BioMarin Pharmaceutical Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
April 24, 2024

There are 16 speakers on the call.

Operator

Good afternoon. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the BioMarin Pharmaceutical First Quarter 2024 Conference Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise.

Operator

After the speakers' remarks, there will be a question and answer session. At this time, I'd like to turn the conference over to Tracy McCarthy, Group Vice President, Investor Relations. Please go ahead.

Speaker 1

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 10 Q, 10 ks and 8 ks reports. In addition, we will use non GAAP financial measures as defined in Regulation G during the call today. These non GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with U. S.

Speaker 1

GAAP, and you can find the related reconciliations to U. S. GAAP in the earnings release and earnings presentation, both of which are available in the Investor Relations section of our website. On the call from Bymer and Management today are Alexander Hardy, President and Chief Executive Officer Hank Fuchs, President of Worldwide R and D and Brian Mueller, Executive Vice President, Chief Financial Officer. Jeff Ajer, Executive Vice President, Chief Commercial Officer and Greg Guyer, Executive Vice President, Chief Technical Officer, are here with us to answer questions during the Q and A portion of the call.

Speaker 1

I will now turn the call over to BioMarin's President and CEO, Alexander Hardie.

Speaker 2

Thank you, Tracy, and good afternoon, everyone. Thank you all for joining us today. In addition to strong financial results, we made significant progress in the quarter, developing the components of BioMarin's new corporate vision and strategy, all in the interest of positively impacting patients' lives while creating value for shareholders. And with a number of strategic initiatives ongoing to finalize these components to be communicated and invested today, which we have now set for September 4. We are pleased to share the 1st chapter update today, the results from our strategic assessment of BioMarin's R and D portfolio.

Speaker 2

As innovation is fueled BioMarin's success to date, we undertook a prioritization of our overall portfolio from early to lifecycle stage assets. The goal of this assessment was to accelerate the delivery of those assets, which add the greatest value to all of our stakeholders and align with the timelines for our strategic growth plans. We added a commercial lens early in the portfolio review process to ensure that return on investment, resource allocation, patient impact were all thoroughly considered. As a result, we chose to accelerate 3 assets that we believe offer the most transformative potential for patients and value creation for shareholders. We are also discontinuing 4 programs that did not meet our new higher bar for continued development.

Speaker 2

Moving briefly to progress made in the quarter on our 4 strategic priorities outlined in January, Beginning with our opportunity to accelerate and maximize Voxelgo, we made significant progress during the quarter with 74% revenue growth year over year and more than 500 additional children receiving therapy in the Q1. FOXOGA in achondroplasia continues towards blockbuster status. The majority of new U. S. Prescriptions in the quarter were for children under the age of 5, an important trend since FDA's age expansion approval last quarter, albeit we continue to see expansion in the over-five population as well.

Speaker 2

Global access to VOXOGO from infancy is having a significant impact on rapid uptake as families pursue maximum therapeutic benefit by starting treatment early. In the United States, we continue to observe an increase in the breadth and depth of our prescriber base as real world experience drives confidence in Voxelgo's extensive safety and efficacy profile. Leveraging our established leadership in achondroplasia, we also made important strides in our plans to expand the multiple other growth related conditions. Our pivotal program with VOXOGO for the treatment of children with hyperchondroplasia will begin the treatment study mid year with a target of completing enrollment by the first half of twenty twenty five. Based on ongoing discussions global health authorities on study protocols with Voxogo, the neopathic short stature and multiple genetic short stature pathway conditions, We expect to begin enrollment into these programs later this year.

Speaker 2

The momentum we are seeing with Voxogo in achondroplasia supports our belief that CNP can potentially unlock clinical benefit for children across a number of growth related conditions for many years to come. Hank will share perspective on the opportunities ahead with Voxogo based on strong proof of concept and indications beyond achondroplasia as well as the potential for longer acting formulations. The second priority, establishing the RockTavian opportunity continues to be complex. With pricing and reimbursement established in the United States, Germany and Italy, aligning the required steps leading to patient treatment continues to pose different challenges. For example, while the Rocktavia national German price was established and published in December, the sub insurers inserted new barriers to reimbursement.

Speaker 2

In the U. S, the complexity of local site reimbursement contracting continues to be an obstacle. We remain confident in the clinical profile of Roctavian and we're pleased with the Roctavian update at the THSNA meeting showing durable hemostatic efficacy, proved quality of life and no safety signals at 4 years. With respect to the additional Roktavian development programs, we are proceeding with Roktavian development in Japan and in the prior inhibitor population and of course other programs until we observe more meaningful Roktavian commercial uptake. We recognize the importance of allocating our resources to the highest value creating opportunities.

Speaker 2

And with the current levels of Octavian investments and continued challenges with commercial uptake, we plan to communicate our evaluation criteria for Octavian in terms of its place in our portfolio and related timing for potential next steps at the Investor Day in September. The 3rd priority is our focus on the most productive R and D assets. And as already mentioned, I'm pleased we have completed the initial chapter of that work. Beyond our refresh pipeline centered around 3 key assets to be accelerated, we're in a strong position to leverage external innovation in conjunction with our internal capabilities to fortify our mid and longer term pipeline. At Investor Day, we will also share more about our innovation strategy and plans and how they fit into our capital allocation and internal external portfolio innovation strategies.

