Biomarin Pharmaceutical Inc Q2 FY2021 Earnings Call

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

Thank you, Grace. 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, 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 report. On the call today from BioMarin management are J.J. Bienaimé, 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. We hope to keep the call today to one hour and give everyone a chance to ask a question. So, we respectfully request that you limit yourself to one question during the Q&A portion of the call. Thank you for your understanding. I will now turn the call over to BioMarin’s Chairman and CEO, J.J. Bienaimé.

Thank you, Traci, and good afternoon, everyone. We hope you and your families are enjoying this summer. So, we had very strong results in the first half of this year, recording $988 million in total revenues in the first six months of the year, and $0.5 billion in total revenues in the second quarter alone, representing a 17% top-line year-over-year growth, including Kuvan, and 38% year-over-year growth in Q2, excluding Kuvan, which as you know, has been facing generic competition in the U.S. since October of last year. These results underscore our ability to execute, despite the impact of a global pandemic, and more importantly, a testament to the value our product represents to patients. Based on this strong performance, we are pleased to be raising our total revenue and bottom-line guidance for the year, and Jeff and Brian will provide more details in a moment. With the commercial business increasing steadily, we look to the next generation of BioMarin products to drive transformational growth in the coming years. With our late-stage products of VOXZOGO and ROCTAVIAN currently under review by health authorities, the R&D organization achieved a number of key goals in the first half of the year. In this quarter, Hank and his team advanced regulatory progress with both products, setting up for four potential U.S. and European approvals, beginning with VOXZOGO in Europe in the next few weeks, hopefully by the end of next month. And actually, we are going to start treating our first commercial VOXZOGO patients in France imminently, based on early access program, which will approve the so-called ATU in France, and Jeff will give some more details in a little while. So, we expect EU approval to be followed by potential approval in the U.S., based on the current PDUFA action date on November 21, and discussions with FDA are moving forward. With ROCTAVIAN, the recent validation of the MAA and then potential CHMP opinion in the first half of 2022 paves the way for a third potential major market approval in the next 12 months upon completion of the two-year observation from all 134 patients in our pivotal GENEr8-1 study with ROCTAVIAN. This will be the basis of a potential BLA submission next year in the U.S., should the data be supportive as we expect, and then anticipating a fourth major market approval is possibly in late 2022. The value proposition of ROCTAVIAN increases with each additional year of bleeding control as demonstrated. As we just shared at the recent ISTH meeting from our pivotal GENEr8-1 study, over 90% of the 134 patients had an annualized bleeding rate of zero or lower than baseline after 4 weeks following treatment with ROCTAVIAN. And this is just with one intravenous infusion of ROCTAVIAN. Also at ISTH from our Phase 1/2 study, following a single infusion of ROCTAVIAN throughout these 5 years, we observed a 95% reduction in mean annualized bleeding rate to less than 1 bleed per year compared to the bleed rates for participants previously treated with standard of care Factor VIII prophylactic. Again, we’re not comparing ourselves with placebo here. We compare ourselves to the standard of care. So, we recognize that it has to be determined how long ROCTAVIAN will demonstrate hemostatic efficacy, but we have reason to believe based on the current data that bleeding control may be sustained for at least five years and beyond, based on the current data. And while the gene therapy is not likely to be lifetime therapy at this time, the value proposition ROCTAVIAN represents to patients and payers only strengthens with each year of data we are accumulating. To date, based on this five-year bleed control from our Phase 1/2 study, at least $3.25 million per patient has been spared for each patient in the clinical trial in the U.S. This is based on the fact that in the U.S., the current Factor VIII prophylactic therapy costs about $650,000 per year. So, as you can imagine, payers will understand this kind of math pretty easily. So, when considering value, we recently learned also from a review of some insurance claims of patients taking Hemlibra in the U.S., that many of them are still using recombinant Factor VIII, despite being treated with Hemlibra. This is based on insurance claims in the year 2020. This certainly highlights the ongoing infusion burden with Hemlibra but the tremendous cost of potential cure. Hemlibra, which is a great therapy can cost over $700,000 per year per patient in addition to whatever Factor VIII patients are taking. The bottom line is that the sustained, durable hemostatic efficacy observed following treatment with ROCTAVIAN in the longest and largest gene therapy trial ever done in hemophilia A positions ROCTAVIAN in a very attractive treatment options to both patients and payers receiving approval in U.S. and in Europe. As we shared with you previously from a paper published by Croteau in 2019, the lifetime cost of Factor VIII prophylaxis alone, and not including other aspects of the disease management and surgeries that these patients have to undergo on a regular basis. So, the lifetime cost of Factor VIII prophylaxis alone is estimated in that paper to be between $28 million and $31 million. So, obviously, if we price our product between $2.5 million to $3 million, we’re not pricing our product as a lifetime cure. But more relevant to the value proposition ROCTAVIAN, specifically as noted in the ICER report last year, ICER determined that the value proposition for ROCTAVIAN was around $2.5 million. That was a cost-effective threshold for treatment with ROCTAVIAN. And that was based only on three years of efficacy data. Now, we have five years. So, we are thrilled with the dramatic bleed control demonstrated with ROCTAVIAN. More than ever, we believe that it will be an important treatment choice based on efficacy for patients and cost savings for payers. As our next potential significant growth drivers, ROCTAVIAN and VOXZOGO have been a key focus, and we expect will be transformational to BioMarin upon potential approvals. But, it is our next generation of early-stage pipeline products that we look forward to unveiling in more details later this year. The BioMarin value proposition reaches far beyond our strong base business and our near-term opportunities in hemophilia A and achondroplasia, and we’re excited to share more details with you at our upcoming R&D Day in November of this year. So, thank you all for your continuous support. And I would like to turn the call over to Jeff to discuss the commercial business update in more details.

