BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX) Q3 2023 Earnings Call Transcript

BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX) Q3 2023 Earnings Call Transcript November 2, 2023

BioCryst Pharmaceuticals, Inc. beats earnings expectations. Reported EPS is $-0.19, expectations were $-0.25.

Operator: Good morning and welcome to the BioCryst Pharmaceuticals Third Quarter 2023 Earnings Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference to Mr. John Bluth at BioCryst. Please go ahead.

John Bluth: Thank you, Maria. Good morning and welcome to BioCryst’s third quarter 2023 corporate update and financial results conference call. Today’s press release and accompanying slides are available on our website. Participating with me today are CEO, Jon Stonehouse; CFO, Anthony Doyle; Chief Commercial Officer, Charlie Gayer; and Chief Data & Insights Officer, Jinky Rosselli. Following our remarks, we will answer your questions. As a reminder, tomorrow at 1:00 p.m. Eastern Time will be hosting an R&D Day where we plan to describe our drug discovery process and introduce additional therapies from our pipeline. So today we’ll focus on ORLADEYO and tomorrow we’ll take a deep dive and answer your question on our pipeline programs.

Before we begin, please note that today’s conference call will contain forward-looking statements, including those statements regarding future results, unaudited and forward-looking financial information as well as the company’s future performance and/or achievements. These statements are subject to known and unknown risks and uncertainties which may cause our actual results, performance or achievements to be materially different from any future results or performance expressed or implied in this presentation. You should not place undue reliance on these forward-looking statements. For additional information, including a detailed discussion of our risk factors, please refer to the company’s documents filed with the Securities and Exchange Commission which can be accessed on our website.

In addition, today’s conference call includes non-GAAP, pro-forma financial measures. For a reconciliation of these non-GAAP measures against the most directly comparable GAAP financial measure, please refer to the earnings press release posted in the press release section of our Investor Relations website at biochrist.com. Now, I’d like to turn the call over to Jon Stonehouse.

Jon Stonehouse: Thanks, John. Third quarter ORLADEYO revenue of $85.7 million was another strong quarter of performance and gives us a high degree of confidence we will achieve our goal of no less than $320 million for the year and remain on-track for the $1 billion at peak. This growing revenue along with the discipline around our capital allocation put us in a very strong financial position heading into the end of the year. Since we have more time today to discuss ORLADEYO, we’ll go deeper into what we see in the market and how we see the market changing overtime. As John mentioned, you will also hear from another member of the team today. Jinky has been with BioCryst for over eight years. Jinky’s title is Chief Data & Insights Officer but to simply explain her role, Jinky gathers data and insights across the company and in the marketplace to help us understand the truth of what’s really going on, not to look for data supporting what we hope to be true; this is a very important distinction.

She will share the data and insights she and her team have gathered around the AJE [ph] market in ORLADEYO, both today and what we see that will impact the future. We hope this will help you understand what we see and why we remain confident in our current growth trajectory and the path to peak revenue of $1 billion. Now, I’ll turn it over to Charlie to talk about the quarter’s performance.

Charlie Gayer: Thanks, Jon. Patient growth in the third quarter continued at the consistent pace we have described before. The net growth in U.S. patients benefiting from ORLADEYO in Q3 was nearly identical to what we saw in each of the first two quarters this year and our global growth continued to gain strength. As Jon noted upfront, we are excited to describe our expanding pipeline and its future promise tomorrow. Today we are excited to describe the future we see for ORLADEYO. With Q3 revenues of $85.7 million and the consistent patient dynamics we are seeing, we repeat our guidance of no less than $320 million this year and are as confident as ever that ORLADEYO is on a path to a $1 billion in peak global revenue. I’m going to describe the pattern of growth that we have seen and show you how we believe this pattern will translate to that peak.

Jinky will describe in more depth how we validate these forecasts. As a side note, I first worked with Jinky at another company starting in 2007. She is the main reason I joined BioCryst right behind her in 2015. I joined not only because I enjoy working with her and her team but because they do objectives, insightful, patient focused work that I believe tells the truth about the future for ORLADEYO as closely as could ever be predicted. Let’s look at the data. We included two slides in our earnings decks that describe ORLADEYO growth. The first, Slide 4 shows the monthly pattern of U.S. patient prescriptions and patient discontinuations graphed on the same Y-axis. You can see that months bump up and down over the last eight quarters but the range is tight.

