Biomarin Pharmaceutical Inc Q1 FY2021 Earnings Call

Welcome to the BioMarin First Quarter 2021 Financial Results Conference Call. Hosting the conference call today from BioMarin is Traci McCarty, Vice President of Investor Relations. Please go ahead, Traci.

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

Thank you, Traci, and good afternoon, everyone. We hope you and your families are well and enjoying the return to normal day-to-day activities as access to COVID-19 vaccines increases and the U.S. continues to open up. We had a really strong start to 2021, recording $486 million of total revenues and GAAP net income of $17 million in the first quarter and $114 million of cash flow from operations, an important achievement. We have also reaffirmed previously released financial guidance for the full year. This takes into consideration both the typical uneven ordering patterns in some of our ex-U.S. regions as well as continued uncertainty outside of the U.S. due to COVID-19. It is not by chance that BioMarin has successfully managed through the challenges caused by the global pandemic. Our business is built to weather uncertainty, given the essential nature of our products. The underlying strength of our business is quantifiable across a number of metrics. BioMarin’s five-year non-GAAP income compounded annual growth rate or CAGR of 62% far exceeds the 12% average of biotech companies with at least $1 billion of revenues in the last five years. Our five-year revenue CAGR of 16% is better than 10 of the 15 biotech companies with at least $1 billion of revenues over the last five years. With the potential approval of vosoritide in European markets and the EMA market representing an opportunity that’s three times the size of the U.S., we are poised to deliver meaningful growth beginning in 2022. On the heels of potential vosoritide approval this year in the U.S. and Europe and with the European filing of ROCTAVIAN, which is targeted for this June, we could potentially receive a second significant product approval in Europe in the second quarter of next year. Similar to the achondroplasia market opportunity in EMEA, we believe that there are three times as many severe hemophilia patients in that region as compared to North America, representing transformational growth opportunities with vosoritide approval and commercialization. Assuming favorable results with ROCTAVIAN at year two, we will target a biologics license application or BLA submission in the U.S. in the second quarter of 2022, followed by an expected six-month review procedure and then potential U.S. approval at the end of 2022. Based on the cumulative data to date with ROCTAVIAN with both the 6e13 and the 4e13 doses, we believe it is reasonable to expect durable bleeding control at year two in the Phase 3 study. That is also based on the first 17 patients that reached the three-year milestone. So, the data support two-year efficacy and safety data from our expansive program that would represent significant cost savings to global healthcare providers. It should be a very momentous 2021 and 2022 with these exciting catalysts on the horizon. Thank you all for your continued support. I would like to turn the call over to Jeff to discuss the commercial business update.

