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

Welcome to BioMarin's Business Update. I will now hand the call to BioMarin's Head of IR, Traci McCarty.

Thank you, Audra, and good morning, everybody. To remind you, this nonconfidential presentation contains forward-looking statements about the proposed acquisition of Inozyme Pharma by BioMarin Pharmaceutical and the business prospects of BioMarin, including expectations regarding the acquisition's anticipated occurrence, manner and timing, its potential benefits and financial impact for BioMarin, our integration plans, the development and potential commercialization of Inozyme's product candidate, INZ-701, and other statements that are not historical facts. These statements are subject to material risks and uncertainties, and actual results may differ materially depending on whether the acquisition is completed as anticipated, if at all, and the progress of BioMarin's product programs, actions of regulatory authorities, availability of capital, future actions in the pharmaceutical market and developments by competitors and those factors detailed in our press release issued today and BioMarin's filings with the Securities and Exchange Commission, such as 10-Q, 10-K and 8-K reports. In addition, we will use a non-GAAP financial measure as defined in Regulation G during the call today. Non-GAAP measures should not be considered in isolation from, as substitutes for or superior to financial measures prepared in accordance with U.S. GAAP and should be read in conjunction with BioMarin's consolidated financial statements prepared in accordance with U.S. GAAP. You can find additional information regarding non-GAAP information in today's press release. During the call today, BioMarin's President and CEO, Alexander Hardy, will provide an update on today's announcement. And then we will open the call for a brief Q&A session that will include BioMarin's Head of R&D, Greg Friberg; and BioMarin's CFO, Brian Mueller. I will now turn the call over to Alexander.

Thank you, Traci, and thank you all for joining us today on short notice to hear about our agreement to acquire Inozyme Pharma. We are really pleased that the first business development transaction of the year fits so seamlessly into our focused enzyme therapies business unit, providing an opportunity to leverage BioMarin's proven regulatory, development, manufacturing and global commercialization capabilities. Inozyme's investigational enzyme therapy replacement therapy, INZ-701, is currently being assessed for the treatment of ENPP1 deficiency, a rare, serious and progressive genetic condition that affects blood vessels, soft tissues and bones. The condition is associated with increased cardiovascular mortality risk across all age groups, particularly infants. Data from an ongoing Phase III pivotal study of INZ-701 in children is expected in early 2026 with potential regulatory approval in 2027. Moving now to INZ-701, which is highly compatible with BioMarin's enzyme therapy business unit and has an attractive product profile in a serious genetic condition with significant unmet need. INZ-701 for the treatment of ENPP1 deficiency is a strong strategic fit for BioMarin. Like 5 of our 6 enzyme therapies, it would be a first-in-disease treatment. Adding this investigational therapy to our enzyme therapies portfolio is a natural addition to our late-stage pipeline. And if data is supportive, we will leverage our regulatory and commercialization know-how in countries across the world to provide access to INZ-701 to patients across our global footprint. The product profile of INZ-701, a disease-modifying enzyme therapy replacement therapy, aligns with our strengths and core capabilities, advancing medicines that address new therapeutic areas. We expect the pivotal ENERGY 3 study with INZ-701 in children will read out in early 2026 followed by the potential approval in 2027. The possibility to expand the age range of the treatable patient population provides a value-creating opportunity consistent with our core drug development capabilities. Moving briefly to the epidemiology of ENPP1 deficiency. The published prevalence estimates vary significantly, going as high as 10,000 patients worldwide. With efforts to date, Inozyme has identified over 670 patients. With BioMarin's strong capabilities in diagnosing patients and growing new markets, we currently estimate that the total addressable patient population, TAPP, will be in the range of 2,000 to 2,500. We would expect this number to evolve as we focus our efforts on finding and treating eligible patients across our global footprint. And consistent with other enzyme therapies, we expect the majority of prevalent patients to be in geographies outside the U.S. This was our experience with Naglazyme, where estimated patient numbers were smaller before there was a therapy and a market to build awareness and access. We would expect the same dynamic to occur once INZ-701 for ENPP1 deficiency becomes available, benefiting from BioMarin's unique capabilities, finding and treating patients with rare genetic conditions. Turning now to details of today's transaction. We believe that INZ-701 with Phase III data expected early next year and the first potential regulatory approval in 2027 represents an opportunity to create a meaningful difference for patients with ENPP1 deficiency. We believe this opportunity with a late-stage, high-promise asset with total acquisition cost of $270 million approximately on a fully diluted basis represents a capital-efficient opportunity that aligns well with our growth plans. Based on current estimates of eligible patients with ENPP1 deficiency across all ages and considering BioMarin's work to be done sizing the eligible patient population, we are targeting peak revenues of between $400 million and $600 million by the mid-2030s, noting that we believe that most of the commercial opportunities lies with the adult indication, which is planned to launch early in the next decade. Moving to the transaction impact to BioMarin's P&L. We are planning for the development of INZ-701 over the next 2 years should pivotal results in 2026 be supportive. Given BioMarin's financial strength and increasing profitability, we believe we can absorb the incremental INZ-701 R&D and SG&A operating expenses. So today, we reaffirm our previously provided full year 2025 financial guidance, excluding the impact of purchase accounting to be determined upon closing as well as our goal to achieve 40% non-GAAP operating margin in 2026. In summary, we're excited to add INZ-701 to BioMarin's late-stage pipeline as we believe it holds tremendous promise for people living with ENPP1 deficiency. I want to thank the team at Inozyme for their outstanding work and dedication to advancing this important, potentially life-changing therapy. We're pleased to have the opportunity to take INZ over the finish line for the benefit of families living with ENPP1 deficiency. I also want to thank the BioMarin teams for their contributions towards accomplishing this transaction under our new corporate strategy. We look forward to moving INZ-701 forward after this transaction closes, which is expected in the third quarter, subject to customary closing conditions and to adding other external innovation to BioMarin's pipeline over the coming quarters. We thank you for your attention, and we'll now open the call for a brief Q&A session. Operator?

