BioMarin Pharmaceutical Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 1, 2023

There are 16 speakers on the call.

Operator

And welcome to the BioMarin Pharmaceuticals Third Quarter 2023 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. I will now turn the conference over to Tracy McCarty, Head of Investor Relations. Please go ahead.

Speaker 1

Thank you, JL, and thank you all for joining us today. To remind you, this non confidential presentation contains forward looking statements About the business prospects of BioMarin Pharmaceutical Inc, 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 authorities, 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 10Q, 10 ks and 8 ks reports. On the call today from BioMarin Management are JJ Bienaime, Chairman and Chief Executive Officer Jeff Ager, Executive Vice President, 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. We do plan to end this call promptly at 2:30 p.

Speaker 1

M. Pacific Time, and we thank you for your understanding. I will now turn the call over to BioMarin's Chairman and CEO, J. J. Bienaime.

Speaker 1

J.

Speaker 2

Bienaime:] Thank you, Tracey. Good afternoon and good morning, everybody. As You will have seen this afternoon we announced that I have decided after over 18 years with BioMarine to retire as the Chairman and Executive Officer, effective December 1 this year. And as many of you are aware, I recently actually turned 70. I cannot believe it myself.

Speaker 2

So I will not it will not be a surprise to you that succession planning has been underway with the Board over the past Several years. These announcements and the appointment of Alexander Hardy to succeed me as CEO follows a thorough multi year planning process. Together with the Board, we conducted a comprehensive search over the past year and we are thrilled to have Alexander step into the role. As part of this transition, I would also step away from my position as Chairman of the Board of Directors. However, I will continue to serve on the Board until the 2024 Annual Meeting of Stockholders, and I will stay as a consultant to the company for the remainder of 2024.

Speaker 2

I look forward to working with Alexander and the Board during this period to ensure a smooth transition. I am pleased that our Linde Independent Director, Richard Meyer, with Randy will be our new Chair of the Board. When I joined the company in May 2005, we had just one marketed product and recorded about $26,000,000 in annual revenues. Since then our team has developed and commercialized 7 additional medicines, pioneered groundbreaking first and transform the lives of countless of patients. Almirall is now a profitable fully integrated industry leader And one of the most successful biotech company with annual revenues anticipated to be more than $2,400,000,000 this year and also expected to grow to close to $3,000,000,000 next here.

Speaker 2

BioMarin is extremely well positioned for substantial future growth and profitability. Our market cap has grown from around $300,000,000 when I started as CEO to more than $15,000,000,000 today. Our stock price went from $6 when I joined at SCU 18 years ago to over $83 today at the close. So we have generated returns greater than the XBI index over the past 1 year, 3 years, 5 years 18 years. Power Marine is now a profitable, Fully integrated industry leader with annual revenues of more than $2,000,000,000 and extremely well positioned For substantial future growth and profitability, We have expanded from operating only in the United States.

Speaker 2

When I started with the company We have now at that time 300 employees to sitting our medicine in almost 80 countries around the world and more than 3,000 employees. As the company is posed for its next phase of growth with the recent introduction of VoxSogo and Octavian, This is the ideal time to hand over the reins to the next leader. In the search, the Board focused on finding a successor with experience driving commercial growth and operational excellence, while at the same time bringing a deep understanding of the science and a strong Background in product development. We are confident that Alexander perfectly meets those criteria. As CEO of Genentech, Alexander And the commercialization of 10 new products in therapeutic areas including cancer and hemophilia.

Speaker 2

Serving as CEO of this industry, innovative and impactful company over the past 18 years has been the highlight of my career. We have built an incredible organization with great potential to be further unlocked by Alexander and the team. While I will miss working with our talented and inspiring employees day in and day out, I am confident that the company is well positioned for future success. So to those on the call today, thank you for your engagement and support over the years. I still also want to emphasize that I will still be involved with the company And I will still be very involved with biotech in general as you will find out in the future.

Speaker 2

So now let's turn back to the quarterly results. We are very pleased with the results in the 3rd quarter, Recording 15% total revenue growth compared to the Q3 last year and continued strong growth in earnings per share faster than revenue. These results were driven primarily by VoxSOGO, which remains on track to become our 1st blockbuster product. We saw strong demand and uptake in the quarter and we expect this trend to continue. In the Q3, more than 300 additional Children began treatment with Voxelgo since the end of Q2 and additional strong growth is expected in Q4.

Speaker 2

As a result, today we increased full year 2023 Voxsoego guidance to between €435,000,000 €455,000,000 With recent U. S. And European approvals, Voxelgo's age expansions all ages in the U. S. And for children ages 4 months and older in Europe, Over 1,000 additional children now have the opportunity to benefit from a longer Voxogo treatment window.

Speaker 2

We are also pleased to share that based on increased steel finish manufacturing commitments, box auger supply is planned to increase from 23 levels The first and second quarter in 2024 and is expected to be fully unconstrained by mid year 2024. Turning now to Octavian, where we have made tremendous progress building and connecting the network that will facilitate patient treatment. We'll be laying the groundwork for patient access to Roxavian. It has taken time, but has been an essential step to ensuring access and reimbursement. Well over 100 people have been tested for roctivian AAV5 eligibility globally, which is the first step that a patient needs to do to determine if he can be treated with Octavian.