Speaker 2

Lastly, our 4th priority to increase profitability faster than originally planned. As demonstrated by our Q1 results, we're tracking well towards achieving this priority. As I complete my Q1 as CEO, I hope it's evident that we're taking decisive and thoughtful action to realize our priorities, all designed to align with our broader operational and cost transformation strategies to be shared at Investor Day. Our full year 2024 guidance reflects double digit revenue growth, non GAAP operating margin expansion and non GAAP earnings per share growing faster than revenues. These full year guidance items allow you to track our financial progress as we transform BioMarin's operating model to produce the best outcomes for the patients we serve, our employees and our shareholders.

Speaker 2

So in summary, we are making tangible progress across the enterprise to reshape BioMarin's corporate vision and strategy. This is an enormous body of work that remains in process. But as you can see from our Q1 updates, we're working with a sense of urgency, purpose and we are making definitive progress. We're excited to continue this work over the coming months with the goal of sharing our vision for a successful future with you at Investor Day on September 4 in New York. Thank you for your attention.

Speaker 2

I will now turn the call over to Hank to provide an update on key R and D highlights.

Speaker 3

Thank you, Alexander, and good afternoon, everyone. The R and D team is energized by the more focused approach, decisions and clarity on the path forward to advancing the highest potential programs following our portfolio review. As a leading, innovative and scaled biopharma company, it is more important than ever that we invest R and D resources in medicines that benefit the greatest number of patients. We move forward with an evaluation framework that will provide a high bar for consistent assessment of programs to determine if they fit in our burgeoning portfolio strategy. Briefly on the 3 programs that we chose to accelerate and starting with BMN-three fifty one for the treatment of Duchenne muscular dystrophy.

Speaker 3

BMN-three fifty one is a potential best in class antisense oligonucleotide designed to restore full length dystrophin expression to more than 10% of normal at steady state. The next generation skipping oligo has the potential to convert patients' phenotypes from progressive functional loss to durably preserve strength and function if data are supportive. BMN-three fifty one is differentiated from other antisense oligos based on optimized chemistry and a unique splice enhancer target site, which together result in significantly improved potency for restoring dystrophin expression. It is also differentiated from gene therapy BMN-three fifty one produces near full length dystrophin rather than the truncated microdystrophins produced via gene therapy. And BMN-three fifty one can be administered chronically.

Speaker 3

For this reason, we believe the potential clinical benefit of BMN-three fifty one over currently approved gene therapies and other treatments represents high value to patients and families living with this debilitating condition. The 52 week clinical proof of concept study with BMN-three fifty one is actively recruiting patients and will include 18 boys with Duchenne muscular dystrophy with the potential to expand enrollment as needed and is designed to assess both dystrophin levels and functional measures. Also accelerating BMN-three forty nine is a potential first oral therapeutic for the treatment of alpha-one antitrypsin deficiency liver disease with the ability to address genotypes beyond PIZZ based on preferential binding to the Z protein with potential transformative effects on reversing fibrosis and preventing end stage liver disease. There is a large addressable market and we aim to differentiate ourselves from the competition based on specificity for the ZAAAAT allele and the ability to titrate to effect. This first in human study in healthy volunteers remains ongoing.

Speaker 3

BMN-three thirty three, our long acting formulation of CENP is designed to optimize and expand the reach of treatment for our portfolio of growth disorders by providing treatment optionality via less frequent dosing and potentially improving the patient and caregiver experience. Leveraging our current leadership in treating achondroplasia and anticipated expansion into other growth related conditions including hypochondroplasia, idiopathic short stature and multiple genetic short stature pathway conditions, we believe offering multiple treatment options will help families interested in safe and effective medicines to treat rare skeletal disorders. BMN-three thirty three is completing IND enabling studies and is slated to enter the clinic in early 2025. Finally, for BMN-two ninety three, our gene therapy for hypertrophic cardiomyopathy, we are completing activities to advance it towards the clinic while we await additional supportive information and we'll share our next update with you at Investor Day. We look forward to accelerating our prioritized programs as they hold the highest promise for patients and align with the timing of our strategic growth plans.

Speaker 3

The programs that did not meet the criteria for advancement, We are working with We are working with sites now where applicable to continue monitoring patient safety per protocol as a top priority and we would like to thank all the patients who participated in these studies, the investigators, sites and other health care providers. Having the ability to focus on our priorities program in terms of resources and strategy that will enable us to that will enable the highest probability and most rapid outcome for patients who may benefit. We will share more on timelines for each at Investor Day. Touching briefly on other encouraging clinical updates validating our plans to expand Voxelgo's reach to address a variety of growth related conditions, we were pleased to see Doctor. Dawber's 1 year update from his hyperchondroplasia study demonstrating a 1.8 centimeter improvement in annualized growth velocity at the American College of Medical Genetics.

Speaker 3

Our registration study in hyperchondroplasia is progressing well with the treatment study enrollment planned for mid year. We are targeting approval in 2027 subject to enrollment and data results. I was also pleased to preview Doctor. Dawber's abstract to be shared at the Pediatric Endocrine Society's website, including very encouraging data from his study addressing both ISS and pathway conditions. Showed positive efficacy results in all subgroups.

Speaker 3

It was well tolerated with a similar safety profile to previous reports in patients with achondroplasia. These data are supportive of our thinking around the role CNP may play in benefiting patients across a variety of growth related conditions. We are still in discussions on study design for multiple genetic short stature pathway conditions and expect to have a more detailed update on the Q2 call and are still expecting to begin that study in the second half of the year. On BioMarin's clinical program in idiopathic short stature, we held productive discussions with the U. S.

