ROCTAVIAN revenues as a steady growth curve as opposed to what Gilead saw with hep C and that sort of curative curve.

Yes, there will be a good cadence of the global rollout. But are there any nuances there with respect to how physicians in the U.S. what could adopt it and perceptions either of ROCTAVIAN or for gene therapy overall versus Europe or Japan, et cetera? Or is it like a traditional market?

I mean based on market -- recent marketing research, again, it doesn't look like there are significant differences in terms of clinicians. So -- and also, although interestingly enough, one aspect of the Barclays research that surprised us, was that, as you know, there are now a lot of patients on Hemlibra, although we see not the majority of severe hemophilia A patients. And the patients we interviewed in the research, some of them were on -- most of them were still on recombinant Factor VIII injections. And they said that they were planning on going directly from Factor VIII to gene therapy and skip Hemlibra, which was a positive surprise for us. We didn't anticipate that. We'll see what happens in the real world, but that was kind of interesting.

Perfect. Okay. Well, let's switch gears to VOXZOGO. So maybe just give us a sense...

Let me -- do you mind, because there's been a big issue about the theoretical oncogenesis risk, if I can say a few words about that?

Yes. Yes, let's talk about that.

Because we had this presentation on Monday at WFH, which I think is very critical to answer the question of the theoretical oncogenesis risk of AAV gene therapy. So we presented 2 very important analysis. One, we had -- there was 1 patient that was treated over 2 years ago in our Phase II trial that developed a tumor of salivary gland, which we believed -- it was believed by investigators and the scientific advisory committee that it was not [ regulated ]. Now we've proven with deep genomic analysis of the patient tissue that it's absolutely unrelated. So that's one good point. The second good point, we also did, as you might remember, in our Phase II and Phase III trials, we had patients -- we had a few patients that had a liver biopsy, 5 patients actually. And we did also genomic -- and none of those patients has any problem with their liver, in terms of liver tumor, but we need a genomic analysis of their liver cells. And we've demonstrated them together. You can see that in the WFH presentation that actually the insertional rates of ROCTAVIAN is lower or at worst case, the same as any wild-type AAV insertion rate. Everybody in this room, everybody has AAV circulating in their body. And some people do get cancer, but not everybody gets cancer. It's consequently, the likelihood that you will get a risk of oncogenesis with ROCTAVIAN is extremely low. And I would say the [ insertional ] rate is actually lower than several order of magnitude lower than what you get naturally from just flying on an airplane and the kind of stuff on the day to day life. So to me, this is very critical to document the safety of ROCTAVIAN and actually AAV gene therapy in general. Sorry, and now we can go to VOXZOGO. I just wanted to make that point.

Yes. No, absolutely. So VOXZOGO, kind of the same question with respect to U.S. and Europe. I know you've just launched essentially in both regions. Give us a sense for kind of the types of patients that have enrolled in the therapy, the early launch dynamics.

[indiscernible]. Do you want to take that, Brian?

Yes, sorry. No, it's been great to observe the early launch dynamics. Just a reminder, VOXZOGO was approved in Q3 last year in Europe. So European launch first for us was somewhat unique. And then in the U.S. approved late November, so around Thanksgiving and then you get right into the December holidays. So as JJ noted, we essentially really launched at the beginning of this year. So fair to say that the momentum we're observing is just consistently positive across the board, whether it be access patient interest, physician interest, pricing and reimbursement. So for all of those really to be lining up well in both the U.S. and Europe is what we're observing. And we're trying to be transparent with the same data we're measuring and sharing that with the investment community, whether it be a number of countries we're selling in, number of patients on drugs -- are on drug, we reported on that in Q4, almost 300 patients. What's interesting is that with Europe first, typically, a European launch requiring country by country, reimbursement negotiations. Some countries take a while. There's a complicated health technical assessment dossier that's required that gets reviewed, several in-person meetings over the course of months, but to have some of the early access countries, like Germany and France, be available to us and to get VOXZOGO early access and get the momentum there, we're seeing it in the patient numbers. So that's why we reported the proportion of U.S. and Europe patients. Most of the patients, most of our revenues through the first quarter are coming from Europe. In the U.S., although it's a little bit behind, it's rapid access, this one large market with relatively open pricing. So typically, with a U.S. launch first, you're going to see more rapid growth in the U.S. We expect that. It's just a little bit behind with Europe up first.

But there is no reimbursement issues. I mean it takes a while as usual. But from the time of patients, so we track that very closely as patients say, decide they want to be or their parents, they want to be on therapy. On average, it takes 23 days from that decision point to patients receiving his or her first injection.

