BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) Q4 2022 Earnings Call Transcript February 27, 2023

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

Traci McCarty: Thank you, Paul, 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 10-Q, 10-K and 8-K reports.

We do plan to end this call promptly at 5:30 Eastern Time. So, please reach out if you have questions. On the call today from BioMarin's management team are JJ Bienaimé, Chairman and Chief Executive Officer; and Jeff Ajer, 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. I will now turn the call over to our Chairman and CEO, JJ Bienaimé.

JJ Bienaimé: Thank you, Traci, and good afternoon, everyone. Thank you for joining us on today's call. So, as we communicated throughout 2022, a truly transformative year for BioMarin. We have built the foundation for accelerating growth, double-digit revenue growth and the successful pivot to GAAP profitability. In 2022, we achieved all of our top and bottom line guidance items, further underscoring our commitment to creating value for our patients, our employees and our shareholders. Our high performance in 2022 will flow through 2023 and beyond, driven by our strongest global commercial launch on record with VOXZOGO and our profitable base enzyme business and the addition of ROCTAVIAN, a truly disruptive onetime gene therapy for those with severe hemophilia A.

While the process of finalizing reimbursement in Germany has taken longer than expected, given the novelty of the approach, at the patient level, we are very encouraged by the interest we are seeing for ROCTAVIAN. And patients have gone through a companion diagnostic testing in Germany as an important first step in the patient journey toward treatment. And in the United States, we are pleased to share that roughly 300 patients from the bleeding disorders community have engaged with BioMarin directly to learn more about ROCTAVIAN. Many of them may not ultimately be eligible for treatment, but it is a good indicator of awareness and interest in ROCTAVIAN ahead of potential approval this year. And Jeff will provide more detail in a moment, but suffice it to say that once the reimbursement side of the equation has been finalized, we are confident in both prescriber and patient interest in ROCTAVIAN.

We are extremely pleased to have delivered $2.1 billion in total revenues for the full year 2022, a record financial achievement for BioMarin. We will build on this result in 2023 with an intention to deliver over 15% top line growth and significant operating leverage, driving approximately 30% growth in bottom line profitability based on the midpoint of our GAAP and non-GAAP guidance provided today. As planned, we have made the transition to an earnings growth story, a unique accomplishment in the biotech industry, and we thank you for your continued support. And I will now turn the call over to Jeff to discuss the commercial business update. Jeff?

Jeff Ajer: Thank you, JJ. Very pleased with our record performance in the fourth quarter, resulting in $538 million in total revenues, representing close to 20% growth year-over-year, including KUVAN and 27% growth, excluding KUVAN. The strength of our enzyme brands provides more than a $1.6 billion foundation from which to layer on both, VOXZOGO and ROCTAVIAN larger market opportunities. Turning to 2022 VOXZOGO contributions. Full year global revenue totaled $169 million, with growth expected to accelerate in 2023. Full year 2023 VOXZOGO guidance of between $330 million and $380 million represents over 100% growth from the midpoint as compared to full year 2022 results. With only 6% of the total addressable patient population receiving VOXZOGO treatment as of the end of the fourth quarter of 2022, there is significant room to grow from a combination of continued market penetration, new markets coming on line and potentially expanding the approved label indication for younger ages.

The global launch of VOXZOGO exceeded even our high expectations for the brand in its first full year. We are pleased to share that as of the end of January 2023, an estimated 1,264 children with achondroplasia were being treated with VOXZOGO under the currently approved age ranges, including in Europe for children two years and older, the United States for children five years and older and in Japan where VOXZOGO was approved for all ages from birth. The urgency to treat based on the finite window of therapeutic benefit while growth plates are open, is an important driver of interest from families seeking treatment with the only approved medicine targeting the underlying genetic cause of achondroplasia. We look forward to learning later this year of European and U.S. health authorities, are supportive of extending access to VOXZOGO to younger children, which would make it available to more than 1,000 children in those regions.

Briefly on our new product guidance categories in 2023. As we have turned the corner to sustainable GAAP profitability and with 8 marketed products, we have aligned the product guidance categories with our framework for growth. First, we now combine our enzyme products, including VIMIZIM, NAGLAZYME, BRINEURA, PALYNZIQ, and ALDURAZYME and exclude KUVAN. Second, we will provide individual product guidance for both VOXZOGO and ROCTAVIAN since they represent our new larger market opportunities and significant growth drivers. Going forward, we will still provide actual results for individual product revenues as listed on the first page of our press release issued today and we will continue to comment on the key commercial drivers at the brand level as appropriate.

