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

Okay. Go ahead and get started. Welcome, everyone. This will be a fireside chat with BioMarin. My name is Vikram Purohit. I'm one of the biotech analysts with the research team. Happy to have with me the CFO of BioMarin, Brian Mueller, with us. Thanks so much for joining us, Brian. Before we get into the session, I just need to read a brief disclosure statement. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/research disclosures. And if you have any questions, please reach out to your Morgan Stanley sales representative. So with that, let's get started. Brian, we'd just love to open it to you for some opening remarks on the business and some key highlights you think that BioMarin's achieved throughout the year and then we'll go from there.

Yes. Thanks. Appreciate it, Vikram. Thanks for having us. Thanks, everyone for attending. BioMarin has always been high science developing, innovative asset, but I thought I'd touch on first here as part of these opening remarks is an emerging part of our story, which is our financial growth and prospects. There's -- I refer to 3 cornerstones of our financial strength. It all starts with our base business. So these are 6 internally developed assets, mostly enzyme replacement therapies for ultra rare metabolic disorders. That base business is roughly $2 billion in annual revenues. It's reached profitability and positive cash flows. And we refer to the base business as resilient because it's insulated from the IRA being single indication orphan products, very high barriers to entry, both manufacturing and commercial. And importantly, that base business is still growing, could be mid to high single-digits in any given year, depending on the asset or the year. And then next is the launch of 2 potential blockbusters with Voxzogo for achondroplasia, which is the most common cause of dwarfism; and Roctavian, which is gene therapy for severe hemophilia A. Both of those assets were under both European and FDA review over the last 2 years. So some major milestones over these last 2 years has been getting Roctavian and Voxzogo approved in both the U.S. and Europe. The Voxzogo launch has exceeded even our own high expectations. We reported over $20 million of revenue for the first half of '23. And the Roctavian launch is underway this year. We were just approved in the FDA 10 weeks ago. So launch underway in both the U.S. and Europe. Then the third aspect of our future growth is, while we strive for growing our profit and margin expansion and increasing cash flow, we are still increasing our investments in R&D and have the most assets under development than any other time in the company's history. Again, we've got fully integrated end-to-end R&D and commercialization capabilities. We've got an industry-leading track record with our internally developed assets. So wrapping that all around an increasing level of R&D in the future, we believe, will lead to sustainable growth in our pipeline. And then lastly, quick plug. We are hosting our R&D Day tomorrow here in New York. We'll be reviewing some of the detailed science of 7 different assets, including 2 new assets as well as some of the science around the indication expansion opportunities for Voxzogo and Roctavian, which again, we believe they are $1 billion opportunities themselves, and they each also have a number of possible new indications. So very exciting. I'll encourage you to turn in, come by or catch the [ replay ]. I'll hand it over back to you.

Appreciate it. Thank you. So we have around 25 minutes. I was thinking you can touch on Roctavian first, then go on to Voxzogo and then touch on additional pipeline assets in the time that we have left. So with Roctavian, obviously, there's been a really big focus on understanding what the initial ramp and slope of the launch curve in the U.S. is going to look like. But before we get into any specifics, kind of just educate everyone and us what does the patient flow look like? What is the process from when a patient initially indicates to the prescriber that they're interested in Roctavian to the point where they actually get it? Just kind of walk us through the steps that need to happen there.

Yes, sure. So a significant part of a decision by a patient and a physician to explore Roctavian is recognizing that there's this, what we call joint decision-making. The patient needs to be interested and educated, and then likewise, the physician's assessment as to whether they're a good candidate is critical in that conversation. And so, firstly, while there might be interest on either or both of those parties, that requires consultation. It requires basic logistics like your next regularly scheduled appointment. I know we're super excited because the product is launched, but for those severe hemophilia A patients who might be reasonably well controlled, they may see their hematologists just a couple of times a year. So it wouldn't be until their next regularly scheduled appointment where they might have the conversation about Roctavian with their doctor. And then they're going to go back and talk to their family about it and think about it, get educated. So then -- they may not talk about it again, so they come back. So that's one part of the process. And then once there is mutual interest and you complete some of the paperwork like a patient consent form, we're seeing several of those come in already -- there's the diagnostic testing. So there's a simple blood draw required for our companion diagnostic, which was approved along with the product. That's to test for antibodies to the AAV5 vector. The vector is naturally occurring on earth. And so many of us have been exposed to it. Studies have shown that up to about 1/3 of humans -- and it varies depending on the country and where you're at. I think there's higher levels of AAV in agriculture settings, if there's an example. So AAV5, antibody free, healthy liver testing and some other screening. And then the final part would be making sure that reimbursement's in place, and I can touch on that a little bit if you'd like, as well as just logistics at the site infusion set up. So you can tell that is a process. What we've estimated is that, that process for the average patient could take between 2 and 5 months.

