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

Good morning, everyone. Welcome. My name is Jess Fye. I'm the large cap biotech analyst at JPMorgan, and we're delighted to be continuing the conference with BioMarin this morning. So good news, we're not going to switch rooms for Q&A today. There's going to be mic runners. If you have a question after the presentation, you can raise your hand, and someone will bring you a mic. You can also submit your questions electronically, and I can ask them. So without further ado, let me pass it over to the company's CEO, JJ Bienaime.

Thank you, Jess. Good morning, everybody. It's a pleasure to be back here in person after this COVID hiatus. As usual, this presentation will contain forward-looking statements. Please refer to our 10-K and 10-Q filings. So again, it's good to be back. As you know, BioMarin is really anchored in science. And I would say all the genetic products breakthrough that we've been developing and launching are foundational to our performance. In a nutshell, we believe we are a best-in-class genetic disease company. We believe we are at inflection points of transformative growth. We have a base business of enzyme business that is pretty solid, profitable and still growing, also protected from IRA regulations because our Medicare business is very small. And also, our products are very complex and expensive to manufacture. They're true biologics. And consequently, the barriers to entry are very high. Generally, the average biopharma product peaks 9 years after introduction. Aldurazyme, Naglazyme are 17 and 20 years old product, and they're still growing. So we have a very solid base business that will continue to grow in the single digits every year. But the key thing here is that we are -- now as we know, we launched VOXZOGO last year, which is doing very well, as a first treatment for achondroplasia. This is our strongest launch to date. And now ROCTAVIAN was approved late last year in Europe and for severe Hemophilia A Gene therapy, and we are looking forward to approval in the U.S. by the middle of this year. And our -- as you will see, our profit margin is expanding, thanks to these new revenues. And we're going to leverage our world-class infrastructure we've been building over the past 10 years. We also believe that we have best-in-class innovation capabilities with industry-leading R&D teams. The company has now 8 internally developed generic-based commercial therapies on the market. We are definitely fully integrated and scaled up in terms of discovery, clinical, regulatory reimbursement, worldwide manufacturing. And we are just going to continue to leverage all the advances in generics to continue expansion of the company between now and '25 and beyond. So here is where we start, a recap. In Q3, we had a pretty significant growth here, 12% growth in revenues year-to-date at the end of September of last year; 17% with our Kuvan, which is generic now in the U.S.; very significant operating margin expansion from minus 1.2% to 11.2%; and our GAAP net income is now positive. This is going to be 2022, the first time in the history of the company without any special event that we're going to be GAAP-profitable. We intend to continue to be GAAP-profitable in the -- on a going-forward basis. As you see on this side, I'm kind of preannouncing a little bit on the left the 2022 revenues, which will be around $2.09 billion, almost $2.1 billion. And we anticipate those revenues to actually double or so by the mid-decade to $4 billion to $5 billion, thanks to the maintenance of our base products and the slow growth of our base products and then the continued expansion of VOXZOGO and the launch of ROCTAVIAN. So our strategic priorities are to, from now on, drive sustainable growth and value creation and sustainable profit growth and profitability. So if you look at between now and between 2018 and 2021, again, we had -- in terms of our core products, our enzymes -- mainly our enzymes, as you see on the slide here on the right, Vimizim, Naglazyme, Palynziq, Brineura, Aldurazyme are all proteins, they're all enzymes. They've been growing on a compounded annual growth rate of around 14% between 2018 and 2021. And they're going to continue to grow, as I said, in the future. But obviously, the key drivers of growth is going to be in the short term VOXZOGO and ROCTAVIAN, starting with VOXZOGO. As you saw last week, we announced that we are -- we filed for expansion of our label to patients under 5 years of age in the U.S., under 2 years of age in Europe. So you see on this slide, right now, we've got about 17,000 market -- eligible market. We're going to move to 18,000 with this approval, hopefully, at the end of this year, which is in terms of market size about a $3 billion market opportunity. Also, we have now passed -- at the end of last year, we passed 1,000 children treated with VOXZOGO. We are active in 32 markets and are preannouncing here also our 2022 revenues, which were about $169 million. So we are very comfortable with the consensus sales for VOXZOGO in 2023 based on that. Actually, if you annualize our December sales, we are basically on a run rate already of $300 million a year with VOXZOGO. So a very successful launch, and we are very excited about the label expansion and the future growth. Now moving to ROCTAVIAN. So this is a slide that's showing market size initial -- based on the initial label or anticipated label in the U.S., about 3,000 patients in EMA, 3,000 in the U.S. Rest of the world by 7,000. So that's 13,000 patients also initially for -- eligible for ROCTAVIAN treatment, it's about a $14 billion-plus market. We should be treating our first patient this quarter in Germany. And then Italy, France will be coming in the second half of the year and the U.S., hopefully, by the middle of the year; Japan and Brazil, which will be pretty important markets too, by the middle of decade. So I just want to emphasize here that we do believe that ROCTAVIAN is