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

Okay. Good morning, everyone. I hope you're enjoying a very rainy London-esque Healthcare Conference. The weather is fun as is running from the Fairmont to this hotel, but we made it. I have the pleasure of hosting Brian Mueller and Alexander Hardy, CEO. Alexander, why don't I hand it to you for some brief introductory remarks, and we'll get into one-on-ones.

Great. Thank you very much. Thank you very much, everybody, for joining. It's good to be here. So I started at BioMarin just under 12 months ago. It's been a very busy 12 months. We have refreshed the strategy of BioMarin. We're focused on genetically defined diseases. And we are focused on 3 pillars of our strategy: innovation, growth and value commitment. As part of that, we have doubled down our efforts in skeletal conditions with multiyear driver of growth VOXZOGO with multiple new indications, and 5 subsequent indications now under development. We focus our efforts on ROCTAVIAN and we've realized and have a plan to further increase the really exciting level of growth possible with the enzyme therapy portion of the business. We've identified about $0.5 billion of cost transformation. We have eyes on that, and that's going to result in our ability to reach operating margin of 40% by 2026, 40% plus thereafter. We're on track. We believe we have to achieve revenue guidance of $4 billion by 2027. And mid-teen CAGR growth from now through to 2034. We've also restructured the business, a focus now on business units. We believe that will help us deliver the results. We've also got the right team in place with some very important announcements over the last several months. We have a new Chief Commercial Officer, Cristin Hubbard, we have a new Head of R&D joining us from Amgen Rare Diseases, Greg Friberg, and we have a new Chief Business Officer, James Sabry. So we have the team, the strategy, and we're already making really good progress.

Understood. I'm actually going to start with a part of the business that I don't think gets talked about enough, but I've noticed, especially in the back half of this year, you're talking about it more, which is high single-digit growth for your ERT franchise. And I think as for a lot of investors, they're kind of skeptical, they're like, look, we all know this business, it's steadily growing and now suddenly BioMarin is talking about accelerating some of those products. Talk to me about what geographies you're really focused on in terms of accelerating growth for your ERT franchise? And are there specific products that you would call out where you feel like there's real room for upside and acceleration that maybe investors aren't seeing right now?

Yes. Akash, I think the -- this is a portion of our business, a very substantial proportion of our business, yes, approximately $2 billion in revenue, the enzyme therapies, which I think is underappreciated. And I think people miss a few things about it. First off, this has been growing quite considerably. So people think of this as being resilient and it is resilient to competition. It's resilient to the Inflation Reduction Act, very minimal effects from those things on it. But actually, it's been growing. The last 3 years, the CAGR of the enzyme therapy business has been about 8%. If you go back a little bit longer, it's actually higher. We were then in the launch phase for Palynziq, and I come back to the specific products within the portfolio, but it's been about 11% over the last 5 years. So it has been growing at a significant rate. And we actually think that this will not only sustain at that growth rate, we actually think we can grow it a little faster. Why do we believe that? Well, this is where our geographic footprint of being in 80 countries. There's still quite a lot of growth potential in less developed markets. And we believe we can realize that additional level of growth, identifying, diagnosing patients, improving adherence in all geographies. And then when we look at the individual products within enzyme therapies, I think there's one that I'll pick out specifically because it has the most room to grow, and that's Palynziq it's only a few years into its launch. In fact, it was only launched last year in Japan. It's doing extremely well. We have a Phase III underway in -- to expand the label into adolescents, that should expand the population eligible for Palynziq by about 10%. So we're confident we can grow this business even faster, but it's very important the investors already realize that it's growing at a pretty significant rate.

Understood. Now maybe going -- I remember when you've kind of introduced yourself to The Street at JPMorgan last year, you were talking about, yes, we're geographically really diversified, but I want to have more of a U.S.-centric focus. And since you've rightsized things from a cost perspective, you've gotten your team in place, Again, I feel like a lot of the questions from investors is like, well, what's happened in the past? How do things change by just changing people? How do you accelerate your U.S. launch trajectories and specifically on VOXZOGO, where maybe the demand there hasn't been as strong as maybe your team had internally hoped for?