Maybe 2 things to touch on there. First, kind of site preparation. Second, as you just mentioned, payer considerations. So in terms of how much preparation a site needs to be able to administer Roctavian both in terms of staff training, any sort of kind of physical infrastructure -- Could you kind of educate us on what they need to have in place to be able to administer Roctavian once the patient is fully through the process of being at the point where they can get it?

Yes, sure. So the -- like you said, there's some basic logistics, maybe just starting with the supply chain, making sure that the Roctavian delivery and storage can be accommodated. We don't expect hemophilia treatment centers to stock Roctavian. So it's almost like a -- and we're prepared and this was part of the strategy to have almost like a just-in-time delivery model. It's a very delicate, very costly product to handle. I believe it storage, just as an example, at minus 80 degrees Celsius. So a deep frozen product. So that's important and a key part of site setup. And then there's, like you said, education and the ability to deliver the infusion. It's an IV infusion and many existing products within an HTC are going to be IV infusion. So that's not a high hurdle, but it is an important one. And then whatever contracting is necessary between the -- to actually procure the Roctavian and to ensure that reimbursement is secured for that size of customer, if you will.

Sure. And that kind of payer negotiation process, like how long do you think it will take before kind of all the contracts you need across all the HTCs that are kind of the -- represent the initial part of the launch, they're all in place?

Yes. I mean it's going to vary based on site. There's 140 hemophilia treatment centers in the U.S. It would be inefficient and non-practical to go after all of them initially. So we're targeting a smaller number of sites that we will, believe, be able to get through that process quickly, get set up, including the contracting, and have a number of patients interested and available. So that's the primary focus. The contracting, again, underway. We're observing this now. There's a couple elements there that we think are key to that process. One is payer coverage policy, which we've been really pleased to have seen, again, just in these first few weeks of launch. Several payer coverage policies issued, noting that Roctavian is medically necessary. Some of these are very large U.S. payers. So good momentum there. And then the second piece is the arrangement we have with a large group purchasing organization that is actually a confederation of hemophilia treatment centers. This is the model that they use for other products. So that should provide access, convenience. And yes, there's an element of ensuring that the reimbursement from that ultimate payer gets down to the HTC and how those economics work. So that is complicated, but that's the process we're in now.

And have you disclosed what portion of the overall 140 HTCs you're currently targeting?

We haven't, for competitive reasons, but...

Or have you talked about kind of what portion of the addressable severe hemophilia A patient population at the initial launch targets?

We haven't. But again, we hope to get access for everyone ultimately. And one other element there is the hub-and-spoke model. So not all of those HTCs lead to the infusion sites, especially those that may not have a high concentration of patients or may be in less dense population areas where if there's a site or a physician that has expertise and proficiency in fusing gene therapy, they could be the hub center. The patient might get their eligibility testing, consult with their doctors go to the infusion site to get the Roctavian infusion, but then go back to their spoke site for follow-up. So that's another reason why you don't need to get to all 140 [ HTCs ] immediately.

2 questions for you, maybe based on some of the market research that BioMarin might have done when kind of serving the landscape here. First, what strikes you as the typical profile of a patient and a prescriber, because it's actually going to make it through the funnel and receive and/or administer Roctavian?

