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

Good afternoon, everyone. Welcome to Barclays Global Healthcare Conference. My name is Gena Wang. I cover U.S. SMID Cap Biotech. It is my great pleasure to introduce our next presenting company, BioMarin. With us today, we have Brian Mueller, Chief Financial Officer. With that, maybe -- do you want to give a very quick high level overview of the company, and then we can dive into the questions.

Yes. Thanks, Gena. Thanks so much for having us. Hello, everyone. BioMarin is truly at an inflection point in our growth trajectory. The company has had a lot of success over the years, a very innovative company with 8 internally developed commercial assets generating over $2 billion of revenue and have now reached the point of profitability as an enterprise. So current objectives are to both maintain that level of innovation to continue to expand product opportunities, develop and bring new products to market, but also execute on an aggressive financial growth strategy, both growing the top line and increasing bottom line profitability, both in terms of absolute dollars like earnings per share as well as operating margins. We also have a new CEO, Alexander Hardy, who joins us after J.J. Bienaimé led BioMarin over the last 18 years, built an amazing company. J.J. was ready to retire, and again, back to the inflection point, this next chapter of growth for BioMarin is going to look very different. So we welcome in Alexander as the new leader. He quickly in his first few weeks, frankly, identified top -- the top 4 priorities for the enterprise at this time, and I'm sure we'll unpack this a bit more, Gena, but those are maximizing the Voxzogo opportunity. Voxzogo is our fast-growing product. It's approved in achondroplasia, and again, growing rapidly but has the potential to work in other indications. Established the Roctavian opportunity. We did not see the commercial revenues at a substantial scale come online, if you will, last year. So hence, the establishing the opportunity. Prioritizing our R&D, again, is a high innovation company with a lot of investment in internal research and development over the years. We've got the most assets that under development than we've had in any other time in the company's history. However, when you're trying to do a lot, you then inherently may not focus enough on what could be the highest priority value-creating assets. So we're going through that process right now. Then the fourth objective is to grow profitability faster. Again, we've been on a profitability mission in the last couple of years, reaching non-GAAP income, again GAAP net income but we think we can actually grow profitability faster both through the levers I mentioned as well as operating in cost efficiency tactics going into the future.

So since given your position like -- you're in charge of financial, so maybe walk us through in terms of profitability and non-GAAP and a transition to GAAP profitable. What are the key data points that will make this happen and make it more sustainable and have a continued growth?

Yes, thanks. I'll cover kind of the basics of it. But just to maybe skip to the end just a little bit. All those elements that I just mentioned in terms of those top priorities as well as our long-term financial aspirations, are also part of a number of work streams that include refreshing the corporate strategy and R&D strategy, building a capital allocation strategy that can be clearly communicated and convincing to investors. All of those elements are proceeding rapidly with a sense of urgency within BioMarin towards an Investor Day later this year. At that Investor Day, we'll look forward to reading out our goals and objectives across all of those elements. And that will include long-term financial guidance, and give a lot more color to your question. But -- so my answer for now, Gena, is a little bit of how we got here in the meantime. As BioMarin grew up over the last several years, in order to get to the $2 billion in revenue, we had to invest in a really significant amount of infrastructure. We talk about how we sell our products in close to 80 different global markets. We probably have BioMarin employees in approximately 50 markets globally. Behind that is a robust, now mature business support infrastructure, sales and marketing infrastructure that includes market access as well as just kind of the basics of supply chain. Fully integrated research and development from early-stage discovery research through to the pre-IND-enabling work. And then, of course, as you've seen with our track record through clinical development, regulatory to approval, we do that at a global level as well. And then manufacturing, world-class manufacturing, we've got a campus, wholly-owned manufacturing campus in Northern California and in Shanbally, Ireland where we produce most of our products in-house, that includes a gene therapy manufacturing plant. So again, robust quality functions. And my point is the infrastructure is largely built. That's how we got to the $2 billion in revenue. And with that level of scale, I think part of getting to that non-GAAP profitability a few years ago was really proving out the business model. Could you get to a profitable independent biotech company through ultra rare disease assets? We show that you can by having a portfolio of a number of assets. But then we realized that those ultra rare disease assets -- a drug approval is a drug approval, whether it be a $200 million market or a $2 billion market when you're navigating the process. So we started to focus on larger rare diseases to enable more robust revenue growth after reaching that scale of the base business, if you will. And that led to us getting into markets like achondroplasia, which is 22,000 patients globally. Severe hemophilia A is a massive multibillion-dollar market. So that was that strategy. And then getting back to your profitability question, that allowed us to start to then get leverage from the base business. So I'd say the profitability story to date has been a bit more pure leverage. Where we're going next is optimizing the business. That's the work that's coming under this strategic review.