Yes. So I mean, it is a very interesting thing comparing a business like BioMarin's with other pharma businesses such as the large pharmas, the U.S. is usually the driver, right, of most molecules and most businesses. Actually, 2/3 of our revenue is outside the United States, but the United States for VOXZOGO represents the largest single market opportunity. The launch for VOXZOGO was slow in the United States, mainly because the indication wasn't the full age range and that changed in November last year, the FDA gave us down to birth for the VOXZOGO indication. And since then, the product has been growing extremely well. And the U.S. is on track to be our largest single market for VOXZOGO. I think the business unit approach, whereby we're going to have, instead of -- the U.S. had been responsible for the entire portfolio, we'll have somebody dedicated to skeletal conditions. I think we'll have the focus to be able to -- and the accountability to be able to pull through stronger performance. And I really think that we're on track for the U.S. to be a very, very strong part of our performance going forward. But that being said, again, it's that geographic footprint is very, very important in rare diseases. So it's not just the U.S. It's also these long tail of countries out to 80 geographies where BioMarin has figured out how to get drugs reimbursed for and paid usually under a named patient program. That's been extremely important and will be extremely important for us going forward.

Right. Understood. Now I think also you're going to have competition that comes out for VOXZOGO. I feel like the goal for your team is, hey, for our most important geographies, we want to make sure we're going from a prevalent to an incident population, right? So as you think about your top territories and then your kind of commercial goals over the next 3 years, how confident are you that, let's say, developed Europe and U.S. will by the time you get competition, be largely an incident market and not a prevalent market.

Yes. That's really important for us and for patients. And we have the opportunity to get -- the earlier you start treatment in achondroplasia, the longer and greater the outcomes and difference you make for these patients. So we want to do it from a patient standpoint, but it's also very important from a competitive standpoint. And that is indeed our goal to -- by the time, should any competitors launch and no doubt we're going to talk about that. We will have already essentially penetrated the prevalent market. And then it's going to be an instant market where the competition is really going to happen. And there, we also believe that we'll have a further lead over our competition because, again, we have the 0 to 2 indication in a lot of geographies, whereas that's going to take longer for our competitors to develop that data. So that's when patients -- and that's where the guidelines are saying now that patients should be initiated as soon as after birth as possible, they will start on VOXZOGO, and then our objective will be to keep them on VOXZOGO as they progress through their growth years.

Understood. Now just thinking about competition and if it enters, the way we kind of think about it, if you're well controlled. I mean, like if compliance was an issue, you would have seen compliance be an issue of 95% compliance in the real world, and patients are well controlled on VOXZOGO. Can you -- and you keep talking about geographic diversity, and that's one of your edges. Talk to me about health care markets where you feel like once a patient is on VOXZOGO, it's going to be very hard from a payer perspective, from an insurance perspective to not keep them on the current product and maybe other markets where maybe it's more of a health care provider decision. Is there any nuance between the geographic territories that you're involved in with VOXZOGO right now?

Yes. So I think the resilience of us when and if we face competition, and we've already talked about it being a switch type of situation that the competitors will have to switch patients off VOXZOGO. I think it's very important to understand kind of what goes into that switch decision. The hierarchy of what's most important is efficacy, safety and then only then is convenience. And to your point, if patients are doing well and they do very well on VOXZOGO, I mean, it's a highly efficacious, durable and safe drug, apparent with the consequences of not treating and not getting results in achondroplasia, we think that's unlikely to be a high level of switch. And then there's the geographic footprint that you talk about. I mean, if you look at the prevalence geographically of a disease like achondroplasia, I think, again, it's sort of interesting for -- probably for the -- for investors to understand that 70% of the patient potential for achondroplasia is outside the United States, Europe, Canada, Australia and New Zealand, 70%. So you have to have that geographic footprint. You have to have those teams in place that understand how to get a patient on the drug through a payer system, which, as you can imagine, is quite complicated in these countries without necessarily a complete national health care system.

Understood. In terms of your long-term guidance, and I think you get that question from investors, like the Ascendis data came out, why wouldn't they change it, right? Like why maintain the $5 billion I think even for your own team's admission, the Ascendis data was better than, I think, we expected, I think, even BioMarin expected. So why keep the $5 billion? And then number two, is there an appetite as we get into next year to perhaps give more detail about the assumptions underlying the $5 billion number that you gave out do you think that would be helpful for investors?

Yes. Yes. Well, thanks very much for the question. I mean, the elements of the guidance we gave out at Investor Day, we already touched on them briefly, but it's $4 billion of revenue by '27. And then it's this mid-teen CAGR between now and 2034 that we're targeting. And specifically what you're referring to is that we estimate the peak sales potential of our skeletal conditions franchise at $5 billion between now and 2034 plus time frame. And the question is, how do we still feel confident with that? Well, first off, I just want to be clear, we have intellectual property surrounding our CNP portfolio. I'm not going to talk about that because we want to keep basically our strategy confidential at this stage. But just putting that to one side, when we saw the data, we went back and we looked at the models that we have underlying our long-range plan, underlying our guidance. We already had competitive assumptions in, we refreshed those. We actually did market research. Again, we know this market extremely well, we put that profile in front of physicians, '27 the $4 billion, I mean, that's very, very early. Should Ascendis come to market, that's very, very early in their launch trajectory. What you're bringing up is the longer term, the $5 billion.