Thank you, J.J. As we begin 2021, I am very pleased with the team’s performance across all brands and all regions during the quarter. As J.J. mentioned, we achieved total revenues of $486 million in the first quarter. Excluding Kuvan contributions, total revenues grew 9% in the first quarter of 2021 compared to the first quarter of 2020. Before discussing commercial results, I’d like to introduce the brand name for vosoritide. As we are currently in label negotiations in the EU and with ample product supply ready for launch, we are pleased to introduce VOXZOGO to the investment community. The name is as unique as our Company and our product, and we look forward to spreading the word once it’s go time with VOXZOGO, spelled V-O-X-Z-O-G-O. Turning to results in the quarter, I’ll begin with a reminder of the dynamics of large irregular order patterns specific to our enzyme replacement therapy brands. I want to emphasize that we received large orders during the first quarter from such markets as Turkey, Brazil, Egypt, Russia and Saudi Arabia that are gratifying and good for our business and which we expect will cause the first half of 2021 to have some concentration of our annual revenues for both Naglazyme and Vimizim, relative to the second half of 2021. We reaffirm our annual guidance for total revenues and for each of the commercial brands and ask that you consider that guidance when modeling your expectations for the balance of 2021. Having inventory in these markets helps maintain continuity of supply, the lack of which can occasionally present a challenge in these and other markets and which can have a negative impact on compliance and demand generation. For Brineura, we experienced a different impact from order patterns. In this case, inventory purchases late in Q4 2020 were followed by drawing down of inventory in Q1 2021, which contributed to a decrease in revenue quarter-to-quarter for Brineura. A few more details on our products for lysosomal storage disorders, Naglazyme, Vimizim and Brineura. All three products have maintained strong patient compliance despite the persistence of COVID-19 globally, and our mitigation tactics across the most pandemic-impacted markets continue to successfully support patient access and adherence to therapy. Of note, patient demand for both Naglazyme and Vimizim increased approximately 10% year-over-year, underscoring the essential nature of these therapies. We expect that Brineura, in particular, will resume a trend of modest quarterly growth following the normalization of customer inventory levels in Q1 and driven by roughly 30% increase year-over-year in patients on commercial therapy. Moving now to Palynziq, year-over-year growth of 56% translated to $54 million in first quarter revenue. The U.S. continued to be the main contributor of growth in the quarter, driven by U.S. patient increases of more than 20% year-over-year. While we are still experiencing net patient growth, new patient starts in the U.S. have continued to be impacted by COVID-19 in the quarter. We are optimistic about the growth prospects for Palynziq for the balance of 2021 with an expectation that PKU clinics that have been operating at partial capacity are able to increase capacity over the coming quarters. The pandemic impact on Palynziq has been more severe in the EMEA region where we continue to experience delays in price and reimbursement approvals and very little new patient activity. In spite of that, we are making incremental progress, and I continue to expect that we will see more material Palynziq revenue from this region when PKU clinics have more freedom to operate and start additional patients. Continuing with the PKU franchise, Kuvan contributed $71 million in revenues in the quarter. Kuvan net product revenues decreased by $51 million year-over-year, primarily due to the loss of market exclusivity in the United States in October 2020, resulting from generic competition as anticipated. Circling back to our next potential commercial product, VOXZOGO, launch readiness in key EU markets and the U.S. are quite advanced. Sales, brand and market access teams are in place and working on finalizing details of the launch. Released label finished goods are expected to be available in key markets including Germany, France, Italy and the U.S. and ready to ship to customers within 4 to 8 weeks of an approval. We have been able to leverage existing teams that are experienced from recent launches of Palynziq and Brineura, and expect to be well prepared for what could be BioMarin’s largest brand yet. In conclusion, it was a strong start to the year from a revenue perspective, and I’m very pleased with the continued commitment and resilience of our teams globally. Thank you for your attention. I will now turn the call over to Hank to provide an R&D update.

