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

All right. Perfect. Welcome, everyone, to the Credit Suisse Annual Healthcare Conference. I'm Tiago Fauth, I'm a lead biotech analyst at CS. We're joined today by BioMarin. We have Jeff, Chief Commercial Officer; and Brian, Chief Financial Officer for a fireside chat today. We'll try to leave about 5 minutes towards the end for Q&A if there are any questions from the audience.

But I guess to kick it off, let's start big picture as BioMarin is kind of evolving towards larger indications in VOXZOGO ultra-rare. What does that mean in terms of the business strategy, operating leverage investments in the early stage pipeline, and we'll get into some more specifics following that.

Yes, great. Thanks so much. Thank you, Tiago, for having us. Really appreciate it. So yes, here we are in early November 2022 towards the tail end of what has been a transformational year for BioMarin. We're achieving double-digit revenue growth and have turned the corner to sustainable GAAP profitability driven by steady growth in our base enzyme business, the rapid uptake of VOXZOGO globally and disciplined expense management. We're pleased to have increased our VOXZOGO for achondroplasia guidance 4x this year due to this rapid uptake, it has really exceeded even our internal expectations. And following VOXZOGO, we've got ROCTAVIAN. The launch is underway in Europe, this is a gene therapy for severe hemophilia A. And in the U.S., our BLA is under review. We announced a progress report yesterday that the FDA has scheduled their pre-licensure inspection and have made the formal request for the 3 year Phase III data that we're expecting to report in January as we have the last couple of years. This was anticipated as well as the aspect that this is a substantial amount of data, which could trigger the FDA to issue a major amendment and extend the PDUFA date by 3 months. But again, this is anticipated. We talked about it back in August. And for that reason, by the way, we are under active review, just like yesterday, we're going to stick to reporting material milestones for the U.S. BLA review and not get into the daily play-by-play. But back to the beginning, we're executing on our strategy. Again, I'm pleased to achieve the revenue growth that we have this year and continue to aspire to margin expansion through disciplined expense growth, and at the same time, reinvesting back in the business and building out our early stage pipeline for future launches beyond VOXZOGO and ROCTAVIAN.

Got it. That's perfect. And perhaps just kind of following-up a little bit on the regulatory side. Historically, the timing for the readouts. The early readouts of the full cohort is around January, right? So once you get those data, you did allude that you present that as early as you have. Like what is the potential time line for you to actually file those data with the FDA and get more visibility on the new PDUFA potentially? Because there are a lot of moving parts, and I know it's hard to predict some of those. So yes, to the extent that you can provide some rough outline on what the time line could look like?

Yes. I do appreciate the interest there, Tiago, and it's new news, and that would be speculative, that probably falls into the play-by-play category, we'll stick to those material milestones. But I did indicate that January is when we've typically reported that data. So I'd ask you to look out for that.

Yes. That makes sense. So perhaps turning to Europe then, again, you have some lunch prep, like can you -- Jeff, can you kind of update us where you are in terms of the reimbursement agreements and also talk about the actual kind of patient journey and logistics in order to those patients? Once we get reimbursement, that is no longer the bottlenecks, what are the potential bottlenecks in these early stages of the launch?