absolutely a transformational product and has a major impact on the quality of life of severe hemophilia A patient. This is a quote from one of our European patients that has been treated a few years ago in our clinical trials. He says, "The impact of gene therapy on my day-to-day has been a life change. It has been a big change. And it's the peace of mind of leaving day-to-day without being afraid of everything. That is the 3 years that I've had so far in normal life, not bleeding, not even once." So again, on the commercial outlooks, again, we announced in the press release yesterday that we signed our first outcome-based agreement in Germany. We anticipate completing additional outcome-based agreements with large insurance [indiscernible] in Germany this quarter. Testing with companion diagnostic is already underway for some patients. We expect to treat our first German patients definitely this quarter, if not this month. And we are comfortable with the ROCTAVIAN full year 2023 consensus estimates, assuming a late March approval in the U.S. So we will provide a full 2023 ROCTAVIAN guidance when we report our Q4 2022 in February. The interest in ROCTAVIAN is still the same from health care professionals in Europe and the U.S. based on marketing research we did last year. 80% of health care professional in Europe are likely to adopt ROCTAVIAN within 1 year availability. And they think that ROCTAVIAN will capture 35% of the entire severe adult hemophilia A patients in Europe, 75% in U.S. and a 40% market share anticipated for severe adult hemophilia A patients in the U.S. Also in the U.S., we're making great progress. As you know, ICER did a cost-effective analysis over a year ago. But they -- last December, a few weeks ago, they published their final assessment, whereby they determined that ROCTAVIAN is cost-effective in the U.S. at around $2.5 million per treatment, which is also -- which is very good for us. We have already been approached by several large U.S. health insurance companies. They want us -- and it was inbound calls. They called us because they want to implement a favorable policy for our ROCTAVIAN reimbursement in the U.S. And we believe that we're going to have some U.S. outcome-based agreements in place in the form of a warranty guarantee of efficacy with ROCTAVIAN over several years. Also, the FDA completed our pre-license inspection of our gene therapy facility, which is 45 minutes north of here in Novato. They did that in December. We had a few comments from the agencies and observations. We believe they are addressable. Actually, we have already answered their comments, and we are preparing for launch. Also the FDA has also planned some clinical site inspections that will take place this quarter before the PDUFA date. And as we had communicated earlier, we are going to submit the 3-year Phase III data to the FDA in the coming weeks. So with this, one of our strategic priority is aggressive life cycle management of our existing products. So starting with VOXZOGO. Right now, achondroplasia -- addressable achondroplasia market opportunity is around 18,000 patients in BioMarin territory. It excludes India, China and most of Sub-Saharan Africa. But as you know, we had doctor -- we had an investigator-sponsored trial that shows that VOXZOGO is likely to be effective in other genetic form of short statures, and we actually have identified a few indications where it looks like VOXZOGO vosoritide is going to be effective, like hypochondroplasia, they are listed on this slide here. And actually, we've done some marketing research. If you look at those different markets, there are about 600,000 patients between the age of 4 and 17 that could be eligible for treatment with vosoritide that are more than -- whose height is more than 3 standard deviation below average, which mean that they are severely impacted by the disease and could be interested in treatment with VOXZOGO. And we have plans to actually start some studies to explore those new indications. Now on ROCTAVIAN initially, I said earlier, our initial indication initial market is about $14 billion. We have several clinical studies already started to expand the market eligibility. First one on the slide is patients with prior FVIII inhibitors. So it would add another $4 billion to addressable market; patients with active inhibitors, another $2 billion to $20 billion; patients that are AAV5-positive, the vector using ROCTAVIAN, that's another $9 billion; and then treating younger patients right now, the product is only approved for age 17 and above. That would create a total market -- cumulative market opportunity of about $32 billion. Just will highlight also that one of the strengths of BioMarin is our biologics manufacturing capabilities. We own all our manufacturing facilities. We believe that for biologic this is fundamental to control your manufacturing because your product is approved with the plant that makes it. So the plan is the product in some ways. On the right side of the slide, we've had several biologics facilities that have been ongoing for over 20 years in Novato, one in Novato and one in Shanbally, Ireland, which is 200,000 square meters. But more recently, we have built a state-of-the-art gene therapy manufacturing facility, which is already approved, was inspected twice by the EMA and has been approved for usage for selling in Europe. This actually facility has received several awards. And it's the only facility that were for BioMarin product that we start absolutely from ground zero, from scratch, at the end of the plant and the exit, you get the vials package ready to go, ready to be shipped to the hospital. So we have a substantial track record of global inspections and cGMP compliance, and we are very proud of our manufacturing asset here. So with this, as I said, accelerating the pipeline is one of our key priorities here. And with this, I'm going to let Hank Fuchs, our President of Research and Development, say a few words about our pipeline.