Thank you, J.J. I’m very pleased with the team’s performance across all brands and all regions during the first half of the year. In the second quarter, we achieved $502 million in total revenues, representing 17% growth in the second quarter of 2021 compared to the same period in 2020. Significant growth concentrated in markets where customers placed orders, specific to our enzyme replacement therapy brands drove strong sales in the first half of the year. Specifically, in the first and second quarters of 2021, large orders for Naglazyme and Vimizim from such markets as Turkey, Brazil, Egypt, Russia and Saudi Arabia is expected to partially satisfy demand for those products in those regions in the second half of 2021. As a result, we expect a step down in volume in the second half of 2021 in those markets. Based on the strength of demand in the first half of the year and expectations for the remainder of 2021, we are raising full year guidance on total revenues, increasing Vimizim, Naglazyme and Palynziq guidance, raising the bottom end of the range for Kuvan and reaffirming previously provided Brineura guidance. The detailed guidance updates are available on page 4 of today’s press release. Beyond ordering dynamics, patient demand is another key indicator to pay attention to. For both, Naglazyme and Vimizim, patient numbers increased more than 10% year-over-year, underscoring the essential nature of these important therapies. For Brineura, in the second quarter, patients on therapy increased 33% year-over-year. Moving to Palynziq, where year-over-year growth of 45% translated to $59 million in second quarter revenue, despite continued COVID impact to new patient starts due to PKU clinics closed or not operating at full capacity. Building on that theme, it is important to note that PKU clinics in the U.S. have not opened up to new patient starts at the rate we anticipated. We are still experiencing net patient growth, noting that new patient starts in the U.S. in the second quarter were lower than we expected. Consistent with expectations, the U.S. was the main contributor of growth in the quarter, driven by U.S. patient increases of approximately 30% year-over-year. And while we remain optimistic about the growth prospects for Palynziq for the balance of 2021, we expect U.S. PKU clinics to increase new patient starts at a slower pace than originally anticipated. The pandemic impact on Palynziq in the EMEA region remains in effect where we have experienced delays in price, 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 $79 million in revenues in the second quarter, an increase compared to the first quarter of this year and reflects two factors: first, slower-than-expected erosion to generics; and second, a rebound from the seasonal dip in demand for Kuvan in Q1 that we typically experience. Kuvan net product revenues decreased by 36% year-over-year, primarily due to the U.S. loss of market exclusivity in October 2020 as anticipated. Despite the impact of these challenges, as I mentioned, we are raising the bottom of the range of full year revenue guidance for Kuvan. And now, turning to VOXZOGO, our next potential commercial opportunity and potentially the largest launch to date. As J.J. said, we are so pleased to have received a positive CHMP opinion for treatment of children two years old through final adult height given the importance of starting treatment early in achondroplasia. Additionally, receipt of authorization for use or ATU early access program granted in France allows access to VOXZOGO for those seeking treatment in France. This will give us the ability to get patients started in France imminently. Consistent with our past practice, we will communicate the price for VOXZOGO once we have an approval. Assuming the upcoming EU decision aligns with the CHMP opinion, which is typically the case, we look forward to potential launch in the third quarter in Europe. Upon that approval, we expect to launch in Germany first, begin the reimbursement process in other large markets and take advantage of named patient sales opportunities in markets where they exist. As we have shared previously, when asked for help modeling VOXZOGO revenue, we are targeting annual net per patient revenue that is more like Palynziq than enzyme replacement therapy. Turning to commercial supply. We anticipate the release labeled finished goods will be ready to ship to customers in key markets such as Germany, France, Italy and the United States within 4 to 8 weeks of an approval. Teams are currently in place and well-prepared for what could be BioMarin’s largest brand yet. We look forward to sharing more detail on launch plans pending potential approvals over the coming weeks in Europe and in November in the United States. In conclusion, results in the first half of 2021 exceeded our expectations and reinforced the essential nature of our commercial brands to the people who rely on them. Despite typical uneven ordering patterns, demand for our products in the more than 75 countries where we do business is robust. BioMarin’s commercial team continues to execute seamlessly and look forward to new product launches around the world over the coming quarters, should timing of approvals align with our expectations. Thank you for your attention, and I will now turn the call over to Hank to provide an R&D update.