[Operator Instructions] We'll take our first question from Salveen Richter at Goldman Sachs.

Congratulations on the deal. Could you just walk us through the data that you've seen to date and the diligence you did in order to acquire this asset?

Greg, can you take that, please?

Thanks for the question, Salveen. We've reviewed the totality of the data that Inozyme's presented publicly to date. Of course, they have a variety of studies that they've performed, including a Phase I study that was in adolescents and adults. Very nicely, that study showed not only the ability to give the molecule in a subcutaneous fashion in a safe way, but it was able to show that from a biochemical standpoint, pyrophosphate levels certainly were brought back into normal ranges, and the pull-through to be able to see the physiologic consequences of that were indeed present. That can be measured in a variety of ways, but really gave us the confidence that from a proof-of-mechanism and proof-of-concept standpoint that not only biochemically but also on the functional side, there appeared to be very, very good promise moving forward. That was called the 101 study. With regard to the ongoing ENERGY 3 study, now this is in the children, this is the 1- to 12-year-olds, the data that's been released publicly in the recent earnings report and press release, we've reviewed as well with our team. We've been, of course, looking through all of the details there and feel confident again that, that study is right on track, again, as indicated, to read out in the first half -- first quarter of 2026. And of course, there is also activities going on in the adult space to fire up an additional Phase III to build on the experience so far. I haven't talked about infants yet. There is a Phase III study that's getting going in the infants. The infant disease is slightly different with regard to its phenotype, a very severe group. We even call it generalized arterial calcification of infancy. This is an incredibly high mortality, lot less data available there. But that public data, of course, we've reviewed as well on several patients, including the antidrug antibody data. And again, we feel confident in the totality of the package, particularly in the ENERGY 3 study and then the opportunity should the deal -- once the deal closes, too, to work in the adult space. So hopefully, Salveen, that answers your question. It's all of the available data. And again, happy with what we see. Proof of concept is really clear there. And the opportunity, again, to build on the great work that Inozyme has done already is something that we're very much looking forward to.

We'll move next to Joe Schwartz at Leerink Partners.

Congrats on the deal. I always thought of you guys when I heard this story. I guess, Alexander, I heard you describe this as BioMarin's first BD development of the year. So I'm wondering if you can characterize the environment that we're in now and [indiscernible] that was reached and whether we could see more BD in '25. Is this the kind of template we should expect?

