BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) Q1 2023 Earnings Call Transcript

BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) Q1 2023 Earnings Call Transcript April 26, 2023

BioMarin Pharmaceutical Inc. beats earnings expectations. Reported EPS is $0.27, expectations were $0.18.

Operator: Welcome to the BioMarin Pharmaceuticals First Quarter Investor Update Call. Hosting the conference call today from BioMarin is Traci McCarty, Group Vice President, Investor Relations. Please go ahead, Traci.

Traci McCarty: Thank you, Ross, and thank you all for joining us today. To remind you, this nonconfidential presentation contains forward-looking statements about the business prospects of BioMarin Pharmaceutical, including expectations regarding BioMarin’s financial performance, commercial products and potential future products in different areas of therapeutic research and development. Results may differ materially depending on the progress of BioMarin’s product programs, actions of regulatory authority, availability of capital, future actions in the pharmaceutical market and developments by competitors and those factors detailed in BioMarin’s filings with the Securities and Exchange Commission, such as 10-Q, 10-K and 8-K reports.

On the call today from BioMarin’s management team are JJ Bienaimé, Chairman and Chief Executive Officer; Jeff Ajer, Executive Vice President and Chief Commercial Officer; Hank Fuchs, President, Worldwide Research and Development; Greg Guyer, Executive Vice President, Chief Technical Officer; and Brian Mueller, Executive Vice President and Chief Financial Officer. I will now turn the call over to our Chairman and CEO, JJ Bienaimé.

Jean-Jacques Bienaime: Thank you, Traci, and good afternoon, everyone. Thank you for joining us today. So we are very pleased with BioMarin’s progress in the first quarter as more families gain access to VOXZOGO logo as well as or our other essential medicines. Our financial performance in the quarter was strong, especially in light of ongoing macroeconomic challenges across the globe. 15% growth of the top line and 15% non-GAAP income growth on the bottom line puts BioMarin firmly on track to achieving our 2023 financial goals. These results included $88 million in VOXZOGO revenues and strong Q1 profitability of $51 million on a GAAP basis, and all this is from our fully owned portfolio of commercial products. With Q1 total revenues coming in at just under $600 million, we are on the path to achieving our 2023 objectives of double-digit revenue growth and significant operating leverage, driving approximately 30% growth in bottom line profitability in 2023, as communicated in February.

We are very pleased with the continued cadence of VOXZOGO take worldwide. VOXZOGO is now being used in around 1,500 patients in 35 different geographies, and we have seen significant growth of VOXZOGO in Japan since approval there. And as a result, we are raising again our 2023 full year guidance midpoint by $50 million at the midpart level based on increasing expectations for the brand. Based on the still very limited market penetration, we believe VOXZOGO is on its way to become a blockbuster. Turning to ROCTAVIAN. In Europe today, we have begun working directly with a single national German insurance fund, or GKV, on a final federal German prices and therefore, we will not pursue any additional Outcomes Based Agreements with sub-insurance, which are the German, most of the regional funds at this time.

We believe that the highly innovative profile of ROCTAVIAN offers an attractive treatment option for those people with severe hemophilia A interested in an efficacious alternative to chronic therapy. We believe that working directly with a primary health insurance provider in Germany, which we expect will cover ROCTAVIAN treatment with a onetime payment and with us an outcome based will facilitate access. We also believe the German health care system will recognize our payment value based on the transformational efficacy observed in a majority of participants across our extensive development program with ROCTAVIAN. Our initial interactions with the GKV have been positive, and we anticipate a final German reimbursement price that would be representative of the full value ROCTAVIAN delivering to patients, especially based on our recent PDUFA update of our Phase III trial.