Thanks, Jeff. Beginning with VOXZOGO for the treatment of children with achondroplasia, we were thrilled to announce the positive CHMP opinion in the quarter, paving the way for potential European approval in this quarter. We were also pleased that the positive opinion recommended treatment with VOXZOGO for children ages two and above, a broader group than we had anticipated, given the importance of starting treatment as early as possible. We appreciate the European Medicines Agency recognize how important early treatment is, given the window of time when VOXZOGO can provide a clinical benefit. In the United States, two-year results from the Phase 3 extension study to supplement the new drug applications are under review, and we look forward to the PDUFA target action date of November 20, 2021. VOXZOGO is the first medicine that addresses the root cause of achondroplasia and is potentially the first medicine to be approved for children with achondroplasia. I would like to convey our gratitude to the families, the advocacy groups, investigators and colleagues who have supported the development of VOXZOGO. We’re at the cusp of the potential approval of another innovative product that addresses the root cause and tremendous unmet need of a significant pediatric condition. We want to thank everyone who contributed to this important moment. Briefly, on ROCTAVIAN, regulatory milestones are tracking to plan. We recently announced that the European Medicines Agency had validated our Marketing Authorization Application, which could lead to a CHMP opinion in the first half of next year under the accelerated assessment timeline. We’re very pleased to be tracking for its potential approval next year in Europe, given the breadth of clinical evidence demonstrating dramatic reductions in bleeding rates, Factor VIII utilization, Factor VIII infusion rates following with ROCTAVIAN. In the United States, we expect to resubmit the Biologics License Application for ROCTAVIAN in the second quarter of ‘22, assuming supportive two-year data, followed by an expected six-month review procedure. Further supporting the role we believe ROCTAVIAN may play in the treatment of severe hemophilia A, last week, we’re very pleased to have shared 12 presentations at the International Society on Thrombosis and Hemostasis 2021 Virtual Congress. The 3 oral presentations and 9 posters spanned a variety of relevant gene therapy topics, as well as data updates from both our pivotal GENEr8-1 and Phase 1/2 studies with ROCTAVIAN. As you may have seen in the updates, the largest and longest development program for any gene therapy in hemophilia A, ROCTAVIAN demonstrated continued durable clinical benefit through at least 5 years. Data from our pivotal GENEr8-1 study demonstrated that over 90% of all 134 participants at an annualized bleed rate of either zero or lower than it was than their baseline, and reminder that their baseline was collected while they were on best standard of care Factor VIII prophylaxis therapy. At 5.1 years after receiving a single dose with 6e13 vector genome per kilo dose cohort of the Phase 1/2 study demonstrated that after week 4, the mean annualized bleed rate was reduced by 95%. Also of importance to patients when considering the overall benefit from ROCTAVIAN and the pivotal GENEr8-1 study, all but 2 of the 134 participants remain on prophylactic Factor VIII treatment. In the Phase 1/2 study for both the 6e and 4e13 dose cohorts, all participants remain on prophylactic Factor VIII therapy through years 5 and 4, respectively. What our investigators are telling us is that this status is hugely meaningful outcome for these patients in these studies. We are very encouraged by these results and look forward to the full two-year readout with all 134 participants in early ‘22, the basis of our potential U.S. BLA submission in the second quarter of next year. Lastly, we want to extend our thanks to the community, investigators, and the people who participated in the clinical program. You’re making history and we thank you for your contributions to the body of knowledge in this important new therapy for hemophilia A. Turning now to our earlier-stage pipeline and beginning with 307 gene therapy for phenylketonuria. The dose escalation portion of the study continues with incoming subjects now receiving a 6e13 vector genome per kilogram dose, based on encouraging signals from the 2e13 vector genome per kilo dose. We look forward to gathering a meaningful amount of data with the 6e dose before determining next steps. To remind you, we are targeting normal fee and normal diet, and we look forward to the readouts from additional subjects given the interest in gene therapy solutions for phenylketonuria. Behind BMN 307, we’ve been concurrently moving a number of our next-generation products for it and are pleased to have 2 active INDs to highlight today. Last week, our IND for BMN 331 gene therapy for the treatment of Hereditary Angioedema, or HAE, was activated in the United States. HAE is characterized by unpredictable, painful, recurring and self-limiting acute edematous attacks, which may occur at multiple locations such as the face, extremities, upper airways and the GI tract. Laryngeal attacks are the most serious manifestation of HAE, and they can cause fatal asphyxiation due to obstruction of the upper airways. And while standard of care has improved over recent years, HAE patients still require chronic therapy, still experience debilitating, unpredictable breakthrough attacks that require rescue medication. BMN 331 is an AAV5-based gene therapy intended to restore the deficiency in circulating levels of the missing or dysfunctional C1 esterase inhibitor protein causing HAE with one-time IV infusion, thereby providing a durable preventive effect against HAE attacks without the need for regular prophylactic treatments. This will be the first gene therapy clinical trial for the treatment of HAE in the U.S. and BioMarin’s third investigational gene therapy product to the clinic. We’re finalizing study protocols and hope to begin dosing participants by the year’s end. We are pleased to share that in addition, BMN 255, our small molecule for the treatment of a subset of chronic renal disease, is in the clinic, and we are dosing participants. We’ve been very productive and somewhat under the radar with these advances as well as a number of other candidates over the last quarters, and we look forward to sharing a deeper dive on the burgeoning next-generation pipeline at our upcoming R&D Day in November. Thanks for all your support. And I’ll now turn the call over to Brian to update financial results in the quarter.