Speaker 2

The seronegativity rate on the samples that we have tested to date is approximately 70%. So 70% of the patient tested are eligible For ROKAVIEN, they still need to have a leave a scan, but most of the eligibility comes from the AAV5 positivity. And we expect the testing momentum to continue as awareness and access increases. While it has taken more time than anticipated to get global health To facilitate RockTevan treatment, we remain encouraged by the high level of interest and demand from patients, physicians, Patient advocacy groups, hemophilia treatment centers and payers. In Europe, we had strong progress in the quarter And expect to have final German and Italian prices for Octavian published by year end.

Speaker 2

And in the U. S, significant momentum Connecting the network to facilitate treatment is occurring. Jeff will provide more detail on launch progress and our updated expectations for Octavia. Turning to BioMarin's record year to date revenues of nearly $1,800,000,000 in the 1st 9 months of the year. This represents 14% year over year growth even with lower than expected contributions from Octavia.

Speaker 2

These results underscore the strength of our business and Double digit revenue growth and our profitability objectives as set out as the start of the year. The business is poised for strong growth in 2024 and beyond. With Voxogo continuing to exceed expectations, sorry, and we'll keep an access And reimbursement in place for a meaningful uptick next year, we believe BioMarine revenues are set up to approach $3,000,000,000 in 2024. In summary, we have built an industry leading company. The strategy to create a sustainably profitable and growing business I provide patients with innovative and essential medicine is coming to fruition.

Speaker 2

This future looks very bright for BioMarin And I want to thank my colleagues for the tremendous collaboration and effort we have built together. Thank you for continued support. I will now turn the call over to Jeff Fager to discuss the commercial business update. Jeff?

Speaker 3

Thank you, JJ, in so many ways. I'm very pleased with our commercial performance in the Q3, resulting in $581,000,000 in total revenues And representing 15% growth year over year, including Kuvan and 20% growth, excluding Kuvan. Turning to Voxogo, as JJ mentioned, today we updated full year guidance to between $435,000,000 $455,000,000 representing approximately 165% year over year growth at the midpoint. Appreciating that the run rate for the Q4 and Full year 2023 may seem conservative based on Boxelgo revenues of $123,000,000 in the 3rd quarter. We note the impact from supply constraints discussed last quarter continue to limit growth through the end of this year.

Speaker 3

While we continue to closely manage new patient growth and limit inventory stocking, we expect to fulfill smaller orders from various regions in Q4, while at the same time adding hundreds of new patients in the 4th quarter. As a reminder, new patient starts with Voxogo in the 4th quarter will represent only a fraction of a full year revenue patient in 2023. Importantly, we expect approximately 2,600 patients to be receiving VOXOGO treatment by year end 2023. Voxelgo Supply is planned to increase from 2023 levels through the 1st and second quarters of 2024 and is expected to be fully unconstrained by mid year next year. These commitments will ensure that we have ample to exceed full year 2024 consensus currently at $624,000,000 and support growth beyond 2024.

Speaker 3

At the end of the Q3, more than 2,300 children with achondroplasia in 38 markets were being treated with Voxelgo. Uptake to date represents 12% penetration of indicated patients in BioMarin's commercial footprint, Highlighting the significant growth potential remaining. With the opportunity to now treat up to an additional 1,000 children Following the recent age expansion approvals in the U. S. And Europe, we look forward to the possibility of the youngest children in these regions benefiting from VOX Turning now to Rocktavian.

Speaker 3

We are pleased to share that the 2nd commercial patient was treated today in Germany. As J. J. Highlighted, we continue to make progress connecting the network that will facilitate treatment. 2023 has turned out to be the year of building that Network to ensure and support meaningful patient uptake in 2024.

Speaker 3

Starting with Europe, We have tentative agreement with the German National Association of Statutory Health Insurance Funds or GKB On the final German price for RockTavian, which we expect to be formalized and published by the end of the year. As we have said previously, we believe this important step given the unique treatment and reimbursement profile of Rockavian We'll open up the access funnel to treatment in Germany. We are pleased to share that in Germany, The people are known to be eligible based on CDx testing for AAV5 antibodies. The vast majority of those are in follow-up for next As expected, the seronegativity rate of about 70% is in line with our study results and consistent with expectations. We are also pleased to report that there are now 10 sites in Germany testing for eligibility.

Speaker 3

With a large pool of eligible patients and the final German price expected to be published soon, we are optimistic about patient uptake rates in 2024. Important to note is that the first patient treated resulted in net revenue of approximately $800,000 Gross to net revenue adjustments going forward under the GKB agreement will be different than for the first patient reported, But our overall expectations are to maintain similar net revenue per patient in Germany, noting the impact of weight based dosing and variable weight of patients. In Italy, negotiations with the Italian Medicines Agency are going well And we expect to have a final price published by year end. Italy represents then our 2nd major European market that has agreement on price and reimbursement, Opening the door to Rockkavian access likely in early 2024. We continue to work with the authorities in France and expect pricing negotiations to extend into 2024.

Speaker 3

It has taken several months in the U. S. Following approval To align stakeholders and to facilitate first patients treated. In general terms, this is a result of that unique profile of one time reimbursement Navigating hospital administration and finance adds a level of complexity for hemophilia treatment centers or HTCs leading to the final step of patient treatment with Rockavian. We expect that these administrative steps Taken at the HTC level, while time consuming, are one time events and essential to facilitate patient access going forward.