Thank you, Jeff. As J.J. conveyed, we look forward to a number of important events on the horizon in 2021. Accumulating data on the durability of both VOXZOGO and ROCTAVIAN suggests meaningful clinical benefits will be maintained. Therefore, we remain optimistic about the potential of these two therapies to be transformative to the people who need them. In Europe, beginning with VOXZOGO, our dialogue with European health authorities has been quite positive. We look forward to a CHMP opinion in June, followed by a European Commission decision in late summer. With labeling discussions well underway in Europe, we feel that the VOXZOGO path forward is significantly de-risked. Turning to ROCTAVIAN in the European Union, we held a very productive pre-submission discussion and meetings with European health authorities and remain on track to submit the marketing authorization application in June. Of particular note, the RAPTOR and co-RAPTOR are fully aware of the coming five-year Phase 2 and two-year Phase 3 ROCTAVIAN data cuts and are not requiring those data to support submission, giving us added confidence in our ability to meet the June submission goal. Assuming we remain on the anticipated timelines in Europe, therefore, we could potentially receive a CHMP opinion on ROCTAVIAN in the second quarter of 2022. Turning to the United States and VOXZOGO, in the quarter we provided the Food and Drug Administration with the two-year results from the Phase 3 extension study to supplement the new drug application already under review. As anticipated, they designated the submission a major amendment to the application to provide the time for a full review of the submission, thus extending the PDUFA target action date by three months to November 2021. We are pleased that the pre-approval inspection of our Nevada facility for the manufacturer of VOXZOGO was completed, checking off another milestone for regulatory review. Special congratulations to our technical operations and compliance teams for that accomplishment. We are also happy to report the Phase 2 study with zero to five year olds completed enrollment in the quarter. The importance of starting treatment with VOXZOGO as early as possible cannot be overstated. We are hopeful that the output of our zero to five-year study will provide support to regulators to enable the youngest children to benefit from the first potential therapeutic option to treat the underlying cause of achondroplasia. Developing VOXZOGO has been a 15-year journey, and I want to extend my deep appreciation to the BioMarin team, our investigators and the families who have dedicated themselves to advancing the standard of care in achondroplasia. Moving to ROCTAVIAN in the U.S., following discussions with the FDA this quarter, we have aligned on the previously communicated base case scenario of resubmission with two-year follow-up safety and efficacy data on all Phase 3 subjects in the second quarter of 2022. The FDA remains committed to this path forward to support their final benefit-risk assessment. Based on the consistent dramatic bleed control observed to date across our Phase 2 program, not just with the 6e13 dose, but also with the 4e13 dose through three years and in the 6e13 dose through four years as well as the Phase 3 data to date now out to two years, we are encouraged that the combined dossier will provide ample evidence of clinical benefit with ROCTAVIAN. We remain on track to share the Phase 2 five-year update with the 6e13 dose as well as the four-year update on the 4e13 dose later this year and plan to also include those data in the U.S. BLA resubmission in 2Q 2022, assuming favorable results, followed by an expected six-month review by the FDA upon resubmission. Briefly, on the earlier-stage pipeline, dose escalation has commenced with BMN 307, our investigational gene therapy for phenylketonuria. The program continues based on the encouraging Phe lowering observed with the lower dose tested so far. In our IND-enabling studies for BMN 351 for Duchenne muscular dystrophy, this antisense oligonucleotide therapy demonstrated dystrophin protein expression levels between 30% and 50% of normal levels in the quadriceps in a DMD mouse model treated for at least 13 weeks and possessing the human skippable mutation. The familiar chemistry and novel biology of BMN 351 position us uniquely. Levels of antisense oligonucleotide that are known to be achievable in muscles with this class of molecule are expected to produce enough protein in humans to transform lives. While it is early days, we are very encouraged by these data as we shared at the world muscle meeting last fall because this may represent the potential of another important new therapeutic to address unmet need in this population. With BMN 331 gene therapy for the treatment of hereditary angioedema, we’re conducting IND-enabling studies and expect to file an IND in the middle of the year. Our collaboration with DiNAQOR on hypertrophic cardiomyopathy, which we announced in May last year, is progressing well. Preclinical studies are underway, and we plan to select our candidate vector in 2021 for this program. We look forward to sharing a deep dive on all of these next-generation products at our upcoming R&D Day, tentatively planned for this November. The R&D organization is energized and very busy as we advance multiple early to late-stage programs this year to deliver on our goal of bringing transformative therapies to patients with rare genetic diseases. Thanks for your support, and a special thanks to the worldwide R&D team who are driving hard on behalf of our patients. I’ll now turn the call over to Brian to update the financial results in the quarter.