Yes. Like you said, we've spent a lot of time on this. Obviously, we have a lot of experience in our clinical trials. The Roctavian Phase III study was a 134 patients, the largest gene therapy study that's ever been conducted. And on one hand, the research and the conversations and our experience suggests that early adopter patient might be that younger male that -- and hemophilia A, FX mostly, if not only male. The profile where a young man might be starting out his adult life, graduating college, getting their first job, moving away from home, potentially getting married, want a more active lifestyle, doesn't prefer to travel with a bunch of prophylactic factor. So the promise of that freedom from therapy and liberation from the worst symptoms of the hemophilia is attractive. But interestingly, over time, with [indiscernible] middle-aged men who maybe want to spend more time being active with their kids, or again, they've been on their factor for decades and are interested in the freedom from therapy. And then even older gentlemen that might have vascularity issues and have again been infusing themselves for decades where they want to enjoy their retirement, later years and have freedom from therapy. So for that reason, yes, there may be this early adapter population in younger males, but we're also seeing and hearing interest from all age groups. And on the physician side, physicians likewise. I think there's a spectrum of those that have been watching, if not part of gene therapy development from the sidelines, or being part of -- even in our clinical studies, especially the physicians that I think would have had patients in the study and have seen them do really well. I think that would make them sort of the more likely early prescribers. And then, there's physicians now we've been in touch and we've had several inbound and outbound -- Now that we're approved, we're doing lots of patient, physician education sessions. We've held dozens of Roctavian branded sessions so far in these first few weeks of launch. So there's that group of physicians that may not have had direct experience with Roctavian, but are now interested. Their patients may be asking about it. They want to be able to offer to their patients. So that's a key part of the launch for us is to engage with that group. And then we do recognize that there's physicians that are skeptical. And so, we won't give up on them, and we'll work to educate them on our data, which, again, is a really strong data package, reduction in bleed rate, over a 90% reduction in the use of the Factor VIII injections. Several patients bleed-free after 3 years in the Phase III study. So it's a great package to engage the community with.

And my second question for you in terms of kind of feedback from the market is on the topic of safety language and the label. So at the time of the approval, there was some debate about what is the language around hepatotoxicity monitoring requirements? What does that really all mean? Could that be something that depresses some interest from prescribers? From what you've heard from the field, have those issues been giving prescribers pause?

Well, it's early days. So we need to gather more data maybe before I speak to what the conversations that our teams are already having in the field. But I can share, as you know, the label reactions -- and this was a key part of the launch. This is the protocol in the Phase III study. But couple schools of thought there. So there is some risk of the liver issues that you mentioned, and that's why steroids are available as part of the early days of the infusion, but it's more so the follow-up that gets the question. So there is a weekly blood draw for the first few months, and then it starts to taper off over time. And while that sounds burdensome, I think the -- where we hope the conversation will land, and this has been part of the voices that we've heard thus far is, number one, these are basic blood drives. You can go -- there's usually a LabCorp within a couple of miles of most homes or businesses. So you can get that simple blood draw. And the other element is that if you're responding and your body is generating your own Factor 8 and you're free from your prior therapy, yes, there's some burden of that follow-up. But if you're also free from your prior therapy, which could be 3 to 5 injections a week, "it's worth it". I think the comment we've heard that we hope will be the emerging theme.

Just going back on to our initial topic of discussion, which was just tracking the initial part of the launch. From all the metrics you mentioned, the patient consent form CDx testing, what's the 1 or 2 metrics that you were most closely watching like internally? And how have these initial markets of demand tracked versus your kind of internal expectations for how you think the launch should have gone?

Yes. Great question. So we're just a few weeks away now from our -- what will be our Q3 earnings call next month. So I won't speak to any quantitative details. We'll look forward to giving a robust launch update and the dynamics we're observing. But again, I can share some of the momentum and progress thus far. So I mentioned the dozens of branded Roctavian patient congresses. Those have been well received. Interacting with the patient associations, which have been great conversations. And this is a very close-knit community. This is a hemophilia A community because of some of those painted blood issues from the '80s and '90s. So they really -- they stay really close, which means you can get good momentum in progress when you're educating the group. Or another large factor there will be as more of the patients in the clinical studies and eventually the early commercial patients start to share their stories, there should be the type of product where there's a huge element of that too because of the closeness in the community. So that's patient engagement. Again, physician engagement, lots of inbound and outbound from physicians and HTCs, that site readiness that we started a conversation with. You could just picture tracking a schedule of those and when they expect to be online and ready to infuse Roctavian. We shared recently, and this is kind of new news since the approval that commercial product is now available, that our initial supply was approved by the FDA. There's a special lot release protocol unique to the gene therapy class in general, and that's just Roctavian. So that took a few weeks after the approval, but product is available now in commercial warehouses for shipment. And then coverage payer coverage. And I mentioned the significant amount of lives covered under some of these payer coverage policies, which have been favorable to Roctavian, consistent with the package insert, the label. And then the HTC [indiscernible] on that. So good momentum. Again, those are some of the key metrics, as well as, again, we are seeing patient consent forms come in, engaging with doctors and sites to get the early eligibility testing done. So it takes progress. But again, as we said it earlier, it's a gradual process and a long process. So the key is to just put all of these pieces in place, make sure we have momentum, and then they should start to come together as patients there to come off the bottom of the funnel, as you mentioned.