Speaker 3

In short, the groundwork completed in 2023 is expected to enable simplified access to Rocktavian, We have more and more AAV5 eligibility testing and giving us confidence in the prospects for 2024. However, with less than 2 months remaining in the year and the holiday season beginning soon, we are lowering full year Rockdibian 2023 guidance So less than $10,000,000 Moving now to specific steps completed this quarter, starting with the issuance of coverage policies across payers, Both private and public, we are pleased to share that nearly 2 thirds of all covered lives in the United States have been issued coverage policies to date, representing approximately 205,000,000 people. Importantly, the vast majority are in line with label or clinical trial criteria and are thus favorable in meeting expectations. Additionally, we are encouraged by the rapid uptake of the outcomes based warranty With signed warranties in place, representing more than 95,000,000 U. S.

Speaker 3

Lives. We have also received notice that the J code for RockDavian has been assigned effective January 1, 2024. The permanent J code is expected to accelerate payers' prior authorization review process, ultimately speeding time to patient treatment. Taken together, these developments are a strong indication of the value The U. S.

Speaker 3

Health system places in a cost effective one time gene therapy. We stated in our approval and Q2 To earnings call, we expect it could take patients 2 to 5 months to complete the steps necessary before treatment with RockTavian. The commercial team has been hard at work implementing a number of tactics to prepare physicians, HTCs and patients for the opportunity to benefit from Rockavian. With respect to site readiness, HCCs are being prepared and educated on how to Sir, Octavian, we have targeted the largest and most capable HDCs for site readiness by year end, a number of which have readiness plans before the end of this year. Increasing HCP and patient awareness in the U.

Speaker 3

S. It was also an important focus in the quarter. A number of activities were conducted including national HCP inpatient webinars And the 3rd Annual Global Gene Therapy Scientific Summit sponsored by BioMarin. We are especially encouraged by the number of local patient advocacy groups, which have been willing to host branded patient awareness programs for Rockabian. Medical eligibility, including CDx testing is underway.

Speaker 3

And as a result, the U. S. Patient funnel is beginning to take shape, giving us confidence in the prospects for treating patients going forward. In conclusion, we are on track to achieve 2023 full year total revenue guidance, driven by the strength of our enzyme product revenues and continued high demand for Voxelga globally. Looking ahead, We believe the network built to facilitate treatment with Rockavian combined with our high expectations for Boxelgo and strong enzyme business We'll enable BioMarin to approach close to $3,000,000,000 in total revenues in 2024.

Speaker 3

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

Speaker 4

Thanks, Jeff.

Speaker 5

Thank you, JJ. It's a privilege to spin ours. And thank you all for joining us today. We provided a thorough update on our earlier stage pipeline at R and D Day in September. So if you missed it, Please find the full presentation on BioMarin's IR website.

Speaker 5

Starting with OXOBO in the quarter and shortly beyond, We received some important updates from global health authorities resulting in expanded access to children, younger children in both the U. S. Where it is now approved in all age groups and in Europe for children 4 months of age and older. We're gratified that the youngest children now have the possibility of greater potential long term benefits from treatment of FOXO2. And I want to thank not just the usual clinical and regulatory teams at these finish line efforts, but also the extended BioMarin team of Safety professionals, biometrics professionals, operations, pharmacology, really the whole entire fully integrated team played a strong role in enabling this Advancement in access of patients.

Speaker 5

So on behalf of the families and children with achondroplasia, thank you all. As mentioned last quarter, we have solidified our plans to begin the pivotal program using Boxova for the treatment of hypochondriplasia with the natural history arm of the study expected to begin this quarter. The pathogenesis in epidemiology are similar between achondroplasia and hypochondroplasia. While hypochondriplasia presents with a milder phenotype in some patients in terms of short stature disproportionately in clinical manifestations, We plan to target the population with the most severe form of the disease and therefore the highest unmet need with high deficits beyond 3 standard deviations below their means. With alignment from FDA on the single registration enabling 52 week randomized double blind placebo controlled study with a primary outcome of annualized growth velocity, we look forward to initiating the treatment arm of the study in 2024 following the natural history run-in portion.

Speaker 5

In addition, we plan to initiate 2 new clinical programs next year with So go one in idiopathic or polygenic short stature and the other in defined genetic short stature conditions. We know that CNP is a pivotal physiologic Further, human genetic studies of CNP and not FGFR3 Demonstrate that even modest nudges in CNP signaling have a significant impact on final adult height. This supports our confidence that Voxelco can deliver on the Transformational improvement in growth across many forms of skeletal impairment, while remaining while retaining the strong safety profile demonstrated in achondroplasia. For these reasons, we look forward to starting the clinical programs in these additional statral indications in 2024. Please take a look at the full R and D Day presentation for the latest update on our 7 portfolio candidates discussed in September, and we look forward to keeping you apprised as they progress through development.

Speaker 5

And thanks for your support. Now I'll turn the call over to Brian to update financial results in the quarter. Brian?

Speaker 6

Thank you, Hank, and thank you, JJ, as well. Please refer to today's press release summarizing our financial results For full details on the Q3 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 and L and other key financial updates this quarter. As usual, all results will be available on our upcoming Form 10 Q, which we expect to file tomorrow. We are pleased with our year to date revenue growth of 14% and non GAAP earnings per share growth of 33%, which well positions us to achieve our top and bottom line financial objectives in 2023, as indicated by our narrowed guidance provided today on total revenue and earnings per share.