Thank you, Hank. Please refer to today’s press release summarizing our financial results for full details on the first quarter of 2021. As usual, our comprehensive report on the quarter will be available in our upcoming Form 10-Q, which we’re on track to file tomorrow. As J.J. mentioned, the anticipated timing of revenue and expenses over the course of 2021 resulted in a strong start to the year. With respect to revenues, Jeff mentioned some of the specific markets that placed large orders in the first quarter. While we don’t expect that pattern to repeat this year, future quarterly revenues in 2021 may be lower; we are pleased to be able to supply the market earlier rather than later, and we continue to emphasize our full year guidance in our annual business cycle as the best metric to measure our performance. Moving to operating expenses. While R&D expense in the first quarter of 2021 was largely flat compared to the first quarter of 2020, the program mix of our R&D spend is starting to shift to our earlier-stage pipeline. As we advance these early-stage assets, we expect R&D expense to increase over the course of the year, which is a key timing element driving the quarterly financials this year. Likewise, as we hope to be launching VOXZOGO in the second half of the year, SG&A expenses are also weighted towards the back half of the year. Timing aside, SG&A expense for the first quarter of 2021 was slightly lower than Q1 last year, primarily due to lower foreign currency exchange losses and slightly reduced operating activity in Q1 2021 due to the pandemic. Turning to bottom line results. We reported GAAP net income of $17 million in the first quarter of 2021 compared to GAAP net income of $81 million in the first quarter of 2020. The decrease in income was primarily due to the absence of the $60 million gain on the sale of the Firdapse commercial assets in the first quarter of 2020, and the impact of the U.S. Kuvan generic competition in 2021. Non-GAAP income decreased to $104 million in the first quarter of 2021 compared to Q1 2020 non-GAAP income of $117 million, also primarily due to the Kuvan U.S. generic entry late last year. Based on the expected timing dynamics of both revenue and expenses from quarter-to-quarter in 2021 and our business plans for the remainder of the year, we reaffirm full year 2021 R&D expense, SG&A expense and the bottom line guidance. Lastly, with respect to total cash and investments, we ended the first quarter of 2021 with $1.4 billion, compared to $1.35 billion at the end of 2020. We set a goal of earning positive operating cash flow in 2021. While the aforementioned timing dynamics also impact cash flow, the business is off to a strong start in 2021 with $114 million of positive cash flow from operations in the first quarter. This solid cash position coupled with BioMarin’s business fundamentals, as shown with our stable operating financial performance, put us in good standing to manage through this year when our rapid growth is on pause in anticipation of the potential launches of VOXZOGO and ROCTAVIAN. Beyond our late-stage pipeline, our increasing investment in the early-stage pipeline sets up the advancement of the next generation of transformative BioMarin products. Thank you for your support, and we’ll now open up the call to your questions.

Operator instructions. You have a question from Joseph Schwartz from SVB Leerink.

Hi. I’m Joori dialing in for Joe. Thanks for taking our question. I was curious about your ROCTAVIAN program first. How satisfied are you with your pricing discussions with EU health authorities, given that another gene therapy manufacturer recently decided to forgo offering their gene therapy product in Germany after they didn’t get a lot of traction for their premium price?

Thank you. I think the first thing to recognize is ROCTAVIAN is a very different situation with respect to value proposition compared to the product you referenced. I’ll remind you that ICER in the United States recently reviewed ROCTAVIAN and Hemlibra against standard of care prophylaxis. With respect to ROCTAVIAN, their determination was that ROCTAVIAN would be a superior choice at a presumed cost of $2.5 million. Thinking about that relative to the Germany situation, their situation relied on cost offsets of transfusions, which are relatively lower costs than the cost offsets due to the ability to reduce or eliminate Factor VIII replacement therapy. That’s the main distinction. In addition, when we price ROCTAVIAN, we intend to capture the full value of that product, which includes, in part, cost offsets but also potentially superior clinical outcomes and quality of life benefits. So, I think you’ve got an apples-to-oranges comparison that needs to be thoughtfully considered.

I would add that the price that was turned down in the Germany example wasn’t that low; it was close to $900,000 per treatment. I think the issue was that the market in Germany for that indication was very small compared to other parts of Europe. The disease prevalence varies by region, which creates a very different situation for us. Germany is a significant market for us in Europe.

And then my second question is on VOXZOGO. You said that this program could be your strongest launch in the Company history. What is the driving factor that makes you believe that this could be the largest brand? Are you detecting high demand from younger patients, older patients, parents, advocacy groups? I’m curious to know what gives you confidence and how you’re thinking about the adoption pattern, assuming approval. Thanks.

