Earnings Call Transcript - BCRX Q3 2022

Operator, Operator

Hello, and welcome to the BioCryst Third Quarter 2022 Earnings Conference Call. My name is Michelle and I will be your operator for today's conference. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. As a reminder, the conference is being recorded. I will now turn the call over to Mr. John Bluth with BioCryst. Sir, you may begin.

John Bluth, Head of Investor Relations

Thanks, Michelle. Good morning, and welcome to BioCryst's third quarter 2022 corporate update and financial results conference call. Today's press release and accompanying slides are available on our website. Participating with me today are CEO, Jon Stonehouse; CFO, Anthony Doyle; Chief Commercial Officer, Charlie Gayer; and Chief R&D Officer, Dr. Helen Thackray. Following our remarks, we will answer your questions. Before we begin, please note that today's conference call will contain forward-looking statements, including those statements regarding future results, unaudited and forward-looking financial information as well as the company's future performance and/or achievements. These statements are subject to known and unknown risks and uncertainties, which may cause our actual results, performance or achievements to be materially different from any future results or performance expressed or implied in this presentation. You should not place undue reliance on these forward-looking statements. For additional information, including a detailed discussion of our risk factors, please refer to the company's documents filed with the Securities and Exchange Commission, which can be accessed on our website. I'd now like to turn the call over to Jon Stonehouse.

Jon Stonehouse, CEO

Thanks, John. We continue to see steady progress with the ORLADEYO launch, and underlying growth trends remain strong. New patient starts are consistent with previous quarters, and discontinuations appear to have stabilized. We are investing more to continue this momentum. Based on our expectations for continued growth in Q4, we plan to exit 2022 having more than doubled sales from the great start we had last year, and we'll be a quarter of the way to our expected peak of $1 billion globally in just the second year of launch. We've shown you long-term data from our trials, and we will continue to show you real-world data that demonstrates our drug works very well in many patients. The competitive landscape has changed, too, highlighting how challenging it is to pursue a strategy of oral drugs in HAE. Right now, and perhaps for some time to come, ORLADEYO is the only direct-acting oral therapy with once-daily dosing to prevent HAE attacks. With this unique offering, we believe this is a therapy every patient should have the opportunity to try. Charlie will share more specifics on the ORLADEYO quarter performance shortly. Our strategy of going after challenging targets, specifically serine proteases for patients suffering from rare diseases, is rooted in our ability to discover potent, specific, and bioavailable molecules. In developing an oral once-daily kallikrein inhibitor for HAE, we believe this allows us to offer something unique to these patients, and we believe HAE is just the start. Moreover, because these are difficult targets, we don't stop at the first molecule we discover; we work on improved next-generation compounds. We saw that with AVORALSTAT and ORLADEYO. We believe we've done it again with Factor D and are fortunate to have two molecules that may put us in a position to potentially introduce the first oral Factor D monotherapy molecule to the market. While the future of 9930 is still to be determined, we expect to have answers from data on the first 15 patients treated over two to three months by the middle of next year. We have also been working on additional next-generation complement inhibitors, including BCX10013, a potential once-daily oral Factor D inhibitor that we have advanced into the clinic. In Q1 of next year, we plan to show you data in humans that supports the potential of once-daily dosing. Additionally, we are focusing on other targets in the complement system, which could allow us to treat more rare diseases and combine molecules for optimized therapy. We will showcase more in an R&D Day next year. The goal is to be the global leader in complement therapies, a challenging but achievable objective. We believe this strategy allows us to accomplish things others may not manage to do, and we look forward to sharing more with you next year. What does this mean for you as a shareholder? It starts with the evidence that we can successfully discover, develop, and launch an oral drug directed at a challenging target that meets an unmet patient need. We expect ORLADEYO to fill a significant gap for thousands of HAE patients, reaching $1 billion in global peak sales, which would represent a major accomplishment for creating meaningful value for patients and shareholders alike. We plan to replicate this success with complement therapies, envisioning multiple innovative therapies that can vastly improve patient outcomes. Now, I'll turn the call over to Charlie to discuss the ORLADEYO performance in detail.