Right. So thank you, Tiago. The European launch is underway. We haven't reported patients treated yet, but there is a number of steps -- important steps to get to that point. The first thing I'd note is a European launch is really at misnomer, there is no European state per se. So the European launch proceeds market-by-market, and we always start with Germany as the largest market in Europe, the one place where we can get early sales, while we're negotiating full price and reimbursement and also the place where we typically get the highest price. So no surprise that we're focusing on Germany first. And just to think about what does the European launch cascade look like, in parallel, we need to navigate Germany, and then France and Italy and Spain and the Netherlands and so on. And each one of those is its own separate market according to its own rules, reimbursement approvals, cadences. So all of those things are going on in parallel and they all kind of add up at the end of the day through European launch. In Germany, we've accomplished a number of things. We got a price listing in Germany in September. We have labeled commercial product sitting in our warehouse now, ready to ship to pharmacies. We have pharmacy agreements in place to handle ROCTAVIAN in the quarter. We've done dosing site identification and in-servicing to make sure that those hub dosing centers in Germany are [Technical Difficulty] products. We've got a co-diagnostic program in place, and this is really important, because one of the screening tests for ROCTAVIAN is to be AAV5 negative. So every patient needs to go through a screening process to make sure they're not AAV5 positive. So we've got that co-diagnostic in place. We've made a lot of progress. The last piece to fall is the outcomes-based agreement with individual German insurers. Why do we have that in the free pricing period? We have that to cover the substantial -- well, what might be perceived as a substantial risk against a substantial cost of therapy. So we can cover that risk for German payers. And we also know that German players are interested against a very substantial price tag of getting to economic terms and we're negotiating that right now. We think we're very close to having those outcomes-based agreements in place in Germany. And once that piece is in place, and we're going to be pushing patients for commercial treatment. In terms of the patient journey, it's not all that complicated, but there is a number of important steps. One is the decision to be treated with a gene therapy is a material one and one that shouldn't be taken lightly by patients were their prescribers. So there's a process of education about gene therapy in general and about ROCTAVIAN more specifically. There's this -- in Europe, there's this notion of shared decision-making between the physician and the patient. That's a process to get through, it's not all that complicated, but it's important. I mentioned the AAV5 screening, there is also liver health screening which is important, but not all that complicated. What we're talking about here is liver enzyme testing, ALT and [ AST. ] That's available everywhere with one or 2 days turnaround, and then a liver fibrosis test, which would typically be an ultrasound, which is probably a one to 2 week on the schedule type of an event. So decision to treat affirmative AAV5 testing liver health testing, making sure that there is reimbursement coverage from health insurer, and it's scheduled for infusion. And that's probably the simplest step. It's about a 3, 4 hour infusion, it can be done in any of the dosing sites and that's the final step. And then there is follow-up following the procedure, and we've got that organized and prepared well.

Got it. Perfect. So -- and when you're thinking about the rollout to other regions within Europe, again, you're going to have to have a country-by-country dialogue there to get approval. What would potentially early access look like for this indication? So it's a little different than what you were for -- VOXZOGO ultra-rare. And so is that a potential source of near-term revenues? It doesn't seem like that's an expectation, but how would that roll out to other regions look like?

There are some early access opportunities, Tiago, and we'll be pursuing them consistent with our previous experience with other product launches. There is markets in the Middle East, for example, Saudi Arabia, United Arab Emirates, Qatar and also in Latin America, Argentina, where we've had a history of being able to treat patients relatively early on, on an inpatient sales basis, and we'll be pursuing those markets for ROCTAVIAN. Those are probably good opportunities earlyish in 2023.

Got it. Perfect. Understood. And what about the pricing evolution and pricing been? So again, right now, you only have some seamless, so what could be net pricing in Germany? In the U.S., you have a report that kind of sets a pretty high bar. How should investors think about the range and how wide that range of pricing across different geographies could look like? Because, again, relative to the legacy business or the base business, there's generally a narrow band, how wide could it be for a drug like ROCTAVIAN.

Actually, the band that we're expecting for ROCTAVIAN may not be all that different from the pricing band that we've experienced for our other products at the current exchange rates. So we guided in August to about $1.5 million net per patient in Germany. It's probably coming in a little under that but not materially under that. That's one benchmark for Europe. In the U.S., as you noted, ICER recently completed another review of ROCTAVIAN relative to Hemlibra and concluded at a presumed price of $2.5 million list that ROCTAVIAN would provide $4 million of lifetime savings for a patient against treatment with Hemlibra. That's a really powerful statement, because it's exactly those health care system savings that will be a very powerful motivator for payers, and we intend to leverage that point. We haven't set a price in the U.S., but ICER used a $2.5 million presumed price. One thing to note is, in the U.S., if we set a list price of $2.5 million, that's what the payers pay, but we'll receive a net price of less than that based on discounts, I think 340B discounts in the U.S. for hemophilia treatment centers and reserves against the outcomes-based agreements that we intend to have in place to support the reimbursement of ROCTAVIAN.