Speaker 6

As underscored in today's guidance update, we continue to expect double digit revenue growth coupled with meaningful P and L leverage with GAAP and non GAAP earnings per share growth faster than revenue. Moving on to Q3 results. Omicron's $581,000,000 of total revenue in the Q3 of 2023 Grew 15% compared to the Q3 of 2022 and 19% on a constant currency basis. Boxogo's strong performance and healthy growth in the enzyme products marketed by BioMarin drove this result With the partial offsets of lower Kuvan revenue due to continued generic competition and aldurazyme timing of order fulfillment to Sanofi. The strength of our portfolio consisting of 8 commercial products allows us continued patience on the pioneering nature of the RockTavian launch, Specifically, the ability to maintain our original full year 2023 total revenue growth expectations, which represents 16% of year over year growth at the midpoint and our implied Q4 2023 growth rate at the guidance midpoint of over 20%.

Speaker 6

We remain confident in the long term prospects of RockTavian and its potential to drive growth in 2024. With With respect to gross margins, Q3 2023 gross margin of 78.5 percent is an improvement of 1.6 percentage points as compared to the Q3 of 20 R and D expense in Q3 2023 was $191,000,000 and SG and A expense was $224,000,000 which combined together totaled $415,000,000 and grew 11% versus last year. As compared to 15% revenue growth in the quarter, This aligns with our goal of growing operating expenses slower than revenue to deliver operating margin expansion for the full year. The increase in R and D and SG and A was primarily driven by the development of our early stage pipeline and global commercial launch activities for Voxogo and Rocktavian. As we look ahead to the Q4, we anticipate that total SG and A and R and D expense will be higher than Q3 on a dollar basis due to the same drivers.

Speaker 6

Moving down the P and L, we continue to see an increase in interest income due to higher yields on our cash and investments. On tax expense for the quarter, I will note that we recognized tax expense at a lower effective rate during Q3 due to some discrete tax benefits during the quarter. This lower tax expense in Q3 will likely modestly benefit the full year tax as well, We continue to project that our global annual effective tax rate will be in the 20% to 23% range over the next few years. On the bottom line, we delivered on our commitments to profitability with $40,000,000 of GAAP net income in Q3 2023 and $89,500,000 of non GAAP income. This level of profitability for Q3 year to date Gives us confidence to achieve our stated objectives of sustained and growing profitability on a full year basis going forward.

Speaker 6

Year to date 2023 non GAAP diluted earnings per share has increased 33% as compared to Q3 year to date last year. And today, we have reaffirmed our midpoint guidance for non GAAP diluted earnings per share for the full year. In closing, We are on track to meet our top line and bottom line objectives for 2023 and beyond with strong double digit growth in both revenue and profitability. The continued success of Voxogo, the momentum building for Rocktavian and ongoing margin expansion efforts gives BioMarin a strong foundation to achieve our financial goal of being one of the industry leaders in revenue growth and margin expansion as we close 2023 and head into 2024. Thank you for your attention and we will now open up the call for questions.

Speaker 5

Thank

Operator

Your first question comes from the line of Salveen Richter of Goldman Sachs. Your line is open.

Speaker 7

Good afternoon. Thanks for taking my And JJ, it's been a pleasure working with you. Good luck on the next venture here. With regard to my question, You talked about the with RockTavian, the HTC preparedness that's required and then you also provided some Context of 2 to 5 months to prepare patients for treatment. Can you just break that down for us like the time period needed for HTC, The then kind of the payer dynamics that will play out the diagnostic aspect as well and how demand is stacking up as you get a sense From physicians and these centers right now?

Speaker 7

Thank you.

Speaker 3

Hi, Sabine. I'll take a shot at that one. There's a lot of moving parts in this launch. There is the specific HTC dynamic, Which is not unique to Rockavian. So you may be getting some insights into how that's playing out In a parallel launch in the United States, the HTCs need to be prepared both for The administration of a one time treatment with RockKBN, which includes handling a frozen product A very high value, it includes other dynamics like 340B discounting and pricing, Relative in some cases to larger healthcare systems that may be a parent organization And have some capabilities that the HDC does or does not have.

Speaker 3

So there's kind of those dynamics inside of the HDC. There's also the payer dynamics going on, which you would expect anyway in the United States. But in this case, the payer dynamics Are complicated by the fact that gene therapies in a high value one time treatment Our new and different, we've known and expected the payers will Take some time to get their hands around that issue for years and we've been preparing for that eventuality. There's also patient awareness and interest in a highly competitive and very dynamic changing standard of care environment. There's physicians that have a number of options available to them.

Speaker 3

There's all those dynamics going on in parallel and We're navigating all of those issues in parallel. Some are taking some time. I mentioned the payer dynamics specifically. What I believe is that the 2 thirds of U. S.

Speaker 3

Population with issued coverage policies 4 months after approval, I think is really encouraging and very, very fast. The uptake of the warranties, which is a brand new thing for payers, at the level that I described is very fast and very encouraging. And we're seeing the patient funnel now starting to shape take shape in the United States. So I've been describing the patient funnel over the last year in Germany and the U. S.