Speaker 3

FDA on this program and have aligned on plans to support approval in this new condition, new indication. Based on this feedback, we plan to start the clinical development program in ISS in the second half of this year. We expect our first study protocol in ISS to be posted to clinicaltrials.gov in the next few weeks and will include the following agreed upon elements. The study will be placebo controlled Phase 2 study and patients who will be naive to human growth hormone treatment and will use the primary endpoint of annualized growth velocity determined at 6 months to determine the therapeutic dose levels. Patients will be randomized to 1 of 5 study cohorts, 1 of 3 different doses of OXOBO including doses that are both higher and lower than the commercial dose in achondroplasia, placebo or human growth hormone.

Speaker 3

We have made a lot of progress with the FDA in designing the development path for ISS and intend to refine the design of our Phase 2 program as data emerge from the Phase 2 program, including the results of dose selection from the planned study. In conclusion, we are pleased with our rapid progress building out BioMarin's leadership in multiple growth related conditions and we look forward to updating you on our progress with these clinical programs in the coming months. Thank you for your attention and I'll now turn the call over to Brian for our financial updates.

Speaker 4

Thank you, Hank. Please refer to today's press release summarizing our financial results for full details on the Q1 of 2024, including reconciliations of GAAP to non GAAP financial measures. All Q1 2024 results will be available in our upcoming Form 10 Q, which we expect to file in the coming days. In the Q1 of 2024, BioMarin generated record total revenue of $649,000,000 representing 9% year over year growth, 13% on a constant currency basis, driven by continued strong demand for Voxogo. Our base portfolio products, including KUVANT, contributed $484,000,000 of net product revenues in the Q1.

Speaker 4

Looking more closely at net product revenue in the Q1, Roxelgo revenues of $153,000,000 represented 74% year over year growth. That level of growth was despite the supply constraint on Voxelgo discussed last year and expected to continue through the Q2 of this year. Our plan for supply to satisfy the forecasted commercial demand around the middle of this year remains intact. 21% revenue growth of Palynziq in the Q1 demonstrated continued momentum for the only biologic approved for the treatment of PKU, offset by lower Kuvan revenues as expected. Importantly, we continue to observe commercial patient growth in these brands that we expect will drive sustainable revenue growth over time despite the quarterly order timing.

Speaker 4

GAAP R and D expenses in the Q1 were $205,000,000 an increase of $33,000,000 year over year, primarily due to increased early stage research activities as well as increased activity in our clinical programs. GAAP SG and A expense in the Q1 was $226,000,000 representing a year over year increase of $15,000,000 driven by the continued support of the global Voxelgo market expansion as well as corporate expenses in the quarter. This financial performance in Q1 drove an operating margin of 13.6% on a GAAP basis and 23.8% on a non GAAP basis. Moving to the bottom line, GAAP net income for the Q1 was $89,000,000 an increase of $38,000,000 year over year and representing GAAP diluted earnings per share of $0.46 Non GAAP income for the Q1 was $140,000,000 representing non GAAP diluted earnings per share of $0.71 and growth of 18% over the same period in 2023. The R and D prioritization decisions made in the Q1 will positively impact the non GAAP diluted earnings per share in 2024 due to now lower levels of expected R and D expense in the second half of twenty twenty four versus prior guidance.

Speaker 4

We estimate that the discontinuation of the 4 programs announced today will result in a reduction of between $50,000,000 to $60,000,000 in R and D expense in 2024. And as Alexander and Hank mentioned, we're prioritizing 3 of our pipeline assets as well as the Voxelgo indication expansion. And we identified opportunities to accelerate the development of those assets this year. Therefore, there is a planned offsetting increase in 2024 R and D expenses of approximately $15,000,000 to $20,000,000 which together with the planned reductions we expect will result in lower projected R and D expense for the full year of between $35,000,000 to $40,000,000 Those anticipated net R and D spend reductions in 2024 are driving an expected increase to our non GAAP operating margin guidance to 24% to 25 percent and an increase to our full year non GAAP diluted earnings per share guidance to between $2.75 to $2.95 per share. Noteworthy is that we are maintaining our prior projections for the full year, except for the changes in R and D, including total revenue guidance, which remains the same as communicated in February.

Speaker 4

Also, this update does not include the impact of any further potential strategic business decisions and potential future cost efficiencies to be discussed at Investor Day. As we look forward to Q2 2024, we continue to anticipate limited revenue growth in Q2 versus Q1 due to the timing orders timing of orders for the enzyme products and similarly for Boxilgo while we manage through the supply constraint. We expect higher operating expenses in Q2 versus Q1 due to normal quarterly business dynamics, our various 2024 strategic initiatives and the timing of expenses. With all this in mind, we expect limited total revenue growth in Q2 versus Q1 and we expect non GAAP operating margin and EPS to be lower in Q2 than in Q1. In the second half of twenty twenty four, we anticipate more meaningful revenue growth as we expect the Voxelgo supply constraints to be resolved.

Speaker 4

From an expense point of view, we expect all of the reduced R and D for the discontinued programs announced today to begin to be realized in the beginning of Q3 through the end of the year. Lastly, while we plan to share our updated capital allocation strategy at Investor Day, Regarding our $495,000,000 of convertible notes maturing in August of this year, we plan to leverage our strong cash position and expected operating cash flow to repay the notes with available cash. Furthermore, given the settlement structure of the notes, we are planning for a share neutral outcome should the notes be in the money at maturity, with the goal of returning value to shareholders by avoiding the potential dilution associated with the 4,000,000 underlying shares. As we move into our next chapter of Bauma Rin, we are executing on our growth strategy with impressive performance driven by voxelgomenachondroplasia and our pursuit of new indications, a durable and growing enzyme products business and an increased focus on streamlining the business through cost structure transformation and operating model efficiencies. Together, this presents an opportunity to drive meaningful improvements in our financial performance and sustainable shareholder value creation.