Got it. And we did receive several questions on the actual structure of the outcomes-based pricing. And it's kind of rough to discuss that without getting to a lot of the details. But can you just tell us in terms of the assumptions used for that kind of modeling? Is it -- how consistent is it with the clinical experience? I'm assuming fairly so, but -- yes, any additional comments there.

Yes, I could start with that, and Jeff can add any of the real-world tactics that we're experiencing out there. So what's most important conceptually with the outcomes-based agreements is that our goal is to stand behind the value proposition of ROCTAVIAN financially and that the payers can feel comfortable that this investment is protected. And of course, the underlying key assumption or variable in the agreements as they operate would be the durability of ROCTAVIAN's effectiveness over time and whether or not they might have returned to their previous standard of care. So importantly, we look to our clinical trial experience, both the Phase II data, which, while it's a smaller number of patients have now reached 6 years. And I believe most, if not all, are still not using their former standard of care. And then the Phase III study, which, again, 2 years were reported last in January, expecting 3 years of January, that's a 134 patients. And then just a reminder, in -- when we reported the Phase III 2 year data last January on the set of 134 patients. There were 17 patients that based on when they enrolled in the study had actually reached year 3. So we're expecting that those same 17 patients when we expect to report the 3 year data this coming January, would have those same 17 patients now at year 4. So that's another durability point that we plan to use as the basis for estimating how these outcomes-based agreements would operate. And importantly, of note, ROCTAVIAN has been very durable in the clinical trial setting. Only 6 of those 134 patients at the 2 year mark for the Phase III study have resumed some form of their standard of care. And in some cases, not -- that was not always full prophylaxis, but going back to on demand. So we plan to use that data set as part of how we will estimate the outcomes-based agreements will work. But you can think of them tactically as a pro rata value return to the extent that ROCTAVIAN stops performing, because the patient returns to their prior standard of care. It wouldn't -- these agreements wouldn't trigger liabilities for a single spontaneous bleed, which may not even be related to the drug, et cetera. So you can imagine in these contracts, and this is part of why it does take some time to get them executed and negotiated. They'll be at the level of detail where it's very clear whether that patient is in the outcomes-based agreement liability category or in the ROCTAVIAN continuing to perform category. And I'd also note that because we've been at this for more than a couple of years now, we believe that we've got some proprietary language in terms that will be very useful for ROCTAVIANs and payers that we think is competitive. So that's another reason why we won't share every detail in the structure of the agreements could vary country-by-country. One note there, because this has gone back and forth over the ROCTAVIAN development journey, especially outside of the U.S. is the concept of either pay upfront, in which case you have this liability exposure in the outcome-based agreement or pay over time, in which case, if a payer is making annual payments, the requirement for them to make that next installment, if you will, would be based on whether ROCTAVIAN is still performing. We had, in our experience early on, most folks expected that these gene therapies with several years of potential durability would be in a pay-over-time model. It is sort of logical to match the cash flows with the value that's being realized. But as we went out there and did payer diligence, we learned that this was again before the 2020 review cycle. We learned that systems aren't necessarily set up for that, especially outside of the U.S. Many health care providers, again, whether they're national or commercial private payers don't manage long-term balance sheet liabilities. They live in a world of cash flows and current year P&L. So again, difficult to picture how they might manage these longer-term obligations. And so, over the last couple of years, the pendulum had shifted to more of this pay upfront model, including outside of the U.S. But we're seeing some countries are actually interested in pay-over-time. We're showing that we can get out there and negotiate unique special contracts with these payers for ROCTAVIAN. So it's going to be varied, but what's most important is that ROCTAVIAN has shown durable effectiveness in the clinical studies, and we plan to back that up in the commercial setting.

