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

Great. Good morning, everyone. My name is Jess Fye. I'm a senior biotech analyst at JPMorgan, and we're continuing the 42nd Annual Healthcare Conference today with BioMarin. We're very delighted to have BioMarin's new CEO, Alexander Hardy, making a presentation for the company. We're going to follow that with Q&A. If you're in the room, someone will bring you a mic, if you raise your hand for a question, you can also submit them over the portal or you can listen to me ask questions. But with that, let me pass it over to Alexander.

Thanks very much, Jess. Good morning, everybody. As Jess said, I'm Alexander Hardy. I'm the new CEO of BioMarin. I started in the role, 1st of December 2023. Thank you very much for joining us here today. So this is our safe harbor statement. I'll be making forward-looking comments, so please look at our publicly available materials for more information. So I've been in the role around 5 weeks. And in that time, I've had a chance to interact with investors, with employees and other partners. And I have to say, I am enormously excited about where BioMarin is and its potential. It's an enormously exciting company. And I thought about what would be best for me to cover in this initial chance to interact with you in this new role. And I thought I'd cover 3 topics at this first instance. First is tell you a little bit about my background and how it is, I believe, relevant for where BioMarin is in its growth. Secondly, a little bit about why I chose BioMarin. And then thirdly, early on in my tenure, I have a pretty good idea of the direction that BioMarin needs to take, and I want to share my initial thoughts on the direction and priorities for BioMarin. At that point, I do want to stress that I'm not going to be giving 2024 guidance in this presentation or I'm going to be giving long-term financial projections. For our 2024 guidance, please join us for our 4Q '23 earnings in late February. And for the long-term financial projections, please join us for our Investor Day which is planned for the third quarter. So a little bit about me. For those of you that I've not met, I have 30 years of experience in the industry large pharma, big biotech and even a spell in small biotech. Last 18 years was at Genentech. During that time, I had 2 assignments with Roche. One was heading up Asia Pacific and China for Roche and the other one was heading up global product strategy in Switzerland. Five years ago, I was appointed the CEO of Genentech. I think given BioMarin situation, I think the last 2 roles that I had at Genentech are probably the most relevant to talk a little bit about. Because the topics of life cycle management, commercial excellence and operational excellence are really key themes for us in charting the future of BioMarin. So in that Roche role heading up global product strategy, my team included all the life cycle leaders that lead the molecule programs from research through development through launch commercialization and beyond. And during the time when I was in the role, this is when Roche was charting its entry into multiple therapy areas, highly competitive therapy areas, such as multiple sclerosis, such as hemophilia, spinal muscular atrophy, et cetera. We also developed the program, Phase III program life cycle management program in ophthalmology, which I think is a large part of the success that Roche is enjoying right now in ophthalmology. And then as I mentioned 5 years ago, so beginning of 2019, I moved over to the CEO of Genentech role. 2019 was an extraordinarily successful year for Genentech. We actually had the highest absolute growth rate in Genentech's history. But at the end of that first year, we had our first biosimilar launches against our 3 largest products. They represented about 40% of revenue. And then, of course, as we all know, the pandemic challenges hit many companies, challenges with diagnosis, initiation and switch. The approach that Genentech took to deal with these challenges was, as you would imagine, one of innovation. And over the course of 5 years, we launched 10 new medicines. These were in highly competitive areas where we hadn't had any presence before. We also were very successful with our launch in ophthalmology. And in 2022, we were recognized with the most successful launch in the industry with Vabysmo. As a result of these efforts, at the end of 2022, Genentech started to move back into growth. And in 2023, that growth accelerated to a very high level. But this was not just about innovation from a product standpoint. There was innovation in many different areas. There was innovation in terms of the operating model, in terms of the go-to-market model and the customer interface model. And we actually launched in 2020, the first of its industry type of an ecosystem model at the customer interface level. It's basically allowed us to partner much more closely at a local level in the United States. It meant broader roles and fewer roles in our customer-facing team. But it was really about effectiveness, and the results were quite extraordinary. But it was also much, much more efficient. And the operating model changes that we instituted meant -- over the last several years, Genentech's revenue grew by 24%. Our operating profit grew by 34%, and our profit per employee grew by 69%. So you can see that it was not just revenue growth, but leverage a growth leverage through to the bottom line. And I think these experiences and this track record, I think, set me up well for where BioMarin is. So why did I choose BioMarin? Well, I think it's an enormously exciting company at a really interesting point in its development. I've been following it, as you can imagine, being located here in the Bay Area for many years. BioMarin was on my radar screen, and I was watching under the vision and leadership of J.J. the company become more and more successful. So I suppose if I was to answer this question very, very simply, I had the honor at Genentech of leading a great company. I saw with the possibility of moving to BioMarin, the opportunity to grow a great company. But I think there's tremendous opportunities from a value creation and an impact from a patient standpoint. And these were very, very important parts of my decision as well. So let me take you through what I saw from the outside which has only been reinforced as I now I'm into the role. So first, I saw the potential for a very, very strong revenue growth industry-leading revenue growth. I mean we've seen with Voxzogo already with the launch in achondroplasia that is on track to be a blockbuster product. But the potential with now the expanded indication in the young children population and with the subsequent indications, this really has the potential to be a significant multiyear growth driver. Secondly, Roctavian, a scientific breakthrough in severe hemophilia A. It's important to recognize that in severe hemophilia A, 50% of patients are still receiving prophylaxis factor VIII. And Roctavian offers them the opportunity to create their own factor and to live a life free of those prophylaxis treatments. It's a really exciting