Over the long term, we don’t expect today’s updates to impact our expectations for ROCTAVIAN as we continue to hear feedback from German hematologists that they are ready to treat despite some of the challenges, BioMarin has experienced with German regional funds reimbursement in the very short term. So we are pleased to share that other markets in Europe and outside of Europe are actively pursuing access to ROCTAVIAN, which Jeff will review in a moment. With the U.S. PDUFA action date only 2 months away, we are optimistic cautiously, of course, for what lies ahead in the second half of the year. The commercial team is working hard to prepare for another successful product launch. And as we communicated during our Q4 conference call a couple of months ago, in the United States, roughly 300 patients from the bleeding disorders community have engaged with BioMarin directly to learn more about ROCTAVIAN, which is a very positive sign.

So we believe 2023 is the year of ROCTAVIAN, and we are looking forward to continued progress ahead in both Europe, the U.S. and the rest of the world. So in summary, we are very pleased with BioMarin’s performance in the first quarter and our outlook for the remainder of the year. The momentum behind VOXZOGO continues driving record financial results. We are making good progress on the European launch of ROCTAVIAN, and we look forward to the outcome of the June 30 PDUFA milestone. In the U.S., we are ready. So importantly, we have made the transition to an earnings growth story, a unique accomplishment in our industry, and we thank you for your continued support. I will now turn the call over to Jeff to discuss the commercial business update.

Jeff?

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Jeffrey Ajer: Thank you, JJ. I’m very pleased with our record-breaking performance in the first quarter, resulting in $596 million in total revenues and representing 15% growth year-over-year, including KUVAN and 19% growth excluding KUVAN. Solid contributions from our enzyme products resulted in year-over-year growth of approximately 5%, which is in line, given anticipated seasonality and ordering patterns for certain brands. Overall, the enzyme product revenue base is tracking as expected, and we anticipate it will provide meaningful contributions to BioMarin’s full year total revenues this year. Turning to VOXZOGO. As underscored by our guidance increase today, we are very pleased with the continued acceleration of growth.

Today, we’ll raise full year VOXZOGO revenue guidance to between $380 million and $430 million, a $50 million increase at the midpoint and representing 140% growth over 2022. At the end of the first quarter, approximately 1,500 children with achondroplasia in 35 different markets were being treated with VOXZOGO within the currently approved age ranges. Uptake to date represents 9% penetration of indicated patients in BioMarin’s commercial footprint, highlighting the significant growth potential that remains. This includes Europe for children 2 years old and older, the United States for children 5 years old and older, and in Japan, where VOXZOGO was approved with no age restrictions. Japan was a key driver of growth due in part to the availability of VOXZOGO treatment for children of all ages.

We also saw significant contributions in the quarter from Europe, United States and certain markets in the Latin American regions. Looking ahead for the remainder of 2023, we expect growth across markets with continued uptake in existing markets and expansion into new markets. We do look forward to learning in the coming months if European and U.S. health authorities are supportive of extending access to VOXZOGO to younger children, which would make it available to more than 1,000 additional children in those markets. Taken together, we continue to believe that VOXZOGO has the potential to be our first $1 billion brand. Turning now to ROCTAVIAN. To remind you, upon European approval of ROCTAVIAN late last year, our plan was to quickly facilitate access for patients in Germany through the use of Outcomes Based Agreements.

At the time of approval, the prepricing window in Germany was 12 months, but was changed to 6 months in January. With a 12-month prepricing window at the time of launch, it made sense to pursue OBAs with the goal of facilitating access to ROCTAVIAN prior to final federal reimbursement. Now that we are already working with GKV on a final federal price for ROCTAVIAN, we will not pursue additional OBAs, as JJ shared A reminder, GKV is the umbrella entity that is responsible for health insurance to approximately 90% of the German population, and we believe this path will facilitate the broadest access. While we work to finalize a German price with GKV, reimbursement for people treated with ROCTAVIAN is possible under Named Patient authorizations through individual insurers.

Those sales would be subject to the final price once it has been established. Patients treated under executed OBAs will benefit from the terms of that OBA at least until the German price is finalized. As JJ shared, we expect the GKV negotiations to yield the price for ROCTAVIAN that incorporates durability and other benefits that would be paid in a onetime upfront payment and without bespoke Outcomes Based Agreements. Turning to CDx testing in Germany. We are pleased to see a significant pipeline of patients building as more tests are in motion. As of the most recent data, 18 people had been screened for AAV5 seropositivity, an important eligibility criteria for treatment with ROCTAVIAN. We expect that our first treated patient in Germany will be sourced from this pool in the second quarter.