Got it. Understood. And I do want to pivot a little bit because I want to cover a couple of other things in the business. I know that's where most of the detention has been. But beyond that, let's talk a little bit about VOXZOGO. Again, can you just give us a brief remarks on where you stand with that launch. Japan seems to be a bright spot in terms of having patients already identified in the system, so that is definitely a net positive. So how should we think about VOXZOGO going forward? We've already raised guidance a few times, but how much potential is there for that molecule yet?

Do you want a take that?

Yes. Thanks. VOXZOGO launch is going very well. We're in the middle of our global launch cascade. By the end of Q3, we had reported that we are active in 29 markets. And just a reminder, our global footprint is 78 markets. So we're about halfway into our global footprint. Importantly, we have full reimbursement in most of our strategic markets. So places like the United States, Germany, Japan, France and Italy, we've got full price on reimbursement. And we expect those strategic markets to be a driver of growth through 2023. We're nowhere near ceiling penetration of patients in any of those markets. And the smaller markets that we're in places like the Netherlands and Switzerland and Argentina, individually, those markets are smaller, but there are so many of them that collectively -- as we're adding patients slowly, collectively, they add up to another big driver. So through 2023, I expect a combination of the strategic markets driving growth, the secondary markets that we're in driving growth and our ability to access or continue accessing new markets that will drive growth. It's a really powerful growth story going into 2023.

Yes. And if I can add. Thanks, Jeff. Maybe a couple of other comments on beyond the launch, which has gone really well, but a couple of other key considerations for the overall commercial prospects for VOXZOGO. So first, it's beyond the sort of global cascade that Jeff mentioned, this is a larger patient population for BioMarin. We got to this $2 billion-ish revenue mark we're at today with these ultra-rare orphan drugs, we're talking 100s, if not 2,000 or 3,000 patients. There's over 20,000 achondroplasia patients in our commercial territory. So a larger patient population. And then while VOXZOGO for achondroplasia is not a lifetime therapy, it's indicated just through the -- while the growth plates are open, that's a long time. So if you pick your starting a young child and take that child taking VOXZOGO until their 17 or 18 and their growth plates closed, that's a really long durable revenue stream for BioMarin. And then over time, while those kids move on and become adults, we'll be looking to the incident population. Right now, we're mainly out there marketing to the prevalent population. Then the last thing I'd say is, stay tuned to learn more from both BioMarin and investigators on the potential to expand VOXZOGO beyond achondroplasia. So there's an investigator-sponsored study running in a number of other genetic short stature disorders by Dr. Dauber in Washington, D.C. Dr. Dauber reported interim data back in May on a small number of patients through 6 months. We expect that he'll have his one year report at some point in the first half of next year, which should provide additional information for how VOXZOGO might be able to help other genetic short stature conditions beyond achondroplasia because of the mechanism of action. So we're doing work internally to really try to understand both Dr. Dauber's data, as well as what the potential indications or basket of indications could be, what the clinical trial and regulatory pathway would look like. That's going to take conversations with the regulators, but potential big opportunity that we're excited about, look forward to sharing more on that soon.

Got it. Understood. And perhaps just thinking a little bit more about the financial aspect and the business strategy going forward. You have alluded to operational leverage a couple of times. It sounds like there is a space for margin expansions. Usually provide guidance in the Q4 earnings call. So yes, how should we think about that for BioMarin going forward since the drivers of growth seem to be like changing dramatically, right?