therapy. And thirdly, we have this foundation of enormously durable, profitable and IRA insulated base business of the ERT products. I mean, this is a really fantastic attribute of BioMarin to have this growing base business, especially when I look across the industry, there's so many companies that face substantial LOE threats in the second half of this decade. Also, I saw at BioMarin significant profitability opportunities. The company obviously hit the milestone of becoming profitable. It's financially self-sustaining. It's cash flow positive. And with my experience, I can see that now is the opportunity where there can be a lot more than operating leverage. We can grow earnings per share much faster than we can grow revenue. And that's enormously exciting. So revenue and leveraged earnings per share growth. And thirdly, and this is definitely not lost but is the track record of innovation under Hank and his team is truly extraordinary. It's not just innovation, but it's a track record of success of bringing those products to approval and to patients. And that's underpinned also by experience and expertise across multiple modalities, the ability to get registered and launch products across a global network and the very sophisticated manufacturing capability and infrastructure that we have. But a large part of it was also the mission of BioMarin. I mean for those of you that don't know my BioMarin, it is one of the leading companies in producing innovative medicines for genetic disorders and its impact on patients' lives has been truly profound. And I believe it's going to be even more profound in the future. So those 8 approved products are now helping 13,000 patients a year. Originally, the product was very -- the portfolio was very much focused on ultra-orphan indications towards the products and the indications on the left-hand side of the page. In recent years with Voxzogo and Roctavian, we're starting to move into more prevalent diseases still rare diseases but more prevalent diseases. And the opportunity to extend our impact even more to more patients, still with that high bar of being best in disease and first-in-class. To bring that really to life, I'd love to talk just briefly about 3 patients on Voxzogo because I think it really speaks to the impact that BioMarin and Voxzogo has on patients. So let's start and meet Eve. She's age 3. She's been on Voxzogo for 1.5 years. She was in our under 5 study, and now she's on the long-term extension follow-up. Eve's parents talk about how Voxzogo has been integrated into the nighttime routine. Eve takes Voxzogo, she has a bath, they read a bedtime book and then they go to bed. Her parents love how she dances and her fearlessness in going up on stage. Then I'd like you to meet Annika. She's here pictured, age 14. She's now 16. She's been on Voxzogo now for more than 6 years. She was part of the Phase III study, and she's part of the long-term Phase III extension. Now before Voxzogo, she was having issues with her legs bowing and she was scheduled for length -- leg lengthening surgery. After Voxzogo, her life has become a lot more normal. She is now able to brush her own hair and tie her hair back into a pony tail. She's able to open doors because she can reach the door handle herself. And now she's looking forward to being able to carry her surfboard under her arm and take the pedal extenders of a bicycle. And finally, meet Kennedy Kaye or KK. Her story was just covered on the NBC affiliate in Louisiana on the 18th of December 2023, and I encourage you to look at that coverage. This is really remarkable, the impact that Voxzogo's had on her quality of life. Before Voxzogo, she'd had 5 surgeries to deal with a hearing impact from disease. She was scheduled for further surgeries. She had to wear a breathing mask at night to help her breathing. Now after she's been on Voxzogo, she's able to pursue the hobbies that she's passionate about. You can see here there is cheerleading, there is swimming and is playing soccer. She is a goalkeeper in soccer. And now her dream is to be like Christiano Ronaldo. I think this really speaks to the impact that Voxzogo can have to empower patients to be able to do everyday things that many people in this room take for granted and to do the things they love. This is a very large part of why the fabulous people at BioMarin come to work every day and a very large part why I wanted to join them. So what is driving this enormous innovation at BioMarin? What's the key to success for drugs like Voxzogo? Well, the core 4 principles has really helped us identify the opportunities in terms of medicines and utilizing genetic data. And it's created a very broad and innovative early and late-stage pipeline. Now my thoughts on where we are with R&D is we've got great strengths to build upon. But we have to take our core 4 and we have to apply additional levels of focus. We've got to be focusing yes, absolutely on the science, on the potential patient impact, but that's highly related to the market potential and the return on investment. We've got to be very disciplined through the early stages of research with our spend. We've got to have high bars for success. And then when we choose the medicines that we're going to advance, we've got to get behind them to maximize and accelerate those to maximize our R&D investment. So as I said, it's early days, but it's already very clear to me what some of the themes are that we're going to focus on for this next period at BioMarin. First, we're going to accelerate and maximize the Voxzogo opportunity. We've got tremendous momentum with the achondroplasia launch. We've got the opportunity now to take that into other indications. Now you would have heard BioMarin talk about Voxzogo before. The difference here is that Voxzogo indication expansion is the top priority at BioMarin. Secondly, we've got to establish the Roctavian opportunity. We've made important progress in market access and readiness. But 2024 and 2025 are going to actually inform what that uptake curve is. The product offers patients important advantages. We're going to let the results do the talking for Roctavian and let guide our outlook and our communications with the market. As I've already mentioned, we're going to focus R&D on the most productive assets, hold a high bar for what we're bringing through into early research and what we're investing in. And then we have the excellent opportunity to accelerate EPS growth and expand the margins. This is going to be more than operating leverage. I mean, clearly, we've got a future in the next several years of really good revenue growth. But we can do more than that. We're going to have an intense focus on operational excellence. We're going to be prioritizing our investments. We're going to optimize the cost structure, and this is going to allow us to significantly improve profit margins and EPS. So let me talk a little bit about the Voxzogo opportunity because it is -- I think it is incredibly exciting. BioMarin is really well positioned with this incredible asset. We now have patients that are 8 years on from the Phase II study of Voxzogo. And the durable efficacy and the