Thank you, Hank. Please refer to today’s press release summarizing our financial results for full details on the second quarter of 2021. As usual, our comprehensive report on the quarter will be available in our upcoming Form 10-Q, which we are on track to file over the next few days. As J.J. mentioned, the anticipated timing of revenue and expenses over the course of 2021 resulted in a strong start to the year and the upward revision of full year 2021 total revenue guidance, including Vimizim, Naglazyme and Palynziq as well as improved GAAP and non-GAAP guidance. With respect to revenues, Jeff mentioned some of the specific markets that placed large orders during the first half of the year in both the first and second quarters. They were concentrated in markets where countries typically place bolus orders, causing unevenness in revenues on a quarterly basis and in 2021 on a first half as compared to a second half basis. Based on these quarterly timing dynamics, we continue to emphasize our full year guidance as the best metric to measure our performance. While we continue to steadily identify and add new patients to each of our commercial products over time, we anticipate that demand for BioMarin products will continue to increase in the future, notwithstanding global ordering patterns. Moving to operating expenses. R&D expense for the second quarter was $161 million, which was lower compared to R&D expense of $182 million for the second quarter of 2020, which included an upfront payment to our DiNAQOR related to our DiNAQOR collaboration last year. Based on our R&D expense trends through the first half of the year and expectations for the second half of 2021, we have lowered the top end of full year R&D expense guidance by $10 million. Next, with respect to SG&A expense, Q2 2021 SG&A totaled $184 million, which was slightly higher than SG&A expense of $175 million for the second quarter of 2020. We hope to be launching VOXZOGO globally in the second half of this year, which is driving our SG&A expenses to be weighted to the back half of the year. Of note for 2021 is that our SG&A line this year includes some charges for idle plant time of approximately $25 million, mostly related to maintaining our ROCTAVIAN manufacturing capability during its continued development cycle. Based on these SG&A drivers in 2021, we are narrowing our full year SG&A guidance by $10 million and further note that we’re trending towards the higher end of the range for SG&A expense. Turning to bottom line results. We reported GAAP net income of $13 million in the second quarter of 2021 compared to a GAAP net loss of $29 million in the second quarter of 2020. Non-GAAP income of $98 million in the second quarter of 2021 also grew as compared to non-GAAP income of $57 million in Q2 2020. These bottom line results follow the same circumstances noted earlier. Higher first half 2021 revenue and higher second half 2021 expenses resulted in a strong profit result due to the second quarter. With the second half of the year trends that we’re expecting hold true, we predict recognizing a GAAP net loss and lower non-GAAP income in the second half of the year. However, back to the full year 2021, we’re very pleased to announce the improvement of full year GAAP and non-GAAP guidance. We’ve reduced full year GAAP net loss by $20 million to between $110 million and $60 million for 2021. Non-GAAP income full year guidance is now increased to between $190 million and $240 million, representing an increase of $20 million on each side of the range. That substantial level of non-GAAP income helped generate a continued increase in our total cash and investment, as we ended the second quarter of 2021 with $1.47 billion compared to $1.35 billion at the end of 2020. We set a goal of earning positive operating cash flow in 2021. And while the aforementioned timing dynamics also impact cash flows, the business delivered $83 million of positive cash flow from operations in the second quarter and $196 million on a year-to-date basis in 2021. This solid cash position coupled with our strong operating performance through the first half of the year is a strong foundation from which to look forward to the potential launch of VOXZOGO over the next few months in ROCTAVIAN next year and the progress of our early-stage pipeline that is leveraging the same R&D organization that developed our portfolio of 6 approved products in 2 large market late-stage programs is an exciting next chapter in BioMarin’s potential future growth story. Thank you for your support, and we’ll now turn the call over to your questions. Thank you.

Your first question is from Cory Kasimov from JP Morgan.

I wanted to ask you about ROCTAVIAN. I’m curious if you’ve been able to get much physician and also payer feedback coming out of ISTH, just given the virtual nature of it, and the five-year particularly in the context of Factor VIII levels, demonstrating a continued decline despite a still very favorable ABR. So, basically, wondering if this update impacts how they’re thinking about the product and the treatment paradigm in any meaningful way? Thank you.

Maybe I'll start, and Jeff will discuss the physicians and the payers. It was a virtual congress, which isn't quite the same. You’re right, Cory. However, I was impressed by what I heard from clinicians regarding their experience with ROCTAVIAN and their patients. They are not overly focused on surrogate markers but are more concerned with the patient in front of them. What struck me, now five years later, is that what is foremost in the physician's mind is the freedom that ROCTAVIAN provides their patients. While we might see it as simply taking fewer doses of a different medication, it’s about the life-changing freedom these individuals are experiencing. It’s been five years since they first faced the condition of hemophilia, which is quite significant. I believe this aspect resonates more with people than thinking about what tomorrow holds. Jeff, do you want to add anything from your perspective?