Right.

Well, there after achondroplasia, we have hypochondroplasia. We're already in the Phase III, we'll have a lead there that will -- we believe will get approval in '27 should we get approval by the FDA. So we'll be on to the subsequent growth of the 5 subsequent indications. And they are a lot larger market potential than achondroplasia. There's about 420,000 patient potential in those 5 subsequent -- I should say, totally in the 6 indications that's 17x larger than achondroplasia. Now could Ascendis or another competitor if it's another CNP, it could potentially develop in those subsequent indications just like VOXZOGO has. But again, we'll have a lead. And we've assumed in that $5 billion a very, very low penetration into that population. These are undeveloped markets. These are diseases like idiopathic short stature conditions, that's about 190,000 patients. Again, contrast that to 24,000 patients in achondroplasia gives you the size of the potential but these are brand-new markets, and we've got very conservative assumptions about how much we'll penetrate. A competitor coming in will actually, we believe, help develop that market. Yes, we'll cede some share. Again, we'll have that first mover advantage, that geographic footprint, et cetera, et cetera. But that's why we still believe that we can achieve the $5 billion.

And I think to that point, just on achondroplasia alone, as we get into 2027, and let's say you do get competition, is BioMarin's base case modest growth, flat or a decline in the achondro-specific sales for VOXZOGO? What's kind of baked into your assumptions?

I'm not going to get into the specifics of our assumptions, but we believe that there will be switching. Again, that's reflected in our guidance. But overall, VOXZOGO will continue to grow as we bring on these additional indications and as we expand out in geographies. I mean we're in approximately 45, 46 countries right now with VOXZOGO, by 2027, we will have launched in another 20 countries. So again, there's multiple reasons to believe that we're going to be able to sustain this high level of growth even through competitor launches.

Understood. Maybe just more near term on VOXZOGO. In terms of patient starts, and I think I did a poor job at this, too. You had 400 patient starts kind of in Q1, but that's also when you got pediatric on the label, right? As we think about the steady-state rate of patient adds for VOXZOGO on a go-forward basis, is that kind of like 300, 350 range the appropriate metric to think about over the next several years? Or -- because I think the other kind of, I think, misunderstanding I had and The Street had was, oh, supply is coming back online, we should see an inflection any color on, a, patient add cadence, but b, maybe how supply coming back online wasn't necessarily some huge bolus like some might have thought?

Yes. I mean, since you're in the mode of saying something you could have done or should have done differently.

I could have differently, yes.

I think we probably should have explained even more clearly what the supply challenge meant, it wasn't a significant bolus of patients. We were managing the markets we launched in and now those launches are happening. There wasn't a significant sort of take of sales. The Q1 was very much, as you said, about the label expansion in the United States. There patients were waiting to go on VOXZOGO. With regard to patient numbers going forward, Akash, I think we're moving away from reporting patient numbers. Now it's very important to explain why, it's because as you get out we'll be in approximately or more than 60 countries by 2027, getting patient-level data and tracking patients is extremely complex and difficult. There's -- as you probably know, here we are in Europe, there's a lot of confidentiality issues, et cetera. So we want to move away from 12 quarters after launch from patient numbers and move to revenue as being the best guide. And there, we are targeting this 25% CAGR between now and 2027 for VOXZOGO. And if you think of the last quarter, we were over 50%. So we're confident about that 25% CAGR. And I'd suggest that's probably the best thing to keep your eye on.

Makes sense. Now I remember when you had kind of got introduced and the question you got is like you've taken a look at the pipeline, what's your kind of favorite child, right? And I think there was a perception at the time given you have expertise within DMD, it could have been the DMD corrector. But talk to me about that long-acting CNP program. And what you see there, a, from potentially bridging patients from VOXZOGO onto a next-gen program. But then b, in terms of the clinical profile for VOXZOGO, where do you feel like a long-acting formulation could actually improve efficacy, whether it's average growth velocity. But to your point, maybe other secondary markets like stenosis and proportionality?

