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

Good morning, and welcome once again to TD Cowen's 46th Annual Healthcare Conference. I'm Phil Nadeau, one of the biotech analysts here at Cowen, and it's my pleasure to do a fireside chat with BioMarin Pharmaceutical. We have with us today, Alexander Hardy, the President and CEO; and Brian Mueller, the Executive Vice President and CFO. Guys, maybe I'll kick it to you to begin. Could you give a brief state of the company overview, biggest strengths, biggest challenges? And what does BioMarin need to achieve to outperform over the next year or 2?

Excellent. Well, thanks very much. Thanks, everybody, for joining us. So I've been CEO of BioMarin for the last 2 years and started off with a kind of a strategic refresh, what's the strategy of the company. It was very clear to me that BD should play a significant role in the future of BioMarin, hadn't played much of a role beyond early BD up to that point because we've got some really clear competitive advantages of being a rare disease company operating at scale. So it's really cool to have done 2 M&A last year, buying Inozyme and then obviously, the acquisition of Amicus, which is on track to close in the second quarter of this year. So we've got that together with the enzyme therapy business is going to drop right into those -- both of those acquisitions will drop right into our enzyme therapy business, which is already operating at scale in 80 countries around the world. And then our skeletal conditions business anchored by Voxzogo, but now with 333 coming. So we've got these pillars of multiple pillars of growth, multiple paths of growth, good clarity of continued top line growth, leverage to the bottom line over the next several -- over the -- yes, through the next decade. And so that's really cool to see that all in place. It's obviously not reflected in the share price, but we're confident that the things we're doing are creating tremendous shareholder value. In terms of the challenges, obviously, entering now a period of competitive intensity. We've been preparing hard for this over the last 2 years. We've been taking advantage of every additional delay in terms of the launch time lines for our competitors, whether it's for the overall approval or for the infant population, which is a very important part of skeletal conditions, the incident population. We've used our time well, and we're now ready to compete. But this is this period. There's no doubt about that. And I'm sure that's going to be part of what you're going to be talking to us about, Phil. I think also in '26, and maybe Brian, you can absolutely expand upon this is, obviously, we've made the strategic decision around Roctavian. So we don't have, albeit the unpredictable sales of that in 2026. And obviously, Kuvan generic continued generic erosion. So some of our nonbusiness unit nonstrategic income is -- provides a headwind, and that's obviously part of our guide for this year.

Yes. Maybe just what Alexander is referring to is our 2026 revenue guidance. It includes effectively a 3% headwind to our growth because of the decrease in some of this other revenue. There's the removal of our expectations for Roctavian revenue. There's continued decreasing Kuvan revenue. Kuvan has been generic in the U.S. for more than 5 years now. And then lower royalty revenues. We had a partnership agreement related to an out-license years ago, and it's now run through its period where BioMarin receives royalties. So that's a substantial number of more than 100,000 -- more than $100 million. When you adjust for that headwind, both of our business units are expected to grow at the midpoints of high single digits. enzyme therapies at 7% growth at the midpoint and skeletal conditions through competition, as Alexander mentioned, at 8% at the midpoint.

Maybe while we're on guidance, what are the key risks to the guidance? What could cause performance to fall short in 2026? And then similarly, what could drive outperformance? If you were to beat the guidance, why would that be?