And while not all patients tested will be eligible and choose treatment with ROCTAVIAN, we are encouraged by the level of interest from patients in Germany. Beyond Germany, our applications seeking price and reimbursement approvals as well as other launch preparation activities are making progress in both France and Italy, where we expect negotiations to conclude by Q4 of this year. In Italy, we were pleased that ROCTAVIAN was recently awarded conditional innovation designation, a positive signal that should facilitate pricing and reimbursement. We are also encouraged by early interest in ROCTAVIAN in other markets, including Argentina and Saudi Arabia, where we have the potential to provide access to ROCTAVIAN through Named Patient authorizations.

We are aware of 11 completed CDx tests in Argentina and a recent prescription for ROCTAVIAN treatment. Taken together, we are pleased with the progress we are seeing outside of the United States, especially noting some key differences in reimbursement and launch dynamics between the U.S. and other markets. Touching briefly on some of the differences that we believe will positively impact the ROCTAVIAN U.S. launch upon a potential approval in June. First, we intend to implement a single warranty, which will allow us to offer a uniform agreement to all purchasers in the U.S., avoiding the need to negotiate bespoke contracts. Next, we plan to leverage the value-based assessment from the Institute for Clinical and Economic Review, or ICER, which noted that ROCTAVIAN was a dominant treatment with substantial cost savings, along with projected gains and quality adjusted life years at $2.5 million per onetime treatment.

ICER’s conclusion of value is consistent with the results from payer research conducted recently in the U.S. As in prior launches, we believe it will be possible to navigate reimbursement approvals following approval for individual patients on the basis of medical exception until coverage policies are issued. Finally, in Europe, we are not promoted to promote — we are not permitted to promote ROCTAVIAN directly to patients. So many people with severe hemophilia A only learn of it during their annual or semiannual check-ins with their hematologists. In the U.S., in contrast, we intend to use all channels available to raise awareness of ROCTAVIAN. That is a good segue to our update on U.S. commercial preparedness. Our teams have worked with treatment centers to ensure site readiness, conducted discussions with payers, worked through a refinement of our warranty and our promotional campaign is ready.

The supply of ROCTAVIAN to meet demand has been manufactured, we stand ready to go upon potential approval. We have identified and are focused on a relatively small number of the largest and most capable hemophilia treatment centers to be ready to treat with ROCTAVIAN in the U.S. at or shortly after launch. We understand the value of and are committed to hemophilia treatment centers being the site of treatment for ROCTAVIAN for the reasons of appropriate patient selection, post-treatment follow-up and monitoring and more generally due to the complexity of hemophilia management. In conclusion, we are off to a strong start in 2023, delivering record-breaking results in the first quarter underscores demand for our essential medicines. Based on the challenges faced securing additional OBAs in the quarter to facilitate patient access to ROCTAVIAN and the updated U.S. PDUFA action date from March to June, we have lowered full year 2023 ROCTAVIAN guidance to between $50 million and $150 million.

Thank you for your attention. And I will now turn the call over to Hank to provide an R&D update. Hank?

Henry Fuchs: Thanks, Jeff, and thank you all for joining us today. BioMarin’s worldwide R&D organization has gratified to see the enthusiasm from families interested in benefiting from VOXZOGO treatment for their children with achondroplasia. In the coming months, we look forward to learning the outcome of our request to potentially expand the label, both in Europe and in the United States, to offer the possibility of treatment to children of all ages where VOXZOGO is currently available. Also, later in 2023 with VOXZOGO, we look forward to results from the investigator-sponsored trial evaluating VOXZOGO’s potential to treat other genetic forms of short stature, including, for example, hypochondroplasia, mutations in the NPR2 gene and Noonan syndrome, just to name a few.