Charlie Gayer, Chief Commercial Officer

Thanks, Jon. The core metrics for ORLADEYO were strong once again in the third quarter. New patient starts aligned with our six-quarter running average, and the absolute number of discontinuations remained flat, showing slight improvement for the second quarter in a row. Additionally, we observed a 9% growth in patients on paid therapy. All these metrics support what we've previously described: a pattern of consistent linear growth for ORLADEYO. In Q3, we also expanded our prescriber base significantly. The overall prescriber base grew by another 11%, and we had our largest number of repeat prescribers as more physicians offered ORLADEYO to additional patients in their practices. Moreover, 54% of new prescriptions came from the top 500 HAE treaters, and approximately 25% of those prescribers were newly activated. We've even recorded the largest number of Tier 2 prescribers to date this quarter. These trends correlate well with a survey we conducted with 60 allergists in September, where physicians anticipated that the percentage of patients treated with ORLADEYO would rise more than any other HAE therapy over the next 12 months due to the long-term clinical data supporting its efficacy. Next week, at the American College of Asthma, Allergy & Immunology Congress, we will present real-world evidence confirming that regardless of baseline attack rates or prior therapies, patients experience excellent long-term control with ORLADEYO. In Q3, we identified two opportunities to invest further: expanding our sales team to enhance our impact among top physicians, and increasing our market access team to assist practices navigating payer authorization for HAE therapies. As we complete our second year on the market for ORLADEYO, we remain excited about its potential. One month into this quarter, our metrics are strong, and we anticipate double-digit revenue growth in Q4, ending the year with total ORLADEYO sales at $255 million, more than double 2021 sales. Helen, I’ll turn the call over to you.

Helen Thackray, Chief R&D Officer

Thanks, Charlie. Today, I'll discuss our pipeline updates, focusing on our progress with current molecules and goals for advancing new drug candidates targeting complement-mediated diseases. We aim to establish ourselves as the global leader in delivering medications addressing dysregulation of the complement system. Our latest achievements include expanding our Factor D inhibitor program and identifying several new targets for oral drugs to engage additional pathways of the complement system. Our discovery team is making strides in generating new molecules for these targets, reinforcing our confidence in our novel discovery platform's capability. Achieving successful results could present numerous opportunities to address complement-mediated diseases effectively. In summary, we are not only adding a second oral Factor D inhibitor to our portfolio but also building our capacity for multiple oral drugs targeting complement system diseases, including those affecting the classical pathway, lectin pathway, and terminal pathway. We intend to invest significantly in developing several oral medicines targeting these new structures. Should we successfully deliver treatments for multiple pathways, we could introduce combination therapies within a single oral dosage form, expanding treatment options even further for complex and serious diseases. Now, let me share specific insights on our first oral monotherapy Factor D inhibitor, BCX9930, aimed at rapidly bringing it to market. Our immediate goal is to verify a safe and effective dose regimen in our pivotal REDEEM trials for PNH. Our near-term focus is currently on confirming that we're delivering safe and effective therapies and aiming for a once-daily mode of administration. With BCX9930, we have made critical progress and reopened enrollment in the REDEEM study. We've also begun screening new patients at lower doses to establish a safe and effective therapeutic regimen. We amended the REDEEM and RENEW protocols, adjusting the dosing regimen to 400 milligrams twice daily, which we believe will mitigate previous adverse effects experienced at the higher dose. Although it's early for conclusive results, we plan to provide updates mid-2023 based on initial data from approximately 15 newly enrolled patients. If the new regimen offers favorable outcomes, we intend to refocus on pivotal programs and expedite BCX9930's market introduction. If not, we'll discontinue the program. Additionally, as mentioned earlier, we are advancing BCX10013, the second unique molecule designed to offer a differentiated product targeting the proximal alternative pathway of complement therapy. BCX10013 is already in clinical testing, demonstrating promising safety, tolerability, and pharmacokinetics, making us optimistic about its future as a once-daily oral therapy. We will continue to update you on progress and data as we move ahead. Finally, regarding BCX9250 and FOP, the competitive landscape in this ultra-rare disease has become crowded, leading us to discontinue its development and redirect those resources towards our complement-focused initiatives. In conclusion, we have demonstrated our ability to deliver orally administered small molecules for challenging targets, and we are confident in achieving our discussed goal of delivering oral drugs across multiple difficult targets within the complement system. I will now pass the call to Anthony.