New Starts to date has been well above discontinuations. We have good months, great months, just okay months, leading to trend lines of start forms and discontinuations over the past two years that are essentially flat. That means the growth of net patients on therapy remains very linear. Net patients are on the secondary Y-axis. We have not shown the numbers on the chart but we crossed 1000 U.S. patients on ORLADEYO in early May and are well above that point now. This U.S. patient growth combined with reimbursement dynamics, shipping days and other factors create variable revenue patterns you can see on the right slide of Slide 4. Q1 tends to be down because of reauthorization. Q2 jumps up after reauthorization is complete and Q3 and Q4 tend to go up more gradually.

However, the long-term revenue trend follows the patient growth trends. So where is ORLADEYO heading? Slide 5 shows you what we expect based on what we see today. I’ll walk you through some simple numbers that are representative of our data and our view. I’ve simplified and approximated the numbers but precision is not important because the long-term view does not change. We expect to end 2023 with roughly 1,050 patients who have reached a state of either paid therapy or long-term free product or PAP. We also have a population of newly prescribed patients on short-term quick start free product at any given time. And when you include them, the proportion of patients on paid product is just under 70%. I’m going to exclude the Quick Start [ph] patients because the coverage for them is still pending.

That leaves us with a paid patient ratio of about 73% which is what I will use for this analysis. The 1,050 year-end patient base multiplied through a compliance rate of just over 90% and a gross to net reduction of 15% to 20% off last list price on paid patients get to an annualized rate of about $310 million per year. Our patient growth history plus forecasting methods that Jinky will describe, give us confidence we will average around 200 net patient additions per year through 2028. We have averaged a bit above that rate for the past 2 years and I’ve shown you the consistency. Growth could be more some years, less others but we expect to add 1,000 net patients by the end of 2028 which adds up to an additional $295 million in annualized revenue.

By the end of 2028, we are looking at a minimum of just over $600 million annualized U.S. revenue without any other changes. But we also expect the 73% paid ratio to grow to 85% based on the work we are doing and the trends we are seeing. Most of that percentage improvement plus the revenue growth impact will not happen in 2024. The percentage growth will accrue over the next 3 to 4 years. With over 2,000 patients, that improvement would be worth at least $100 million per year by 2029, making steady-state U.S. revenue around $700 million per year. Now assume a very modest average annual price increase through early 2029. And you can see how U.S. revenues are likely to reach $800 million or more in 2029. The early trends we see outside the U.S. give us confidence that ORLADEYO will reach around $200 million in the rest of the world, completing the path to $1 billion in global revenue around the turn of the decade.

The results that we have seen in the past we are on are not surprising to us. ORLADEYO is a highly differentiated product that HAE patients wanted back in 2020 and they continue to want today. Jinky will tell you more about how we use robust insights on patients and health care providers to predict where ORLADEYO is heading. Jinky, welcome to today’s earnings call.

Jinky Rosselli: Thanks, Charlie. We truly believe that robust and thoughtful methods are critical in providing an understanding of not only the drivers of demand for ORLADEYO but a complete unbiased reflection of the overall HAE market. Charlie mentioned in past calls, our quarterly market studies showing consistent strong demand for ORLADEYO. These quarterly studies serve a robust and generalizable example of AK [ph] prescribers and HAE patients. A key question we asked consistently in these studies is potential prescribing over the next 12 months. We feel this question is a good metric to keep informed of on-demand and shifts in that demand. Latest studies show that HAE physicians anticipate prescribing ORLADEYO to about 25% of their patients in the next 12 months.