We are also engaged in active discussions with top authorities concerning the opportunity to leverage VOXZOGO, a natural regulator bone growth, and these other conditions characterized by impaired bone growth. Moving to ROCTAVIAN. As we announced in March, the United States Food and Drug Administration extended their review of the Biologics License Application for ROCTAVIAN. As anticipated, the FDA determined that the submission of the 3-year data analysis from the ongoing Phase III Generic 1 study, as requested by the agency, constituted a major amendment due to the substantial amount of additional data and set a new PDUFA target action date of June 30, 2023. We continue to engage with the agency and look forward to our June 30 PDUFA action date.

Briefly on the earlier stage pipeline, we shared a few incremental updates in our press release today on BMN 255 for hyperoxaluria and chronic liver disease; BMN 331 gene therapy for hereditary angioedema; and BMN 349 for alpha-1 antitrypsin deficiency. We look forward to providing updates across our advancing development pipeline at our R&D Day in New York on September 12. Starting with BMN 255, we have concluded the multi-ascending dose in the healthy volunteer study. In January, we shared early data that demonstrated a rapid and potent increase in plasma glycolate following treatment with BMN 255. Oral daily dosing at all tested levels for 14 days was safe and showed sustained elevations in plasma glycolate, which is predicted to have a profound reduction in oxalate excretion in patients.

Based on these early signals, we now plan to initiate and enroll an expanded study in patients with chronic liver disease and hyperoxaluria later in 2023. We believe the availability of a potent orally bioavailable small molecule like BMN 255 may be able to significantly reduce disease and treatment burden in patients with — in a patient population with significant unmet need. Turning to our next gene therapy, BMN 331 for hereditary angioedema, which is like hemophilia in the sense that it poses a chronic lifelong burden of therapy due to the risk of breakthrough attacks that are extremely burdensome and potentially life threatening. The disease is due to genetically determined loss of the key protein regulating the inflammatory cascade responsible to these attacks.

The available therapies on the market have confirmed the effectiveness of replacement much like in the case of replacement Factor VIII therapy in hemophilia. We’ve shown in 3 studies with BMN 331 gene therapy that in mice and non-human primates that a similar dose to that employed in clinical studies of ROCTAVIAN can provide ample and constant expression of C1 inhibitor within the therapeutic range in patients. We expect to continuously express levels of protein will provide improvements in the disease course of hereditary angioedema over existing therapies. In March, the second patient was dosed safely at 60 30 for kilo following an encouraging response from the first participant, who demonstrated an early increase in C1 inhibitor that may ultimately be therapeutically relevant, and this is exciting.

With BMN 349 for alpha-1 antitrypsin deficiency, preclinical studies have demonstrated oral bioavailability in a small molecule that potentially sequesters the mutant protein preventing polymerization in the liver cells that drive progressive liver disease form of the illness. In preclinical studies, BMN 349 is titratable to effect with rapid onset and high potency. Preclinical results have strong implications for potential improvement of our current management, particularly for severe liver disease requiring rapid action. IND-enabling studies are underway, and BioMarin is close to submit an IND for BMN 349 in the second half of the year. Stay tuned for updates on these as well as 351 for Duchenne Muscular Dystropy and BMN 293 for myosin binding protein C3 hypertrophic cardiomyopathy at R&D Day in New York in September.

Thank you all for your continued support. And I will now turn the call over to Brian to update financial results in the quarter. Brian?

Brian Mueller: Thank you, Hank. Please refer to today’s press release summarizing our financial results for full details on the first quarter of 2023. Since JJ and Jeff spoke to our revenue performance for the quarter and future revenue outlook, I will primarily focus on the remainder of our P&L and other key financial updates this quarter. As usual, all results will be available in our upcoming Form 10-Q, which we are on track to file by the end of this week. We referred to last year as a transformational year for BioMarin with the growing base business of enzyme products plus the successful launch of VOXZOGO, together with operating expense control, driving meaningful GAAP net income and a foundation for our financial growth strategy into the future.