Anthony Doyle, CFO

Thanks, Helen. ORLADEYO net revenue for the quarter was $66 million, contributing to a trailing 12-month total of approximately $227 million—over $100 million more than our total revenue for 2021. Comparing Q2 and Q3 revenues, an evaluation reveals several key points to note. Q2 included positive out-of-period reimbursement adjustments of approximately $2.2 million, and over $1 million of shipments typically processed in July were shipped early in June due to the 4th of July holiday. For Q3, we also encountered a $500,000 negative out-of-period reimbursement adjustment. When adjusted for these factors, Q2 revenue would have been approximately $62 million, while Q3 would have been adjusted to $67.5 million—indicating about 9% growth quarter-over-quarter. Even without those adjustments, the compounded quarterly growth rate from last year, with Q4 ending at around $46 million to Q3 2022, exceeds 9%. This steady growth, spurred by consistent new patient starts and stabilizing discontinuation rates along with ongoing global expansion, gives us confidence that Q4 will deliver double-digit growth percentage over Q3, with full-year revenue forecasted at $255 million—more than double last year's figures—placing us firmly on the pathway to $1 billion in global peak sales. The detailed third-quarter financial data and today's press release are available for review. Total revenue for the quarter stood at $75.8 million. Besides the $66 million from ORLADEYO, the remaining revenue comprised a $6.9 million RAPIVAB stockpile order and $2.9 million from RAPIVAB API sales to our partners. Our operating expenses were $83.3 million, excluding non-stock cash compensation for the quarter, and our cash position at the end of the quarter was $463 million, inclusive of the $75 million drawn from the Athyrium facility in July. Effective capital allocation is essential for biotech growth. Our team managed internal and external spending effectively during the enrollment pause in the 9930 clinical trials while working closely with the FDA to agree on a plan to address the clinical hold, bringing the program back to life efficiently. We initially guided for ORLADEYO net revenue at no less than $250 million and operating expenses between $440 million and $480 million for the year. With the hold on enrollment for 9930, our guidance now stands at $255 million in revenue and operating expenses between $365 million and $370 million for full-year 2022—more than $100 million less than the earlier upper guidance. Therefore, our net cash utilization is significantly lower than initial expectations at the beginning of the year, which is valuable in the current macroeconomic climate. As Helen mentioned, we are discontinuing BCX9250, which necessitated more than $100 million in investment over the coming years. Pursuing disciplined capital allocation and maintaining a healthy balance sheet places us in a robust position to invest in future growth opportunities. Operator, we are now open for Q&A.

Operator, Operator

Thank you, sir. We will begin the question-and-answer session. And the first question in the queue comes from Ken Cacciatore with Cowen and Company. Sir, your line is open.

Ken Cacciatore, Analyst

Thanks so much. Great explanation on Q3. I appreciate that on ORLADEYO. I was just wondering with the investments that you're making to continue to press the advantage you have with the commercial spend, do you want to give us a little bit of thoughts as we look into 2023? It seems like Q4 is on a nice trend already. Maybe any context you can provide for ORLADEYO and maybe discuss when we should start seeing a little bit more ex-US contribution?

Jon Stonehouse, CEO

Yes. Charlie, you want to take the first one?

Charlie Gayer, Chief Commercial Officer

Yes, I think the first thing to say is, and Jon mentioned this upfront, we still have all confidence in the world that this is a $1 billion peak sales drug. And so as we look to make other investments, it's really about being as efficient and accelerated in that process as possible. You're asking around 2023, I think we will give guidance for 2023 in early next year. But we feel very good about our trajectory based on the underlying trends. And then as far as ex-US contributions, eventually, we may start to break that out, but still for 2022, it remains a small percentage of total sales. Everything we observe in underlying trends across Europe and other regions gives us confidence that, at peak sales, that could exceed $200 million.

