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

Good afternoon, everyone, and thank you for joining us for our next session of Baird's Global Healthcare Conference. I'm Joel Beatty, one of Baird's biotech analysts, and I'm really pleased to have this session with BioMarin Pharmaceutical, and with us today we have CFO, Brian Mueller. Brian, thank you so much for joining us today.

Yes, thank you, Joel. Thank you for having us, and thanks. Thanks everyone for joining.

Cool. So, obviously, today you had your R&D Day, which I was really excited about, knowing that you'll be in town around the time of our conference. And then the heartbreaking aspect of it is I haven't even been able to catch-up on it myself yet. But I'd love to hear more about it from you and maybe what to focus on for people that haven't seen it yet, but would like to go do so.

Yes, thanks for asking. It's fresh on my mind since we just wrapped it up about an hour ago, and made our way over here. So thanks. And I guess first, just a plug, I'd encourage you all to check out the replay. The slides will be on our website within a day. But yes, I'd love to give you a few highlights. So just -- background as to how we got here, maybe that's worth just a few seconds. BioMarin has always been high science, innovative therapy, working on translating genetic discoveries into transformative medicines, frankly, before it was a big thing in the sector. Going back, 20 years ago, there were just a couple of rare disease companies, it was us and Genzyme and Shire. And since then, over time, we've built this portfolio of 8 internally developed products, but also built out this infrastructure, not just commercial and manufacturing, which are very robust and global, but this R&D engine. It all starts with our core 4 research scientific attributes or principles, which are understanding the true cause of disease and dysfunction, usually a genetic cause, developing a therapy that is targeted to that cause, not palliative, not somewhere else on the pathway, but targeted to the condition. Best example of that is our enzyme replacement therapies which is a $2 billion business. Genetic mutation, patients don't make a certain enzyme, that's part of the metabolism. We've got a recombinant human version of that enzyme, weekly infusion, and it does what it otherwise would have done, if it was in the body naturally. Next is the third principle is clearly discernible endpoints. Can we measure whether the drug is working clearly? Do we have well understood biomarkers, well-opened biomarkers? And then the fourth is truly transforming disease, not a marginal impact but striving for normalization. So that's how we built this business. And I bring it up as a backdrop because I think you really will see the fruits of that approach and now the resources and capabilities that we have. Firstly, just to note, for those that follow the Roctavian gene therapy program for severe hemophilia A, we shared the 7-year Phase II data. So, that has in the past been released about every early in the summer. We shared it today. So it's a small, it was a Phase II study, but with durability being one of the questions around gene therapy for hemophilia A to have 7-years now in these 13 patients continue to see factor levels stabilizing and bleeding control. 11 of 13 patients in those studies are still off of prophylaxis, the standard of care. So that was a great highlight. We reviewed, again, some deep science and rationale around the development program for 7 assets, including 2 new assets. You might be familiar with our pipeline and some of the assets we've been talking about over the last year. Today, we announced another gene therapy for cardiomyopathy and another monoclonal antibody program for long-QT -- I'm sorry, long-QT syndrome. So 7 assets reviewed, and then the last major component of the pipeline was the, or is the indication expansion opportunities for Voxzogo and Roctavian. So these are 2 potential blockbuster products that we're launching now, each with a, indicated label that we think could derive individually over a billion dollars of revenue. Each of those assets has significant life cycle management indication expansion opportunities. And then I actually wrapped it up with a few words around how this fits into our business strategy. We've built this base business of over $2 billion in revenue, which is profitable, cash flow positive. And the beauty of it is, at the same time, we think we can invest in the business in this next-generation of innovative assets. We think we can do that while still achieving the profitability goals that we have, call it sort of the virtuous cycle. So I commented on that today in our long-term strategy around building a high profitability, high value growth enterprise. So tune in.

Terrific. Well, yes, I look forward to watching that full R&D Day. And that's also a terrific framework for the rest of our discussion here today. Maybe it'd be good to dive into some specific agents from here. And maybe first, I'll begin with Roctavian, which was recently approved. As far as maybe Europe, I believe we've heard that the first patient was dosed there recently. Could you tell us more about kind of the status of the launch there and does the first patient being dosed mean we should start looking for more of a trajectory there?