Yes. Well, I think as the leaders in this space, the follow-on to VOXZOGO is extremely important. And we think that 333 is a significant -- has the potential to be a significant step forward. I mean just going back to the sort of the hierarchy of priorities for physicians and patients, it's efficacy, safety, convenience is very much third. If we can improve on that, we want to. And the target product profile for 333 is for it to be superior in efficacy to VOXZOGO, and we can touch a little bit on that but with the convenience of weekly -- with weekly administration. I think if you've got that sort of product profile, it is the worthy heir to VOXZOGO, and we will be able to switch patients from VOXZOGO to 333. So that's why it's the -- it's such an important priority for us. We've got a lot of focus on expediting it, at -- in our Investor Day, we said we're targeting a launch of 2030, that puts it well ahead of the patent expiry for VOXZOGO. But obviously, given the competitive context that we face, the sooner the better, and we'll be providing an update at the beginning of next year about how we can move this even faster. Clearly, we can leverage our knowledge, some data sets for VOXZOGO. We won't be explicit about what those things are, we're leveraging, but that will be our goal to expedite the path to approval as quickly as possible.

Understood. Now you're going to have healthy volunteer data on that program next year. Scientifically, it's kind of interesting because if you model Ascendis' PK versus our PK, Ascendis is kind of this slow AUC, but the Cmax for VOXZOGO is meaningfully higher, right? And I think the question becomes safety, hypertension, cardiac AEs. And I think when you look at a long-acting CNP program, that kind of sustained level of CNP elevation is kind of that open question from a safety perspective. Is that safe to do? Talk to me about how important healthy volunteer data could be in terms of derisking this program because I feel like that's something investors aren't really paying attention to.

Yes. What we've seen in our preclinical data, the potential for 333 to offer higher free CNP levels by about 50% to 100% higher with that area under the curve with a less of a peak concentration. There is a potential this could have a safety benefit. But again, the main thing we're focused on is can we improve on the efficacy to a meaningful degree. And that is what this -- next year, we will have the healthy volunteer data. This will allow us to see in humans can we see that increase in free CNP levels. If we see that increase in free CNP levels, we believe that gives us a high degree of confidence that when we then do our clinical studies with patients that will translate to efficacy. So again, watch the space next year, we will have -- by the end of next year, we will have that data showing CNP levels in healthy volunteers.

Understood. And outside of average growth velocity, what -- given you've really made inroads within the achondroplasia community and their parents, what are those other secondary endpoints where you feel like a next-gen program could really differentiate and maybe investors aren't understanding?

Yes. I mean I think the -- it's also in an area that's really important because it's incredibly important to caregivers and to HCPs is all the data beyond height. We end up all obsessing about AGV levels, annualized growth velocities, because this is the regulatory endpoint, and it allows all of us to -- with all the challenges of doing it compare across products and studies. But the reality is that there are significant other health considerations that patients, particularly with achondroplasia have to deal with. And you cannot collect those in traditional clinical settings or I should say, clinical trial settings. This is where real-world data, time on the market, collecting that data in registries. And we have that ongoing with VOXZOGO, and we will do the same thing with 333. The other aspect is it's not just about bone growth, it's about bone health. So that would be another thing that we'll be watching very, very carefully. It makes no sense just to grow a longer bone if that bone is weaker. So that's also an area that we'll be looking at with 333.

Understood. Now on the DMD corrector, I think there was -- I felt like there was a tone shift, like, okay, we were supposed to have data maybe start of next year. And now it seems like it's coming out more midyear. And I know my team and I were discussing like, is that a tone shift? Are they seeing something in the early data that's making them say we need 26-week data, not 13-week data before we reveal this to The Street. Just to kind of get this on the record. Are you seeing any data with the DMD corrector than when you made that decision? And why extend it out to 26 weeks and not 13 weeks?

Yes, there is no shift. We have not seen any data. We remain as excited about this program. We do have -- with these early cohorts, we have 2 time points. We have 13 weeks, and we have 25 weeks. At 13 weeks, the effect on dystrophin levels in the muscle are still on the rise. And in fact, that's the same thing at 25 weeks. But the challenge of predicting what you see at 13 weeks, is that going to translate to 25 weeks? So we thought the sensible thing to do was to commit to an external communication of the 25-week data. So this is all underway. We'll see the 13-week data that will give us a sense, but we think the best read and the most responsible thing to do is wait for the 25 weeks.

And maybe just lastly, because 30 seconds to go, potential for accelerated approval with the data that you're going to generate on the DMD corrector program by next year, is that a possibility?

What we've seen with preclinical data is really exciting. We've seen up to 50% improvement in dystrophin levels. Our target product profile that we have is the bar is 10%, which is significantly higher than anybody has shown right now. We think with these cohorts that we can show 10% improvement in dystrophin levels in the muscle, we think we will have a strong case to then pursue regulatory approval. So watch the space. Most important thing is to see that data at 26 weeks, yes.

Understood. Given I was 2 minutes over on Apellis, we're going to end it on time here. Yes, he is saying, thank you. Thank you so much, Alexander. I really do appreciate it.

Thank you very much, Akash.

And thanks everyone for joining us.