Speaker 4

Thank you for your continued support and we will now open up the call to your questions. Operator?

Speaker 5

Thank you. We will now begin

Operator

the question and answer session. We'll go first to Phil Nado at TD Cowen.

Speaker 3

Good evening. Thanks for taking our question and congratulations on a good quarter. We just wanted to follow-up on your comments on RockTavian. Can you give us some sense of what you need to see to support continued investment in the RockTavian program? Or maybe ask another way.

Speaker 3

What would you have to see over the next several months in order to decide to license RockTavian or curtail future investments there? Thank you.

Speaker 2

Thanks very much for the question, Phil. As you heard today, our focus from the R and D side is to allocate assets with the highest value. And clearly, we have a high level of current Octavian investments, continued challenges with commercial uptake. What we're saying today is that at Investor Day, we will communicate our evaluation criteria and the timing for that evaluation criteria at Investor Day on 4th September. The possible outcomes of that I'll just elucidate.

Speaker 2

One would be that we see the uptake, the ramp starting to happen in a asset and a path towards a reasonable return on investment by rightsizing the level of investment across the organization from an R and D, medical affairs and commercial standpoint. And thirdly, the third possible outcome would be we remove it from our portfolio and we divest the asset. So we're not ready yet to share the evaluation criteria or when evaluation criteria timing would be, but we will provide more information on this at Investor Day. I just wanted to also highlight that even as we speak right now, we've really focused our strategy and execution with RockTavian. We're focused on the site level pull through for patients in the 3 major commercial markets where reimbursement established, United States, Germany and Italy.

Speaker 2

We have focused our lifecycle management activities. So the ongoing studies, ones where we feel that there is a high potential, which is the prior inhibitor population, the registration in Japan. And we'll continue to drive drive towards an evaluation and communicate more at Investor Day. Thank you, Phil.

Operator

We'll go next to Geoff Meacham at Bank of America.

Speaker 6

Afternoon, guys. Thanks for the question. I know you've talked about label expansion for Voxelgo being of the highest importance strategically. I guess the question is in the near term, what are the next steps in optimizing the current formulation for Voxogo? I wasn't sure what the cadence of data coming up is for that.

Speaker 6

Thank you.

Speaker 3

Yes. Hi, Jeff. Pank here. So big picture, absolutely, your question started in the right direction, which is all of the activities that are underway to expand our CNP franchise into as many areas where there's potentially transformative medical benefit for children with statural impairments, not least of which is entering into a Phase 3 registration enabling trial in hypochondriplasia. And as I delineated, we're now well underway in terms of empathic short stature.

Speaker 3

And we're really making great progress with our long acting formulation. So in the category of additional presentations to delight patients, we have a lot of stuff that's also going on internally that for proprietary reasons we won't detail until we're ready to get a little further along. But to suffice it to say that we have a lot of confidence in the future of the CNP franchise, number of different opportunities for treating and transforming the lives of patients and a number of different approaches to take to give families as many good choices they can have for treating their children.

Operator

We'll move next to Salveen Richter at Goldman Sachs.

Speaker 7

On the strategic review here across the pipeline, how do

Speaker 4

you think about the

Speaker 7

additional levers for lowering OpEx from this line? And how are you thinking separately about the mid to late stage pipeline in this context in BD that may need to be done to essentially add to the revenue pipeline on the board?

Speaker 4

Thanks, Helveen. This is Brian. You broke up for just a second when you mentioned the line item you were asking about. Would you mind repeating which one?

Speaker 1

Sure. The R and D line item.

Speaker 4

Yes. R and D, thanks. So as you noted, starting with your question, thank you, by the way, the strategic review is looking at both strategy and operations and efficiency and we'll be eager to share details in Investor Day. But big picture similar to the margin expansion narrative just enhanced now that we've talked about in the past. It starts with a bit of core leverage of what we've built over the last many years, specific R and D, full end to end, early stage research, clinical regulatory to medical affairs, leveraging that engine.

Speaker 4

And then next will be streamlining the business and cost transformation, so doing that same work but more efficiently. And then 3rd, as you're seeing today is prioritizing the work on the right assets. So those three things we believe will provide leverage. We'll share more details on what the specific levers are and the tools around cost transformation and business efficiency at Investor Day, but those are the 3 big levers. I'll hand it over to Hank on the pipeline question.

Speaker 3

Yes, Salveen, the portfolio evaluation we undertook was actually it started as a planned activity, but I think what's new this year because we've been doing it annually every so off every for the last several years. But what was new I think this year was a higher degree of rigor and a higher bar set and a tighter commercial input as Alexander mentioned as well. And I have to comment that I'm very pleased about that tighter commercial connection starting under Jeff and looking forward to Kristen joining where we'll really be able to have the opportunity to look at assets which are both important and transformational to patients, but also valuable to BioMarin as an organization. What didn't change in any of this review was this notion that we're going to do what we can to make a big difference in people's lives. We're going to leverage good biology to find those assets that we believe are highly likely to work.

Speaker 3

Increasingly, what we've been doing is tying the timing considerations of our portfolio to our emerging growth strategy, which kind of leaves then the last piece of your question over. I'll turn it over to Alexander to talk about your comments about the rest of the pipeline and potentially making room for later stage or other assets.