Thank you, JJ. It's nice to see everybody in person, and thanks for your support for BioMarin. Over the weekend, we released the most recent tranche of data from our ongoing follow-up of patients who have been treated with ROCTAVIAN. And just to orient you to the slide, we have a group of patients, over 100 of whom were dosed more than 3 years ago. And in addition, we have 17 patients who were dosed more than 4 years ago. So we're accumulating quite a bit of data on durability of ROCTAVIAN gene therapy. 3 years after a single dose of ROCTAVIAN median FVIII levels and 4 years after a single dose of ROCTAVIAN are in the range that we expected them to be based on our prior Phase II study and provide substantial hemostatic effectiveness, as evidenced by the maintenance of relatively low bleeding episodes while patients are off prophylaxis. And to remind you, if you are not on prophylaxis, you'll bleed 20 or 30 times a year. And best standard of care is around 4.8 bleeds per year. And so this represents best opportunity for patients to have both the benefit of low bleeding and unbuckled from the burden of chronic therapy. And in fact, when one looks at the annualized bleeding -- the annualized utilization of FVIII at the baseline, this was over 130 infusions per year, and we've knocked that down in the population to around 8 or 10 infusions per year. So we're very excited about the sustained durability of ROCTAVIAN. As JJ mentioned, we'll be sharing these data with the Food and Drug Administration shortly. One of the concepts that we've been exploring about ROCTAVIAN has had a sustained durability in the event durability continues to decline. And we've learned a lot about controller of protein expression from human studies. And on that basis, we've been able to identify some mechanisms that enable increased expression using small molecule drugs. So some nonclinical data as well as some human liver biopsy data that we've developed from ROCTAVIAN and actually published as indicated progressive transcriptional failure of the episome. So the DNA is still in the liver. But over time, the DNA gets -- the transcription of the DNA into RNA gets silenced. On the basis of that, we were able to screen several small molecule drugs that modulate this silencing mechanism and have identified some promising candidates, one of which is shown on the far right. And just to orient you to the slide, we created an experimental system in which we've been able to deliver the transgene and then silenced its expression much like we see in ROCTAVIAN-treated patients and then add increasing concentrations of this FDA-approved small molecule drug that can be taken relatively simply by patients year -- potentially years after they've received their dose of ROCTAVIAN. And you can see at 1/10 of the concentration of the drug that's used already therapeutically, we can increase protein -- we can increase transcription by 13 fold, which is more than enough to restore expression back to original levels. And in fact, this phenomena is dose-dependent and can actually restore protein expression -- or transcription quite a bit. So the next steps here will be to investigate this in humans. So this is pretty exciting because the concept would be that, again, years out after a single dose of ROCTAVIAN and a factor expression is declining, we can reawaken expression and render the patient in a more stable hemostatic zone.

Hank, and you could apply to other...