Yes. Thanks. It's a great question, Phil. So I mentioned just in terms of framing of the guidance, there's first that other revenue kind of downward adjustment headwind. But within the guidance itself, when we guide, we try to be measured. We have a plan. We monitor all of the material swing factors within our guidance, and then that's how we develop a range. So on enzyme therapies, I think there's a couple of underlying drivers. One, by the way, is just execution. It's early March and a long way to go in this year, and it's more than a $2 billion business now. So there's just some level of estimation. And as you know, Phil, there's an element of our business, which is order timing. A lot of our customers and payers are single national health care system payers, and they can tend to order variably over the course of the year. So depending on how those orders stack up in a particular quarter or do not, we get some order timing. So I think that's a risk especially with the events over the last couple of weeks, we continue to monitor for geopolitical risk instability, global economic risk, again, take some of that in control. But obviously, as events unfold, we're watching that closely. So that's enzyme therapies. In skeletal conditions, there's probably beyond the comments that I made, which apply to both enzyme therapies and skeletal conditions. The 2 key variables, I think, within the guidance for skeletal conditions are the ultimate impact of this competition. The competitor was approved by the FDA on Friday. We're ready to compete. We think we will compete. We believe that any switching of our Voxzogo patients will take time and be difficult. But to the extent there are more or earlier switches, we try to account for that. It's in the lower end of our guidance. And to the extent we do better, that would be the higher end of the guidance. To be clear, in all points in our Voxzogo revenue guide, we do assume competition. So to the last part of your question, how can we overperform? I think it's going to be continuing to grow in the under 2 population where we are the only approved therapy, continue to expand our outside of the U.S. revenues. Only 25% of Voxzogo's revenues are in the U.S. So while this competition narrative gets a lot of attention, it's actually a small part of our business. in that 75% outside of the U.S. revenue, we are both penetrating existing markets more deeply, and some of these are large markets, and we're still expanding into new markets, launching into new countries. So to the extent we do better there, that would be an outperformance.

And the guidance also assumes a 40% operating margin this year, which is an increase year-over-year, excluding the impact of Amicus. Is that achievable? How are you increasing operating margin during 2026?

Yes. Thanks. We believe it's absolutely achievable subject to the Amicus slight dilution. We've been on this mission over the last 2 years. As Alexander mentioned in his opening remarks, -- the strategic review completed in 2024, not only refreshed and refined the overall corporate strategy, but our financial growth strategy. So we identified that $0.5 billion cost transformation program. That is complete. We're still realizing part of it this year, but it's been implemented. We've constrained overall operating expense growth at the right levels to where we can balance investing in the business, but also cost control. If you look at our performance over the last couple of years, we've got consistent leverage growth where profitability is growing at a 2, 2.5, sometimes 3x rate of revenue growth, which is pretty healthy. We've gotten the revenue growth, I think, very clear and in line. You see that over the last year and in this year's guidance. So that revenue growth, cost under control, that gives us that margin and really healthy growth in EPS as well.

There's some debate as to what Amicus is going to do to your numbers this year. You referenced on the earnings call that there's kind of a wide range of estimates out there. We have put Amicus into our model for the second half of the year, and we have 2026 total revenue of $3.7 billion and non-GAAP EPS of [ $4.80 ], so modestly dilutive in 2026. I know you're going to update your guidance later, but just generally, does that sound reasonable?

Yes. Thanks, Phil. So yes, so we will give an updated view on 2026. All the numbers that I mentioned were excluding Amicus. And we expect to close in the second quarter. And with the sizable business that Amicus would bring subject to closing, whether it's earlier in Q2 or towards the end of Q2 could be a swing factor. But I like the way you framed it, kind of simplified it and just took second half of the year for discussion purposes here today. And this isn't guidance, but that's not unreasonable, the [ $3.7 billion ]. In earnings per share, again, we'll wait until we update the guidance to quantify that. We did share that we expect the Amicus acquisition to be slightly dilutive in calendar '26, but accretive for the first 12 months and then substantial accretion beginning next year in '27. So that's a dynamic that will be clear. We did announce as part of the Q4 earnings that there is $0.25 of loss per share related to pre-closing costs on the Amicus acquisition. We raised our debt. We're starting to incur some interest expense. There's some other transaction fees that we incurred before closing. So that's some of that headwind. but we'll talk more about.