Speaker 2

Yes. Thanks very much, Frank. Thank you, Sylvie, for the question. Yes, I mean, we are we have a real commitment to innovation at BioMarin. And we're excited about what we see in our early pipeline.

Speaker 2

We're excited about the 3 assets that we're prioritizing to accelerate. And we're extremely excited about the Voxergo Lifecycle Management, which we're really excited at this call to be able to share some really significant progress, I think, as you heard in Hank's comments. But we also see that going forward in terms of meeting our ambitions for sustained growth into the long, long term, we see a role for external innovation. In the past, that's been very successful for us from an early research standpoint. We now see that there's an opportunity by dialing in on assets that could augment our existing portfolio, that leverage our distinctiveness, I.

Speaker 2

E. What we know and we know we do well better than others, that we should be more open to those sorts of opportunities. I would just stress that our guidance at the moment for this year does not reflect any incremental BD activity. We will share more and you'll have to get used to us saying this. We'll share more at Investor Day about our plans in the space.

Speaker 2

But in the interim, we've got no plans right now to transact major BD, but we do see a growing role for this in the future.

Speaker 5

It's helpful. Thank you.

Operator

We'll take our next question from Chris Raymond at Piper Sandler.

Speaker 8

Thanks. So just on the leverage you guys highlighted here, the focus today is all on the R and D line. But I guess I wanted to ask on another important line item, which is SG and A. BioMarin's historical spending as a percent of revenue has been pretty meaningfully above that of your large cap peers. And I know the last shoe, if you will, hasn't dropped yet with respect to all the transformation you're affecting here, Aleksander.

Speaker 8

But any sort of thoughts there in terms of the potential, in terms of having maybe a more in line SG and A line item?

Speaker 4

Hey, Chris, this is Brian Mueller. Thank you for the question. I'll start just to give you a little more color on the line item and then maybe hand it over to Alexander as he thinks about the opportunity. So I might reference back to the comments I gave in response to Salveen's question on R and D. It does start with leverage.

Speaker 4

So importantly, as you know, in order for us to get to the $2,000,000,000 plus in revenue mostly through the base enzyme

Speaker 9

products

Speaker 4

business where we sell in almost 80 markets, very diverse, complicated global sales and marketing, supply chain and related supporting infrastructure. That's the level of operational capability that we built over the last decade and basically over the last couple of years and now going forward, we're growing into it and making that machine work. It's that same infrastructure that's launching Voxelgo, that's driving a lot of the margin improvement that you're seeing last year and this year. It will be that same infrastructure that launches future products grows the business from here. So it does start leveraging what we built, recognizing that that was a significant investment in the last few years.

Speaker 4

And then next what we're doing is streamlining it. Again, our focus over the last several years has been that organic capability growth. We're now focused on optimizing the business and prioritizing. We're also making sure we're reallocating resources not just to the right places organizationally and globally, but in the right brands. Voxelgo with this growth we've seen and its future potential deserves more resource allocation.

Speaker 4

How can we continue to sustain this robust launch? And for the mature brands, is there an opportunity to be more efficient there and recognize that while they're still growing, they may not require the same level of investment that they did over the years. So that's the approach. Alexander, any comments on the opportunity?

Speaker 2

Yes. Thanks very much, Brian. Thanks for the question, Chris. Yes, I mean, I've been really impressed by the potential leverage we have with our footprint, 70 countries and the capabilities we have globally. So building off the leverage, just like we've done with R and D, we're considering how to really leverage the capabilities we've got to have a greater impact and to be more efficient.

Speaker 2

And that's one of the work streams that we have is cost transformation. It's looking at all the line items on our P and L to say how can we now optimize that. So you can expect to hear more from us at an Investor Day about our specific plans on the G and A line. On the sales and marketing line, and additional efficiency in how we do research and development. This will all be rolled up into the long term guidance that we'll be providing and our path to significantly improved margins, which as we've said at the start of this year was one of our priorities.

Speaker 2

So more details to come, but it's certainly one of the areas of focus for us.

Speaker 9

Thank you.

Operator

We'll take our next question from Akash Tewari at Jefferies.

Speaker 5

Hey, this is Amy on for cost. Thanks so much for taking your question. So first, what's driving the difference between the reported Voxovo demand increase and the revenue increase from the numbers? It seems like the demand is up more than sales from a quarter over quarter basis. Would really appreciate any color on how to reconciliate this.

Speaker 5

And then also if we can sneak in one more. Is there an increased appetite to divest the gene therapy franchise? And can you outline how much spend this makes up currently on OpEx? Thanks so much.

Speaker 4

Thanks for the question, Amy. This is Brian. I'll start and if Jeff has any other color to add. I think what you're starting to see on the Boxogo line is the consequences of its robust growth globally in a number of significant markets now online whereby we've got 2 things going on. 1, some order timing.

Speaker 4

We've seen that trend over the years with the enzyme business. We're seeing a bit of larger for those markets that place less frequent larger orders. We're seeing some Boxogo revenue impacted by basic order timing. 2 is the timing of patient additions. Any being a chronic therapy, any new patient additions for Voxogo, especially in say the second half of the quarter are going to be less revenue generating than patients that were on drug the entire quarter.

Speaker 4

So that's another dynamic that could just draw the disconnect that you mentioned. And then perhaps to the first point, there's some unique aspects right now with the supply constraint. We are managing through the supply constraint by managing orders at the specific market and SKU level and that's going to throw the trends off a little bit. You might recall back in Q4 where we reported revenues over our guidance not because we over performed on patient additions but because some additional supply became available and so we shifted into the market. So we'll ask you to stay tuned.