Thanks, Hank. In fact, we haven’t had a chance to specifically get out and check in with payers and physicians and any kind of formal way since ISTH, it just hasn’t been enough time. But a couple of observations I would make from some recent prescriber research that we’ve done in the United States and Germany that follows the availability of a full 301 data set through one year, GENEr8-1 data set through one year is, a lot of stability in the interest ROCTAVIAN relative to the last time we out to do this market research two years prior, but a significant interest increase in the confidence in the product. And that’s probably due to a combination of the longer data set from the Phase 1/2 study and the full data set from the GENEr8-1 study being available. So, I find that really encouraging. And as you know, Cory, our U.S. team has been out talking to payers for a year and a half now. And payers appreciate what Hank just mentioned, and a lot pivots on the final durability of this drug with patients. The five-year data that we’ve recently released is certainly supportive of continued durability, and the payers we continue to work with are considering mechanisms in the U.S. and Europe of being able to address risk of durability in managed access agreements or pay-for-performance agreements of one type or another depending on the market. So, I’m really confident as we head into this next round.

Jeff and Hank indicate that the payers do not monitor factor levels or attract them and do not organize in that way. Instead, their focus is on the annual cost of patients, which exceeds $800,000. Currently, we have five years of efficacy data, suggesting a savings potential of nearly $4 million for those payers. That is our point of emphasis.

Your next question is from Robyn Karnauskas from Truist Securities.

Just a question on VOXZOGO. Now that you have the European opinion, you’re about to get the U.S. opinion. Can you talk a little bit about your latest thoughts on the dynamics amongst the patients and the doctors? Are you seeing patients or children reaching out for interest in getting the drug and trying to see whether appointments are being available? And how are you going to manage that? And then, what are you seeing on the awareness side, especially in Europe and the United States, now that you’re so close to approval, where are you at there? It’s sort of a similar question about VOXZOGO that you answered for ROCTAVIAN. Thanks.

Hi Robyn, this is Jeff. I'll go ahead and answer this first and then ask Hank and J.J. to add anything I'm missing. First, it's important to note that we cannot engage with patients and prescribers before receiving approval. We are eagerly anticipating reaching the point where we can begin that engagement. As J.J. mentioned earlier, we have secured an approved early access program in France, which will enable us to start treating patients. In Germany, we are prepared to launch immediately following approval, should we be fortunate enough to receive it. Our market research indicates that there are expert centers across most European markets, which we will rely on as the initial prescribers for patients with achondroplasia. We expect that patients will begin their treatment in these expert centers, then gradually move to being treated by local physicians who will eventually initiate their treatment. In the United States, we have a team focused on establishing relationships with pediatric endocrinologists, who we believe will be the primary prescribers. These doctors are experienced in managing and prescribing treatments for growth disorders. Additionally, we recognize that some patients are being treated in genetics clinics, and we have strong connections in those clinics that we intend to utilize. Our market research shows significant interest in VOXZOGO from caregivers, and we are looking forward to progressing to the stage where we can start selling and promoting the drug.

Maybe the one thing I would add is 80% of the patients were born to parents of normal stature, and there’s not a subtle condition. This is a big health impacting condition, and they’re looking forward very much to improve health. And I would say the evidence that interest and awareness is rising cresting as Jeff was just describing, just from the EMA’s actions in terms of their recommendation, they were willing to extrapolate safety and efficacy data from the pivotal trial in patients older than five to making the product available in children other than five. We saw this with Brineura with the EMA as well that sort of their thinking is no child should be left behind. So, I think they recognized the urgency of the condition and the importance of giving Jeff’s team the tools they need to get this medicine to patients really.

And just to clarify, you said 48 weeks of the delay between like an approval time and time you could get drug to a center. I just want to be clear that’s true like with for the U.S. and Europe. How to think about modeling it?

That's correct. This involves Greg's operations team finalizing the product release and ensuring quality before it reaches the distribution center for shipping to customers.

So, Robyn, it's between 4 weeks and 8 weeks. It’s not 48 weeks.

Not a year... Although again, we are going to treat our first commercial brand in the next few days.

Your next question is from Salveen Richter from Goldman Sachs.

For VOXZOGO, do you feel that the FDA views the overall clinical package for approval similarly to the EMA, just given the two-year data comment, and also with regard to the EMA’s recommendation for a broader age group of two years of age and older?

As we’ve talked about, every health authority has their own sort of unique class on it. In the case of the U.S. FDA, we’ve been transparent all along talking about the fact that their original recommendation was two-year trial. And of course, we provided them two years’ worth of control data on improvement in height velocity. We think we have a really strong package. We’re getting really close to the finish line. And as typical for BioMarin, we’re going to not get into the sausage making of the later stage discussions with the health authorities. But we remain very confident in the package that we submitted. And I think that European action speaks good volumes to the results of diligent peer review. The perspective might be ever so slightly different, but I think the main question remains on balance of the benefits exceeding the risks here. We’re pretty confident of the coming actions.

Your next question is from Geoff Meacham from Bank of America.

I had one on ROCTAVIAN, and it sort of parallels another question. So, as you guys continue to accumulate long-term data, just a bigger and longer follow-up. Are there any themes that you can identify for maybe what characteristics could predict stable Factor VIII and longer durability, or in contrast, what could predict maybe a breakthrough bleed or shorter durability? I’m just trying to get a sense for maybe how you could optimize that looking to the commercial launch? Thank you.