New data on future prescribing of ORLADEYO have been consistent studied over study, reinforcing our assumptions, the demand remains strong. We do recognize that the HAE market is competitive and is likely to get more competitive. Our market nature shows that products with a strong value proposition are sticky, meaning prescribers and patients are loyal. Across our volumes and research over the years, HAE patients have consistently expressed how grateful they are for every new therapy available to them which is totally understandable given HAE is a rare disease with historically limited options. These patients have also indicated a high level of satisfaction with their treatments. When our quantitative data prelaunch should this level of satisfaction, I admit, I did have a moment to panic.

In past market type studies when customers are highly satisfied. The implication is that there are no remaining unmet needs. But digging further into the research in these highly satisfied HAE patients, we’re offering the promise of an oral therapy. Over 50% were willing to switch from their existing prophylactic therapy to ORLADEYO. Patients’ willingness to switch to ORLADEYO signal that there are still unmet needs, namely controlling their attacks as no treatment is perfect and treatment burdens associated with their current injectables. The core insight here is that these patients are expert covers and will, therefore, always indicate high levels of satisfaction. Simply say that these HAE patients are seeking a freedom and an improved quality of life.

As we continue to mine our actual ORLADEYO data and study our sources of business, we do see this intent stated in research proving out in our population. Top 3 reasons our actual patients have stated as reasons to switch to ORLADEYO include wanting to reduce number of attacks, wanting to reduce severity of attacks and wanting to reduce the burden of current treatment. Their motivation for switching is wanting more. The reason for staying on therapy based on research with current patients is essentially the same. Best frequent and severe attacks in addition to the convenience of an oral which reduces the treatment burden. Assumptions for our forecast rely heavily on insights from market studies, our conduit work and ultimately, a simulation model.

Collectively, these approaches helped us quantify demand, an uptake not only to ORLADEYO but also impact of the competition. Unlike traditional mass market, rare disease markets really have prescription data to build forcasipin [ph]. Hence, we supplement and collect as much data as possible through primary methods to fill these gaps. In our most recently completed conjoint study, our sample included 175 HAE treaters and 100 HAE patients. We ask the holders to allocate brand preference in terms of current use and the potential future use including the competition in their choice sets. We then analyze these preference data and incorporate them into market models driven by Montecarlo [ph] simulation. Our simulation models can provide the most probable estimated patient numbers, market shares and ramp to peak for ORLADEYO.

Montecarlos simulations allow us to run hundreds of iterations in the simulator and the models continue to reinforce confidence in reaching 2,000 patients at peak in the U.S. even competition entering the market. In the near term, the model confirmed by actual has shown strong holiday uptake with its source of business from protein naive and protein switches. In the outer years to peak, assuming a conservative scenario that all investigational products reach the market, our research consistently shows that new injectable products will take share mainly from current injectables by claiming the convenience of less treatment injections. Despite that, our model sees Tavio [ph] remaining as the leading injectable products because less frequent injections are an incremental benefit that will not be sufficient to drive many patients to switch.

Switching from an injectable to oral, however, offers a much more dramatic benefit to many patients. Our model anticipates that ORLADEYO will most likely be insulated from these new injectable entrants. Likewise, our research and model anticipates minimal switching away from ORLADEYO to any new oral because any new product, it is unlikely to offer a meaningful benefit over what they already experienced with ORLADEYO. Similar to how TAXYRA remains sticky, as a sticky market-leading injectable in the outer years, our research and data show that ORLADEYO will be equally sticky as a market-leading oral. We strongly believe in continuous optimization of our forecasting methods. We post launch, our models have evolved with additional levels of sophistication, including actual or with [indiscernible] data like patient adds, discontinuation, overall patients on therapy and other market dynamics that could affect near-term revenue performance.

We have found historically that our models correlate strongly with actuals and have predicted early day numbers and corresponding revenues reliably. Forecasting year 1 of launch is always difficult. But a year prior to launch of ORLADEYO, our model showed U.S. revenues approaching $100 million and our actual year 1 revenues came in at $122 million. Beyond forecasting, our team also study these data in depth to help better understand the needs of our patients, our physicians and points to opportunities for optimization of our patient services in real time. With availability data on a granular level, coupled with robust market insights, our team can proactively partner with the commercial teams with a full story of ORLADEYO. Our commercial teams are always ready to action on the truth from these data ready with strategies and solutions to address any of the findings.