Speaker 3

Patient population is substantially larger than that of Germany, but Early signals in the U. S. Look like the taking shape of that patient funnel is going to have some Similarities to what we've experienced in the United States, all of which gives me a great deal of confidence that As we finish up this year, hopefully treat some patients in Q4 that we're really set up With payer approvals in Italy and Germany and the dynamics in the United States falling into place, all of which point to greater uptake In 2024. Thanks for the question.

Operator

Your next question comes from the line of Jeff Meachman of Bank of America, your line is open.

Speaker 8

Great. Hey guys, thanks for the question. JJ also wanted to I'll wrap up congrats on the retirement. So not surprisingly, I have a few on RockTavian as well. So the first one is, I know you're not giving more detailed 24,000,000,000 guidance and the $3,000,000,000 in revenue, but at a high level, how would you characterize The Rockkavian contribution.

Speaker 8

And the second question is, I guess when you use Germany as a proxy, you have 60 patients That are pretty late in the onboarding process. It's been on the market officially for over a year. Is there what you characterize as a second wave or Is the 60 mostly it? I wasn't sure kind of if there's a bit of a ripple effect once you get formal reimbursement. Thank you.

Speaker 6

Yes, hey, thanks Jeff. Brian here. I'll start with your first question. On the $3,000,000,000 as you noted, haven't given the specifics behind that. We'll plan on doing that early next So you're likely typically would, but importantly, there's both continued growth in Voxogo Over 23 and a meaningful contribution from RockTavian.

Speaker 2

So we'll ask you to

Speaker 6

stay tuned for the details, but You understand what has been the typical growth trajectory for the mature enzyme products Still growing healthily here, plus substantial growth in Voxelgo, plus meaningful Rockhaven contribution It's up to that approximately or approaching $3,000,000,000

Speaker 2

As usual, we will give more detailed guidance when we report to Q4 is everywhere of next year.

Speaker 3

I think great question about the 60 AAV5 eligible patients that have yet to be treated in Germany. Actually the pace of CDx testing in Germany has slowed down over the summer. That's probably a reflection both of the general slowdown in August in particular in Germany And also a reflection that as I've noted previously,

Speaker 6

our

Speaker 3

earlier plan to Treat patients and the free pricing period while we are negotiating with TKV wasn't Paying out the way we had hoped it would. So we know the HTCs were slowing down In Germany, waiting for the GKV process to be finished. My perception is a pickup following the end of the summer In CDx activity and lining up patients to be treated in Germany is both reflective of 1, getting past the summer and 2, an expectation that these HDCs know essentially that we've come to conclusion on price. They're just waiting for that price to be published so they can move ahead with patient treatment. And while we're on the subject of Germany, which The physicians in Germany and the data on other launches would bear out.

Speaker 3

Germany moves slow for adoption of new hemophilia options. Having 60 patients in Germany that are AAV5 eligible On a population based adjusted basis in the United States would equate to about 240 to 250 patients. So just benchmarking what maybe the possibilities in the U. S? Thank you.

Operator

Your next question comes from the line of Phil Nadeau of TD Cowen. Your line is open.

Speaker 9

Good evening. Thanks for taking our questions. JJ, let me add our congratulations on a very successful tenure and your retirement from BioMarin. Again, a couple of follow ups on Rokhavian, specifically on patient demand, in the last earnings call, you mentioned that patient consent forms had been trending well and environment was happy with The rate that they had started to come in. Any update on, outpatient consent forms are trending?

Speaker 9

And is there any visibility on when the first That's question 1. And then question 2, in terms of the institutional challenges, we've had some physicians mention things like training staff, Beds need to be set up, equipment needs to be ordered. Are those challenges at the HTCs? And if so, is there anything BioMarin can do

Speaker 3

Thank you for the question, Phil. So Let me start with the second point first, the institutional challenges. In the prepared remarks, I addressed HTC site readiness and some of the elements of that, that I think are one time events that won't be recurring. The types of things that you just mentioned, I would say generally are captured in that HTC site readiness Some of the institutional things that they're doing to get ready for Rockabian treatment in particular, and taking a little bit of time, Which should be resolved and facilitate patients to move expeditiously through those types of things going forward. In terms of patient demand in the United States, we're not disclosing patient level detail in the United States, But we're continuing to see as I noted that patient funnel buildup in the U.

Speaker 3

S. And I'm qualitatively encouraged by what we're seeing so far. In the U. S, we have this hub operation and in prior launches, all of the patients Move through our hub essentially first before they move through the next steps towards treatment. Given the nature of the HTCs and their capabilities And the fact that they operate in this multi sponsor environment, we've been seeing patients come into our hub Maybe later in the process and not the very beginning of the process.

Speaker 3

So this is a little bit of a different dynamic for us. We're getting our hands around that one. But yes, encouraged by the patient demand that we're seeing in the United States and the patient funnel building up.

Speaker 2

Yes. In addition to the funnel building up though, I mean, It is possible, I think that was your question, could we treat some U. S. Patients by Iran? I would say, yes, it is possible.

Speaker 2

We have 3 U. S. Patients who have now cleared all Rotavian screens for treatment like the AB5, liver scan, Liver Health and all that. So the timing of their treatment isn't guaranteed in 2023, but they have completed all eligibility testing for treatment. So It will very likely occur in the not too distant future.