Ken Cacciatore, Analyst

Great. Thanks so much.

Operator, Operator

Thank you. Next question in the queue comes from Chris Raymond with Piper Sandler.

Chris Raymond, Analyst

Hey guys. Thanks. So, a question and also a follow-up. Just on the ORLADEYO quarterly dynamics, I appreciate the color on the puts and takes from Q2 and Q3. Can you provide some color on the timing for realizing this dynamic while recognizing that pull forward? I'm getting questions from investors wondering why that wasn't mentioned last quarter. And as a follow-up on the next-generation molecule 10013, can you walk us through what you know pre-clinically that gives you confidence that you won't run into the same sort of signals as 9930?

Jon Stonehouse, CEO

Yes. So, maybe I'll take the first one. Anthony, if I go down the wrong path, feel free to correct me. But we did point out that there was $2.2 million in non-period accrual adjustment in Q2 that made the quarter appear higher than normal. You don't really know these differences until you finish a quarter or month like July. In retrospect, July 4th landed on a Monday this year, and several shipments were made prior due to potential holiday disruptions, leading to them being shipped in June instead of June. So, I'm unsure if there's anything else to add to that.

Anthony Doyle, CFO

No, just that this kind of variation can happen. What we're focusing on is the underlying strength and maintaining confidence in our growth trajectory.

Jon Stonehouse, CEO

Yes. Last thing I'd add is that we're the only ones with the data at the end of the day. No offense to those trying to estimate, but we believe we’re the most accurate guiders and stand firm on our projection for the year at $255 million, which is impressive given our initial $122 million result last year.

Helen Thackray, Chief R&D Officer

Yes. Regarding BCX10013, while it’s not yet confirmed that we won't encounter issues like those seen with 9930, certain factors give us confidence. First, it is a unique molecule with distinct properties that should yield different behavior in clinical settings. Additionally, we are leveraging lessons learned from 9930 in our ongoing development process, and initial signs are supporting the case for advancing into patient trials and a potential for once-daily dosing.

Chris Raymond, Analyst

Excellent. Thank you guys.

Operator, Operator

And the next question in the queue comes from Jessica Fye with JPMorgan.

Daniel Wolle, Analyst

Good morning guys. Thanks for taking our question. This is Daniel for Jess. A couple of questions. First off, could you elaborate on the inputs you considered when adjusting the full-year sales guidance to the lower end of the previous estimates? Secondly, I understand you’ll provide detailed data in early 2023 for 10013, but can you expand on some early clinical findings related to that product, particularly concerning hemolysis, since it is targeted as a one-state oral therapy?

Jon Stonehouse, CEO

Regarding the guidance adjustment, it’s straightforward; after gathering another quarter of data and being into November, we feel confident in the $255 million projection given our year-to-date performance. Rare diseases can see significant shifts with just a few patients, reinforcing that confidence. Now, Helen, you can address the 10013 specifics.

Helen Thackray, Chief R&D Officer

Sure. In early clinical data with 10013, we've conducted trials among around 90 healthy volunteers to analyze safety and pharmacokinetic profiles, but we haven’t yet treated patients. Our next step is transitioning to patient studies to confirm the anticipated therapeutic effects on complement activity.

Jon Stonehouse, CEO

Regarding the Inflation Reduction Act and managing multiple indications for therapy, we have yet to draw firm conclusions as implementation details unfold. However, we are committed to advancing molecules for various indications reflecting patients' needs while ensuring shareholder value. Considering the complement system's potential, a single molecule might target multiple diseases, and that's our approach moving forward.

Operator, Operator

The next question comes from Brian Abrahams with RBC Capital.

Joe Spak, Analyst

Hi, this is Joe on behalf of Brian. Thanks for taking our question. I wanted to ask about ORLADEYO once again. Can you fill us in on any improvements you're observing in patient retention rates? Are any specific patient types more likely to stay on ORLADEYO, and how have your educational initiatives impacted retention rates?

Jon Stonehouse, CEO

Charlie?