Yes, the topic of predictability and variability is frequently discussed. The fact that only 2 out of 134 patients dosed in the GENEr8-1 trial needed to return to prophylactic therapy relatively quickly, while 132 did not and maintained adequate hemostatic efficacy, indicates promising predictability of response. Not everyone will respond identically, which is a common issue in medicine. However, managing and monitoring this in our field is relatively straightforward, as we do not exclude patients from therapy; they can always return to Hemlibra or Factor VIII prophylaxis. Currently, we understand the side effect profile to be quite favorable, making it a viable option for patients. Of course, all of this will be subject to review by health authorities for their final decisions during the review processes for the EU and the U.S. With that in mind, the durability data we have provide confidence that although we cannot predict exactly where or when things will stabilize, it seems likely to be several years after the initial transduction. This underpins what J.J. mentioned regarding the commercial value of the product, and aligns with Jeff's insights on having confidence in a product that can significantly change patients' lives, as reflected in the substantial positive clinical outcomes reported by my physician colleagues.

And again, as Hank said, we have very few patients that don’t return, less than 2% based on our current data. So, obviously, although obviously, it’s not great news for those patients, I don’t know of any therapy that works in 100% of the patients. But the fantastic COVID vaccine on the market, we have about 90% response rate and hundreds of patients have been taking them, although 10% of them don’t respond.

Your next question is from Debjit Chattopadhyay from Guggenheim Securities.

So, on ROCTAVIAN, post-approval, how do you think physicians are going to decide on steroids? So, would it be prophy or on-demand with close monitoring for the first 12 to 16 weeks? And secondly, assuming a 7 to 8-year durability, how are you thinking about retreatment, especially on the back of the benign immunogenicity profile of AAV5 vectors? Thank you.

It’s a bit premature to discuss steroid use following approval since we don’t have a label yet. We are in the early phases of addressing this in Europe and plan to begin the process with the FDA next year. Regarding steroids post-approval, we have data on both on-demand and prophylactic use. We've gathered information on both light and heavy on-demand steroid treatments. Our findings suggest that corticosteroids may not need to be administered as aggressively in the context of gene transfer. Simpler regimens, such as starting with a prophylactic approach, might be adequate. We currently have a study underway that is progressing well, thanks to our clinical team. We will continue to gather more insights leading up to the product's availability, which will help inform the product labels regarding steroid use. As for future considerations, we are conducting extensive research on the molecular mechanisms behind vector loss, which could involve liver cell turnover or complex intrahepatocyte factors. The positive aspect is that we are making progress in our understanding, which will aid in designing next-generation vectors. However, it's too early to think of this as a development candidate. My focus is on the scientific learning process and being ready for potential future vector expression challenges, which is still quite a way off for most patients.

Your next question is from Phil Nadeau from Cowen Company.

The FDA’s Cellular, Tissue and Gene Therapies Advisory Committee recently announced a meeting for early September to discuss the safety of AAV vectors. Hank, I’m curious to get your thoughts on that meeting. And then, maybe specifically, has BioMarin been asked to present at the meeting, or do you have any plans to make a presentation, even during the public comments period? Thanks.

Yes, it's great that the FDA is consulting their experts early in the development of these therapies, which clearly have transformative potential. However, there are still uncertainties, including some known issues that are therapeutically significant. They mentioned topics like integration considerations, thrombotic microangiopathy, and severe hepatic reactions. We haven't been invited to present anything, so we'll be observing the discussion like everyone else for now. I believe we don't have much to contribute on that front since we haven't encountered the same issues that others in the field have faced with different capsids. One aspect worth considering could be the implications for product or class-specific labeling, but it's still too early to discuss that. What makes our program stand out is the substantial data set we've accumulated. Many of the current issues are based on very limited patient events. Gathering extensive data is essential for enhancing our understanding of the safety of the AAV gene therapy platform. We're pleased to have already treated 134 patients in our Phase 3 trial, and after over a year of follow-up, we have a wealth of knowledge. So, we will be observing with great interest.

Your next question is from Paul Matteis from Stifel.

I had a couple of questions on vosoritide. I was wondering if you’ve had any engagement with the FDA on the two-year data and how important do you think that is to the FDA in determining durability of effect. And then second, I don’t know if it’s premature, but I guess, there are a couple of ways you can think about pricing for this drug in the U.S. One is based on prevalence and the other is kind of looking at growth hormone, which really isn’t kind of in the normal orphan ballpark, and those span a wide range. So, I’d be kind of curious, at least in your philosophy and if those two are the kind of right brackets to be thinking about?

I’ll start on the two-year data, Paul. I mean, there’s not a lot more to say about that other than that they flagged this as a consideration for discussion at their advisory committee, and we believe that we addressed the issue of durability not in the exact way that the FDA wanted, but in a way that is robust scientifically for them to come to their conclusions. But as you know, they reiterated their request. We have provided the data. We are interacting with them about the data, as I mentioned. We’re getting close enough to the finish line now that we won’t go into the sausage making of the back and forth. But suffice it to say with the PDUFA data of November 20, I think we’ll all know the answer of the FDA fairly shortly. And we remain confident that the data package addresses the issues of their consideration. That is to say that VOXZOGO’s effect will accumulate over time that that benefit of the natural regulator bone growth will facilitate wellbeing in all the endochondral bones of the body resulting in both stature gains, but ultimately over time improvement in their health.