And if I could just jump in here, little bit. I mean, this is focused very much on the short term, the '26. But the benefits of the Amicus acquisition, again, we plan to really elucidate more on this post close. As I already said in my first comments, we believe very strong hypothesis that these assets are worth more in our hands, these medicines. We'll be able to reach more patients in more geographies around the world. And therefore, during the announcement, we said we feel comfortable with their estimates for the deal of $1 billion peak for each of the assets. We believe that we'll be able to do better. And so we'll explain what we expect and how we're going to do that. I mean the very simple math, and it's a lot more than this, is that they were in 50 countries, we're in 80 countries. It's very simplistic because we're much deeper in many of those countries. These are where the prevalent population is outside the United States and outside Europe. This is what we've built over 30 years at BioMarin. And then there's obviously the earnings leverage on top. So both of these 2 are going to be -- you're not going to see much of it in the short term. But over the next 5 to 10 years, this is going to be very, very significant and very exciting is what we believe, and we're going to share more about that.

I'm sure you're not going to comment on what I'm about to say, but when we put Amicus into our model in the late part of this decade, we had about $3 of EPS accretion. So EPS went from $7 to $10. So massive accretion. Like I said, I don't think you're going...

If I'm not commenting on '26 EPS with the transaction, I'm definitely not coming.

Before we dive into the programs in a bit more detail, just in terms of business development, Alexander, as you mentioned, you did Inozyme and Amicus last year. Where are you in your business development strategy today? Do you have more capacity to do additional deals? Or do you think for now, you're relatively full?

We're -- the BD team, again, we believe that business development is a very important part of our strategy going forward. So the BD team is right back at work. Our primary focus is further strengthening our pipeline. Obviously, we need to delever from the Amicus acquisition to do anything very significant. But given the economics that we've just been touching upon, we expect to be able to delever very rapidly. So in the meantime, you can expect us to continue to do sort of early pipeline deals, very traditional biotech business development. But in the course of time, we're really convicted that, again, BioMarin in its position as leading at-scale biotech company focused on rare diseases, there's a significant value creation opportunity for us. So watch for us to be -- continue to be active.

Turning to Voxzogo, perhaps the biggest investor debate. Brian, began to discuss the competition and the impact on the franchise. Could you go into a bit more detail, how do you consider Voxzogo's competitive position today? What is the approval of TransCon mean in the short term? And then longer term, how is the competitive environment going to play out?

Yes. Well, I'm excited about this moment. We've been preparing it for this for the last couple of years. We've been taking advantage of the delays to further prepare. We've been quite quiet about the specific competitive strategies, the very obvious one, which is the ex U.S. footprint, that's been very, very clear. We're obviously going to continue to grow significantly in the 75% of our revenue, which is outside the United States. We're still expanding, as Brian already said, in large underpenetrated countries, and we're also launching in new countries. So that is one aspect of why we're going to continue to grow through competition, we believe. But we also have the 0 to 2 indication, which we will be the only one that has that for several years. Not surprisingly, the TransCon CNP label was for 2 and above. So we are the only drug approved for 0 to 2 population. That in achondroplasia, that is where the guidelines say you should diagnose and initiate is as early as possible. And the majority of our patient starts are in that 0 to 2 population. So essentially, our competition is coming in with a drug that looks short term, similar efficacy, similar safety with a convenience advantage. The dynamics of a switch market, which they face is a very complicated one. What's most important to caregivers and to physicians is long-term durability and safety. We have lots of evidence for Voxzogo for that. It's a complicated decision to switch. which is between the physician and the caregiver. And we think that this is going to be a dynamic that will play out over time. This will not be a rapid switching market because again, 90% of patients on Voxzogo are adherent. They manage the injections. They're part of the family's daily routine. Patients do very well on Voxzogo. And this convenience aspect is well down the list of what's most important to both caregivers and physicians. And all of our market research reinforces that the switching dynamic will be a complicated one and a long conversation between caregivers and physicians and a lot of different dynamics. There's a big burden on the physician's office and on the caregiver to go through that whole switch dynamic. to going through the payer coverage to the training. It's a burden on the physician practice. This is not going to be something our research shows that the physician is going to drive. Again, it's going to be a dialogue. Some patients will switch, and we have taken a conservative approach in our guidance with regard to that. And now we're ready to compete and looking forward to this playing out. I think part of our knowledge from this is our relationship built over 5 years. We have a 5-year head start. We have, for example, again, this is the sort of detail that I was not going to share until the point of approval. We have an outstanding clinical coordinator team. These are nurses -- these are BioMarin employees who train the family on the injection process and then stay in continued contact with the child and the family as the child grows up. So as investors, what you should be thinking about here is that we have a relationship and eyes on every single patient in the United States with achondroplasia. We have a very strong relationship and a really good understanding of what's most important to those patients and a relationship. And again, we've been preparing for this, and we're ready to compete.

