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

Day 2 of our London Healthcare Conference. Great to see everyone. Always really appreciative of the attendance. My name is Akash Tewari. I'm a pharma and biotech analyst here at Jefferies. I have the pleasure of hosting the BioMarin management team. Alexander, why don't I hand it off to you for some intro remarks, and we'll get started.

Great. Excellent. Thank you very much. Can folks hear me okay? Good. So thanks very much for joining us. Thank you for your interest in BioMarin. So actually, at the beginning of next month will be my 2-year anniversary as CEO of BioMarin. I just wanted to -- this is always a period where hit a milestone like this of a degree of reflection. We've done a lot of things, made a lot of changes. I think we're in a period of execution now of those changes. So what are the things we've done? We've reorganized the strategy around 3 pillars, around growth, driving growth from our existing portfolio, innovation, our pipeline, supplemented by business development and then value commitment, realizing greater returns, increasing profitability, cash flow -- free cash flow from improving our operations. We identified $0.5 billion of cost transformation. A lot of that we've dropped to the bottom line to improve that cash flow and strengthen the balance sheet. But we've also reinvested into the growth drivers into that pipeline. We're now, as I said, into execution phase, growing that current portfolio. But we're entering now a really interesting -- it's great to have Greg here, the Head of R&D, 14 months into the role. We're now into a period of pipeline readouts. So what can you look forward to in that? We've got 351 for Duchenne's muscular dystrophy, where we're on the verge of -- by the end of this year, we'll be sharing the top line results of that program. At the beginning of next year, we've got the readout of the Phase III data of hypochondroplasia, Voxzogo, which will be another growth opportunity, the fourth of 5 additional indications that we're pursuing for vosoritide or Voxzogo. We have the Phase III readout for the 401 program. This is the program that we acquired as part of the Inozyme acquisition. And in addition, we have the pending approval by the FDA with an FDA action date of February 28 of next year of Palynziq in adolescents, which is an exciting additional growth opportunity for Palynziq. Palynziq is already growing at about just over 20% this year. So this will be another additional growth leg for that. So there's a lot to talk about. Akash, I'm looking forward to hearing your questions.

Thank you. And actually, I'm going to start -- we'll get to the guide, we'll get to the products. But I wanted to talk a bit about the unique BD environment we're seeing right now. I've had 2 companies where there was a public offer and then there was a topping bid, and it is annoying for me to deal with, but nonetheless, you don't see that typically. I think the question I have for your team is there is this kind of dynamic of people who have cash and you have about $2 billion in terms of flexibility. But then you might be competing against a mega cap company where they might have a limitless balance sheet seemingly in terms of getting an acquisition done. How does that concern apply to your team? Because your new Head of BD has come in, you guys have talked out external acquisitions. Do you feel like it has been more difficult for you to identify assets that you find compelling and pay a price that makes sense? Or actually, that's not the case.

Yes. I mean we have built a world-class BD function. We do think that BD is a real opportunity for future growth to supplement our internal innovation. The space we're playing in, I mean, let's be really clear, we're focused on genetically defined conditions. We've defined that. That is an absolute requirement for anything we look at from an external standpoint. And that is a segment that we see little -- relatively little competitive pressure in terms of other people hunting after the same assets. They require very specialist expertise. Just for the very nature, these end up being a little bit smaller opportunities or smaller opportunities that will move the needle for the big pharma players that are the actors in the play that you're watching and enjoying watching. So we don't see that same context with the companies and the assets that we are going to do right now.

Understood. And to me, you're kind of thinking about like peak sales and risk adjustment. I can't help but think, Alexander, you're thinking, give me a Palynziq, Voxzogo like opportunity that fits into this business unit approach, right, genetic disorder, skeletal muscles -- skeletal conditions and then enzyme replacement. It seems like that's the kind of sweet spot and then either pre-commercial or just launch. I mean, is that the right framework we should be thinking about in terms of external BD.

Yes, we've largely got it spot on, Akash. I mean we're -- BD is about, for us, supplementing the growth rates in the medium term. That's what we're focused on doing. We don't need to buy revenue. We don't have any large loss of exclusivity events. But we believe that actually assets are worth more in our hands than where they're sitting right now. There's lots of under-resourced genetically defined disease or rare disease companies. And why do I say that? Well, actually, the prevalent populations for these genetic conditions sits outside the United States and Europe. This is a footprint that we're in 80 countries. It's absolutely remarkable. We've built that up over 20 years and occupied it with our enzyme therapies and Voxzogo. That's where the patients are. And these companies don't have that sort of geographic presence. I'll give you the example of achondroplasia, which is Voxzogo's first indication. 68% of patients are outside the United States, Europe, Australia, Canada and New Zealand, 68%. So you need that geographic footprint. We have that, others don't. And that is just one element of the capabilities. Our capability advantage is across research and our deep genetics capability, our development, our ability to design studies, regulatory endpoints for these sorts of conditions, manufacturing. Again, many of these small rare disease companies use contract manufacturing organizations. We have our own manufacturing capability across multiple modalities. So we can do that more efficiently and effective. And I've already mentioned the commercialization footprint. So I hope that this investor audience can see that there's a real value proposition. As we announce deals, you'll be able to understand the value proposition of how this is going to actually be really good for the growth prospects.