We believe combining our enzyme products from a guidance perspective will make it easier to delineate the steady growth of our mature products as compared to the more rapid growth from our new larger brands. To that end and briefly on our enzyme products, there were no surprises in either fourth quarter or full year results across the brands. As we have said previously, large irregular orders placed in 2022 and prior periods impacted growth rates for the full year. As a result, VIMIZIM ended the year closer to the lower end of full year 2022 guidance and NAGLAZYME ended at the higher end of 2022 guidance. We were pleased to see our efforts to drive new patients initiating PALYNZIQ therapy in the U.S. and Europe, results in net product revenue growth of 7% in 2022 as compared to 2021 and achieved $255 million for the full year.

In 2023, we will continue to maintain our base patients on PALYNZIQ and continue to drive growth through new patient starts, primarily in existing markets. Turning now to ROCTAVIAN, for which we have guided to 2023 full year revenues of between $100 million and $200 million based on the current uncertainty of U.S. approval. Echoing JJ's enthusiasm for ROCTAVIAN prospects ahead, there are numerous encouraging signals from the hemophilia community in both Germany and the United States. Data privacy regulations in Europe preclude us from having patient-level data, but we know that 10 people have completed companion diagnostic testing to determine eligibility for ROCTAVIAN. Based on seropositivity work previously reported, we have an expectation that a portion of these patients would be AAV5 negative and otherwise medically eligible for treatment.

As JJ mentioned, in the United States, where we have had time and opportunities to engage with the hemophilia community in advance of launch, we have had direct contact with roughly 300 patients taking more information about ROCTAVIAN treatment. These are adults with hemophilia A who we plan to follow up with directly upon launch. As the patient-focused organization, we are thrilled to see the growing interest in ROCTAVIAN, and we look forward to updating you on progress treating patients commercially. Turning now to the reimbursement side of the process. In Germany, we are pleased to have a major payer agreement in place to enable reimbursed treatment with ROCTAVIAN, a process that was more extensive than anticipated. As a result, the commercial ramp for ROCTAVIAN in Germany has been hindered by the lengthy process of finalizing additional outcomes-based agreements with insurance organizations while we pursue a federal agreement on reimbursement.

Recall that the timing for achieving federal reimbursement takes approximately one year. So, these outcomes-based agreements have been a gating step to facilitating reimbursed access to treatment in the free pricing period following approval. We are pleased with our progress with a significant percentage of hemophilia patients now covered by the executed outcomes-based agreement and negotiations well underway with insurers covering essentially 100% of the German population. An important and upcoming milestone is March 15th. The new free pricing period in Germany is now 6 months, down from 12 months historically and ends on March 15th. That means that the terms of federal reimbursement will be retroactively applied to any patient treated after March 15.

That has the practical impact of derisking for insurers the price and terms or any patients treated with ROCTAVIAN after March 15. Beyond reimbursement, we've made steady progress in other important aspects of the launch in Germany, including patient eligibility, testing, site readiness, medical education and promotion of ROCTAVIAN. Building on this progress, we were pleased to attend two key congresses in Europe in February, which provided significant opportunities to engage with the hemophilia community and promote ROCTAVIAN for the first time. BioMarin's presence at EAHAD, the European Association of Hemophilia and Allied bleeding Disorders, included a well-attended promotional symposium highlighting efficacy and quality of life data for ROCTAVIAN.

Photo by National Cancer Institute on Unsplash

At GTH, which is the German Society for Thrombosis and Haemostasis, we have an opportunity to engage with German physicians directly, many of whom shared feedback reflecting confidence in both the clinical outcomes and the safety profile of ROCTAVIAN, indicating that their centers are ready to dose ROCTAVIAN. We will continue to pursue similar opportunities to engage with the European bleeding disorders community going forward. In anticipation of U.S. approval this year, whether on our current targeted PDUFA date of March 31 or later, the U.S. commercial team is preparing for launch. The activities underway include site readiness, payer discussions, warranty refinement and promotional materials preparation. The supply of ROCTAVIAN to meet both European and U.S. demand has been manufactured.

So, we stand ready to go upon potential approval. Relative to site readiness in the U.S., we have identified and are focused on a relatively small number of the largest and most capable hemophilia treatment centers to be ready to treat with ROCTAVIAN at or shortly after launch. We are committed to the concept of hemophilia treatment centers being the site of treatment for ROCTAVIAN for appropriate patient selection, post-treatment follow-up and monitoring and more generally due to the complexity of hemophilia management. Relative to reimbursement, our team is actively meeting with payers in the U.S. in advance of launch, addressing both clinical aspects of hemophilia and the potential value of ROCTAVIAN and business discussions focusing on the warranty structure for an outcomes-based agreement.