Speaker 4

We're trying to provide the right metrics in terms of patients and ask you to follow revenues to watch those trends. It's a great question, but it is dynamic. And just give me a thumbs up, so we're covered.

Speaker 10

Divest gene therapy.

Speaker 4

And that gene there was a gene therapy question whether divestiture is an option?

Speaker 2

Yes. Thanks for the question on Roktavian divestment. As I mentioned before, our focus right now is making sure that we really established what the Rockavian opportunity is and we've really focused our strategy around that. I talked already about the possible outcomes of our assessment and one of them could be that we removed from the portfolio and divest. That is not our focus right now.

Speaker 2

We are not engaging with people around the divestment of Octavian. Our focus is really on establishing the opportunity right now. But should we remove it from the portfolio, we will absolutely look at the options around divesting it.

Operator

We'll go next to Jessica Fye at JPMorgan.

Speaker 11

Hey guys, good afternoon. On the pipeline, can you talk a little more about the long acting CNP product you're prioritizing? What's the half life there and the dosing frequency you're contemplating? And then just a quick one on BMN-two ninety three, the gene therapy for hypertrophic cardiomyopathy. Is that one staying or going?

Speaker 11

I don't know if I caught it in the list. Thank you.

Speaker 3

Hi, Jess. Long acting, we have every reason to believe that the dosing interval there could be as long as weekly. But obviously, that's going to be informed by early human clinical trials to actually measure what that dosing frequency is going to be. On 293, that's a program we want to gather a little bit more information. We've recently learned that there is a population of patients with a C3 deficiency in hypertrophic cardiomyopathy who are very severely affected with really poor outcomes, as measured, for example, by short time to left ventricular assist devices or mortality.

Speaker 3

And we are actively working with investigators to understand better how findable those patients are and how interested and motivated those patients are. And finally, whether there's a regulatory pathway to a faster approval by virtue of the severity of their condition. As we've learned, the more significant the medical the unmet need is, the more motivation there can be for the uptake of these novel disruptive types of therapies. So that's the additional information we're gathering and we'll keep you informed as to decisions that we make about further advancement of 293. Thank you.

Operator

We'll go next to Joseph Schwartz at Leerink Partners.

Speaker 3

Great. Thanks very much. I was wondering, can we infer anything from the amount of savings that you expect to realize as a result of the strategic portfolio assessment of R and D programs, which you announced today, about the amount of operating expense savings, which might be realized as a result of the remainder of the strategic and operating assessment, which is ongoing. Can you give us any insight into the relative degree of operating expense savings, which might remain to be realized relative to what you announced today, even if it's just general order of magnitude?

Speaker 4

Yes. Thanks a lot, Joe. It's a really good question given we talked today about the financial impacts of what was a discrete clear eyed view on the portfolio itself. The financial repercussions in the net reduced R and D were a consequence of that portfolio review, not the purpose. And from there, I would not make an inference on what the future potential savings are for two reasons.

Speaker 4

This was a review top to bottom of the current portfolio and again the consequence, but also the strategic review and the remaining optimization of the business is work in process. So, we'll have to put that latter part in the category of stay tuned for Investor Day to hear both the strategy, both top level business strategy, operational excellent strategy, long term guidance, and we'll give color on all the line items, how we'll plan to be more efficient on cost. But to the heart of your question, I would not make that inference today. Okay. Thank you.

Operator

Our next question comes from Gena Wang at Barclays.

Speaker 5

Thank you for taking my questions. I have one regarding Rocktavian revenue of $800,000 in the quarter. We also together with, I believe, many investors did a due diligence regarding exactly how many patients got treated in the Q1. So based on our due diligence, we understand that Germany actually there's no patient got treated. And some investor did their due diligence believe a few patients got treated in the U.

Speaker 5

S. So the question here is $800,000 Can you remind us where that revenue is from? And also at what point the timing for you to recognize revenue as well as pay for performance, the warrant, at what point you booked this? My understanding previously was gross to net, but just want to make sure.

Speaker 4

Hi, Gina. Jeff here.

Speaker 10

Yes, we are aware and have heard of some survey or due diligence work by yourself and others, but without knowing the methodology and so forth of the survey results, we can't really speak to them specifically. We can speak to our revenue. So in the press release, it was noted that first patient was treated in Italy and the revenue that you see in Q1 is tied to that first patient in Italy. Revenue recognition varies a little bit by market, but essentially, Gina, we can tell when product is shipped to patients. We're scoring revenue right around that treatment of patients.

Speaker 10

And so if your question is, is it likely that there has been a bunch of patients treated and we're not seeing that in our prepared remarks or revenue. I think the answer is no. And maybe Brian could make some further remarks about revenue recognition.

Speaker 4

Yes, I think you've got it right, Jeff. Thank you. Maybe just noting the nuance in Italy is that Italy happens to be a market where title transfer and revenue recognition occurs before the actual dosing of the patient, hence the March revenue and the 1st week of April treatment. I'll share that in other key markets like the U. S.

Speaker 4

And Germany that revenue recognition and title transfer is much closer if not at the point of infusion.

Operator

We'll go next to Ellie Merle at UBS.

Speaker 12

Hey, guys. Thanks for taking the question. Can you help us understand how you're thinking about the relative size of the opportunities between ISF and genetic short stature pathways, and also as well as the level of clinical risk or clinical validation from the data that you've seen from these, to date, between, the 2 of these, planned studies and just help us understand how you're thinking about the biology and confidence and activity in ISS as well as the genetic short stature pathways?