Yes, great question. No, there's a lot of focus on that. Just a reminder that pricing and reimbursement in Europe often by design is a very structured process that typically can take 12 months or 15 months or longer. So, we filed our top few pricing and reimbursement dossiers in Europe late last year. So we're getting towards the end of those processes, but still negotiating final price in Germany, France, and Italy. Those are the top 3 markets that we're prioritizing in Europe. It was great to get that first patient in Germany dosed. But important to note, while we're working through those, final pricing and reimbursement discussions, there has been a lot of work that happens on the ground, educating physicians, getting sites ready. Part of the Roctavian patient journey is getting the test for antibodies to the AAV5 vector. This is a companion diagnostic that was approved along with, with Roctavian. That test is available and we're seeing dozens of patients put their hand up. Doctors encourage their patients to pursue Roctavian, start that eligibility testing. So we've got, again, dozens of patients have made it through that part of the process. So the demand signal is there, sites and physicians are ready. So now it's just a matter of that final pricing reimbursement, which again takes long by design.

Yes, yes, that makes sense. And then I guess for the U.S., we've also seen recent approval. Can you walk through, it's kind of those same dynamics you're seeing about patients being tested for AAV5. Are you also seeing that in the U.S., or is it a little bit differences in timing or just what you would expect from the dynamics of the market?

We are. We are seeing similar dynamics. Now, there's 2 big things that are different in the U.S. from a launch standpoint. The first is that you don't have that same structured single national payer pricing and reimbursement. It's important that we set a responsible WAC price, which we think we've done because of the value proposition for Roctavian, which actually has the potential to deliver value back to the system if patients stay off their costly standard of care for up to several years. And then secondly is the ability to market directly to consumers in the U.S. We can't do that in Europe. We're really reliant on the physicians to engage with their patients and I think we can engage with the patient communities there, the associations, but not direct to consumer marketing, if you will. So we're leveraging those 2 things in the US, the ability to price and then the ability to set a price and then the ability to market to consumers. Now, the other parts of the U.S. launch, some of the dynamics that we're seeing are good payer engagement. That's another key stakeholder group. So while we set the price, it's important that early on in the launch, we see payer coverage policies being issued. And we are seeing that. There were several payer policies issued in the first few weeks of launch. This is just the 10th week of launch. So I can share that several coverage policies have been issued favorable to Roctavian, meaning that they're consistent with the label, they use terminology like medically necessary. So, good to see that level of engagement from payers. Lots of interest from physicians and patients. We've held a few dozen Roctavian branded patient engagement sessions, which have been well received. Lots of inbound calls from both doctors and patients, so we feel like the interest and the momentum is there. And then the last piece of sort of logistics in these early days of launch are getting the hemophilia treatment centers up and running both logistically, ready to dose, Roctavian, and all the contracting necessary because while we have payer coverage policies, the local practice economics are important. So what's the -- mechanisms and contracting required between the site and that ultimate payer that's also in process. But again, good progress, just to share, there's 140 hemophilia treatment centers in the U.S. It would be either inefficient or impractical to approach all of those immediately, so we're starting with a smaller number of what we believe will be HTCs that are both -- can both be ready the earliest and then have early good throughput for patients.

Terrific. And I guess with that in mind, how do you see the -- well, actually, I guess in talking with physicians, sometimes we'll hear that, well, the profile for Roctavian looks really great, although this is also an area where prophylaxis can be quite great, too. Let me think about that dynamic. How do you position Roctavian in the market, or how would you respond to that to physicians?