We’re really excited about VOXZOGO. We have a comprehensive clinical package supporting potential approval and launch. We have a multi-year effort behind defining the natural history and burden of illness for achondroplasia, which was not well characterized before BioMarin’s work and which is foundational to our value proposition. We have many years of durability expressed in Phase 2, a robust Phase 3 study augmented by the crossover arm from year 1 to year 2, and the full two years in that Phase 3 from the active participants. In addition, we have another study studying VOXZOGO in zero to four year olds that will read out in the not-too-distant future, and additional work ongoing. So, a robust clinical program with robust results supports this opportunity, and a relatively large patient population to go after. Our EMEA operating region unlocks a patient population roughly three times the size of the U.S. market. There’s a lot of patients and a powerful value proposition. Investigators are excited about this program, and in advance of launch we are getting strong signals of enthusiasm from the market.

I would add that it’s a large opportunity. We estimate in the EMEA region about 11,000 eligible patients. There is no approved therapy for achondroplasia and no competition. In some countries over 80% of patients undergo limb-lengthening surgery, which is painful and risky. That illustrates the unmet medical need in the region and globally for achondroplasia patients.

Next question from Cory Kasimov from JP Morgan.

I had a follow-up on vosoritide. You spoke to the three-times greater patient population. Can you give a sense of initial uptake expectations across geographies comparing EMEA and the U.S.? And how should we model the commercial opportunity at peak and the split between these geographies?

We addressed this in our previous call. We typically anticipate payer coverage, best pricing and most rapid uptake in the U.S. Relative to that, EMEA is a three-times larger opportunity but pricing and reimbursement approvals take longer and must be navigated market by market. Patient uptake in EMEA typically comes slower, but EMEA and other international markets become the long-term engine of growth for our brands, as seen with Brineura, Vimizim and Naglazyme.

To add, the market size is additional patients. We estimate about 11,000 eligible in EMEA that does not include Latin America, Asia and other regions, and about 3,100 patients or so in the U.S. If you assume an average reimbursement price of $150,000 in Europe and $200,000 in the U.S., that would be about a $1.6 billion market in EMEA and about $600 million in the U.S., getting to roughly a $2.2 billion combined market. The market is wide open with no anticipated competition for at least five to six years.

Next question from Salveen Richter from Goldman Sachs.

This is Elizabeth on for Salveen. How have your discussions with the FDA progressed regarding their willingness to allow you to submit ROCTAVIAN ahead of having the full two-year data set? Thank you.

The FDA has reiterated their request to see the two-year data. They stated that before the one-year data and repeated it after the one-year data without having seen the one-year data. That is why our working case remains to file in Q2 2022 with two-year data.

Next question from Sandler O'Neill. You are now live.

Hi. It’s Chris Raymond. A couple of pipeline questions. First on BMN 307: you said last month you were moving to the higher dose. Can you confirm whether you have treated a patient at that higher dose and whether we should expect updates before R&D Day or wait until then? Second, on BMN 255, is that another November reveal or could we get information earlier?

I can confirm the higher dose is the 6e13 dose and that we have already treated a patient at that dose. We will share data more concretely when we pick the dose to take into the registration-enabling program. Regarding BMN 255 and data availability, we will remain somewhat reserved about timing for competitive reasons until we have more clarity about next steps. We are encouraged by the PKU program and see significant opportunity to expand the PKU market with genetically validated, potentially transformative interventions.

Next question from Phil Nadeau from Cowen & Company.

Hi. It’s Ernie Rodriguez for Phil. Are you concerned that shortening your lead time versus competitors is affected by the ROCTAVIAN delay to 2022? Could this harm commercial results from the delay?