Maybe just a point on that because I remember last year, there was this question of would you do -- you have your long-term guide, would you do a deal that would impair that. And I think your answer was like, look, in general, we want to keep our long-term approach. We think that's really important. If there's an asset that we think is super compelling, we're going to have to go for it. But I think lost in that kind of nuances and especially in what you just said, it's about acquisitions that are earnings accretive, right? Talk to me about the importance of if you are in-licensing assets, how does that change the long-term financial profile of the company? And how coherent is that with your long-term guide as well?

Brian, do you want to.

Yes, sure. I can start. First, maybe thanks for the question, Akash. Just to start on the financial elements of our transformation itself, those are on track. There's largely 2. First is executing on revenue, which we've been doing the last several quarters. And then second was cost, where we've always had a sense of prioritization. It was important through this transformation to fully get costs under control, which we have. That comes with disciplined investments in the right places as well as operating efficiency, which we're executing. We're, as Alexander mentioned, 2/3 of the way through here now on $0.5 billion cost transformation. And importantly, it's not just investments prioritization and efficiency. During this time, we've been able to make actually incremental strategic investments across all parts of the business, whether it be global sales and marketing, within the business units or to accelerate the pipeline assets. So this was not outright cost reductions, but strategic investments. So that's on track, targeting 40% non-GAAP operating margin next year. That would be more than doubling of our operating margin back in 2023, which was 19%. Excluding our in-process R&D development charge this year, our operating margin is 33% to 34% target. So that's a substantial improvement. But to your question, when faced with the choice of shareholder value creation and those long-term profitability targets, we'll choose creating shareholder value. So that could adjust where we land long-term margins, but these targets are solidly ahead of many benchmarks within the peer group. So we think we can balance both achieving and sustaining profitability and reinvesting in the business. That's the goal.

Okay. Understood. Now maybe just kind of stepping back. And as a part of that kind of revised tweak guidance, I think there's a bit of confusion about Voxzogo's trajectory both into next year and 2027. And this -- I'm just kind of thinking out loud. Would you agree, if I were to say, I'm very confident, a, Voxzogo is going to grow in terms of just net patient adds year-over-year in a manner that's quite similar to 2025. And then number two, in 2027, there are scenarios that we can easily imagine that patient adds in achondroplasia -- sorry, hypochondroplasia more than offset any competition you face in achondroplasia. How crazy is that framework for you?

I would say that we believe that Voxzogo is going to continue to grow over the next several years. There's still a lot of growth opportunities in achondroplasia, both in the U.S. and in that global footprint. And then as you mentioned, in '27, if we're approved, we have the hypochondroplasia launch. So we think there's sources of growth and plenty of opportunity for the drug to continue to grow through this time frame. With regard to the -- you didn't directly ask the question, but with regard to the '27 guidance, there's a lot happening, obviously. This is the big question is the competitive question around Voxzogo. There's a lot happening over the next several years. We thought it was useful. We had this '27 guidance rather than saying that's a point estimate, there's a whole range of scenarios. And we decided the most useful thing was to communicate a range. And that low case scenario is not a scenario that we believe is the most likely. But we said, okay, what if there are 2 competitors that take substantial share from Voxzogo. What does that mean? And obviously, also backing out things like ROCTAVIAN. That translates to a number which is really in line actually with your own perspective on '26. That's our low case. That's not what we believe is going to happen. We're confident back to the first part -- your question and the first part of my answer. We're confident that actually Voxzogo will grow over the next several years.

Understood. And actually, I'm just thinking about this, there seems to be kind of a -- what I find kind of amusing, maybe a little sad is you have other CEOs that are entering in the space, and they are convinced that there's going to be this kind of explosion for their programs. And it almost implies not only is Voxzogo's share just going to go to 0 in a way that I just don't think maybe makes logical sense, but there's also just that -- there's just patients out there that we're not seeing, right? From my perspective, there seems to be kind of consistent patient adds we see in achondroplasia. And in a lot of your markets, you're going from kind of a prevalence to an incident type of framework. So you've done a good job talking about 70% of your patients are ex U.S. But if you were to tell me, like roughly speaking, how much of the markets you're going in an incident market where you have a 0 to 2 label versus a prevalence market where there's still kind of room to expand. Help us understand that.