Okay. So that mainly was driven by 2 very big potentially big indications, like the Voxzogo and the Roctavian, that were the 2. So then maybe I will ask, since you just -- I think today, we saw the data update at the ACMG with Voxzogo, you showed hypochondroplasia data, you also showed the long follow-up, 7-year, 4 years follow-up data. Maybe like how important these data in terms of market uptake for achondroplasia and also for your Phase III study moving forward for the hypochondroplasia?

Yes. Thanks, Gena. Great that you -- I know I'm sure you've had a busy morning, but you still managed to read that press release and the abstract. Thank you. So yes, great to put that data out there because we've talked a lot about how important both the safety and durability of Voxzogo is to the patient community, to regulators and to the BioMarin community as well. And so to read out 7 years of data from our Phase II study, where the improvement in growth compared to baseline pretreatment rates has been 11 centimeters. And in the 4-year Phase III study what was reported today was just the extension study. So it was the most recent 3 years of 5.8 centimeters of additional growth in the original first year of the Phase III study was 1.5 centimeters. So those 2 together, it's close to 7.5 centimeters. Again, the importance of safety in a rare disease pediatric chronic therapy, so to continue to have Voxzogo demonstrate its strong safety profile. Also included in today's report was an improvement in the quality of life scores. We think this is very important. We recognize that while annualized growth velocity was the primary endpoint of our Phase III. Of course, with a disease like achondroplasia, there is a number of other comorbidities that are important to demonstrate improvement upon. It's just that those -- in some cases, there's not robust scale established. It can be harder to measure. So it usually takes a little longer, but we didn't -- we wanted to get Voxzogo developed and approved so that more patients could benefit from the therapy as urgently and as early as possible. And that's why for us, the -- some of this quality of life data and real-world evidence is a follow-on exercise, but we're starting to see demonstrated improvement, more to come on that. And I do think that's going to continue to help as the data set matures, I do think it's going to continue to help what has already been robust market uptake. But we're a little behind in the U.S. in terms of market uptake compared to other territories because there wasn't a standard of care or treatment home for achondroplasia in the U.S. BioMarin is working to establish that, data publication and awareness like this can be helpful. As you noted, Dr. Dauber, who has been running an investigator-sponsored study in hypochondroplasia, our next indication. He reported his 1-year data today, 1.81, I believe, centimeters of improved growth over 12 months. That's actually a bit higher than what the Voxzogo growth was in achon for the first 12 months. We've already started our Phase III program for hypochondroplasia, the 6-month run-in period started at the end of last year. So we expect to begin the dose -- Voxzogo-dosed portion 52 weeks, double-blind, placebo-controlled portion of the study middle of this year. So again, I think that should help in, say, patient recruiting for studies, those sort of things to have the data continuing to support the thesis.

Okay. Good. And then regarding the commercial update for Voxzogo, and I think that the manufacturing limitation will be lifted mid this year. And then how quick do you think that will uptick is purely based on the demand there?

The impact of the supply constraint?

Yes, like removal of the supply and then how much we see -- we can see the uptick in terms of revenue?