excellent safety profile really is a great underpinning for us now to not only expand out into the younger population, and that's going to have, I believe, a significant impact on uptake. But then we move into other indications. And in fact, it was that safety and efficacy and the similarity of hydrocondroplasia to achondroplasia that made it the obvious next place that we would go. And it -- we were able then to go straight into a registration-enabling pivotal study. We started the natural history portion of that in November last year. We will start the 52-week treatment arm in the middle of this year. And in the mechanism of action, and again, the profile of the drug makes it very, very well suited to explore in multiple other pathway conditions and in idiopathic short stature syndrome -- stature syndrome. These are disease areas where, for example, in the U.S., human growth hormone is indicated. And so we'll be going up against human growth hormone. They're established markets, unlike achondroplasia and hydrochondroplasia. So that comes with positives and negatives. The potential of these disease areas is tremendous. Achondroplasia and hydrochondroplasia are about the same size, but the other indications, ISS and the pathway conditions are all significantly larger. We aim to start the pivotal studies for the pathway conditions and ISS this year. So the other aspect that makes us very confident about the future of Voxzogo is the tremendous launch of Voxzogo and the commercial excellence that underpins this. This shows 8 quarters of benchmark data on rare disease launches across the industry. We have to grow out the competitors because we are polite people, but you can see that Voxzogo did extremely -- doing extremely well even compared to our own high benchmark of Vimizim. I think you have to look at this launch curve and also think about the reality that the last quarters on this graph, we were facing the challenges and not being able to keep up with demand from a supply standpoint. So you can imagine the combination of that under 5 now indication, which is very, very new in the U.S. And together with unconstrained supply from the middle of next year. This really is an exciting picture that we're going to go into 2024 with. So let me just briefly touch on that supply situation because it's -- it really is a fabulous job done by the technical operations group at BioMarin. In 2023, we were able to supply 2,800 patients through their great work. Working in partnership with our CMO, we were able to secure supply, which will be unconstrained as of mid-next year. We'll be able to meet the needs of 6,000 patients in 2024, more than doubling our capacity and then 2025, 8,000. Looking forward, we believe we've got ample supply to be able to meet the growing revenues and needs for Voxzogo. So let me talk a little bit about Roctavian. At this point, I'd like to acknowledge that the news that we've treated the first U.S. Roctavian commercial patient at the end of December. I think this milestone, together with now the publishing of the German price, it was already agreed, but now it's been published, I think, are important milestones in the activation of this market. I mean the reality is this is a highly disruptive therapy in a very complex market. You have to have a highly motivated patient, you have to have a supportive payer and you have to have a treatment site in a physician who's willing and able to use this product. So we've got to get all the pieces in place to start to move this. And we have been making progress with Roctavian. It's slower than anybody would have expected or would want, but we are making progress. On this slide, we show all the different attributes, and I'm not going to go through them with Roctavian but it's a really clear, compelling value proposition, but it will take time. This is a pioneering new therapy area. So as I've already mentioned, we're going to let the results do the talking for it. That's what we're going to focus on. is the results rather than providing lots of expectations and forecasts on Roctavian. Team and I are focused on the execution of this launch and it's going to be exciting to share our progress as we make it. So as I was coming into the role and leveraging my experience working at larger companies and thinking about where BioMarin is in its development, I thought it was also important for us to take a step back and think about how we're going to communicate externally. So for the fourth quarter '23 earnings call, we're now going to guide at the overall product, at the overall revenue level, not on the individual product level. We're going to obviously guide on the other elements of profitability. We're going to have a much more consistent cadence with regard to our updates. We're going to primarily communicate on a quarterly basis unless something is very, very significant in the interim. We're going to focus on really material developments in catalysts and we're going to share scientific data at medical congresses and medical meetings not with investors first. So for example, I know in prior JPMorgan's, we have shared the long-term follow-up data on Roctavian. We're not going to be sharing that at this meeting. That data is going to be shared at a Medical Congress in the middle of this year. Now I can reassure you, I've seen the data. We've seen the data, Hank seen the data. The Factor VIII levels, the annualized bleeding rates, use of Factor VIII prophylaxis is consistent with what we predicted and consistent with prior trends, but please wait until the data is released, and the clinical community can see it it's in its entirety. And finally, we have an Investor Day planned in the third quarter of this year. And this is when I'll be able to having spent more time with investors, with employees, with customers, with patients. We'll be able to provide more of a perspective on the long-term strategy and aspirations of BioMarin. We're going to be reporting out the work of the strategic and operating review committee, and we'll be providing at that stage long-term financial targets. So in summary, again, some of the things I've talked about may seem familiar to you in terms of the priorities of BioMarin. I just want to be really clear on what is different. First, we're going to accelerate Voxzogo expansion. It is the highest priority at the company. Secondly, we're going to focus on executing on Roctavian. We're going to talk less about it and do more. And we're going to communicate those results as and when they happen. Thirdly, we're going to prioritize our really broad and deep pipeline to the assets that have the highest impact from a patient standpoint, but also the highest commercial potential. And then fourthly, we're again to increase profitability faster than we were originally planning to. We have tremendous opportunities to do that. You'll see that those results -- those efforts will be borne out in 2024 and also on a longer-term basis. So with that, thank you very much for your attention. I'd like to now introduce Hank Fuchs, who is the President of Worldwide R&D at BioMarin; and Brian Mueller, who is the Chief Financial Officer. Thank you.