Yes. So there are obviously different markets in different stages. We're still launching. We're now in 55 out of the 80 countries. Again, that's part of how we're still growing. So obviously, those sorts of markets where new patients come from all different age groups. But in more mature markets, this is very much an incident market. The majority of patients with achondroplasia in many countries are diagnosed actually, in some cases, before birth, but within days or weeks of birth. It's very evident, unfortunately, the disease presentation. And we will be -- we have the 0 to 2 indication and to be determined how long it will take the competitors to get that indication. But that -- in many markets, that is the incident population. So competitors will have to switch in the more penetrated markets. They will have to switch existing patients. And as you know, and I think you're intimating with your question, switching patients that are doing well on a treatment as they are on Voxzogo. This safety profile is very well established. There's a lot of confidence amongst prescribers and caregivers around the profile of the product is not a straightforward proposition, I would say. And I think this is a topic that the implied valuation has got wrong. This is not a zero-sum game. Again, in our low case scenario, which is not the one that we believe is the most likely, we've taken that into account and it sits right on top of consensus that the reality is going to be somewhere in between. And yes, there will be some patients to switch, but there will be many that decide to continue because they've seen great results with Voxzogo.

So I'm going to dig into that, and I think it's quite important as we get into the Ascendis approval. And that decision is coming up soon. Look, again, I have a horse in this race, but I can't just help but think. It's hard for me -- like I look at the multidisciplinary review for Voxzogo. There are age-match analyses that were done. There are ways that the FDA cuts the data and some of those analyses end up reflecting what's in the label. And we're in this kind of, I think, surreal scenario where if it's 0.3 or it's 1.5 -- or 1.3 versus 1.5, there's a perceived meaningful difference in terms of impact to your franchise. Do you feel like there are scenarios where the Ascendis label could show efficacy that looks numerically worse than Voxzogo on an age-match basis? And then Greg, I'd love if you could comment on this in terms of switch. What is the label that you anticipate them getting given that they did run a different clinical trial?

Yes. It's always a little bit tricky, and I never like to speculate on what -- how the regulators are going to view data sets. But you're correct, they will be looking at individual patient level data, both with regard to efficacy, but also with regard to safety analysis and how preferred terms are bundled, for example. Our experience would suggest that for accelerated approval, for example, the indication statement that we've received is probably the most likely regulatory outcome, though. Again, I don't want to speculate, again, where the regulators will end on that. Beyond that, again, what we have in Voxzogo is we have almost 10,000 patient years' worth of data at this point. That means, of course, not only are we talking about 1 year or 2 years of efficacy, but we can extrapolate that out to 7, 8, 9 years, we can talk about tibial bowing in a meaningful way, interpedicular distance for hopefully prediction and prevention of spinal stenosis. That's a data set that we want to continue to publish on. We want to own the information that we have. Voxzogo is a safe and effective drug. And all of that data is something that we think will be valuable, certainly to patients and physicians, absolutely to payers.

Okay. So just to hit on that, we got into this question of full approval for Voxzogo and final adult height and whenever -- when does that end up getting reached. Could you potentially make an argument to the FDA that we shouldn't just look at final adult height when you're thinking about that decision, but maybe more holistically, looking at some of these other kind of secondary biomarker-driven endpoints as a part of a full approval decision? And could you be having that discussion with regulators right now?

This is absolutely something that's on our mind. Final adult height is driven by a mathematical calculation and negotiation with regulators. Any time we engage with regulators, it's an opportunity to put in front of them the totality of our data, which we think, again, will help prescribers and patients make an informed decision. We have a wealth of data from that 10,000 patient years' worth of safety and including following up on many efficacy endpoints. So what you can be assured of is that those are going to be active discussions, and we're very much looking forward to having those discussions with regulators around the globe.

Okay. Understood. Maybe just lastly, there is a regulatory and IP discussion to be had here. You guys have seen my research. I'm personally a little skeptical that you had a citizens' petition that perhaps a citizens' petition would be able to block a competitor product from getting on to the market. And to us, we dealt with this with Jazz and Avadel, where you had a once-nightly and that still got approved. But I think one of the things that maybe doesn't get caught in that discussion was there are 2 separate decisions that get made by the FDA, right? There is a separate division that makes a decision on granting both exclusivity and designation. And then there's a separate part of the FDA that actually grants approval. I think if we look back at the Avadel scenario, there was a delay in outright approval as you waited for the actual ODE decision. Is that an angle we should be thinking about here with the citizens position? It's not just as binary as launch or not, but maybe potentially a delay.