Quantitative evidence direct from our customers from the basis of all our assumptions. Full market context, including the competition are always incorporated into our thinking, having a strong commercial team ready to action on the data and also key. Because we anchor in all these variables collectively, we have a strong level of confidence in our views of future ORLADEYO performance and our path to $1 billion. Anthony, I’ll turn it over to you.

Anthony Doyle: Thanks, Jinky. With Q3 ordinary revenue [indiscernible] to $85.7 million, we are well positioned to achieve our 2023 guidance of no less than $320 million. Longer term, Charlie and Jinky outlined the growth factors that we expect in the coming years, giving us great confidence in getting to $1 billion in peak revenue [indiscernible] detailed third quarter financials in today’s earnings press release and I’d like to call your attention to a few items. Total revenue for the quarter was $86.7 million, $85.7 million of which came from ORLADEYO, putting ORLADEYO trailing 12-month revenue at approximately $306 million. Of the $85.7 million of Global ORLADEYO revenue 75.3% came from U.S. sales with the remaining $10.4 million coming from ex-U.S. Operating expenses, not including noncash stock compensation for the quarter were approximately $85.9 million.

We are [indiscernible] our full year guidance for OpEx to $365 million to $375 million based on current trending and as we continue to be disciplined in our approach to capital allocation. Cash at the end of the third quarter was $399.2 million and net cash utilization for the quarter was approximately $16 million. One of the areas that investors and analysts have been asking for additional information related to debt and royalties. So let me go into a little bit more detail on. Looking high level at our balance sheet, total long-term debt is listed at approximately $833 million. However, only around $300 million about this traditional debt and the remainder relates to future royalty obligations. Earlier this year, we refinanced our term loan with Pharmacon.

This $300 million is traditional debt with traditional characteristics, a 5-year term interest-only payments during the loan period, like financial covenants and Apollo payment due in 2028. Separately, between 2020 and 2021, we secured an aggregate of $425 million for Royal financing from Royalty Pharma and from owners. For this instrument, forecast future revenue and based on future royalties payable which we then use calculate an effective interest rate. Our quarterly basis, we accrue interest expenses related to this effective interest rate on the P&L, while between periods, the balance sheet movement is the delta between the interest expense accrued and the actual royalties paid. The amount currently on the balance for this is $533 million, meaning we have accrued more interest expense than we’ve actually had it in royalties.

Out of the future point, these lenses should decrease as revenues increase and as royalties payable should, at that point, be higher than interest expense. GAAP reporting, this is considered to be a debt instrument. However, this is not traditional debt. These payments are based entirely on securing ORLADEYO revenue, i.e., no revenue, no royalties. Additionally, there’s no recourse. The balances are not callable and there is no bullet payment. Hopefully, this additional detail helps. We look forward to sharing more exciting information on our pipeline with you at the R&D Day tomorrow and I hope you can join us then. Operator, we would now like to open the call up for Q&A.

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Q&A Session

Operator: [Operator Instructions] The first question is from Tazeen Ahmad of Bank of America.

Tazeen Ahmad: I have a couple — thanks so much for providing that really detailed analysis of how you see the market evolving. I think in some of my discussions with investors, I often get asked about the benefits of ORLADEYO versus the ramp rate for the launch itself. So while you’re feeling a high sense of confidence that by the end of the decade, you’ll be looking at $1 billion, what do you think would need to happen to speed up that launch in order for the steepness of uptake to increase relative to where you are now? And then I have a follow-up.

Jon Stonehouse: Charlie [ph], you want to take that?

Charlie Gayer: Sure. So first of all, we’re really happy with the ramp rate and the consistent ramp rate and where it’s headed. So we’re always looking for ways to make it go a little bit faster. And we’ve talked about patient activation before. That’s definitely one. We don’t see any one thing that can be done that’s going to meaningfully bend it up. But we just — we plan to keep executing really consistently. And we’re going to get there. I think when you look at the rent rate of 200 patients ads per year that is very realistic and very achievable over the next 5 years. So we’re happy to keep it just at the ramp, it’s at.