Great. So thanks for the presentation. And as a reminder, if you want to ask a question in the room, raise your hands, someone will bring you a mic or you can submit them over the portal. I guess, first, and I know you sort of touched on this in your presentation. Can you spend a little more time on what you found most compelling about the opportunity to lead BioMarin?

Yes. I mean I hope that came really quite clearly through. I mean I think there's very, very few companies who are positioned the way that BioMarin is with the growth prospects that BioMarin has. I mean very few companies, as we know, make it to the milestone of profitability. BioMarin has just made it. And that and the revenue ahead of it, the track record of innovation, for somebody with -- it's very important to me that I can actually feel like I can have an impact. And I think where the company is and the experience that I've had was a really good match in my mind where I felt like these opportunities with what I bring, this is really, really exciting.

Spend a little more time on how we plan to draw on your commercial and operational experience from Genentech to accelerate growth and profitability at BioMarin?

Yes. I mean, obviously, on the commercial side, whether it's Voxzogo and the continued trajectory of that launch is really critical. And then also drawing on my experience with hemophilia with regard to the Roctavian launch. I think I had a lot of experience with life cycle management. That's going to be I'm looking forward to using that with Voxzogo. This is our first opportunity at BioMarin to really go from a single monogenic disorder to being able to help patients across multiple different diseases. It's enormously exciting. And I think that operational experience, which is the reality of many large companies, when you reach scale, you start to really focus then on how do you optimize. And I've seen a little bit of how the movie and the book ends and it's sort of -- it's very, very exciting to be able to grow BioMarin into that rather than having to do it on the back end.

I think on the slide, it said one of the things you plan to do is increase profitability faster. Can you talk about the levers that you see available to increase profitability faster?

Well, here, I'd like to bring Brian in and Brian let me turn it to you.

Yes. Thanks for the question, Jess. Alexander touched on it with some of that operational excellence experience at Genentech and seeing companies get to the end. And that is indeed where we're at. I've commented before that the way BioMarin grew up to reach the scale of the roughly $2 billion in revenue that we have today. We sell in almost 80 markets. We've got fully integrated end-to-end capabilities across manufacturing, R&D, sales and marketing. But those capabilities were built to both establish and then keep up with a lot of that organic growth over the last decade. So now that we've built it, we have a chance to optimize it. So looking at how and where work is done, cross-functionally and globally, is it the right work in the right place, end-to-end business process efficiency systems again, capabilities. So there's a lot of levers available, and this is where we're really looking forward to Alexander's experience, and he's off to a great start in his first 5 weeks. So stay tuned for more.

Great. A question in the audience? I'll just repeat it.

[indiscernible].

Yes.