Operator

Your next question comes from the line of Robin Karnauskas of Truist. Your line is open.

Speaker 10

Great. I have three quick questions. Number 1, JJ, You have mentored so many people on the street, so appreciative. Is Hank retiring too, because that we will have a panic attack, so like Would you like an announcement on that call? Is Tracy getting a promotion?

Speaker 10

That's our first question. Second question would be Roktavian, there was such a focus and you misguided this year on the outcome of what you could achieve. Do you think in 2024 you can do better? And then I think on Voxogo, I mean that came away from our analyst meeting is like the big takeaway. So how do you think about letting analysts understand the opportunity there and the timelines for that?

Speaker 10

And I'll go back to Tracy's promotion. Is Hank leaving? I'll leave it at that.

Speaker 2

Thank you, Robin. I think there were a previous question from I think from Salveen and we had a detailed answer from I know this from Jeff. Indeed, it Taken longer than we anticipated to get the to connect the patient with the treatment centers because the whole system wired out. So again big picture when you have such a big Ticket item like Rockavian, dollars 3,000,000 whack. It attracts a lot of people.

Speaker 2

So essentially it's a big pie That attracts a lot of players that Joey don't get involved in the decision making because they all kind of want a piece of the action. Just Jeff mentioned the 340B, you know, 340B is 20% I mean all basically all hemophilia patients in U. S. Statutory wise Our 340B patients. We talk about 20 percent 340B discount of a $3,000,000 WACC drug, you're talking about $600,000 As you can understand many people get interested in that pie and on a slice of it which just slows things down but eventually Long term, it's actually good news that it will be taken care of.

Speaker 2

So the fact that the takeoff has been delayed, We and to us at BioMarin has no impact on the future potential of this drug. It's taking longer than planned. It took longer. I'm sorry, it was the first time we got a product approved in Europe before the U. S.

Speaker 2

And Orxhaven got approved in Germany. And based on our previous experiences, We thought we could be able to treat some patients during the free pricing period in Germany, which is slowly disappearing, didn't happen then. We are basically very, very close to final deal with the German authorities, so which generally takes about 12 to 13 months. So in this respect, we're not that far behind versus The European approval. So again, we believe Proxima has great potential.

Speaker 2

We believe Proxima would be a Significant contributor in 2024 and beyond, obviously not as much as which is turning into a very, very large track based on our Q3 results anticipated in Q4 and And the fact that thanks to the efforts of our drug supply team, all the constraints in terms of Packaging that we had and steel finish that we had this year are starting to go away and will be much more substantial we We have much more substantial capacity in 2023 and in Q1 and Q2 and then be free of all capacity constraints by the middle of the year. So Hope that answers your question and I'll get back to you regarding Tracy.

Operator

Your next question comes from the line of Joseph Schwartz of Leerink Partners. Your line is open.

Speaker 11

Great. Thanks very much and best wishes to JJ. That's truly the end of an era. So, I guess, I was wondering if you can help us understand what kinds of initiatives you've undertaken to address the administrative delays and Site readiness issues and what kinds of success have you had Where you have implemented these things and what initiatives do you have left to implement still to support RockTavian's growth? Any more color there would be very helpful.

Speaker 3

Thanks Joe for your question. I would characterize the answer to that is Less specific initiatives and more just the nuts and bolts and mechanics Of selling, of providing scientific support to HTCs, the physicians, patient advocacy groups including Local chapter events, all the things that help them through those little steps and Lots of little decisions, including the big decision of affirmatively making the decision to treat. And as Hank and I have discussed just this week that we're really focused on those Small tactical on the ground elements with our teams to just keep those things moving through the various Little challenges that are popping up. So it's more about dealing with those little things, getting to the other side of them, Many of which are one time events and less about introducing new initiatives. Thank you.

Speaker 2

And if I may ask you regarding Germany again, so in Europe, patients don't pay

Speaker 3

for drugs. They don't typically don't pay

Speaker 2

either for doctors visits. So they You don't know the price of a drug. But what so the key thing in Europe is to have official government reimbursement for your drug. That's about to happen in Germany and Italy. We basically, as we've said, we have agreements on the price in Germany already.

Speaker 2

Now we need to Have this price published, which should occur over the next few weeks. Once that happens, There is no barrier whatsoever left in Germany for the 60 patients that are 85 negative in Germany. It's very likely that the vast majority of them We will be treated, obviously, most of them next year because there are so few weeks left In here because of the high disease is coming up pretty soon and the fact that the price probably won't be published for another 3, 4 weeks.

Operator

Your next question comes from the line of Chris Raymond of Piper Sandler. Your line is open.

Speaker 12

Thanks and congrats from us to JJ and sorry to see you leave JJ and really enjoyed working with you all these years. I've got 2 questions, maybe one a commercial one, maybe for Jeff and then one for Hank, if that's okay. So maybe just on Bhaksh Sogou, Jeff, just on that supply constraint issue, maybe could you talk a little bit about the triage process that you've instituted With new patient starts,

Speaker 9

I guess I'm just kind

Speaker 12

of wondering what kind of retention programs do you have in place for those new patients who want to be on therapy but can't? And can you give us a sense of that number now and where you expect it to grow to when you get back up to supply mid next year and start to treat those patients. And then maybe on the R and D side, Hank, just noticing back at GR and D Day, which was just in September, I think your cardiomyopathy programs, I think 293 was supposed to have its initial data Proof of concept in 2025 and I think 365 was the year after. It looks like those have been pushed a year. It's only been a few weeks since your R and D Day.