It’s hard to imagine competitors won’t need to do what we are doing. The recent update from a competitor showed variability and a drop in Factor VIII activity from year one to year two, which mirrors the questions regulators raised for ROCTAVIAN. Competitors may need larger trials and longer follow-up. As time goes by, our ROCTAVIAN data package only gets stronger.

Also, in the most recent competitor update, variability of response was even greater than with ROCTAVIAN and the drop in Factor VIII level at year one was greater than what we observed. It’s unclear whether our timing puts us at any competitive disadvantage.

Given our expectation for longer durability data and the fact we will have five years or greater durability from our Phase 2 studies and the largest Phase 3 of any gene therapy completed with two years of data, our competitive position is strengthened, not weakened. We are not at a competitive disadvantage.

Thank you. Another question: you mentioned ongoing COVID impact on new patient starts. Has the vaccine rollout accelerated the process of getting patients into clinics?

In the United States, where vaccine uptake is further along, we have not yet seen an explicit effect on PKU clinic operations. However, our expectation that clinics will increase capacity later in 2021 is grounded in U.S. vaccine progress. Clinics have been operating at partial capacity since around Q2 of last year, which has allowed continued growth of Palynziq in the U.S. We expect business uptake to pick up as conditions improve.

Next question from Geoff Meacham from Bank of America.

Hi. It’s Aspen on for Geoff. On ROCTAVIAN, you previously mentioned the low dose will be the focus for readout. Can you walk through how the low dose could be an arbiter for longer-term Phase 3 data? Also regarding vosoritide, did the FDA note anything else besides wanting two-year data when they extended the PDUFA, and with a 4 to 8-week turnaround from approval to shipping, should we expect negligible vosoritide revenues this year?

Regarding the low dose, if we look at chromogenic median Factor VIII, after two years in the Phase 3 study it was around 14 IU/dL for the higher group and closer to 10 IU/dL in the 4e group. In the third year after transduction for the low dose group, Factor VIII expression remained in a range that was accompanied by very good hemostatic efficacy with ABR around 1 or lower. If the decline seen after year two is not worse than prior observations, then ABR in year three should be close to zero. Patterns show that after peak factor expression there is an initial decline that decelerates over time, and the decline depends on the initial peak. If year three data look as expected, that augurs well for commercialized material durability through years three and four.

If you look at Factor VIII levels observed so far in the Phase 3 trial at one year and the 17 patients at two years, they’re tracking above the low-dose Phase 2 levels. If you believe Factor VIII is representative of what will happen, the 4e data at year four could be potentially indicative of future durability.

Got it. For vosoritide, I want to confirm whether the FDA identified anything beyond the two-year data request in extending the PDUFA, and whether we should expect very low or negligible vosoritide revenues this year?

With the PDUFA extension, approval in the U.S. would be late—if it happens, hopefully late November—so you would not see U.S. revenues for vosoritide this year prior to that. We do anticipate potential European approval in mid to late summer, so you could see some revenues from Europe this year for VOXZOGO.

The FDA review process allows them to ask information at any time and they have continued to do so. They have asked many questions about the two-year data, which indicates they are deeply into the review. They have continued to ask questions about the application in general and have conducted their site inspection. This feels like they are working toward the PDUFA action date.

Next question from Robyn Karnauskas from Truist Securities.

Hi. This is Kripa on for Robyn. You mentioned the FDA did not even really look at the one-year ROCTAVIAN data. Can you provide additional color on what the FDA was thinking and whether they conveyed a bar for two-year data acceptability? Is there any concern they could request three-year data?

The agency’s decision and its communication have historically been that they want the two-year data. That request was made before the one-year data existed and continued unchanged. The CRL reflected their concerns about a decline in Factor VIII activity between year one and year two and their desire to ensure that any decline is not consequential when using the to-be-commercialized material and steroid regimen used. They asked to see the larger N=134 for the two-year population. When they see the data, they will have much more information. At the two-year mark with N=134, if outcomes go as expected we should see a favorable clinical outcome with a well-defined safety profile. If declines decelerate as previously observed, that should be sufficient to support approval given the magnitude of clinical benefit—the substantial reduction in bleeding observed in our program compared to prophylactic Factor VIII therapy.