Thanks very much for your question, Joe. Yes. Well, we think the environment right now is very favorable for business development. And as you know, we articulated in our strategy last year an important role for business development in BioMarin's future. And we're continuing to focus on business development to supplement our growth outlook over the coming years. And this transaction, the consideration of approximately $270 million, doesn't significantly deplete our firepower. We have plenty of firepower left. We think we have a very, very strong deal rationale for genetically defined conditions. And we see a lot of interest in talking to us about potential partnerships and acquisitions. So we intend to do more deals, and we think this one is a very good first deal with an impeccable logic and a very good strategic fit.

We'll move next to Paul Matteis at Stifel.

Congratulations on the deal. This is Julian on for Paul. I guess, how quickly do you think you're going to be able to get this adult and adolescent study up and going? You talked about how the opportunity primarily lies within those patients. So curious about that. And then also, not much of mention of the ABCC6 deficiency data that INZ shared. Curious if you have any comments on that and if you see that as important for the value of this deal moving forward.

Thank you, Julian. Greg, I'll hand it over to you.

Thanks, Alexander. With regard to the adult study, of course, looking forward to driving that as quickly. It's wonderful to have the dose ranging and proof-of-concept data in hand. And again, as we progress, we'll be thrilled to be sharing more details with regard to the design and potential timing of that study. On the ABCC6 side, of course, for those who don't live and breathe these genetic lesions, it is a different indication. It has a mutation in a slightly different place in the metabolic pathway. Some additional work is currently ongoing through Inozyme. One of their open Phase I studies, again, has the ability to enroll ABCC6. Our focus for this deal has been on the primary indication, again, ENPP1 deficiency. And once the deal again has closed, we're absolutely looking forward to opportunities for a potential life cycle evaluation. That being said, our focus is -- has been on ENPP1 at the current time. And we've been quite impressed and pleased with the work that Inozyme has done again to tee it up to this point where the ENERGY 3 study is and this opportunity to continue to expand into other phenotypes.

Next, we'll move to Jessica Fye at JPMorgan.

Maybe just following up on a couple of the past ones. So within the $400 million to $600 million longer-term opportunity you see for this asset, how should we think about the size of the pediatric opportunity that's going to be accessible in the near term? And when do you project the deal being accretive?

Thanks very much, Jess. Why don't we start off -- Brian, will you answer first the second question around accretion? And then I'll talk a little bit about the patient populations.

Yes. Absolutely. Thanks for the question, Jess. So as we shared in today's press release and in Alexander's remarks, we are pleased to reaffirm our full year 2025 financial guidance that excludes the impact of the purchase accounting treatment of the transaction in accordance with GAAP upon closing as well as our plan to achieve 40% non-GAAP operating margin in 2026. In terms of the near-term dilution, as indicated by the reaffirmation of guidance, we expect to absorb the near-term operating expenses into our overall profitability growth plans. And while the transaction is dilutive in the near term, once accretive and ramping up to the revenue range that Alexander gave, we expect it to be accretive to our operating margins at similar levels as our other products over the long term. So near-term dilutive but absorbable into our cost envelope.

And Jess, in response to your -- first part of your question, the pediatric population represent about 30% of the total prevalent population, and about 2/3 are adolescents and adults. That's our estimates at the current time. And of course, we'll be fine-tuning this as we learn more. So obviously, the level of severity is greater in the pediatric population. More of those patients are under treatment. So this gives you a sense of some of the dynamics that we'll be dealing with. But it does underline our overall belief that the largest patient population -- I should say, largest opportunity lies with the adult population. But we're very excited for the first, obviously, pivotal data in the pediatric population. And we'll be doing everything we can to bring this really important therapy to that population as well.

We'll move next to Ellie Merle at UBS.

This is Tejas on for Ellie. I think it was mentioned you might be able to supplement your Phase III package with infant and adult data to get a bit of a broader label upon approval. Is this still an avenue that's open? And have there been any discussions with the FDA on that potential avenue?

Greg, over to you, please.