And conceivably could apply to other AAVs to the extent that they are experiencing those things. So this is foundational and fundamental to the whole AAV gene therapy field and really comes from the fact that we have the largest and longest duration of follow-up of patients treated with gene therapy. Now several years ago, as it was looking like ROCTAVIAN and VOXZOGO going to work in humans, we had to pivot the pipeline to start steering towards larger therapeutic areas. And I've talked about in the past the concepts of leverage that we're seeking, which is to create therapeutic areas of [indiscernible] within a particular indication to have potentially several different molecular approaches to the indication and to leverage the breadth of platforms that we're able to work in, whether those are small molecules or peptides or biologics or larger nucleic acid-delivered therapies. And so that's been pretty robust in terms of the expansion of the pipeline, also fueled by the fact that as we're -- as the genetic revolution continues, we're discovering more and more conditions, which were in the olden days ran in the family. But now we can understand that they are mediated through a series of genetic disorders in a lot of cases, haploinsufficiency disorders. So in this chart, what you can see is that we're now entering in Phase I trials, and I'll show you some emerging data from our Phase I programs, as well as we have a beat on IND-enabling activities to support the continued growth of the pipeline. In fact, our next 2 INDs are pretty well identified. The 2 INDs after that are pretty well identified. And in the research programs, we've actually, in several other cases identified the specific molecule that's going to be used as a therapeutic. And we're working with our tech ops teammates to develop manufacturing and formulation to enable clinical trials to ensue. In the amalgam, these represent gigantic opportunities for BioMarin based on patient numbers and medical opportunity to serve. So I want to talk about a couple of these with -- and provide you some emerging data. The first of these is BioMarin 255 for progressive renal failure and recurrent kidney stones in hyperoxaluria. This is a well-established therapeutic pathway in the sense that there's already an approved drug. The condition is mediated originally in the genetic form through AGXT deficiency, which results in accumulation of oxalate in the urine, and oxalate crystallites in the urine can cause painful kidney stones and progressive renal failure. The molecular pathway for this is shown on the left and the AGT mutation, which is present in an inherited form and terrible renal disease in children, for which there is an approved therapy, already validates the pathway as a pharmacologically tractable target. And we developed a small molecule inhibitor of glycolate oxidase, which prevents the conversion of glycolate to glyoxylate. Glycolate is then excreted in the urine. On the right is a result of a single-ascending dose study that we've concluded. Now we've actually also concluded the multiple-ascending dose studies and demonstrated the safety, but I want to show you the recently available data. And you can see the placebo at the bottom and in the right in the black -- I'm sorry, on the right side and the black is median -- mean increase in plasma glycolate, an indicator of the effectiveness of the knockdown -- of the inhibition of the relevant enzyme. And the dash line indicates where that FDA-approved product is. So we're about 5x more potent with this molecule in knocking down oxalate production, and we hope to be able to translate that into patients with chronic liver disease who now, interestingly, are found to have epigenetic silencing of the same enzyme. So this is the rare-to-common dream come true in the sense that we can find the genetic disease, which occurs rarely, but the more common form of that through epigenetic silencing and a much more common condition in a subset of patients with liver disease. So we're very excited about these data. Switching now to our next gene therapy, BMN 331 for hereditary angioedema, which is like hemophilia in the sense that it poses a chronic lifelong burden of therapy. And as you can imagine, deficiency of this particular protein genetically resulted in the reduction of an inhibitory protein. And the effect of that is that patients experience these terrible episodes of breakthrough hereditary angioedema. These can be life-threatening. The available therapies on the market establish the therapeutic pathway much like in the case of replacement FVIII therapy in hemophilia. But like in replacement therapy for hemophilia, they cannot provide enduring compensation for the loss of the deficient protein. And in fact, troughs of activity can leave patients vulnerable to recurring episodes of hereditary angioedema. We've shown in preclinical studies with BMN 331 gene therapy that in mutant mice and in nonhuman primates that a dose that's similar to our ROCTAVIAN dose can provide ample expression of C1-inhibitor within an acceptable range in patients to prevent the HAE attacks. Here are some data from the first study of BMN 331 in humans, 2 different dose levels, 2e13 and 6e13. In contrast, actually to ROCTAVIAN, we're actually already seeing a little bit of activity at the 2e13 dose in 1 of the 2 patients but we chose to dose escalate. And the first patient who's treated at 6e13 is almost practically in the normal range to prevent HAE breakthrough attacks. And as in the case of ROCTAVIAN, this represents a pretty substantially valuable effect in the sense that to achieve this kind of a level would require about $500,000 worth of replacement therapy. So if we can document the safety of this in larger number of patients will be looking at a ROCTAVIAN-like development program for BMN 331 for hereditary angioedema to provide the normal physiologic protein of replacement. Now we anticipate several other INDs that are going to be -- that are on the track actually. For example, BMN 351 for Duchenne muscular dystrophy. It's an Exon 51 Oligonucleotide skipper. Unlike our prior programs and unlike everything that's on the market, BMN 351 targets a novel splice site enhancer and is, in fact, more than tenfold more potent in facilitating Exon skipping. And at concentrations that we already know we can achieve in humans based on our experience with drives a person, if we achieve those muscle concentrations in humans with BMN 351, our anticipation will be that there will be more than 20% dystrophin produced. And this is at least twice as high as the amount of dystrophin produced by a much milder form Duchenne called Becker Muscular Dystrophy. So well on our way to initiating treatment of patients with that. Next IND will be BMN 349 for alpha-1 antitrypsin. This is a small molecule rapidly acting, orally bioavailable medicine that binds to mutant A1AT and solubilizes polymers that increase in the liver. And we've shown preclinically that the reduction in polymer burden in the liver of affected animals improves overall liver health. And so we'll be putting this into the clinic with the intention to explore the therapeutic advantages of a pill for alpha-1 antitrypsin liver deficiency. Next on the list is BMN 293 for myosin-binding protein C3. It's a hereditary cardiomyopathy abbreviated HCM. This is gene therapy. We've created a cardiac-specific C3 gene containing [indiscernible] that's delivered by AAV, very similar to our ROCTAVIAN and BMN 331 programs. And we've shown in preclinical models that we can achieve durable rescue of the hypertrophic phenotype in animal models and improvement in cardiac function in a rescue context. And so we're very excited to bring that forward for patients as well. Now each of these new indications are themselves addressing much larger patient populations than historically we've been addressing. As I mentioned on the previous slide, this is -- these are much larger patient populations and historically BioMarin has been addressing. And these are very -- they have the potential to be very high-value mechanisms by virtue of affecting the fundamental genetic defect that's responsible for the condition. And with that, I'll turn it over to JJ to wrap it up.