Next question from Akash Tewari from Wolfe Research.

This is Neil for Akash. According to your market analysis, how big is the addressable market for ROCTAVIAN in severe hemophilia A patients in the U.S. and the EU respectively? For example, based on our math, there are about 2,000 to 3,000 eligible patients in the U.S. after accounting for Ad5, HIV, HBV and inhibitor status. Among those eligible, how many do you think would be interested in receiving gene therapies?

I’ll let Jeff address the detailed commercial perspective, but emphasize that the European market is at least three times the size of the U.S., giving an eligible population larger than the U.S. estimate. We also have lifecycle management projects to expand the eligible population over time.

When we cite three times larger patient population, we’re referring to the EMEA operating region including the EU and additional markets. There are approximately 112,000 hemophilia A patients worldwide, 50% to 60% of whom are severe. When you remove patients under 18 and those with mild or moderate disease, you arrive at an addressable population. Over time, life cycle management could allow expansion to younger patients and mild to moderate disease populations. We will continue to work on market access and outreach to better understand interest levels among eligible patients.

Next question from Kennen Mackay from RBC Capital Markets.

Hi. Thanks for taking the question. Maybe one for Hank. It seems BMN 307 is not fully reflected in valuation. Some competing PKU gene therapy data aren’t encouraging. Can you help explain key differences between 307 and the competition in construct, expression cassette or vector that give you confidence in potential?

AAV5 is well known to us with extensive clinical and manufacturing experience. We have a large amount of preclinical data on numerous elements of the cassette—codon optimizations, spacers, tails, etc. We used lessons from ROCTAVIAN to build a more potent phenylalanine hydroxylase cassette. Many competitors have shown some expression, but they have pulled back from higher doses rather than leaning into higher, potentially more effective doses. Given our confidence in the safety profile seen with ROCTAVIAN and our manufacturing experience, we believe the dose we are testing is likely to produce meaningful and substantial Phe reduction levels. In short, our design and extensive experience position us to potentially be more effective.

I would add that we are testing patients with the anticipated manufacturing process and scale that will be used for commercial production.

Next question from Gena Wang from Barclays.

I have two questions on ROCTAVIAN. Hank, you mentioned the FDA did not see the one-year data. Are you planning additional discussion with the FDA regarding the possibility of an earlier submission with more data? Also, you mentioned $2.5 million—would that be a benchmark price in Europe? How are you thinking about installment payments? And a quick question on VOXZOGO: will you submit five-year Phase 1/2 data to the FDA and given the five-year data showed some decline, is that a concern?

When I say the FDA didn’t see the one-year data, I mean we did not make a submission versus issuing a press release. We are in regular dialogue with the division on various matters. If the FDA changed their view and asked us to submit earlier with one-year data, we would do so. But to date the agency has reiterated its request for two-year data, a request that was made prior to the one-year data existing and has been maintained. Our confidence in ROCTAVIAN remains high and we continue to engage with the agency.

Regarding pricing, ICER suggested a $2.5 million benchmark to be cost-effective in the U.S. They have not done an analysis for Europe. Prices for comparable agents are lower in some European countries and similar in others, so the price in Europe might be lower than $2.5 million but would still be significant.

On installment payments and risk-based agreements, we have had extensive interaction with European payers and there is appetite in a number of key markets for risk-based agreements. There is not a consistent signal favoring installment payments. Where appropriate, we will consider risk-based agreements that align payers and BioMarin on outcomes, which can be a reasonable trade-off to capture value while managing payer risk.

Next question from Debjit Chattopadhyay from Guggenheim Securities.

This is Aaron on for Debjit. For BMN 307, what Phe levels do you think would be commercially viable? Do you need to get down to 120, 360 or 600 µmol/L? Can you say anything about immune response—will it look similar to ROCTAVIAN?