Speaker 12

Maybe is there a sense of what's happening there? Thanks.

Speaker 3

Thanks, Chris. So let's start with the Boxelgo supply constraint issue and I'll ask Greg and Brian to jump in if they I think I'm missing any here, but qualitatively what I can tell you is by the time we were looking at Our patient demand and the resulting unit demand forecast, the very beginning of this year, We anticipated that we would be getting to a point during the course of 2023 that we would not be able to satisfy All of the patient demand that we saw springing up in all of our commercial footprint, A reminder that we're active now in 38 markets. So our objective was twofold during the course of the year. The first was to ensure or do our best to ensure that if we were starting patients on botulgo therapy in any of those markets That we could assure the supply continuity behind those specific patients And that we would minimize or eliminate the risk that patients starting therapy would have to go off therapy for either a very short For a prolonged time, which required a lot of forward planning. And a reminder, you hear a lot about the different dynamics of markets.

Speaker 3

Yes, the different markets look very different. So having a 38 market footprint to be projecting into Projecting those patient demands, looking at our labeled product supply going out 6 9 months forward was a pretty dynamic situation to manage. But getting on top of that early Allowed us to say in certain markets, we're going to delay our entry into that market because we can't be assured of keeping patients on therapy once we start them, but also having a forward looking date that we'd be able to communicate and say, look, We can't get into this market on May of this year, for example, with an increasing supply, Still supply constrained, but supply increasing. When could we project that market to come online for patients to be treated? Those are the kind of dynamics that we were working through.

Speaker 3

And as you can tell By the different quarterly results in our remarks during the year, we've now kind of reached that point where There are patients in certain markets that we are attempting to not get started on therapy because we can't Guarantee Supply, and there are markets that we have earmarked for the future to open up and begin treating patients because We couldn't guarantee the continuity of supply for earlier starts. Maybe I'll pause there and look at Brian or Greg for additional comments.

Speaker 6

Yes,

Speaker 13

Chris, this is Greg. I'll just add. So, the way you should think about it is, and Jeff stated it, for the

Speaker 5

end of the to the Q4,

Speaker 13

We'll add 300 new patients as you said. What you have to think about is we have done a lot of work since we were last on the call with you. And Q1 is less constrained, Q2 is almost close to not constrained and by mid year We'll have no constraints. So it is getting better by the day. So it's not like some event happens in mid year.

Speaker 13

It gets us to totally unconstrained. We're going to be building inventory and building supply and able to support more and more of those patients. There is a significant Lift in patients in the first half of next year that we'll be able to support. And then by mid year, we'll be fully unconstrained for all those markets, all those patients. So think of it as a taper over time that we will start to go after those patients, as opposed to some event that will Consume all those patients in mid year, if that helps.

Speaker 1

And then Chris, I just want to address your question about Certain earlier stage programs shifting, they haven't. As part of our ongoing efforts to streamline communications, we're going to be updating The Street when we have Clinical proof of concept. So those dates, just the points in time when we're communicating updates have changed, but none of the actual advances have changed.

Operator

Your next question comes from the line of Paul Matteis of Stifel. Your line is open.

Speaker 4

Great. Thanks so much. And I'll add my congrats to JJ as well. I appreciate the question. I was curious when you were undertaking the CEO search and succession planning over the past couple of years.

Speaker 4

What were the 2 to 3 key things that you were prioritizing? And as you were thinking on selecting New leadership, how important was it that a new CEO would really stay the course in Baumaran's core strategy over the past few years? Or I guess what I'm kind of trying to say is as we think forward, what are the chances here that Alexander Hardie Does actually enact material changes over the next 6 to 12 months and BioMarin in certain ways could look differently? Thanks so much.

Speaker 2

Yes. So let me try to answer your question. So we've done a pretty comprehensive search Mainly over the past year or so that accelerated about few months ago and we had several very good candidates and the Board Thought that Alexander was probably the best candidate. As you know, he served as CEO of Genentech since 2019. Over there, he was responsible for the company's $25,000,000,000 a year business and leading 13,500 employees.

Speaker 2

So we believe that he has demonstrated ability to deliver growth, which is what is continues to be needed at BioMarin. He steered Genentech through The loss of exclusivity of 3 major drugs during that time that together accounted for 40% Of the company's revenues in 2019 and he returned the portfolio to strong growth by the end of this year of 2022. So we believe that he has the ability to grow to continue to grow our commercial business Pretty successfully. We understand from reference checks that he's a very good leader And he's been evolving and working in competitive markets, Of course, a range of therapeutic areas including hemophilia as you might have noticed. And he's overseen the launch of 10 new molecular entities during his time as CEO of Genentech.

Speaker 2

So he has a strong background and understanding in drug development and science. So he was It hasn't been hard to make some major changes within Bahrain. I'll be going to assess the situation and will determine what needs to be changed If anything, but I think we all look forward to working with Alexander.

Operator

Your next question comes from the line of Akash Tirari of Jefferies. Your line is open.