Yes. Thanks, Gena. A couple of things there. First of all, just to note -- first of all, it's important to note that when we talk about this supply constraint, this is not a bulk drug substance question. It's not a quality question. This is a constraint in the fill-finish process at the end of the production cycle, where there's just a volume throughput challenge. And since that challenge emerged last year, essentially, we accelerated what were existing scale plans. We just -- they were longer-term plans. So we accelerated them and made them more of the priority. And secondly, it's important to note that this is a constraint on growth. So if you look at the quarterly sales trends over the last 3 quarters of the launch where this supply constraint has been a challenge, the product is still growing. We talked about why we didn't give Voxzogo-specific guidance for 2024. We're expecting robust double-digit growth in Voxzogo in '24. So while this is a constraint we're largely trying to manage through order levels, inventory levels in certain of the 41 markets we sell Voxzogo. Within those 41 markets, Voxzogo is weight band dosing. So we actually have 3 different dose levels. So if you can imagine these 120 SKUs in a supply-constrained environment, how we manage through each and every detail. But again, it's a constraint on growth where the product is still growing in the first half of the year. And then to the latter part of your question, yes, our plans to become unconstrained as at least as it relates to our current projections for '24 is on track for mid-year. And I don't think you'll see a hockey stick in the second half of the year, but because of the supply constraint, because of the traction we're expecting to make in the U.S. Just to note that Voxzogo was initially approved in younger children, but above the ages of 4 in the U.S. and Europe. It was just in Q4 of last year, where we got approval for Voxzogo down to infants. So in the U.S., it's able to be used in children of all ages. And because newborn or young children have the largest and longest opportunity to benefit from Voxzogo and because of robust diagnosis, that's another growth dynamic where, again, we're just coming out of the gates. We reported as part of our fourth quarter that 70% of the new patient starts in the U.S. were in these younger children. That's probably a onetime metric that we're not going to continue to update where we're just trying to share the dynamic that the interest is there. My point being that, that's going to be another growth driver. We were expecting it. So it was in our demand forecast, and it's in the mix with this demand versus supply issue, but hopefully gaining momentum, we expect most of the growth in Voxzogo to still be in the second half of the year.

Okay. And then if we fast forward, only focusing on achondroplasia patient like, say, in the U.S., like what kind of penetration -- peak penetration when you think of realistically you will be able to achieve?

Great question. Thank you. So 22,000 patients for achondroplasia globally. We estimate that 3,000 of those patients are in the U.S. It's the single largest market. And to my last remarks on the importance of that under 5 label is that if you just look at the stratification of age groups, 1 to 5, 5 to 10, 10 to 15, it's a 1/3. So we've roughly just increased the U.S. currently available market size by 1,000 patients and the patients that are likely to be the most motivated families to explore treatment. Certain markets where a standard of care was established already for achondroplasia, like Japan is the best example. We saw a very rapid uptake and deep penetration early in the U.S. where there wasn't a standard of care or treatment home for achondroplasia, that was the critical element of the strategy for our launch. Because there was no treatment available, achondroplasia patients in the U.S. might be seen by a variety of physicians. It could be a geneticist. It could be an orthopedist. It could be a pediatric endocrinologist, which is, by the way, the call point or treatment home that we're trying to establish. But as the children -- child gets older, depending on their comorbidities, it could be -- they could just see their regular pediatrician. So where there was achondroplasia awareness and Voxzogo awareness, I think that was the market uptake we've seen in the U.S. thus far. But again, it's somewhat of a laggard to several other key markets. So we really do have the advantage of -- while the U.S. market penetration is a bit behind because it's the largest market, it also has the most opportunity. We're seeing real traction with the pediatric endocrinologist strategy. It was just over the course of the last few quarters where we start to see the prescription volume pivot to be more ped-endos than geneticists. In the early days of the launch, it was mostly geneticists. There's 350 pediatric endocrinologists in the U.S. So you can picture the profiling efforts and identifying those prescriber bases. This, by the way, gets into the indication expansion because we're starting to see where a certain physician when there was no treatment available, you may not need a clinic, but with the level of clinical development happening with Voxzogo being available, we're seeing the establishment of skeletal dysplasia clinics in what perhaps used to be just a traditional ped-endo office. We haven't gotten into specific market penetration targets at this point because you can tell we're optimistic, we've got a lot of room to grow.

Okay. Good. We have a few more minutes and we do want to discuss about Roctavian. And you did mention this will be very important revenue growth for BioMarin. But so far, we haven't seen very exciting uptake and the launch trajectory, it's a slower than, say, from an initially guided also investor expectation. So how will BioMarin do in 2024 to change that? And then there are 2 focus. One is Europe focused and mainly in Germany and Italy and the U.S. market. So maybe I will start with U.S. market? And since I think we treated 1 or 2 patients last quarter.

We treated 1 U.S. patient in Q4.

Yes. U.S. patient in 4Q. And then I think at the previous earnings call, you did have a few patients ready to be dosed. So what should we expect for, say, first quarter? And what could be the change or BioMarin has done to make that trajectory will be different.