We are pleased that the strong start of the business in the first quarter of 2023 is supportive of our 2023 and long-term objectives of substantial revenue growth, margin expansion and increasing earnings. BioMarin’s $596 million of total revenue in the first quarter of 2023 is an increase of 15% compared to the first quarter of 2022. Regarding our revenue outlook for the rest of 2023, Jeff commented on the increase to our 2023 VOXZOGO revenue guidance and decrease to our 2023 ROCTAVIAN revenue guidance, which offset each other in aggregate, resulting in no change to our total revenue guidance for 2023, which is annual growth of 16% at the midpoint. Across the rest of the P&L, Q1 2023 gross margin was 78.8%, which is an improvement of 1.3% as compared to the first quarter of 2022.

R&D expense in 2023 started at a moderate rate in the first quarter, which was expected given the planned increase in R&D investment in our early-stage pipeline and the life cycle management development efforts for ROCTAVIAN and VOXZOGO that we expect to ramp up over the course of this year. SG&A expense in the first quarter of 2023 of $223 million increased as compared to $195 million in the first quarter of 2022, which is in line with expectations as we continue to invest in the global VOXZOGO commercialization, the EU ROCTAVIAN launch and the commercial launch preparations for ROCTAVIAN in the U.S. Back to the bottom line, we delivered on our commitment to profitability with the $51 million of GAAP net income in Q1 2023 and $116 million of non-GAAP income, which sets up BioMarin well to achieve our full year 2023 profitability objective.

GAAP net income decreased in Q1 year-over-year. However, it is important to note that GAAP net income in the first quarter of last year included the gain on the sale of the priority review voucher received in connection with the U.S. approval of VOXZOGO, which was approximately $89 million after income tax. Today, we reaffirmed our 2023 GAAP and non-GAAP income guidance of $155 million to $205 million and $360 million to $410 million, respectively. Total cash and investments in the first quarter of 2023 was close to $1.5 billion, which decreased during the quarter due to some milestone payments, the timing of accounts receivable collections and known seasonality of operating accrual net pay down. As we believe these cash flow timing events were front loaded to the beginning of the year, we expect to resume positive cash flows over the course of 2023.

In closing, we are pleased to observe a solid start to 2023 and are keenly focused on maximizing the potential of the global VOXZOGO and European ROCTAVIAN commercial launches, measured operating expense investments and the resulting leverage profitability growth that we anticipate for the full year and beyond. Thank you all for your attention, and we’ll now open up the call for your questions. Operator?

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Q&A Session

Operator: . And our first question comes from Salveen Richter from Goldman Sachs.

Salveen Richter: Can you provide more detail here on how the GKV facilitate discussions on the final price and any impact on this price given that additional OBAs will not be pursued? And then in the interim, do you expect patients to actually be treated through either Named Patient authorizations or the one finalized OBE? Or is it really just GKV here?

Jeffrey Ajer: Salveen, I will be happy to take that one on. So the GKV process that we’ve described here that takes essentially 12 months to get to a final reimbursement price and broad reimbursement access. This is normal. So this is the same process that we’ve gone through for all of our previous brands.

Jean-Jacques Bienaime: I think 12 months from approval, not 12 months from today.

Jeffrey Ajer: Yes, 12 months from our price listing, which was September 15 of last year. So we’re very familiar with that process. And we are pretty deep into that process by now. So we submit a full price and reimbursement dossier. We did in the fall of last year, that takes a while to get processed by — with GKV. We’ve had our first meeting to review that. There’s usually a series of 4 meetings and reviews before we get to a final answer. We think that, that first meeting was set up a very favorable tone, including testimony from key positions in Germany on behalf of ROCTAVIAN. So that’s kind of the process. What’s different with ROCTAVIAN than our other brands is our other brands have all entered into a situation where there is no existing standard of care.