Speaker 3

Maybe I'll start on the R and D science piece and then I'll look for help from Alexander on the market sizing kinds of pieces. Although I can say a little bit about things like epidemiology. But from an R and D perspective, our confidence that CNP is going to work in conditions beyond hypochondriphlasia is driven by genetics. And we've talked about where patients who had humans who have gain of function mutations in the CNP pathway are taller than their predicted final adult height would be and patients who have negative mutations are shorter. So these are human, if you will, proof of concepts about exposure.

Speaker 3

There are also individuals who are extremely tall, who have gain of function mutations in NPR2 or and who are, or in its receptor. So a lot of biological data, but what's new now is, we're days away from Doctor. Dauber presenting his first 12 month cohort of using FOXOGA to treat patients with either pathway conditions, in his case, Noonan syndrome or with things that were formerly known as idiopathic short stature because that term got coined before sequencing helped us to understand that specific mutations could be accountable for what was formerly known as idiopathic short stature and had an opportunity as has the Food and Drug Administration to review those emerging data which led them and us to conclude that there is a great prospect for benefit with vosoritide in the treatment of these relatively more common conditions. So you've heard me talk about idiopathic short stature in terms of the volume of people who are available. It's something like 2 standard deviations below average stature encompasses 2.5% of the basically the human population.

Speaker 3

So we're talking about a fairly large potential indication. Valens, do you want to add anything more about that?

Speaker 2

In terms of the size of these future indications, at JP Morgan, we talked about how the indications beyond achondroplasia, so hypochondroplasia, ISS, Noonan, Turner's, shocks, in total represent about 600,000 patients compared to the total global addressable population for achondroplasia of 21,000. We're obviously going to be and I just want to highlight this that we're going to be going for more severe patient population in, for example, idiopathic or stature patients. And you'll see in if you go on to clinicaltrials.gov, it's actually posted today, you'll see the design of our Phase 2 study in ISS. So we'll share more at Investor Day about the TAMs for all the different indications. They represent significant multiyear growth potentials for FOXOgo.

Speaker 2

And it's really exciting to see and being able to share today not just the R and D prioritization, but the progress we're making with FOXOgo, not just the uptake, which is really exciting to see in achondroplasia globally with growth accelerating. But we've had really productive conversations with regulatory authorities. We have definite plans now solidified heard from feedback from the FDA on ISS. We have clarity now of the duration of the study, endpoints, comparator. We have a very clear path forward in multiple of these indications and an opportunity to bring Voxergo to so many more patients around the world.

Speaker 5

Great.

Operator

We'll go next to Paul Matteis at Stifel.

Speaker 13

Thanks so much. I was curious what the management team's current thinking is on the various competitors are in achondroplasia, given that we're going to get data from a couple this year. And as you think about potentially, and I don't know if this is exactly fine, potentially giving margin guidance or commentary aspirations at the Investor Day. It feels like whether or not there is competition in the chondroplasia is a key variable. So would love your perspective on that.

Speaker 13

Thank you.

Speaker 2

Yes. Thanks very much for the question, Paul. I really do appreciate it. Overall, we're feeling very good about where we are achondroplasia and now with the path forward in all these other indications starting to become really quite clear from us for us. Demand and the feedback from families is excellent.

Speaker 2

We see really good assistance and adherence to Voxergo. And we're really every day that we're on the market, clearly we now have over 3,000 patients now on Voxergo. We're really establishing a safety and efficacy profile that gives a lot of confidence to physicians to prescribe the product and also family members and parents, children now infants beginning treatment. I think from our perspective that we've done extensive market research, we really understand these disease states. And it's really very clear that the most important thing for patients and caregivers unequivocally is safety and efficacy.

Speaker 2

And they will not sacrifice that for convenience. I was reviewing with the team some of the market research and I'll just give you a couple of examples. A caregiver said, I know weekly or an oral would need to be within 5% or less the efficacy of VoxSOGO, but I wouldn't consider it. Safety is an absolute. And a physician said my number one priority for novel therapy is safety and efficacy That won't be sacrificed for something more convenient.

Speaker 2

So whilst we believe with BMN-three thirty three, we're excited about it. The TPP for that is for it to be at least as effective and safe as FOXO go with the potential for, as Hank mentioned, more convenient dosing. But we believe that FOXOgo is well set up to be a very robust competitor to any potential new entrants.

Speaker 9

Thank you.

Operator

Our next question comes from Mohit Bansal at Wells Fargo.

Speaker 2

And staying on the competitor theme,

Speaker 9

I think one of your competitor is also testing a longer acting CNP in combination with growth hormones in achondroplasia. How do you think about the rationale there? And do you think you could do something similar for Voxogo? And then the related question is, in the ISS trial that has been posted, it seems like you are testing against growth hormones. Is there a rationale to test it in combination with growth hormones as well in that indication?

Speaker 9

Thank you.

Speaker 3

Yes. Hi Mohit. The efficacy of Doxilgo in achondroplasia restores growth to a fairly physiologic level over 90% of average stature growth. So it's hard to beat that in terms of efficacy. And so a little tough to rationalize combination therapy to do better than basically normal.

Speaker 3

I think the most important thing to be doing with Oxago as regards to improving long term outcomes is to start therapy earlier, which was why we were so keen to have label extension into almost every market in the world where Botoxo is available to almost from infancy because that's where you can make a big difference in the overall outcome. And again, probably doesn't necessarily warrant the addition of another therapy, it warrants starting therapy as soon as the condition is understood. And I think same story for ISS. We need to look at the data that comes out next month from Doctor. Dawber to gauge how much of a stature of improvement we get and whether there is any room for improvement.