Jon Stonehouse: Yes. One the other thing I’d add to Tazeen [ph] — and Jinky’s stressed this a lot in her remarks, is remember that there’s a lot of competition and patients are very satisfied with their therapy. When we talk to patients, they’ll tell us, “Oh, my god, I’m going to save my life, has changed my life.” And the injectable therapy. So that stickiness is just takes time to break and get people to understand that they could do better with an oral. But then on the flip side, that’s going to work to our advantage when other competitors come out. So I think the ramp rate is considering the competition in a rare disease is phenomenal.

Tazeen Ahmad: Okay. And then as a follow-up, when you talk about the 2,000 patients of your target, what type of a discontinuation rate is assumed in that? Are those 2,000 patients taking the drug continually or 2,000 patients that will touch the [indiscernible]?

Jon Stonehouse: And Charles talk about the pattern as well.

Charlie Gayer: Yes. Yes. No, absolutely. So first of all, the pattern that we’ve described before has been it’s still the same. And the slide I showed today things demonstrates that. So when a patient starts on ORLADEYO, 60% [ph] of those patients make it through the first year. And then we see very discontinuation after that. There’s always a little bit but those are the sticky patients really once they make it to a year. And so once we get to the 2000, we see a base of about 2,000 patients being sick and staying on ORLADEYO. And then as we’ve talked about before, we have patent protection out to 2039. So it’s a long ramp potentially at peak sales of $1 billion with those 2,000 patients. And that’s just the U.S., the same dynamics will apply in other markets.

Jon Stonehouse: Yes. So you should think that the — when we get to the 2000, we mean they’ve been on for at least a year or much longer you’re going to lose a percentage or two each year but you’re going to get that back on that [ph].

Charlie Gayer: We’re going to replace it.

Operator: The next question is from Stacy Ku of TD Cowen.

Stacy Ku: Congratulations on the progress and we really appreciate the detailed analysis of ORLADEYO. So first, we have a question. Could you further elaborate on your expectations for consistent linear growth? Specifically, how are you thinking about 2024? What are your thoughts on $410 million roughly for consensus? That’s the first question. And then one more on this year. So do you have any updated thoughts on your guidance of at least $320 million. If there is any potential for outperformance, what factors you expect could drive better sales? Is it ex U.S.? Any kind of detailed thoughts around this year would be appreciated.

Jon Stonehouse: Yes, we don’t comment on consensus and we haven’t guided yet for next year but I do think Charlie made some comments in his prepared remarks, that should set expectations so I’ll let him talk.

Charlie Gayer: Yes. I think for next year and for the next 5 years, as we excavate about 200 patient adds [indiscernible] and it could be a little more, some years a little less as it won’t be exact that exactly that every year but with consistent growth, it’s going to be pretty close. And on the $320 million we’re very confident in the 320. We’ve been saying for multiple quarters now put 320 in your model and I think we’d say do the same right now.

Jon Stonehouse: I think the challenge with next year is the cap to paid that were not completely sure how the IRA is going to impact the care patients. There’s still infrastructure that Charlie is putting in place and executing on where he’s making great progress on the front end of making sure Quick Start [ph] gets to pay on a higher frequency but we still have those long-term path folks that we’ve got to get switched over to page. So in the — I think it was a $100 million, Charlie, that you said over the next 5 years will benefit from those switch…

Charlie Gayer: Yes, $100 million would come in 2029 after we move the paid ratio to 85%.

Jon Stonehouse: So you shouldn’t expect much progress on that, next year is the point I’m trying to make.

Stacy Ku: Okay. And then on ex U.S., what are you thinking there? You’ve given kind of some guidance around the breakdown but it looks like there’s some nice sales there. So any comments on that would be appreciated.

Charlie Gayer: Yes. I mean ex-U.S. is going really well. We continue to get — have market access wins. We continue to launch in new markets. We continue to grow in the first [indiscernible] of markets where we’re at. As we’ve commented before, the price is lower. So it’s a volume game. It’s longer term. That everything that we see ex U.S. tells us it will contribute that additional $200 million by about the turn of the decade.