In the case of hemophilia, we knew that we are launching into a situation where there was an existing, indeed an evolving standard of care. And so our strategy was to contract with subnational insurer umbrella organizations, what we’re calling sub-insurers, here to put Outcomes Based Agreements in place, get agreement on preliminary price to facilitate rapid uptake of ROCTAVIAN. When we launch, we believe that the prepricing period in Germany as it has been for years and years would be 12 months. So what changed? The first thing that changed is, late last year, there was new legislation that changed the 12-month to 6-month prepricing period. And that’s new. While some people saw that coming, as we did, what’s new about that is nobody really knows how the parties will behave at the end of the 6-month repricing period and before we have final price and reimbursement approval from GKV.

The second thing that changed according to our plan was we saw more than we were expecting from the sub-insurer groups to engage in finding a path forward and defining OBAs, which are new for ROCTAVIAN. So now that we are in well into discussions on a final price and reimbursement arrangement that covers essentially all of Germany, we think it just does not make sense any longer to pursue additional Outcomes Based Agreements with those so-called subnational insurers. Instead, we think we’ve got some patients covered under an existing Outcomes Based Agreements, it covers a part of the population. And we know that patients can be submitted through their health insurer for essentially a one-off or a Named Patient approval while we work to get the final price and reimbursement Sorry for all the detail, but you did ask for it.

Operator: And our next question comes from Geoff Meacham from Bank of America.

Geoffrey Meacham: Just two quick ones on ROCTAVIAN. So I guess a follow-up on Germany. So you have to go back to square 1 and the communication of kind of cost benefit to GKV. And I guess, was the 6 months of OBA negotiation a total waste here? And then secondly, in the U.S., just commercially, what’s left to help streamline access and reimbursement, obviously, aside from formal FDA approval?

Jeffrey Ajer: Yes. So thanks for the question, Jeff. To reiterate, right after we submitted our price and got that listed in September 15 of last year, shortly after that, we submitted, as we always do for our brands, to the GKV a full price and reimbursement dossier. And as I noted in the last question, it takes 4, 5, 6 months for GKV to get to the point where they’re ready to enter negotiations with us because it is an intensive dossier to review. The work that we did with the so-called subnational insurers was not a complete waste of time. Indeed, we achieved proof of principle with getting one major insurer signed up. So patients under that insurance group have the benefit of that Outcomes Based Agreement. And so I think that’s — as I described also in the previous question, that’s where we’re at.

We’re more than 6 months in. We’re well underway with getting to a final federal reimbursement price. And that price when it’s set will be retroactive to any patients that are treated from March 15 on when the prepricing period ended. U.S. is a completely different situation. So as we’ve disclosed, we have a warranty agreement that does not require to be negotiated 1 payer by 1 payer. It’s a uniform agreement that we intend to offer to all purchasers of ROCTAVIAN. So that cuts down on the time associated with doing bespoke agreements. That’s the first piece. And then the second piece is similar to our other launches in the United States, we know that it is possible to navigate individual payer approvals for patients that are submitted as a part of a medical exception process and while coverage policies are in process of being issued.

And you know because you follow other launches that coverage policies can take anywhere from 1 to 9 or 12 months to get issued variable by payer. So that’s how we plan to navigate that process immediately following launch.

Operator: And our next question comes from Chris Raymond from Piper Sandler. .

Christopher Raymond: If I can ask another ROCTAVIAN question. So just curious, you guys highlighted 18 patients have undergone antibody testing. I think last quarter, that number was 10. So it doesn’t seem like you’re seeing necessarily in Germany anyway an inflection higher or sort of an acceleration. Maybe just talk about that dynamic, is that also subject to any reimbursement barriers that you didn’t anticipate? And then maybe on the guidance change, changing cutting top and bottom by $50 million, it’s — $50 million, it’s — yes, I know you weren’t expecting $50 million in Q1. And I know your original plan didn’t hinge on a March U.S. approval, but maybe can you talk about how much of this reduction is driven by the sort of the resistance you’re seeing in Germany versus maybe a reassessment of the U.S. opportunity?