Great question, Gena. First, let me start with just a minute on the challenges -- the nature of the challenges that we're experiencing in these launch dynamics. So very briefly, it takes 5 elements to check off in order to get to a commercial patient infusion. Interested patients, interested physician, an operational site that's ready to infuse Roctavian, a payer. And then the final, which is the challenge for us is the contracting for full end-to-end reimbursement within a particular center. So on the first 4, we're making progress. We've seen patient interest. We've been out there since the approval in the U.S., engaging with patients, in the patient community, and we have momentum there. Likewise, physicians, again, there's some that were involved in the study. They are key opinion leaders. They're bringing their peers along, but physician interest likewise site interests, operational readiness, payer coverage policy. We now have coverage policies in the U.S. issued covering 250 American lives. So basically 5 out of 6 American lives, they have a coverage policy that includes Roctavian mostly consistent with the label as well. But that last step, which is how a particular HTC will contract with what is often a parent organization within their health care system and then the ultimate payer to understand how the economics work, the nature and frequency of individual pay for right now, each patient is within a single case agreement. So hopefully, over time, to your point of what can we do, hopefully, over time, as these sites and the payers figure it out, some of this contracting will get templatized or we will ultimately get on formulary. And that's when we will say that the launch is more robustly or fully coming online. The big difference Gena, and this gets to your question about kind of what to expect earlier this year. We're getting out of the business of -- trying to predict when it's going to happen. We've been out at this best efforts for several quarters now, making progress but have realized that the timing challenges which, by the way, is mostly attributable to a lack of a sense of urgency in the system because these patients are reasonably well controlled today. There is a standard of care. And so it's not that they're not interested in contracting for Roctavian. It's just not the top priority. And as these contracts work through legal and financial systems and the networks, it's not an urgency. This is different from, I think, what we've seen with the DMD gene therapy, where there's been rapid uptake, but that's because there's such a significant unmet need.

So with -- could you leverage Hemgenix, the sites that are already treating Hemgenix since we just went through the whole process? The first question. And the second question is that you treated 1 patient and I assume that center went through all those steps. Should we expect additional patients from the centers to be treated in a short period of time?

Yes, a couple of things there. On Hemgenix, I've heard similar -- we're aware of where their commercial patients have been sourced. And as you can imagine, that's a gene therapy ready site. So yes, we're trying to leverage and where there's some synergy between these 2 hemophilia gene therapy launches. But in terms of leverage and operations, those are the kind of details where we just want to let the actual revenues do the talking. But since you're asking in that example site, if patient #2 at that site happens to be with a different payer then that's a different contracting process, right, who's the ultimate payer? Is it UnitedHealthcare? Is it Anthem? and how that works its way down? So if they figured it out for one, you'd have to have the same set of factors or stars align. That's what I was going over time, hopefully, this process will get sort of standardized within sites and payers.

Okay. And then quickly, I know we don't have too much time left, but I wanted to ask about Germany and Italy. So Germany, we treated 2 patients, right?

Germany we treated 2 patients.

2 patients, and then what should we expect going forward? And in Italy, what is the price there?

Yes, thanks. So in Germany, again, timing challenges due to the pioneering nature of this launch was -- one of the consequences was that the final German price wasn't finally concluded and published in Germany until middle of December. We were hard at work on that over the course of all of 2023. And we've talked about how there were a number of interested patients in Germany. So now that we have a final price, it's a natural question of why we're seeing those patients come through. Again, we're going to let revenues do the talking and not share minutia of patient-by-patient dynamics. But there are some dynamics in Germany, for example, to the extent some of the patients went through the companion diagnostic testing for the AAV5 antibodies some time ago, then they'll have to be retested to confirm -- reconfirm their eligibility for Roctavian. So that would take time this year. There's a certain element of site readiness in Germany as well, and some of those centers might require a preauthorization still patient by patient, even though we do have a national price. So there are still some dynamics that we're working through. We're executing, doing the best we can. But again, we'll let actual revenues do the talking. And Italy briefly, we announced that we do have an agreed and published Italian price. We expect that the net price, which is roughly similar to the German price will be a little lower, slightly due to price per vial but also the assumption in our pricing that there'll be slightly less vials used because the average weight of Italian patients is a little less than the average weight of German patients. Roctavian is dosed per kilogram of weight. So slightly less than the German price within the ballpark.

Okay. Great. Well, thank you very much.

Thanks, Gena.

Okay. Thank you, everyone.