Yes. Thanks for the question. Of course, when the deal closes, we'll be able to share a lot more of our thinking. At this point, I think it would just be fair to say on very general levels that any program that was moving forward with a Phase III data set would review the totality of data that's available to them at the time of those interactions with the regulators, not just the FDA again, but these would be global discussions. We're quite hopeful again that this is an opportunity to reach patients all around the globe, and we have a footprint that really suggests that from our prior enzyme therapies. With regard to this particular program, it would be routine to review all data. But beyond that, I really can't comment on how the regulators would view that or what the particular path would be moving forward. Once the deal closes, of course, we'll be sharing with you our very latest thinking, and we look forward to having those discussions.

We'll move next to Cory Kasimov at Evercore ISI.

This is [ Adi ] on for Cory. Could you provide if this acquisition provides further upside to your guidance for enzyme therapy business of high single-digit CAGR from 2023 to 2034?

Thanks, Adi. I'll hand that over to you, Brian.

Yes. Thanks for the question, Adi. So our target growth rate for the enzyme therapy business, that high single digit over time, remains intact with our core portfolio. So we believe that this transaction has the potential to augment that growth rate over time and add to it.

We'll go next to Vikram Purohit at Morgan Stanley.

This is [ Parth ] on for Vikram. Could you just walk us through potential time lines for the studies planned for INZ-701 in infants, in adults, in adolescents? And when could the pivotal readout to these populations occur? And do you believe there's potential for accelerated development in these patient age groups on potential positive initial Phase III data set?

Thanks very much. Greg, over to you.

Yes. Thanks for the question. So the ENERGY 3 study is the currently ongoing study. That's the -- in the -- so pediatric population is the 1- to 12-year-olds. That's the one, of course, that will turn its card over on Phase III in the first quarter of next year. Working to the -- on the infant side, the ENERGY 2 study is the infant study in the 0 to 12 months. That study is currently recruiting. Estimates, again, are that it will be several years before we'll see the results of that study. Again, estimates in the 2028 or beyond range, we obviously would be looking for opportunities once the deal closed to see whether, again, we could tighten those time lines at all. And the adult study, again, is currently in its design phase. I think as Alexander may have commented already, we would anticipate that the opportunity for a Phase III study initiated in that program would read out in the 2030 time frame or later. Those are very preliminary estimates at this point. We're looking forward to giving you more updates as time goes on. Of course, Inozyme is an independent company. operating right now and will remain that way until the time of the acquisition. And so again, these are our first paths. We're always looking for opportunities based on the best information that we have, both from the data on the studies as well as from our interaction with regulators to accelerate those opportunities. But you get the -- certainly, the pace with the children, the 1- to 12-year-olds coming in first, the infants coming thereafter and the adults third just because of the staggering of the studies.

We'll go next to Gena Wang at Barclays.

Maybe first, very quick clarification question. The $270 million, does that include Inozyme's own cash, I think about $113 million? And then my second question is regarding the ENERGY 3. When we look at the clinical trial design, and it seems like very simple. It's just PPI increase at 52 weeks from baseline compared to active comparator, which is oral phosphate supplement. So maybe, first, like, how much do we know regarding the oral phosphate supplement that impacted the PPI? And then it seems like this is the biomarker approvable path, assuming Inozyme already have an intense discussion with the FDA agreed on this pathway. Why would it take so long for moving this to the older patient population regarding the clinical trial design? Would that be different from the PPI as an approvable endpoint?

Thanks very much for your questions, Gena. I'll handle the first one very quickly and then hand it over to Greg. So the deal included $40 million in net cash. So therefore, the $270 million approximate total consideration represents about $230 million enterprise value. And now handing over to Greg for the second part of your question.

Yes. Thanks for the question. With regard to the ongoing ENERGY 3 study, you're correct. The primary endpoint is pyrophosphate level. And again, what's been shown is a very rapid and potent ability to normalize or bring pyrophosphate into the normal range in the studies that have been done already. There are additional endpoints outside the U.S. Again, there are even formal co-primary endpoints, looking at more functional measures of radiographic change. And we do expect that even with the FDA, as with any accelerated endpoint, biochemical markers need to be supplemented with functional improvement, in this case, radiographic or other measures that are in that study. With regard to the adults, it is a slightly different phenotype. And so from that standpoint, we're looking forward to engaging with regulators and discussing those endpoints. Whether or not they are radiographic or measure of bone integrity, bone biology, those would be required, we anticipate. The nuance here, of course, is that, both with regard to recruiting the patients and the time it would take to impact those pull-through, those phenotypic markers, that reflects some of the time that it takes to run the studies. It's premature to say much more, again, Inozyme operating as an independent company. We're very much looking forward once the deal is completed to be able to dig in a little bit more, discuss some of our feelings about various regulatory interactions. That being said, again, this is a molecule not only that we feel shows incredible promise in this -- in the pediatric population, but the adults and adolescents are a really key opportunity here. The morbidity associated with this, we think, is underappreciated. And again, Alexander has spoken to the numbers of patients that are suffering with this. We think we're well suited to be able to open up this -- the diagnosis rate as well as work on the genetic side to help better define these diseases, and again, maximize the opportunity to help as many patients around the globe as we can.