And remind us -- you haven't disclosed or quantified how many patient consent forms at this point that you received?

That's right.

So you -- recently the company did issue a release noting that the first patient was dosed with commercial product in the EU. You may not be able to comment much just given privacy considerations around that dosing, but has there been anything you can share with us about the profile of the patient or the prescriber or the center that could be -- that could provide kind of good read-through for how -- what is the profile of a typical patient or prescriber in the EU moving forward? Was there anything defining that you learned from that experience?

Well, you're right. We don't have details. The GDPR privacy regulations in Europe are very strict. So we don't get much detail on the patients. But because we've seen -- I think, in our last public report, I guess we talked about approximately 60 patients that have started the testing process there and about 2/3 of them are eligible. So we are talking to physicians and seeing -- and I'd say it's consistent with the profiles that we spoke about earlier. One interesting thing that's different in Europe than the U.S. is that in Europe, the physicians play a larger role in that decision-making process and identifying patients, different -- again, different from the U.S. We don't have the ability in Europe to market directly to consumers. So again, we have to rely on other mechanisms like the physicians and the patient organization. So again, a little less direct patient engagement there. But based on the profile of the drug, based on our data, based on the value proposition, I think the overall profile would be similar. And in terms of sites, also similar. Germany is a large country. Some of the larger cities will have the more sophisticated larger hemophilia treatment centers. So again, similar hub-and-spoke model.

Sure.

So that's a dynamic there that's…

And one logistical question. In the U.S., once the patient is ready to be dosed -- since you mentioned earlier in our conversation that it's kind of more just-in-time delivery of product, how long does it take once you know that a patient wants to be dosed -- about -- a number of patients that have a specific HTC want to be dosed, how long does it take to get that product?

I'd expect it would be -- first, we come to scheduling, right? And, I mean, these days shipments, again, especially with the delicately handled product, like that is almost immediate. So that's not a long lead time item.

Last question from my side on Roctavian then. So a bit of a practical one. Since you issued a release for the first new patient dose, do you think it's fair to assume that you would do the same thing for the first patient dosed in the U.S.?

We likely will. We know there's a lot of interest externally on that first U.S. patient. So I think -- I'm not -- we're really close to another reg [ FDAs ], I believe. That's right. But yes, I think you could expect a press release.

And do you think we should expect you to kind of issue releases for the first kind of full set of patients dose? Or is it just for the first patient dose?

Probably just the first patient. And then we talked about reporting -- because we -- part of our prior launch metrics that we typically see are our patients on commercial therapy. And obviously, that's important for Roctavian as well. So we talked about announcing either on our quarterly calls or events like this, the -- certain increments of patients, like the first 5, first 10, first 25 versus 50. So that's the plan.

Any questions on Roctavian? Maybe around 5 or 6 minutes left. Maybe we should switch gears, if not, to Voxzogo. Anyone? All right. So on Voxzogo, I think the best thing to start is some of the considerations you laid out with 2Q earnings around supply constraints and additional capacity you've been bringing on to be able to meet demand there. Just kind of level set it for everyone, could you kind of walk us through what that issue was and kind of where you are with -- in terms of being able to fully address it at this point?