That's great. Yes. No, thanks, Tiago. It's a great topic, great question. So first, I'll now -- since we've talked over the course of this year, and I mentioned it earlier that this is sort of our first year of the journey into sustainable GAAP profitability. That's important because we acknowledge it did take a long time. And we do have, again, revenues of approximately $2 billion today. So what's important to note there is while we've been breakeven on a GAAP basis, some decreasing losses, we've earned non-GAAP positive operating income in the last few years. That was with intent, because our strategy had been to build this company for growth. We want to be a large global biopharma. We could have managed the business to a higher profit margin today based on the current business, but we wouldn't have an innovative pipeline and we wouldn't have the global reach and capabilities that we do. So what's important to note is that most of the infrastructure has been built. It's the same manufacturing and SG&A infrastructure that supports this current business, that's going to be launching -- that is launching VOXZOGO and it's going to be launching ROCTAVIAN. It's going to take some incremental investments in Jeff's area, because establishing a new therapy for achondroplasia is new. We're going into a highly competitive severe hemophilia A marketplace that's going to take investment to be competitive and establish ROCTAVIAN in Europe, hopefully, the U.S. But I'd add that it is marginal and incremental and it fits in our overall infrastructure. And we believe that we can continue to make those investments both in SG&A as well as in R&D, which will be increasing on an absolute dollar basis, but decreasing as a percentage of revenue. It's that substantial revenue growth that more over time, we expect will drop to the bottom line.

Understood. So we can open up for questions if there are any from the audience. But while we were queuing for that, just one question, because we haven't talked about the pipeline, right? And that's something that sometimes is a little bit overlooked. I know you guys take a pretty cautious expense in terms of talking about expectations for data. And it feels like there is a lot of things that are overlooked there. So again, how does the current pipeline for BioMarin fits within that strategy of larger indications, a little bit more leverage potentially going forward? How are you guys feeling about the earlier stage stuff?

Yes. No, that's great. Thank you. So first, on the pipeline, just to note, I mentioned the potential for VOXZOGO outside of achondroplasia, that could evolve into a late-stage clinical program here in the foreseeable future. And then for ROCTAVIAN, while there's a base indication that has label restrictions such as seronegative to AAV5 antibodies, no current or prior inhibitors to Factor VIII, severe hemophilia A. We've got a development program going that is looking at how ROCTAVIAN effectiveness in those populations, which could substantially expand that label. So we know that on the pipeline, both VOXZOGO and ROCTAVIAN have the sort of pipeline within the product type opportunities. But with that being said, we're starting to see the fruits from what was our pivot to pipeline initiative a few years ago, also a significant reboot and a lot of investment in our early stage research. We've got more clinical programs in the pre-IND research phase than we ever had as a company. We'll look forward to reporting updates on our BMN 331. This is gene therapy for HAE that is in the clinic. We're planning to file an IND, BMN 351 for DMD here by the end of the year. BMN 255 is a small molecule for kidney disease in the clinic. We're also hoping to file an IND by the end of next year for gene therapy for hypertrophic cardiomyopathy. This is our partnership with DiNAQOR. We've got some very interesting early stage preclinical data, both in animals as well as ex vivo, potential very large gene therapy indication for a very serious disorder. So those are probably the few to look at over the next year, but we're excited, and again, we've got more assets behind those that are in those stage minus 2, stage minus 1 getting close to pre-IND. And by the way, that includes another 6 gene therapies beyond the couple that we've already talked about. So with ROCTAVIAN's success in Europe and hopeful outcomes in the U.S. that could really give credibility and power to BioMarin's gene therapy platform.

So we do have questions, yes, please.

Brian, can I ask a question -- a follow-up question about the outcomes agreements? I'm just really intrigued, I mean, 6 year data is clearly fantastic. I wonder whether there is a drop dead date where the payers no longer have any recourse to you? Is it 10 years down the line? Or do they still have the right to close some money back every year depending on the failure rate of the [Technical Difficulty]

Yes, great question. In case -- the question was how long we're exposed? And is there a cutoff point under these outcomes-based agreements where payers can not come back to BioMarin? That's a great question if it wasn't clear. We're expecting that all of these agreements will have a very fixed term end date. And it could vary, again, based on each country's circumstance and the price in that country. But we talked about 4, 5, 6, even 8 years by all means, there would be an end to the BioMarin exposure.

So I think that should conclude the presentation. Again, yes, I really appreciate you guys spending at the CS conference. Thanks a lot for the time and the insights. Great.

Great to be here. Thank you, Tiago. Thanks, everybody.