The value of the warranty is the simplicity and speed of implementation. It allows us to offer a uniform outcomes-based agreement to all purchasers without the need and time required for negotiating contracts. Our expectation following the U.S. approval and with a warranty that comes with purchase is that we will be able to navigate payer approvals based on medical exception for initial patients, similar to our experience with previous launches. In conclusion, in 2023, we anticipate increased demand for all our brands included in our guidance line items, including our enzyme products, VOXZOGO and ROCTAVIAN. Combined, and from the midpoint of full year 2023 guidance provided today, we expect total revenues would be 15% growth this year, underscoring our commitment to growth and sustainable profitability.

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

Hank Fuchs: Thanks, Jeff, and welcome. Thanks, everybody, for joining the call. In 2022, BioMarin's R&D organization was extremely gratified to see the enthusiasm from families interested in VOXZOGO treatment for their children with achondroplasia. We look forward to engaging with the health authorities to potentially expand the label in the United States and in Europe. With VOXZOGO accessible to children of all ages in Japan starting from birth, we are hopeful that the younger children and infants under the age of two years in Europe and under the age of five years in the United States, will have the same access should health authorities be supportive. The thing on the demonstrated safe and persistent growth-promoting effects of VOXZOGO and achondroplasia, given its mechanism to stimulate endochondral bone growth at the genetic level, we are very encouraged about the potential for VOXZOGO to benefit those from other stature disorders.

Later in the year with VOXZOGO, we look forward to results from the investigator-sponsored trial evaluating VOXZOGO's potential to treat other genetic forms of short stature, including hypochondroplasia, NPR2 deficiency and Noonan, just to name a few. We plan to engage health authorities and align on the best path work for clinical development in new potential indications later in this year. Moving to ROCTAVIAN, as JJ said, 2023 regulatory milestones are tracking to plan. Having recently submitted the three-year Phase 3 ROCTAVIAN data as requested by the FDA, we continue to expect the PDUFA target action date of March 31st until further notice. Should the FDA determine that the three-year data submission does represent a major amendment and thereby extending the PDUFA action date, we will share that update publicly.

In the meantime, we continue to experience a high level of engagement with the agency as we are still under active review. The pre-licensure inspection of our gene therapy facility was conducted in December. BioMarin has provided responses to comments and observations received at the close of the inspection and the Company believes that all findings are addressable. The FDA has also planned some clinical study site inspections that will take place this quarter prior to the PDUFA date. So, the review process is tracking to expectations. In January, we were pleased to share the three-year Phase 3 results from the ROCTAVIAN pivotal program. Based on the dramatic and sustained reductions in bleeding rates with no new safety signals, Factor VIII utilization of Factor VIII utilization rates observed at year three, we're confident in ROCTAVIAN potential to be an important treatment option for those with severe hemophilia A interested in gene therapy.

Briefly on the earlier stage pipeline, we shared some recently available data from both BMN 255 and BMN 331 in January as a preview of what we plan to present at R&D Day in New York in September. BMN 255 is for the treatment of progressive renal failure and recurrent kidney stones in patients with hyperoxaluria. We're targeting a well-established therapeutic pathway for which there is already an approved drug. A genetic form of hyperoxaluria associated with AGXT mutations demonstrates that elevated levels of urinary oxalate are associated with renal calculi, recurrent stone formation and progressive renal disease. With the goal of reducing oxalate to normal levels in patients with hyperoxaluria, we are encouraged by the potency of this molecule in healthy human studies where we have observed increased plasma glycolates to levels predicted to normalize oxalate excretion.

We hope to be able to translate this result to the subset of patients with chronic liver disease who have been observed to have an acquired deficiency of the same enzyme. We are very excited about these data and look forward to sharing more later in this year. Turning briefly to our next gene therapy, BMN 331 for hereditary angioedema, which is like hemophilia in the sense that it posts a chronic lifelong burden of therapy due to the risk of breakthrough attacks that are extremely burdensome and potentially life-threatening. The disease is due to genetically determined loss of a key protein regulating the inflammatory cascade responsible for these decks. The available therapies on the market confirm the effectiveness of replacement, much like in the case of replacement Factor VIII therapy in hemophilia.