We have reached the end of the Q&A portion of the call, and this will be our last question from Kostas Biliouris at BMO Capital Markets.

Congrats on the deal. A couple of quick questions from us. First one, there have been some high ADAs observed in infants. Any thoughts around that? And to what extent those ADAs are neutralizing and if they have any read-through to the potential uptake of the drug? And the second question is, can you talk a little bit about the overlap between prescribers that are currently prescribing your pipeline drugs and the potential overlap with Inozyme drug prescribers?

Thank you very much, Kostas. I'll handle the second part of your question and then hand it over to Greg for the first part. So there's really an excellent overlap with our current call points for our enzyme therapy business unit. The key specialties involved with the treatment of this population will be geneticists and endocrinologists, so audiences that are very, very familiar to us. And this represents really part of a very clear logic here where we'll be adding, from a business perspective, revenue with very limited requirement for additional expenditure beyond the development costs. So now I'll hand it over to Greg for the first part of your question on ADAs. Over to you, Greg.

Yes. Thanks for the question on anti-drug antibodies. Similar to other engineered protein replacements, ADAs have been observed in this program. In particular, Inozyme has published and reported very nicely the particular high rates that were seen in the infants. This is the 0- to 12-year-olds. And again, biologically, that is not an unpredictable phenomenon, particularly if some of these more severe genotypes are not translating into immunogenetic material that the body can see in order to tolerize it. The end results would be that the body, again, of these youngest patients would potentially mount immune responses. That rate that -- I believe 4 out of 4 of the very early infants seeing these, there were impacts on pharmacokinetics. That being said, the most recent announcement from Inozyme is that in several cases, they've been able to dose through those with dose modifications, dose adjustments. And that will be a continued effort on their part, and once the deal is closed, on our part as well to better modify the dosing schedule for those patients. Now the story was much different in the older patients. Starting with the adults. While there were measurable ADAs, the titers generally were quite low, not impacting PK, and it was rare to see the high kind of ADAs that were seen in the infants. The open question was whether or not the children, the 1- to 12-year-olds, were going to behave more like adults or behave more like the infants. And the data that was released by Inozyme just recently suggests that they behave more like the adults. Again, rare cases of very high titers, not interfering with the ability to dose. And on top of this, of course, we have experience, and I think Inozyme is doing a nice job dosing through these, managing them. And all of those opportunities are going to be things that could potentially be explored in the future. I think the latest news, again, is quite reassuring that these anti-drug antibodies appear to be most acute in the infants. And that is something -- again, that continued management work will be ongoing in order to try to mitigate and move forward.

And there are no -- I apologize. That does conclude our Q&A session. I will now turn the conference back over to Alexander Hardy for closing remarks.

Thank you, operator, and thank you all for joining us this morning. As you've heard, we believe that BioMarin is uniquely positioned to both advance INZ-701 through to commercialization as well as to find, diagnose and treat those who can benefit from this potential first-in-disease therapy should data be supportive. We're energized by the opportunity to build on our legacy of treating children with rare genetic conditions to ensure that INZ-701 becomes the first treatment for infants, children and adults living with ENPP1 deficiency. We look forward to sharing more details on potential integration once this transaction has closed. We're pleased to have this first transaction under our new corporate strategy now advancing through the regulatory requirements for closing. Our business development team continues to pursue other external opportunities as this is a core component of our growth strategy and outlook. Thank you for your attention, and have a good day.

And this concludes today's conference call. Thank you for your participation. You may now disconnect.