Absolutely. Yes. So, first to note -- well, maybe first would be that this is a supply constraint we have with our contracted fill-finish process. It's not a quality issue, and it's not a bulk drug substance issue. We manufacture the bulk Voxzogo in our Northern California manufacturing site. It's got a dedicated suite with significant amounts of capacity. So the constraint is again in this contractor third-party fill-finish site. And again, it's pure capacity and stems from this rapid uptake of Voxzogo. You can imagine we had very high expectations for the launch ourselves. And as part of our supply chain planning, had supply at a significant level above even our own forecast. But as you've all seen over the last 1.5 years, we've raised guidance 5x. The uptake has been even higher than we anticipated, which is due to a number of factors, just everything going in favor of Voxzogo. Payer and reimbursement went fast. Parent and physician interest came quickly, and again, had just really rapid uptake in a number of markets. The fact that we're selling in almost 40 markets here just a few quarters into the launch is unprecedented. So that rapid uptake led to consumption of the product we had on hand and forecasted factor. Also importantly, this isn't an immediate stock out type situation. We refer to it as a constraint on growth. So even with the disclosure of the supply chain challenge, we did say that we still plan to add in the second half of this year, hundreds of new patients. Our guidance this year of $400 million to $440 million is, again, a significant number of new patients this year, and next year, again, still continuing to grow. We mentioned that even before we have any other breakthroughs on the supply side, which we're working on, our forecast -- our current supply forecast adjusts that we can supply between $600 million and $700 million of revenue next year. That's not guidance. That's just the supply comment, but a comment that this is still -- the product is still growing. We had a strategy to increase volume and capacity over time. If we're talking about Voxzogo to be a potential $1 billion product, obviously, we had a plan. It's just that, that whole plan now needed to be accelerated by like 1 year. And right now, we're sharing a line with another customer at their contractors. So part of the strategy from here, which again is now accelerated, is getting our own dedicated line up and running and then potentially qualifying a second site over time. So we've got a plan that will free up not just the constraint, but provide ample supply for Voxzogo's growth.

And I think you had mentioned with the earnings update that, had the supply constraint not arisen, the guidance for the year could have been higher than where it ended up coming out.

Modestly -- That was mostly a comment because we, again, had $201 million of revenue in the first half of the year. Though for a growing product, it doesn't take complicated math to get to what full year might look like. And the bottom end of our updated range is $400 million, high-end $440 million. So yes, if we didn't have this constraint, which -- by the way, the way we're managing it is order volume control, some of those customers or countries that may typically like to order a few weeks of products. We're trying to send those orders down a bit, which is what you see in the guidance, in the numbers as well. Maintaining patients on continual commercial therapy, if they're on is an absolute priority, and again adding new patients. So yes, it probably would have been higher, but I'd say modestly.

We have around 1 minute left. Let's just touch on maybe age expansion for Voxzogo. So you have applications in the U.S. and the EU to broaden the label. Just remind us where those reviews currently stand and what the time lines are for a decision there?

Absolutely. So yes, a brief reminder, Voxzogo approved over 5 years of age in the U.S., over 2 years of age in Europe and other places in the world, and for all ages in Japan, which has been really motivating to see and hear about [indiscernible] 2-week old infant starting Voxzogo. So you're right, we're under review based on our Phase 2 study in young children with both U.S. and Europe. Can't comment on the specifics of that since we're in review, but U.S. PDUFA date is next month on that application, and we also expect to hear from Europe here in 2023.

And then, when people think about uptake in those new age groups, assuming you get those approvals, are there any nuances to keep in mind in terms of what the ramp in those age groups can look like versus what you've seen in your current label population?

One way to think about that is we've seen greater uptake in the younger age groups of the existing labeled population. And again, that kind of makes sense, whether you're a parent or physician, this is a growth disorder. It would make sense to get the longest term benefit by starting early. It's not that we haven't seen teenagers start Voxzogo we have. So again -- and this should be about 1,000 patients a year in this -- in the incident population.

So I think -- is that just the U.S. or across…?

That's global. So we say 18,000 patients, and if growth rates are open for most kids until they're 18, that's the 1,000 patients. So I think there's reason to believe that uptake should be strong in that age group.

And final question then. Is there any kind of reimbursement or payer kind of blocking and tackling that's going to need to happen for this newly labeled age group before they can start more readily getting therapy?

I think that's the right way to put it, is blocking and tackling. Again, Voxzogo has been well received by payers in our launch. Good payer coverage policies. We've been able to achieve pretty consistent, good pricing globally. So yes, that will be a piece to execute on, but I'm confident we can do that.

Okay. All right. We'll love to end up there. Thanks so much for your time, Brian. Really appreciate it. Thank you all for joining. We'll go ahead and close out.

Thanks, Vikram. Thank you, everyone.

Thanks.