We have shown in three studies with BMN 331 gene therapy that mutant mice and nonhuman primates that a similar to that employed in the clinical studies of ROCTAVIAN can provide ample and constant expression of C1 inhibitor protein within the therapeutic range to patients. We expect that continuously expressed levels of protein will provide improvements in the disease course of hereditary angioedema over the available existing therapies. The first patient who was treated with the 6e13 dose has had an early increase in C1 inhibitor levels that may ultimately be therapeutically relevant, which is exciting. We look forward to enrolling the second subject to this dose and following the response of the first. We have many other assets moving forward in the early-stage pipeline, including BMN 351 for Duchenne Muscular Dystrophy, BMN 349 for alpha-1 antitrypsin deficiency and BMN 293 for myosin-binding T3 hypertrophic cardiomyopathy, all of which we intend to update in more detail at R&D Day in September.

Thanks for your call. And I'll now turn the call over to Brian to update financial results from the quarter. Brian?

Brian Mueller: Thank you, Hank. Please refer to today's press release summarizing our financial results for full details on the fourth quarter and full year 2022. As usual, all results will be available in our upcoming Form 10-K, which we are on track to file later today. In addition to some of the changes to our key external financial reporting metric, I'm also pleased to share that today and going forward, we are also publishing a set of quarterly investor slide on the BioMarin Investor Relations website. We hope that consumers of our financial and business information will appreciate this material, which is intended to summarize and visualize the key elements of our report each quarter. Since JJ and Jeff have touched on many of the specific financial highlights in Q4 and full year €˜22 and expectations for 2023, I will primarily focus on other important aspects of BioMarin's 2022 financial performance and 2023 guidance.

As we turn to the page on 2022 and look forward to 2023 and beyond, we are observing that BioMarin is executing on its growth strategy over the last several years. BioMarin's durable and growing enzyme products business has helped BioMarin reach GAAP profitability, we are launching two of the highest potential products in company history with VOXZOGO globally and ROCTAVIAN outside of the U.S. and we are investing in BioMarin's largest ever early-stage research pipeline intended to fuel growth throughout this decade and beyond. Specific to Q4 2022, BioMarin's revenue growth of close to 20% in the fourth quarter and continued focus on managing operating expenses helped us achieve our financial goals of double-digit revenue growth and leverage, GAAP, net income and non-GAAP income growth.

It is noteworthy that we recognized approximately $23 million of charges to SG&A expense in 2022, mostly in Q4, resulting from our organization, optimization announced last October, which drove a small GAAP net loss in Q4. Importantly, we were able to accommodate that charge without adjusting our profitability goals for the year. For 2023, the highlights of our guidance include continued double-digit revenue growth, 16% at the midpoint of our guidance and continued leverage with profitability growing at a rate roughly double our revenue growth rate. As recently announced, beginning with the first quarter of 2023, we are changing our methodology for calculating our non-GAAP income to recognize the maturity of BioMarin's profitable business and better align with our peer group.

Details of the revised method are in our press release, and a full reconciliation of prior reported periods for 2021 and 2022 is available on our website. Another noteworthy change is the grouping of our revenues now that we have eight approved products, which Jeff touched on earlier. By grouping our enzyme products together, we have the opportunity to guide investors to the €œbase business€ that we've referred to over the last couple of years in its entirely. This is also an opportunity to recognize that while KUVAN for PKU has been an excellent product for BioMarin for more than a decade, KUVAN is no longer a source of growth and is a decreasing focus for BioMarin. We are now in the third year of U.S. generic competition and are expecting new generic competitors in Europe, and we feel that now is the right time to cease providing specific annual revenue guidance for KUVAN.

While we are not specifically guiding to KUVAN for 2023, total revenue guidance still includes KUVAN, and we thought in this transition year that it would be helpful to share that our assumed contribution in 2023 for KUVAN is about $125 million globally. As Jeff mentioned, we'll continue to report actual sales for each brand on a quarterly basis. The last noteworthy change to our external reporting metrics is increasing the prominence of earnings per share on a GAAP and non-GAAP basis. While we expect it will take the anticipated growth over the next few years to scale our earnings per share, as a profitable enterprise, we recognize the importance of this financial metric and believe it will be helpful for investors to both, measure our performance and understand our planned future financial growth.

We appreciate your flexibility through these changing financial metrics. While reporting consistent metrics for many consecutive years was important, it is equally important that BioMarin's reported information reflect the current and future state of the corporation which we are pleased to observe as a unique double-digit revenue and leveraged bottom line profitability biopharma growth story. Thank you for your attention. And we'll now open up the call to your questions. Operator?

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