Speaker 14

Hi, thanks for taking our questions. This is Ivy on for Akash. And JJ, congrats on the retirement. So for our questions, so I guess for 2024, I know you haven't given any product specific details For Rokce, what will be the cadence of new patients at next year for both U. S.

Speaker 14

And ex U. S. Because consensus right now has 3,000,000 yen contribution from Octavian, which looks quite high compared to the below 10 guidance you have for this year. So what do you think needs to happen to hit that target? Or is it like a fair target to say?

Speaker 14

And secondly, I think for your mid decade rev Sko offer around $4,000,000,000 to $5,000,000,000 Are there any updated thoughts to that target? And if you are to break down this $5,000,000,000 by products, How much of it is from Octavian? Thanks.

Speaker 2

Maybe I'll

Speaker 6

start with the big picture Revenue questions, this is Brian, then Jeff can maybe touch on the cadence briefly. So I touched on this a little bit in Jeff's Question earlier, the key takeaway from the approaching $3,000,000,000 of revenue expectation For 2024 is that RockTavian is expected to come online globally, mostly Germany and U. S. And that the challenges and delays that we've discussed for 2023 In the context of 2024, we expect to be timing. Jeff and JJ touched on the German price dynamics.

Speaker 6

We've got the patient funnel filling up with what we believe to be the final gate, which is concluding the price And getting the publication in the national register. That should open up that pool of patients for 2024. In the U. S. Jeff on a couple of the answers has talked about these dynamics that are coming together positive momentum.

Speaker 6

That's why we use the terminology network to bring all those pieces together. Patient, physician interest, site readiness, Contracting and reimbursement, they all need to come together to have patients come online. That's taken longer in 2023, We expect to be making significant progress over the next few months where we'll start to see those patients come online in 2024. So the key takeaway from that $3,000,000,000 is that there is a meaningful piece of RockTAPI in there, which is a bridge from where we're at in 2023. And then briefly, no changes to the $4,000,000,000 to $5,000,000,000 Obviously, we need to continue

Speaker 5

to monitor

Speaker 2

and

Speaker 6

execute on both Voxelgo and RockTevian. We've commented previously that that $4,000,000,000 to $5,000,000,000 is roughly made up of half of the base business with continued growth and half of Rock TV and Voxelbilt.

Speaker 2

But I think we refer you to some comments that answers to questions that we had previously on the call that should address your questions because They were asked earlier. Sorry, we're waiting out of time.

Operator

Your next question comes from the line of Jessica Fye of JPMorgan. Your line is open.

Speaker 1

Hey, guys. Thanks for taking my question and JJ best wishes for your retirement. Recognizing what you're doing to manage supply with Voxogo, can you just talk qualitatively about the geographic mix of Voxogo sales And which regions or countries have the most growth left in front of them in achondroplasia?

Speaker 3

Yes. I don't think that we're disclosing market level detail, Jess. But overall, mentioned that We're 12% patient penetrated of the indicated patient population, which includes The 4 months and up in Europe and from birth essentially in the United States. There is some variability In uptake, I think I've mentioned previously that early rapid uptake in places like Germany And Japan leave them at a relatively higher penetration rate so far without ceilings, but a higher rate And other places, importantly like the United States, which just had a huge expansion The patient population open to us, that patient population, very young patients having the Strongest value proposition for treatment opens up a lot of penetration room in the United States, for example, probably too much Detail to get into for other markets.

Operator

And your last question comes from the line of Ellie Merle of UBS. Your line is open.

Speaker 15

Hey, guys. Thanks so much for squeezing me in. Just in terms of the occidental expansion studies, just from a disease biology perspective, How should we think about the potential mechanistically for CNP to expand into other indications relative to FGFR inhibitors? I guess, are there indications where you think the biology might make more sense for CNP and not FGFR or vice versa? Or where you think CNP is particularly likely to be Thanks.

Speaker 5

Blessings on you, Ali, for asking the question. So that I could both say unequivocally To Robin's earlier question, I am here and very committed to BioMarin. And partly for exactly this reason, I think that when you look at the genetics of statural impairments and our group has actually published quite nicely on this that gain of function mutations in CNP confer a high benefit loss of mutations convey short stature across a polygenic background. That I think is very strong evidence that CNP is going to be a dominant or regular bone growth. Interestingly, you can find loss of function or sorry, gain of function variance in FGFR3 when they are associated with stature, they're also associated with profound other abnormalities.

Speaker 5

So that's why we think that the CNP access is going to be the perfect target for improving stature across a wide range of both genetic and polygenic indications and why FGFR3 approaches are primarily going to be limited to, FGFR3 abnormalities. You can get A lot of hype benefit nudging the CNP access safely. You have to hit the FGF access quite hard in non FGF indications and probably to toxic effect, at least that's based on human genetic data. So thanks for the question. We're very excited about that future.

Operator

There are no further questions at this time. I'll now turn the call over to J. J. Bienaime, Chairman and CEO.

Speaker 2

Thank you, operator, and thank you all for joining us today. We are pleased with our results this quarter and our prospects ahead. Bioenergy is now a profitable, fully integrated industry leader with annual revenues well over $2,000,000,000 And is extremely well positioned for substantial future growth and profitability. Thank you for your continued support And have a good afternoon or evening.

Operator

This concludes today's conference call. You may now disconnect.

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Earnings Conference Call
BioMarin Pharmaceutical Q3 2023
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