Yes, great question. And again, I probably should have made this comment as part of my R&D update, or R&D Day update. The other key segment of today wasn't just those BioMarin program reviews, but there were 2 panel sessions with some outstanding key opinion leaders in both the short statural growth disorder area, so pediatric endocrinologists, and then hematologists and folks that practice medicine with hemophiliacs familiar with standard of care, familiar with gene therapy. So definitely that was another key highlight today. So 2 things, I'd say, directly to your question, Joel. One is our data. So our Phase III study wasn't designed as a comparator against placebo. We compared to the standard of care, prophylactic factor VIII or recombinant factor VIII prophylactically. And in our Phase III study, the largest gene therapy study ever conducted, 134 patients, we now have 3 years of data from that study. Over 90% of the patients are still not using their prior medicine and off the standard of care. Significant bleed rate reduction and that includes not just overall total bleeds, but what's most important to physicians and patients are these joint bleeds and spontaneous bleeds. And again, just more than a 90% reduction in overall factor usage, even if there was a use before you, even if your Roctavian's working, you might still take an injection just to feel right before you go to the dentist that day, something like that. So we've got a strong data package. And then the reason why that reminded me about the panel is the real promise of the value of Roctavian is, aside from the efficacy and what we hear anecdotally about the quality of life impacts, it is the freedom from their therapy. And if their bleeding is under control, it's almost a freedom from their hemophilia. Again, the burden of therapy, while it is effective to your point, is burdensome, up to several injections a week, carrying around medicine when you need to travel, anxiety if you're managing through peaks and troughs, what level of activity can I do this day? When did I take my last factor infusion? So that -- those are the conversations, that's the experience of the patients in the clinical trial. Those are the conversations that are happening between the docs and the patients. It will just take some time. This is a pioneering, innovative therapy. We've only been, I guess 10 weeks into the launch. So I think this is the type of launch where, as the knowledge and experience and confidence in the product and the data grows, so will the -- the ultimate commercial uptake.

Great. And maybe in thinking ahead, what's the opportunity for Roctavian beyond the initial indication into additional indications?

Yep. Thanks. Great question. It's big. And the reason is, severe hemophilia A is a larger rare disease indication globally. We do plan to launch the product, throughout our global footprint. However, I'll talk you through a couple of these. Our Phase III clinical trial entry criteria were rather strict and excluded significant populations within total severe hemophilia A. So first is being just severe, which is under 1% naturally occurring factor, but, if you're under 2% or under 5%, that's severe or severely moderate, which still requires a lot of maintenance. So can we -- do some additional clinical work to get into that population? The delivery mechanism for the transgene is an AAV5 vector, and that AAV5 vector occurs in nature. Many of the global population have been exposed to it. I think we understand that it is more prevalent around agricultural areas. Approximately 1/3 of the population has been exposed to the AAV5 vector, which means their bodies have naturally occurring antibodies to the vector. They were excluded from the trial, but still represent a significant amount of severe hemophiliacs, again, a third of the market. So we've got several ideas, and these were covered today at R&D Day, to either dose through or around or have other mechanisms to quiet down those AAV5 antibodies to let the transgene be effective. So that's another big population, or big portion of the population. Then the last significant portion of the population that was excluded from our trial, but we've got research or reason to believe that there may be ways to navigate them scientifically, is the presence of either prior or active inhibitors to Factor VIII. That being known as the inhibitor population, this is -- these folks can even, regular factor may not have the same level of effectiveness in those patients because of these natural inhibitors. And so we understand that between the prior and active inhibitor population, the larger portion of those is prior inhibitors, and some of these patients may have had their factor-rate inhibitors a very long time ago. So that might be an eligible population where we can start to dose these patients, see if Roctavian is effective, and have a pathway forward. Interestingly, the FDA label does not contraindicate prior inhibitors. It has got a statement that this product has not been shown to be effective in prior inhibitor population, but we feel like that is an open door for us to do more research, generate the data in that population. And then likewise, even for active inhibitors, there might be other ways to either quiet those down or dose around them. So as I mentioned, each of those has significant pieces of the population, 25% to 30% of total hemophilia, that's where these -- indication expansion opportunities really get big.

Terrific. And I guess maybe from here, let's step back and look at the pipeline as a whole. I guess from a gene therapy standpoint, it seems like, gene therapy even more maybe than some other areas is an area where -- technical expertise is really important and, as you mentioned, BioMarin is one of the largest program of gene therapy, largest clinical trial. How can that be leveraged and what's the status of BioMarin's gene therapy pipeline?