Palynziq can get people under 600 µmol/L and under 360 µmol/L, and a fraction to normal. The ideal for gene therapy would be to get everyone to normal Phe on a normal diet. We believe that even at the dose we are now testing that is within striking distance, though the exact level is a question for the data. The goal is normal Phe and normal diet. Immune response considerations will be carefully monitored, and our experience with ROCTAVIAN informs dose selection and safety expectations.

Based on what we observed going from the lower dose to higher doses in ROCTAVIAN, the response curve can be steep. We believe there is a good chance with the 6e13 dose in 307 to get to normal Phe levels, which is the objective. Even if not fully normal, achieving levels similar to Palynziq would still represent an opportunity, but normal Phe is the objective.

Next question from Matthew Harrison from Morgan Stanley.

Hello. This is Kostas on for Matthew. Quick question on BMN 331: can you provide color around the trial design and how you plan to differentiate from current therapeutics on the market?

It’s early. We plan to file an IND and will gain more specifics after IND feedback. The main competitive advantage of gene therapy is natural replacement versus bioengineered molecules that require chronic dosing and compliance. Gene therapy offers potential persistence and durable disease control without chronic administration. When discussing gene therapy with patient communities, the drive is to be free of their condition. We see these approaches as potential market expansion opportunities.

Next question from Paul Matteis from Stifel.

This is Alexander for Paul. Thanks. Apologies if I missed this earlier, but with the PDUFA extension for vosoritide, is there any indication there may not be an advisory committee meeting from the FDA?

They have specifically communicated that so far no advisory committee is expected. Whether the submission changes that, we don’t know, but to date there has been no indication of an AdCom. Remember that an advisory committee was held in 2018 and our program follows the specifications discussed at that time, and we have provided the FDA the second year of data in a contemporaneous controlled trial. So, I don’t anticipate an advisory committee but cannot be certain.

Next question from Tim Lugo from William Blair.

Digging into the early-stage pipeline, you gave color on six early-stage assets in the press release. Do any have Brineura-like market potential? Also, you have a partnership with Deep Genomics covering multiple programs—when might we see candidates from that partnership?

All assets we consider have the aspiration to be fast to market. We are institutionalizing what we did with Brineura. We recruited experienced leaders and scientists who have delivered transformative programs and want to repeat that. We are also looking at assets that are extendable into other indications and leveraging platform technologies. Regarding the Deep Genomics collaboration, the concept is to use advanced computational approaches to accelerate identification of regulatory targets and candidate therapeutics. That work is intended to improve our ability to rapidly design targeted therapeutics that fit genetic conditions precisely.

Next question from Mohit Bansal from Citigroup.

The gene therapy space appears to be facing challenges, including regulatory conservatism and safety issues. How do you view what’s happening in the gene therapy world and how does that influence how you prioritize targets and diseases?

The situation with regulatory agencies is not entirely novel. OTAT and other groups are relatively understaffed and heavily focused on COVID-related work, which can lead to conservative approaches. When there are existing alternative therapies, regulators ask for more robust evidence. That affects development strategies: if there is no alternative therapy, development can be more straightforward; where there are alternatives, we need robust comparative programs. As the field accumulates more data and experience, regulatory comfort with benefit-risk decisions should improve. BioMarin is a sponsor of much of this learning and we are leveraging it across our pipeline.

There are no further questions at this time. I will now turn the call over back to J.J. Bienaime.

Thank you all for your continued support. With so many opportunities ahead for BioMarin, the momentum towards our next significant phase of growth is building. We had positive operating cash flows of $114 million in the first quarter, which is major progress relative to the first quarter last year and represents the strength of our underlying business. With our next two larger product opportunities in VOXZOGO and ROCTAVIAN within sight, we expect 2022 to be a financially transformational year for BioMarin. Thank you, and have a nice afternoon.

Thank you, everyone, for joining. You may now disconnect. Have a great day.