Can you remind us of the status of the case in front of the ITC?

Yes. This is about to be heard. So they went through the Markman hearings with regard to what the basis of the court case would be. That happened just recently. And now it's in April that the judge will start hearing the case expecting a preliminary decision in the August time frame.

Competition isn't the only thing going on with Voxzogo this year. You do have the hypochondroplasia trial reading out. Can you remind us of the design of that study? And what are BioMarin's expectations for the results?

Yes. So hypochondroplasia, we're very excited about that study. I mean it's -- as a rare disease company, anytime you potentially bringing a first-in-disease treatment, this is what we're really about. This will be our seventh first-in-disease treatment. So a cause for celebration and pride. And the treatment community is really looking forward to this. Again, there's no targeted treatment option right now for these patients. With regard to the study design, we designed it and powered it based on a 1.5 centimeter annualized growth velocity, which is the same as we saw in achondroplasia. In the -- what is called the [ Dauber data ], we call it the Dauber data, Andrew Dauber from National Children's Hospital. He did the proof-of-concept study. He saw a 1.8 centimeter annualized growth velocity in hypochondroplasia. So we powered at 1.5. We think there's good reason to believe that we can actually achieve, and there's good scientific reasons with this, actually, based on the differences between achondroplasia and hypochondroplasia that actually do suggest that you're probably going to get better growth velocity. So we're quietly confident. We want to see that card turnover. We see excitement from the treatment community. The work that we're doing right now in the prelaunch, pre-promotional phase is shortening the diagnostic journey. These unlike achondroplasia, these patients are diagnosed later in childhood. Obviously, just like achondroplasia, the later the start, the less the benefits in terms of long-term outcomes. So we want to start to really increase the diagnosis rate and shorten the pathway to a specialist, and that's the work we're doing right now whilst we wait for the Phase III results.

How large is the diagnosed patient population today? And how rapidly would a drug like Voxzogo be taken up by the community?

Yes. We talk about a total addressable global population of about 14,000 patients. So the genetic prevalence is very similar to achondroplasia, about 24,000, but we reduce it down because of that diagnosis rate isn't as high. And these patients are there. In many cases, they're sitting outside the skeletal dysplasia clinics because there's no approved treatment. So this is -- again, this is the story of rare diseases. Once there's an approved treatment option, we expect that many patients will be reaching out to a specialist, and that's the work that we need to do.

Maybe one more on this franchise. BMN 333, you released promising data last year. It's moving into a pivotal study. Can you discuss the design of the pivotal and what you think 333 could do for the franchise.