Thanks. Yes. Again, ties into R&D Day today where we touched on a couple things that I'll share. First of all is just that. There's a lot of leverage. Maybe starting from the end and working backwards, we've shown with some of the other approved gene therapies being much smaller indications. We've shown that we were able to navigate, a complicated clinical and regulatory pathway to get a large indication gene therapy approved. Like I said, working back, we've developed absolutely the world-class gene therapy manufacturing in CMC. This was a decision at BioMarin years ago when we saw the promise of first Roctavian and the importance of controlling your own manufacturing. There's a lot of other gene therapy programs that stumble when they either need to scale up what was a small batch, preclinical or clinical gene therapy manufacturing process or move it in-house because you used a contract manufacturer. We made the early decision to invest in our own dedicated gene therapy manufacturing facility. It's on our manufacturing campus in Northern California. And since then have only, gotten better and improved and invested in that capability. For example, starting up a pilot plant, which is literally 40 yards away from the main manufacturing plant in the pilot plant, we can create small, either experimental, technical development batches or clinical batches of gene therapy product. But the process and even a lot of the equipment in the pilot plant is the same. So when it comes time to transition that process or product into our commercial plant, it's much lower risk. Our gene therapy plant has a significant amount of capacity and we are moving some of our other gene therapy candidates into that facility. So manufacturing, CMC, a lot of expertise, clinical, regulatory, a lot of expertise. We got Roctavian to the finish line. We think this will bode well for not only our other BioMarin candidates, but potentially being a partner of choice for some of the other gene therapy programs out there that are still trying to work through these issues. The other thing I'd say is, while we're motivated and believe that we have a lot of potential now with this gene therapy modality as a platform, BioMarin is still not a dedicated gene therapy company. We grew up that base business I referred to earlier around complex biologics. We've got small molecule expertise, oligonucleotides. Again we had experience with a compound for DMD. We used that research to get into a version 2.0 of a DMD oligo, which we hope to enter the clinic soon. So we're not quite modality agnostic, but we've got deep and rich technical expertise across several modalities. And like that optionality in the pipeline, because not everything may work out. And so to be able to pivot and invest in the right places as well is important.

Great. Let's jump to Voxzogo, which we've seen a strong launch from since it was approved. And then recently with the earnings call, you mentioned a supply issue. And could you clarify how much impact that could have, or if there's a point in time that we could kind of learn all of that's resolved and behind us?

Yes, thanks. Important topic. Thanks for the question. So first maybe to start with just a little bit of more detail on that supply constraint itself, because there's a couple important points to make. Number 1, this is a fill finish constraint where we use a contractor for the final fill and finish of the vialed product. It's not a bulk drug substance issue. We make our own bulk drug substance on, again, that same Northern California campus in a dedicated suite with a significant amount of bulk drug substance capacity, even for the future. It's also not a quality issue with either the drug product or the drug substance. So again, contractor fill finish constraint. It's also important to note that this is a constraint on growth. We noted that even though we're managing tight supply right now, and that shows up in the form of maybe lowering order volumes for some of those customers or countries that may have typically wanted to order several weeks, 2 months of product at a time. We're trying to limit some of those orders. But when I say constraint on growth, we're still planning to add 100s of new patients in the second half of this year and grow the product significantly last year. I can share an update. JJ, our CEO, made the comment on our Q2 call when we were talking about this constraint that even in this constrained environment, our supply plan should allow us to achieve roughly $570 million. That was consensus at the time for next year. He talked about it in terms of 24 consensus that we can meet that demand. So I'm happy to report that our team and, by the way, our partner have been hard at work since then, and we have secured some additional slots, and we're now at a point where even more supply is available to be able to provide between $600 million and $700 million of revenue next year. That's not guidance. I'm just talking in terms of supply, but it gives you an idea, given this year's guidance of $400 million to $440 million, that even in this constrained environment, the product is growing a lot. And by the way the -- the constraint showed up because the demand was even higher than what were high expectations. We had expectations that this would be a robust launch, and you can imagine our supply chain teams having product on hand at a level significantly higher than that, in case it was better. So it was even higher than that. So we had a strategy already to increase the volume capacity, because we talk about Voxzogo as a potential billion-dollar opportunity. So the situation is we just had to pull that strategy now and accelerate it by basically a full year. Right now, we're still sharing a line with another customer. Part of the mitigation or future strategy is to get a dedicated line. So that's all in the works now.