Charlie Gayer, Chief Commercial Officer

Sure. We’ve seen consistent trends where overall retention rates are now in the mid-60s, and notably, the majority of patient discontinuations occur within the first few months. Those that transition from injectable therapies show the highest retention rates, with around 70% staying on ORLADEYO for at least 12 months. A significant aspect of our strategy focuses on setting patient expectations around efficacy and potential side effects to facilitate better retention.

Jon Stonehouse, CEO

Referring back to Charlie's point about the upcoming presentation and poster at the upcoming college meeting, we encourage all to review that for an in-depth look at the real-world data encouraging patient outcomes, particularly those who switch from other prophylactic treatments.

Joe Spak, Analyst

Thanks for the insights.

Operator, Operator

And the next question in the queue comes from Jon Wolleben with JMP Securities.

Jon Wolleben, Analyst

Hey, good morning. Thanks for taking the questions. Two for me: Could you comment on the trends in gross-net adjustments as we advance? Also, concerning the 15 patients you are observing from 9930 for data to make a go/no-go decision, is this focused entirely on PNH patients or a mix with renal patients as well?

Anthony Doyle, CFO

Yes, there's no significant change in gross-net trends as we advance. We project gross-net adjustments to stabilize around 15% to 20%. The percentage will reflect our patient access dynamics, which we continue to manage effectively.

Helen Thackray, Chief R&D Officer

On the 15 patients for 9930, our focus will largely be on patients from the REDEEM studies, where there are more enrollment sites. Therefore, we anticipate most of them will be patients from that program, primarily PNH patients as we work through the structure of our trials.

Jon Stonehouse, CEO

Additionally, it's crucial to consider that ongoing evaluations need biopsies to confirm disease presence, which can prolong the process. Sure.

Operator, Operator

Thank you. And the last question in the queue comes from Gena Wang with Barclays. Your line is open.

Gena Wang, Analyst

Thank you for taking my questions. I have a question regarding the ORLADEYO launch. Given your earlier comments, can you confirm if the retention rate is now maintained in the mid-60s? Additionally, regarding your 2022 annual guidance of $255 million, quick calculations suggest that would mean $74.5 million for Q4. If taking $67.5 million for Q3 as a baseline, this presents a $7 million growth. Seeing as we're only one month into the quarter, including holiday disruptions, what makes you confident in achieving your Q4 projections?

Jon Stonehouse, CEO

Charlie, would you like to take the retention portion?

Charlie Gayer, Chief Commercial Officer

Yes. The retention rate is indeed stabilized in the mid-60s, with the most patient attrition occurring during the initial months. As patients exceed that six-month mark and find success on the treatment, their chances of remaining on ORLADEYO long-term improve notably.

Anthony Doyle, CFO

Concerning Q4 confidence, building on our previous responses, we are guided by underlying momentum we observe and the continued growth trajectory we foresee as we head into November from October. There are indications supporting our confidence to reach that $255 million guidance as we finish the year strong.

Jon Stonehouse, CEO

We generally do not provide quarterly guidance; however, with our holistic yearly target, you can deduce our expectations for Q4.

Operator, Operator

Thank you. And the next question comes from Justin Kim with Oppenheimer & Company.

Justin Kim, Analyst

Hi, good morning. Thanks for taking the question. As you prepare for the REDEEM studies later next year, how do you see the timing separation between 9930 and the 10013 program. Do you foresee any developments with 10013 that might incentivize prioritization as the next-generation inhibitor?

Helen Thackray, Chief R&D Officer

Regarding the REDEEM studies, we expect fast-track progress; this pivotal program is positioned to be the first to read out. If we confirm a safe and effective dose, it puts us on course to market with 9930 first. We believe that 10013 could provide a best-in-class option; it’s in Phase 1, and we are encouraged by early volunteer data.

Jon Stonehouse, CEO

Yes, in terms of development timelines, there could be about a two-year gap between the two programs. The one in the pivotal study has significant advancements while the other is still early phase. However, if 9930 delivers a promising outcome, we will prioritize it accordingly. Going forward, we plan on a narrower indication set for 9930, while potentially expanding the indications for 10013, given its projected advantages.