Again, just like Greg, I don't really want to speculate on what the FDA will or will not do. You are correct. It is a separate part of the FDA. And I think we're all professional -- we've always been professional FDA watchers, but trying to understand kind of how decisions are made at the FDA right now. What I would -- I would sort of reframe this that this is -- we feel convicted in the importance of the orphan drug exclusivity to incentivize companies like us. We've now had 6 first-in-disease treatments. We know how important orphan drug exclusivity has been for the business case for ourselves and for others to make progress. And we think we made a strong argument. We will only know, obviously, that outcome at the point of approval. We'll find that out at the same time as you do. But it's not the only arrow in our quiver. We also have ongoing litigation in front of the International Trade Commission with regard to the U.S. We've got traditional IP litigation as an option in the United States on a point of approval. And in Europe, there is also the possibility of additional IP litigation around new patents, which are pending at the European patent office. So we've got -- I think primarily, the focus of this conversation has been competing in the market with very satisfied patients, additional indications driving additional growth, our global footprint, our indication 0 to 2. In addition, we have this myriad of ongoing litigation, which I think investors should keep one eye on.

Understood. Now maybe going into hypochondroplasia. Can you talk about the size of that population relative to achondroplasia because there are degrees of severity with hypochondroplasia. And then number two, the Dr. Dauber data so far, I mean, it looks just as good in hypochondroplasia as it does in achondroplasia. Can you give us directionally your powering assumptions for that trial and what you expect on average growth height velocity? And then maybe lastly, what investors love to know, is there warehousing? Have you identified patients? Could this be a bolus launch? Because it's the same doctor. So how immediate is that commercial opportunity for you, let's say, if you get approval in 2027?

Okay. I think there's three questions there. I'll take the first and the third, and you take the second. Okay. So with regard to the first, in terms of the size of the population, we think the genetic prevalence, and we have quite a good level of expertise here, is approximately the same as achondroplasia. So achondroplasia is about 24,000 patients globally. However, to your point, these patients present later. And we think it's likely that it's going to be a more severe subset of these patients, which are really the addressable population. So we would encourage you to use a figure of 14,000 patients. That's what we use internally is the addressable market. The work that we have underway right now is to really create awareness and understanding of the disease. People talk about this relative to achondroplasia. I think the important thing is to talking about this relative to patients without those genetic mutations. There's around 3 to 5x the level of health care utilization. These kids aren't just shorter, but they have a myriad of health issues. With regard to your third question, there are clearly -- this is the same prescribing universe, pediatric endocrinologists as achondroplasia. They're very excited about the prospect of a first-in-disease treatment for hypochondroplasia. They do have patients that they have tried in some cases in the United States to get reimbursement for and have been unable to because there's no approved indication. There will also be, just like we're now seeing with achondroplasia, the older patients are under the care of pediatricians in the community. So the ability to reach and connect with those patients. This is a capability we have that we've developed over multiple drugs using it in achondroplasia, where you get a ping of a diagnosis in a claims data saying that there is a hypochondroplasia patient, a particular pediatric practice. And then we go into action and encourage that patient to be referred into the specialists to get treated -- they're already diagnosed, but to get treated.

And very quickly, the study is powered to look for an AGV delta similar to what's seen with achondroplasia, 1.5 centimeters per year. And that is conservative compared to the Dauber experience, which saw more like 1.8 centimeters. I'll also add that the most powerful predictor of AGV change is AGV that you walk into the study with. So if you're a slower grower, you have the chance to grow faster. And we have refined for patients who are minus 3 standard deviations or less. So hopefully, that will, again, make the powering conservative for what we're looking.

We're out of time. I'm going to sneak one more question, and I think it's quite important. Greg, can you just comment on how to do an apples-to-apples comparison with your DMD corrector data versus the Dyne and Avidity datasets? I think it's quite important.

I think it's important to look at other Exon 51 skippers. So that would be Dyne. Dyne has reported the 3.2%, again, not adjusted for muscle or fat content, but that 3.2%, they recently, I believe, commented that they believe over time that, that will go up to about 4% at their next level. We will be looking similarly at an earlier time point than steady state. Our goal is that we have a level that will predict 10% at steady state. It's a different dynamic. It's a different timing with the phosphorothioate chemistry. It takes almost a year or more to reach steady state. A level of between 3% and 5% at 6 months will predict a 10% level out at steady state.

Got it. Thank you so much. I appreciate it. Thanks, everyone, for joining us. Thank you.

Thank you.