Great. Yes, I think the additional capacity sounds like perhaps a challenge to the sales force to sell that additional supply, and maybe even a challenge to us analysts to reconsider our consensus as well?

Maybe what I'll say -- I'll ask you to wait until we comment officially on 24. But again, the uptake has just been very strong. Side note is one of the questions going into this Voxzogo launch, again, achondroplasia, the most common form of dwarfism or cause of dwarfism, there were questions about whether parents and physicians would put their hand up, and was there really going to be a willingness to treat? And we saw that, there absolutely was. And some of the physicians, including on the panel today, literally talked about phones ringing off the hook and things like that. So it's been really positive.

Great. Any thoughts on the opportunity for Voxzogo as BridgeBio is advancing an agent in this space as well?

Yes. Of course, we're watching the competitive landscape and appreciate that. Several months ago, competition showed some data that did show incremental growth from their compound. A couple of things I'll note there are that Voxzogo, for us, has been a 10-year journey. And even in the late stage development, from starting our Phase III to approval took 5 years. So a small amount of patients, 6 months' worth of data, we would just want to see more data, more patients, longer term. One of the things we like about Voxzogo, beyond the robust data package, Voxzogo's safety profile through tens of thousands of injections, is the nature of the compound. So CNP being a peptide, which is a natural regulator of bone growth, hits exactly the right place in that pathway. And we think that's why we've seen this durable, robust effect from Voxzogo over time. And by the way, why we think it'll work in a significant number of additional patients and other genetic short stature indications. So we appreciate that we've established yet another big market and understand why competitors would be interested. But very, very early days as far as we see it.

Got it. For additional indications for Voxzogo, I think this first indication, you've had 2 years of data to support approval. Is that same 2 years of data needed or can it be reduced for additional indications?

Yes, great question. We're still working through parts of that and we did talk about it today. There's sort of 3 different flavors. I'll be brief. I know we're running on time. So first is hypochondroplasia, which has a similar, it's a mutation in the same gene as achondroplasia, has similar manifestations, slightly different, slightly less severe, but definitely some severe short stature there. This is where we recently announced that because of its similarities to achondroplasia, the FDA did agree to a 1-year study, a pivotal study, which we're now starting. So that's an example, where there's less work to do. We can leverage all that work we did with Voxzogo for ACON and essentially have a new Phase III asset, which is a similar size indication. The other 2, which require more work, are other known genetic short statures, and these were also part of the investigator study that, and Dr. Dauber was on our panel today. So this is SHOX, Noonan’s, NPR2, aggrecan disorder. These are other genes with no mutations, but specific mutations that cause these short stature and other manifestations. So there we might have some additional work to do to -- both work with the regulators and establish the clinical program. But then the third, which is interesting, is idiopathic short stature. So this is more unexplained short stature, not a specifically known mutation, maybe a number of genetic, or, mutations across a number of genes. This is the indication that human growth hormone is approved for in the U.S. And but again, because CNP is a natural regulator of bone growth, there's reason to believe that it could or should work in these other indications. Slightly more complicated development pathway, we might have to do a head-to-head study with growth hormone, but we're talking a massive amount of patients. I mean, growth hormone is predicted to be an $8 billion or $10 billion market by the end of the decade. So stay tuned, we'll keep you updated, but, you know, it's a high priority with a lot of potential.

Great. Well, looking forward to that, and, perfect timing that we've kind of run out of time. But I'll leave it to you, Brian, for any closing remarks.

Well, no, thanks for the interest and support. We'll look forward to keeping you updated on our progress. Again, we feel like we're executing on this strategy of leveraging this profitable, growing-based business, launching 2 potential blockbusters, and reinvesting in the future. Catch that R&D Day replay.

Great. Thank you.

Thanks, Joel. Thanks, everybody.