I’ll start with the pricing, and then Jeff can tell you about some payer research we’ve done. I think we stated before, and we’re reiterating it that we anticipate a pricing here that would be similar to Palynziq, which is around $200,000 a year for patients in the U.S. And that is based on payers’ research and the value proposition that we have here. I would say growth hormone is not a good comparator. Growth hormone insufficiency or deficiencies are a much, much less severe disorder. You’re talking about around two standard deviations from normal in terms of final adult height. There’s no associated comorbidities. We’re talking about 5 to 6 standard deviations from normal in terms of delta here. So a much more severe disorder, which puts it in orphan category. And this is supported by our peer research that Jeff can talk about.

Yes, thank you, J.J. You touched on an important point regarding VOXZOGO and its relation to the treatment population, which is quite small compared to those eligible for growth hormone. More crucially, we need to consider the unmet medical need in achondroplasia and the potential long-term and lifetime advantages of VOXZOGO for these patients. We have engaged extensively with payers in both Europe and the United States to illustrate the unmet need in achondroplasia and to project the benefits of VOXZOGO, which extend beyond the significant improvements in growth velocity that we are primarily studying in the Phase 2 and Phase 3 trials. I believe we've made considerable strides with payers in this area. As J.J. pointed out, we are much more optimistic about the pricing prospects compared to growth hormone pricing.

And also on top of it, here we’re going to have no competition for many years to come, at least for six years, if not more. Growth hormone is a very competitive market, including biosimilars. We’re not quite in the same situation here and other dynamics.

Your next question is from Gena Wang from Barclays.

I have one question regarding ROCTAVIAN. Any thoughts on the possibility that FDA could ask for longer than two-year follow-up for submission? And if so, when would you expect to hear back from the FDA?

The FDA can ask for anything at any time. As you’ve seen in the past, they might require longer data even after issuing a complete response letter. This is the first expectation regarding communication, and I understand it’s frustrating for everyone. There are many reasons they might cite for this. Unfortunately, we cannot control the FDA’s decisions, COVID, or external factors. What we can do is generate substantial data and work towards developing the best drugs with the strongest evidence packages. The fact that the European agency is ready to initiate the application review with one year of data suggests that two-year data is forthcoming, which is encouraging. It indicates the health authority can evaluate the accumulating information package, even if there are ongoing uncertainties about long-term durability. The U.S. FDA has clearly stated their requirements for the two-year data; it’s not due to any concerns about the data they’ve seen so far. They’ve seen the same information you have, and they seem to have decided they want two-year data. I’m hopeful for a positive benefit-risk outcome. If you consider that two years ago, I received a single infusion and two years later, I’m still not experiencing the underlying condition I was diagnosed with, that’s significant. Let's hope that holds true through the next review cycles.

And also, we haven’t had any communications so far with the FDA that would lead us to believe that they are going to require more than two years.

Your next question is from Joseph Schwartz from SVB Leerink.

Hi. I’m Joori dialing in for Joe. Thanks for taking our question. First question is on VOXZOGO. How confident are you that you understand all the influencers and influences in the achondroplasia market? So, for example, the adoption of Kuvan was influenced by dietitians, but needed to be convinced of the merits of the drug? So ahead of VOXZOGO’s launch, our question is, how constant are you that you have a handle and buy in from all the stakeholders that matter that will be important for widespread adoption of the product?

Well, thank you for that question. That’s a good one. In fact, we have a commercial model that includes paying attention to the different stakeholders that are likely to influence the entire range of commercial decisions. We call it our five-piece model. Those include patients and advocates, politicians, physicians, and payers. And so, we pay attention to all of those influencers. In terms of the degree of confidence, each of those groups is not monolithic. There are different individuals. Some are more bullish, some are more skeptical. Some are early adapters, some are later adapters. So, there’s variability inside of there. As it relates, for example, to patient advocacy organizations, depending on where you’re standing in the world, some are really excited about having a treatment option, others less so, same thing with payers. So, I think that we’re reasonably confident in our ability to pull off a strong commercial launch, starting in Europe and hopefully, later this year in the United States. 100% assurance is probably not something that I could promise you.

Yes. I mean, again, I think there is a lot of excitement about the drug in many parts of the world here, based on the feedback we’re getting from our commercial organization. And as you know, in some countries, like Italy and Spain, I think around 80% of patients undergo limb extension surgery, which is not just painful and expensive. So, it gives you an idea as to whether they really want to grow faster than they’re growing right now, and they are willing to do these things. And here, we are finding something that is way more elegant than the limb extension surgery, which only impacts one or two bones of their bodies. So, we are not too concerned here. I think the patient demand is going to be there. Also, as Hank said earlier, I think 80% of achondroplasia patients are born from parents that are unaffected by the disorder and the vast majority of them are interested in growth velocity and final adult height for their kids. And indeed, there are a few patients, but it’s a minority in patients, a few achondroplastic people that might be less interested in the product, but they are not eligible for the product because all of them are adults. But, we’re not counting them in our forecast statement.

Next question is from Michelle Gilson from Canaccord Genuity.