Speaker 3

But I wouldn't anticipate that being a key consideration. Finally, in the Phase 2 study you mentioned, the inclusion of the growth hormone arm is really purely for internal reference so that we have a sense of through randomization what the sort of apples to apples comparison might be. As Alexander just mentioned and I believe I steered us in the direction of, we do have agreement from the Food and Drug Administration on some really cardinal important points of the design of the Phase 3 program just to recapitulate them. We've agreed on the target patient population that is growth hormone naive. We've agreed on the endpoint 52 weeks annualized growth velocity as improvement.

Speaker 3

And most importantly, we've agreed with the agency that placebo can be an appropriate comparator for the registration. So, we're well underway. Don't believe that we need to add other therapies into the armamentarium to augment the effect of vosoritide because it's doing just fine by itself.

Speaker 9

Excellent. Thank you.

Operator

We'll go next to Vikram Pirohit at Morgan Stanley.

Speaker 14

Hi, good afternoon. Thanks for taking our questions. So we had a follow-up on RockTavian. So you obviously discussed some of the reimbursement and market access challenges, the product you've seen here to date. But looking forward, could you speak about some of the strategies you're putting in place now to help with the, I guess, with the operational lift of the franchise?

Speaker 14

And how many months or quarters would you expect it to take for some of the challenges to be a bit less of a variable in the product trajectory, assuming the franchise stays in house with BioMarin?

Speaker 10

Hi, thank you for the question. This is Jeff. I'll field that one. As Alexander mentioned earlier, we're really focused on patient pull through in the markets where we have reimbursement approvals. So reminder that's the U.

Speaker 10

S, Germany and Italy. Patient pull through is really the last mile that we've experienced the challenges with. So we think that establishing proof of concept and pulling those patients through that last mile and getting them treated is what we need to do on a going forward basis. How long that will take? Undetermined, Alexander already mentioned that at Investor Day early September criteria will be laid out for

Speaker 2

what that looks like.

Speaker 10

And the other thing I would comment on is, in Europe, in most cases, the commercialization starts with a price and reimbursement approval. We got the GBA approval listed in December of last year, 4 months ago. In Italy, that was 3 months ago. So one way of looking at the situation, at least in Europe, is to say perhaps the clock started ticking 3 to 4 months ago in those 2 target markets. And so thinking about how long that might take during the course of this year could be instructive.

Speaker 10

Thank you.

Speaker 14

Thank you.

Operator

We'll move next to Tim Lugo at William Blair.

Speaker 15

Hey, guys. This is Lachlan on for Tim. Thanks for taking the question. So you've identified vocogo as a strategic priority and have obviously made a lot of progress on the development front in your indications. But is there anything you're doing on the commercial front there too?

Speaker 15

Because I noticed you obviously added a much larger number of patients this quarter than last quarter. So I was curious if that's sort of a result of any direct initiatives or actions you've taken or just the maturing markets and increasing supply?

Speaker 2

Yes. We're very thanks very much for the question. We're really happy with the progress on BOXO2. I mean, it is one of the priorities as we set out. We've been described as tremendous potential in achondroplasia as we talked about extensively in other diseases.

Speaker 2

So right now it's in achondroplasia and that ramp is accelerating. We added 500 patients in the Q1 compared to adding 300 patients in the Q4 of last year. So we're seeing that growth actually accelerating. This is driven very much by the 0 to 5 ability to use the product from birth, which is now in many, many geographies around the world. And it's good to see that growth is actually consistent across the major markets with the U.

Speaker 2

S. Actually driving the most growth, which is great to see because this was where we didn't have the same ramp. We're now seeing that. And I think the 0 to 5 and the team is really focused on that, as well as the other things we've been doing, we're seeing bearing fruit, which is really focusing on the pediatric neurologists, making sure we've got referral pathways, setting up the skeletal dysplasia clinics, which are going to be very important not just for achondroplasia, but also for the subsequent indications. So the team is really driving on all cylinders in all geographies.

Speaker 2

There's one thing that actually I do wanted to say, which is with regard to supply. We mentioned in our prepared remarks that we will be hitting supply levels, which will be able to meet demand in the middle of this year. But we have really good news to share with regard to the maximum supply available this year. So in January, at the JPMorgan conference, we shared our supply plan for Voxerga, which is obviously very, very critical, especially as we accelerate our lifecycle plans and ambitions for this product. We are now going to be able to supply by the end of this year 8,000 patients supplies worth of FOXOGRO.

Speaker 2

If you remember from January, that's what we said we would achieve by the end of 2025. So the team here in manufacturing has moved this up by 1 year and this continues to give us confidence that even as we ramp up demand for Voxelago, by the end of this year, we're going to be able to meet that demand.

Operator

And that is all the time we have for Q and A today. I will turn it back to Alexander Hardy.

Speaker 2

Well, thank you all for joining us today. I hope you heard and it came across that how hard this team and all the teams across BioMarin are working right now to shape the future corporate and R and D strategy for BioMarin. And we're setting very ambitious long term financial targets and we're starting to deliver on them. We've got a real sense of urgency. I think that comes across and we're really looking forward to sharing our vision with you and our full plans with you all in New York Investor Day on September 4.

Speaker 2

Meantime, thank you very much for your attention. I wish you all wonderful evening. Take care.

Operator

And that does conclude today's conference call. Again, thank you for your participation. You may now disconnect.

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Earnings Conference Call
BioMarin Pharmaceutical Q1 2024
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