Thank you, Hank. So again, we got to -- history is to create markets that address unmet needs. We have created the MPS disorder market. We have created the PKU market. We have created the achondroplasia market, and now we're about to create the hemophilia A gene therapy market, and that's the plan on a going-forward basis. So I talked about sustainable growth and profitability being one of our key strategic priorities. So we really now are planning on accelerating revenues and profitability over the next few years, thanks to the expansion of VOXZOGO and the launch of ROCTAVIAN. We anticipate double-digit revenue growth in 2023 from the base of $2.09 billion in 2022. We anticipate being between $4 billion and $5 billion in revenues by the middle of the decade and continue to grow to the end of the decade, continue to fuel the growth, thanks to all exciting products that Hank just talked about. With this, maybe I'm going to have Brian Mueller, who's our Chief Financial Officer, say a few words about this slide.

Yes. We'll be happy to talk about this over the coming weeks. But when we report our fourth quarter 2022 and full year, we're going to announce some planned new financial metrics for 2023 and beyond. And just to keep it simple for the sake of time here, we're evolving our non-GAAP income methodology, which we consistently reported for many years. But given the profitability, given the maturity of the business, we feel that we should evolve that metric. And we're also evolving how we give financial guidance going forward to be more meaningful to investors in the Wall Street community.

All right. Thank you, Brian. So I think we talked about this so far since we went over time a little bit. I want to give a little time for questions. So thank you for your attention. And Jess, the floor is yours.

Great. So again, if you have a question, go on, raise your hand and ask it, feel free. Otherwise, I will start. Maybe starting with ROCTAVIAN. I think you had your facility inspected recently. Any less deliverables on the manufacturing side as part of that FDA review?

Greg, do you want to say a few things about this? We have our Chief -- our Head of Technical Operations here, Greg Guyer. There's a seat left for you, Greg.

Thanks, Jess. Very rarely get manufacturing question. So it's just awesome. But -- and I think the reason is because it's so important in the space of gene therapy because it really is a differentiator. And so we're ready to go. We've responded, as JJ said, to the comments that FDA left us, was intense inspection for a week by 5 investigators, but all went well. And we're ready to go, preparing for launch. We responded to all the questions and we've heard nothing back from them and actually won't hear anything back with them until we hear on the PDUFA date. So far, so good. We're ready to go.

And again, this facility has been inspected twice and approved twice by EMA, so remind you of this.

Okay. Another question clarifying one of the comments you made during the presentation, JJ, about -- I think you said you were comfortable with ROCTAVIAN consensus for 2023. Was that the worldwide consensus number or the U.S. consensus figure? Because I know you sort of qualified it.

Worldwide. Again, we'll provide detailed guidance when we report Q4. But I did say it assumes however that we get approval in late March. So it could be a little different if it's delayed 3 months because of the Phase III data submission -- I mean the year 3 data submission.

Have you gotten any indication from the FDA either way about whether they might extend the PDUFA?

Until we file, I don't have. Hank?

We've been in some discussion with them about what they'd like to see, but they haven't tapped us to whether this will result in a PDUFA delay. I think that -- I mean, on the one side, the data looked fairly simple and pretty easy to understand, and they've already been in review for a while with the application. On the other hand, there are a lot of things that go on at the FDA that are sort of behind the curtains that make it a little hard for us to speculate as to what their action is going to be.

But I would say we are favorably pleased with the year 3 data. Could have been going in a different way. I would say, for sure, I don't think it reduces the probability of approval here, kind of probably increased it.

Okay. I know investors were pretty pleased to hear that the FDA is not planning on an advisory committee at this time or, I guess, at that time. Is there any chance that advisory committee comes back on the table for this application?