I have one quick one and one more robust question. I guess the first thing, has the FDA seen the five-year data and Factor VIII activity for valrox to ROCTAVIAN and reiterated their guidance to you for two years of data from the GENEr8-1 study to file? And then, the second also on ROCTAVIAN. It seems like the first market you’ll be launching into Europe. And based on some European KOL feedback we’ve gotten, it really seems like KOLs overseas are expecting maybe one or two gene therapies at most for Hemophilia A to be reimbursed and for the government to really be the deciding factor in determining which gene therapy is going to be available. I guess, with respect to this dynamic and your experienced marketing in Europe, how important is it to be the first mover there? And maybe if you could comment a bit on your expectations around both, the near and long-term expectations for ROCTAVIAN uptake in the region?

We are just starting discussions with the local courts. The FDA is aware of the five-year data press release, but I'm not sure if they reviewed the presentations. They have made it clear that they need the two-year data before considering the one-year data, and reiterating their request after the five-year data became available was unnecessary. We already anticipated what they would request even if we had reached out to them. Therefore, the availability of the five-year data did not alter our ongoing discussions.

Circling back to your question about Europe and the preferences of payers for one or more gene therapies, ROCTAVIAN is significantly ahead of potential competitive programs. You are correct that having a first-mover advantage in both Europe and the United States brings numerous benefits. Assuming we receive approval within the timelines we’ve planned, there won't be any second approved program available. If there were, that program would lack durability data and have less robust data sets regarding patient numbers. By the time that happens, BioMarin will be deep into lifecycle management initiatives, exploring other aspects of ROCTAVIAN treatment for Hemophilia A. You are spot on in recognizing that this first-mover advantage is incredibly valuable for ROCTAVIAN. We are optimistic about the uptake prospects related to treating patients, especially noting that once these patients are treated with ROCTAVIAN, they will not be available for any later market entrants. Thank you for highlighting this point.

Yes. Once patients have received treatment with ROCTAVIAN, they cannot undergo another gene therapy, particularly those using AAV vectors, which encompass virtually all current developments. This gives us a significant first-mover advantage over our rivals, and we are quite hopeful about it. Additionally, our AAV5 vector has the lowest prevalence of pre-existing antibodies compared to any other AAV vectors, providing us with another edge against our competitors.

Your next question is from Kennen MacKay from RBC Capital Markets.

I have a quick question about the pipeline. Can you provide an update on the additional patients that have been dosed for BMN 307, especially if dosing extends beyond the lowest dose? Also, within that program and study, what are the key considerations during dose escalation? Specifically, how do you determine the next dose level with a vector like this and in relation to the disease, especially when greater reduction results in better Phe lowering?

We are currently at the second dose level. We have dosed patients at the initial entry dose level, which was 2e13 vector genomes per kilo, and observed some signs of phenylalanine-lowering efficacy. This suggests that we are likely on the dose response curve. Consequently, we increased the dose for the next group of patients. While we haven't yet shared the data from this next group, we have indicated that based on our observations from the 2e group and what we've seen with ROCTAVIAN, we are optimistic that the 6e group may be the one we choose for dose expansion. When choosing a dose, our goal for therapeutic effectiveness is achieving normal phenylalanine levels and a normal diet. The dose that achieves this outcome for the largest proportion of the tested population will be selected. As soon as we meet the criteria for dose cohort expansion and transition into the registration phase, we will present the data in detail, explaining why we chose that particular dose as it aligns with our target product profile. We are eager to share this data once it becomes available.

Your next question is from Matthew Harrison from Morgan Stanley.

I was just hoping, Jeff, that maybe you could comment a little bit on, in more detail, some of the PKU center dynamics you were talking about and how much visibility you have into the flow of patients coming back or the flow of patients coming into those centers? And sort of how confident you are in a second half recovery there?

In fact, especially in the United States, where our business is the largest, we have significant visibility into how the different centers are functioning based on their operational status. If they are open, we can see the percentage of their previous capacity, whether they are seeing patients through telemedicine, and the wait times for patients interested in starting Palynziq therapy. We have gathered a lot of intelligence. Generally speaking, the PKU clinics are operating at some capacity and are beginning to accept new patients, but they are starting them at a slower pace compared to before the pandemic. That remains our challenge. As previously mentioned, we experienced strong year-over-year growth in the number of Palynziq patients by the end of the second quarter. I am confident that without the pandemic, that growth rate would have been significantly higher. There is definitely a patient population eager to start on Palynziq, and we are hopeful that as the pandemic recedes in the United States, these centers will return to normal operations. My confidence in the second half is moderate; considering the delta variant developments and the CDC's recent announcement, I remain optimistic but not overly confident. In Europe, the situation is varied depending on the specific market. Europe's path has been different, and while I am hopeful, I cannot say with full certainty that we will see more patients starting treatment in our key European markets in the second half.

So, that being said, Matt, we are raising the guidance of Kuvan and Palynziq by $10 million each.

We have reached the end of the Q&A session, and we will now turn the call back to BioMarin ‘s CEO and Chairman, J.J. Bienaimé.

Thank you all for joining us today. As we have outlined, BioMarin is approaching a significant phase of revenue growth. We have a strong cash position, a solid base business, two major market opportunities, and the potential for four approvals on the horizon, beginning with the likely approval of VOXZOGO in Europe next month. Additionally, we have a robust early-stage pipeline that we’ve been steadily advancing over the past quarters, which positions us for transformative growth starting in 2022. Thank you for your attention today, and we look forward to speaking with you again soon.

Thank you for joining today’s conference. You may now disconnect. Have a great day.