Right. And the level of awareness in the achondroplasia community, I mean, pretty...

It's very high. Now with social media, people talk a lot, they share their experience. I think that's going to be very helpful actually to spread the news and to spread the real-world experience of those patients. I think, as I told you recently, we tested the advertising campaign in Europe, and we had a picture of a young girl, who has actually been treated with VOXZOGO over 4 years ago. And when we tested that, the campaign with physicians and patients, they say, well, it's a great campaign, but you should use pictures of real achondroplasia patients. And this -- she is a real achondroplasia patient, except that because the impact already of the drug, she looks very different than an average achondroplasia patient. That tells you something about what's going on here.

Right. If you look at the size of the opportunity and the treatment effect that you see, I mean compare and contrast the peak potential here versus some of your other of orphan drug?

Yes. So there are over 100,000 achondroplasia patients in the world, again, excluding India, China and so it would double that, but -- and about, as you know, our drug is only available -- I mean, approved for under -- I mean until the growth plate closes, which is between 16 and 18, or 15 and 18. So our addressable patient population is around 21,000 patients in the world. So in the U.S. and Germany, so far, it's about $300,000 a year. So it's a $2 billion-plus market. And already -- so this is our most successful launch already. We -- Vimizim, which was our most successful launch before we did $70 million, 7-0, or $72 million first full year. Here, we're going to do solidly over $100 million. So VOXZOGO -- Vimizim is already a $600 million to $700 million drug. So this is -- I think this is going to be our first billion-dollar drug quickly followed or about the same time with ROCTAVIAN, depends on when ROCTAVIAN is launched. So very excited about it. And on top of it, also 2 weekends ago, there was a presentation by Dr. Dauber using VOXZOGO in other indications of genetic source statutes beyond achondroplasia, which would significantly increase probably, I mean, the size of the market. You had some great data in Noonan syndrome and hypochondroplasia, for instance, and we're going to explore these indications in the future.

Right. Yes, that was my next question. As we look at outside of achondroplasia, there are lots of other -- just give us a sense, JJ, for the -- your investments in...

So yes -- so it's early. This was -- I mean it was a sponsored clinical trial, but Dr. Dauber showed in Noonan syndrome, 6 centimeters improvement in annualized growth velocity is in, I think, 5 or 6 patients. So that's very exciting. So very significant improvement. The issue -- so Noonan is actually 4x the size of achondroplasia, but only about 1/4 of them, 100,000 patients are severe, which would be our target. So because we want to go after patients that have more than 3, 3.5 standard deviations stature deficit as compared to unaffected people. And we believe that it's probably likely the case with severe Noonan patients. So next step is that we're going to win this, got the 1-year data. You only presented 6 months of data. We'll see what we got with 1 year and then we'll sit down with regulatory authorities to determine what is the best regulatory pathway to get to some of these indications. So that's very exciting.

Okay. And then the rest of the portfolio, so there's a lot going on. It's interesting that you guys don't get as much credit for having other approved...

Yes, eventually, we will, hopefully. But as you know, we have treated our first patients -- 2 patients now in our [ HA gene ] therapy trial. We are about to -- we should -- by the end of the year, we should be treating our first patient with our second-generation oligonucleotide for Duchenne muscular dystrophy, which has great preclinical data in the MDX mouse model in terms of dystrophin expressions in the 30% to 50% range. So we are pretty excited about that. We have a A1AT inhibitors that should be also in the clinic at the end of next year. And also we should file another IND for gene therapy for hypertrophic cardiomyopathy probably sometime by the end of 2023. So we have a lot of shots and goals and then more coming behind that. As you know, we did -- in the past 2.5 years, we did close to 20 preclinical partnerships. So the fruits of that will emerge over the next 2, 3 years.

And a lot of -- the theme really are a lot of curative intent sort of one and done sort of...

We're trying to go after -- not always one and done, but a significant improvement versus what's already available or first-in-class. All our products, so far, are first-in-class.

Right.

And it's great to have the base business performing so well, especially in this -- where a lot of biotechs are struggling. We're aiming for $2.1 billion in revenue from the total portfolio, double-digit revenue growth, excluding Kuvan in the U.S., GAAP profitability, positive operating cash flows. So that's a good...

And over $1.5 billion in cash. We're in much better position than your average biotech company.

Very much so. All right, guys. Thank you very much. Yes.

Thanks.

Thank you, Geoff.

Thanks for having us.