Yes. We're -- this is another reason why we're confident with regard to Voxzogo's profile, its durability of its profile, its benefits with the evidence that we've got of its benefits beyond height and the geographic footprint. These are the reasons why Voxzogo is going to continue to grow through this next several years. And then we have 333 coming. And this was the exciting thing for us to see with the data from BridgeBio that we didn't see a similar AGV result as the Phase II. The Phase III annualized growth velocity looks very similar to Voxzogo. So the lane is still open for superior efficacy. And that is our goal with 333 is not only to offer the convenience benefit of weekly but also superior efficacy than the gold standard Voxzogo and better than anything else that's in clinical development. The PK data that you mentioned, we were very excited about this. I mean it's PK data, so it's in healthy human volunteers. But we were aiming our threshold to move ahead with 333 was to achieve 2 to 3x the level of free CNP that our other -- the other long-acting CNP had shown, 2 to 3x in that PK study, the highest dose cohort, we had 3 dose cohorts that exceeded that 2 to 3x. And the highest dose actually had a 13x the level of free CNP. We believe, and we have reasons to do this, reasons to believe this, that there's a strong predictive that high free CNP sustained over a period of time will translate to higher efficacy. We now need to show that in patients with achondroplasia, and that is the work that we're going to do in this Phase II, Phase III operationally seamless design study. So we're taking the 3 cohorts that exceeded that 2 to 3x into that Phase II. We'll then choose the best dose to take the single dose into that Phase III study, and it will be head-to-head versus Voxzogo. We have said that we're aiming for 2.25 centimeters of annualized growth velocity. So this is approximately 50% better than Voxzogo. That is the floor. The target product profile, as you can imagine, is not the same as that, but that's how the study is powered.

During the first half of this year, you will get pivotal data from BMN 401, which you acquired through Inozyme. Can you remind us of the design of that study and what BioMarin's expectations are for the data?

Yes. So I mean, this is -- it's exciting. Again, this will be another -- this is another first -- so this year, 2 Phase III readouts, potential first-in-disease treatment. So this is definitely worth highlighting that there are no treatment options for ENPP1 right now. So this first Phase III is in a pediatric population. The design of the study is a co-primary endpoint of phosphate levels together with Radiographic endpoint, a functional endpoint, which is a radiographic scan. And this is what we'll see reading out, and we're expecting that readout in the first half of this year.

How does BioMarin size the market and the market opportunity?

Yes. We've been -- again, this is always challenging to do when you've got a first-in-disease treatment. There's no treatment options. We end up -- in most cases, it ends up being more patients, but we want to be on the conservative side. We're saying around 2,000 to 2,500 patient potential for this. Important to note that around 70% of the patient potential is in the adult population. So based on these results in this pediatric population, we will then design the Phase III in the adult population. So this would then be potentially an indication would be approved in the early 2030s and then part of that continued sustained revenue growth that we plan for BioMarin. So there's a lot more to come, a lot more indications to come with the NPP1. We're not just in the interest of time, we won't get into ABBC6, but there are other indications and other interesting possibilities with that.

Palynziq's label was expanded this weekend. What impact will that have on revenue growth?

Yes. We're excited. I mean, even before this adolescent indication, Palynziq last year grew by 22% -- so in our very successful high single-digit growing enzyme therapies, this is an asset that probably gets -- doesn't get the attention that it really deserves. And this will then add on top of that growth potential. Why is the adolescent population so important? Well, whilst numerically, it represents about a 10% increase in the total addressable population, that significantly understates its potential. We, with Palynziq, have been seeking to treat the adult population. And in PKU, this is the hardest population to reach and to get on treatment. As many of these patients are lost to follow-up, not under the care of a specialist, whereas in the adolescent population, they're still under the care of a specialist. They're under the roof of their parents who may or may not have some degree of control over an adolescent. And they're motivated by the fact that they're going through a stage in life where they're about to go off to work, independents, college, et cetera. And so everybody is really motivated to try and get their Phe levels under control and to them to have the possibility of a life which is less limited by PKU. And here, I'm alluding to a very important aspect of an unrestricted diet. So I think you've got a really worthy treatment goal. You've got a drug which clearly works and you've got conditions which I think, again, specialists, adult, I think we're going to see a higher penetration in this population, and it will be a significant contributor to Palynziq's growth.

Great. With that, I think we're out of time. Thanks for making the trip to Boston for the conference.