Operator, Operator

The next question comes from Tazeen Ahmad from Bank of America.

Tazeen Ahmad, Analyst

Hi, good morning. Thanks for taking my questions. With your experiences thus far from the launch, do you foresee any seasonality trends in Q4? Additionally, concerning pricing, given the historical context of rare drugs taking annual price increases, are you observing any shifts in payer attitudes during discussions?

Charlie Gayer, Chief Commercial Officer

Regarding seasonality, we anticipate similar trends as last year, particularly through Q1 when various patients must navigate prior authorizations. In terms of pricing sentiment, generally speaking, payers maintain their sensitivity toward high-cost therapies in rare diseases. However, we have not encountered any notable changes in sentiment thus far.

Jon Stonehouse, CEO

To observe untapped potential for 2023, further investment on commercial arms should see considerable returns next year. We continue to see that switching strategy where patients on injectable therapies tend to benefit most from ORLADEYO. Success with these switches squares our focus on capturing that market.

Operator, Operator

Thank you. Our last question comes from Rohit Bhasin with Needham & Company.

Rohit Bhasin, Analyst

Hi, this is Rohit on behalf of Serge. Can you elaborate on how the recent setbacks with other oral HAE prophylactic products change your long-term outlook for ORLADEYO? What is your perspective on the competitive landscape?

Jon Stonehouse, CEO

Yes, recent setbacks serve as a reminder of how challenging it is to develop potent, specific, orally bioavailable drugs. I believe there are now five companies, including us with AVORALSTAT, which have halted important programs. However, this scenario could enable ORLADEYO to become a leading option as patients increasingly seek oral alternatives that minimize long-term treatment burdens. We perceive this positively as the market increasingly gravitates towards preventive strategies over on-demand options, profoundly improving our competitive positioning.

Operator, Operator

Thank you. And our final question comes from Maury Raycroft with Jefferies.

Maury Raycroft, Analyst

Hi, good morning, and thanks for taking my question. Can you clarify your comment about investing further to sustain ORLADEYO momentum? You mentioned expanding the sales team alongside market access teams. Is this the extent of your investment plans, or will there be further expansion as we approach 2023?

Jon Stonehouse, CEO

Certainly. One key to our ongoing success has been agility—analyzing data and making necessary adjustments. Charlie?

Charlie Gayer, Chief Commercial Officer

To clarify, we consistently evaluate our strategy for maximizing impact. When forming our launch team, we put together a well-prepared group able to compete effectively. We continuously assess where we can invest to refine our approach. In return, any potential opportunities would warrant additional investments, so we see ourselves in a healthy place where continuous evaluation and adaptations are part of our operational ethos.

Jon Stonehouse, CEO

So further investments may arise as opportunities become apparent—in essence, our strategy revolves around effective responsiveness.

Operator, Operator

We have no further questions in the queue at this time. I will now turn the call back over to Mr. Stonehouse for closing remarks.

Jon Stonehouse, CEO

Thank you for your interest in BioCryst. I recently saw data illustrating the sheer number of publicly-traded biotech companies. It’s a crowded space, and the trends show many companies trading below cash. It’s a tough environment that we’re all aware of. However, differentiating ourselves becomes key against the backdrop of such competition. BioCryst aims to be distinguished by our discovery engine that can create effective, oral, specific once-daily kallikrein inhibitors, an accomplishment itself. We've demonstrated rapid clinical approvals across regions, successfully launching drugs that exceeded initial performance expectations. The upward trajectory continues with sound capital management practices that underscore our ability to develop paths for patient access without being overly reliant on market share dilution. To summarize, we've built credibility through objective practices combining disciplined capital allocation, which strengthens the trust of our stakeholders. The team is committed to executing our strategies, and we look forward to sharing our progress as we build your confidence in our vision for BioCryst. Thank you all, and I hope you have a great day.

Operator, Operator

Thank you, ladies and gentlemen. This concludes today's teleconference. Thank you for participating. You may now disconnect.