Biomarin Pharmaceutical Inc Q3 FY2025 Earnings Call

Hello, and welcome to the BioMarin Pharmaceutical Third Quarter 2025 Conference Call. I would now like to turn the conference over to Traci McCarty. Please go ahead.

Thank you, operator. To remind you, this nonconfidential 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. In addition, we will use non-GAAP financial metrics as defined in Regulation G during the call today. These non-GAAP measures should not be considered in isolation from, as substitutes for or superior to financial measures prepared in accordance with U.S. GAAP, and you can find the related reconciliations to U.S. GAAP in the earnings release and earnings presentation, both of which are available in the Investor Relations section of our website. Please note that our commentary on today's call will focus on non-GAAP financial measures unless otherwise indicated. Beginning on Slide 3 and introducing BioMarin's management team, joining today's call, Alexander Hardy, President and Chief Executive Officer; Brian Mueller, Chief Financial Officer; Cristin Hubbard, Chief Commercial Officer; and Greg Friberg, Chief R&D Officer. I will now turn the call over to BioMarin's President and CEO, Alexander Hardy.

Thank you, Traci. Good afternoon, everyone, and thank you for joining us on today's call. Starting on Slide 5, I am very pleased with the strong results across the business, leading us to raise full year total revenues guidance at the midpoint and reaffirm our VOXZOGO revenue outlook for 2025. In addition to top line performance, BioMarin has delivered expanding profitability and significant growth in operating cash flow, bringing our cash and investments balance to approximately $2 billion at the end of the third quarter. We are focused on finishing the year strong, positioning ourselves to achieve record commercial results for the full year. To date this year, we have delivered an 11% increase in top line growth year-over-year. These strong results are driven by the performance of our global enzyme therapies and Skeletal Conditions business units as we deliver for patients around the world. We have built the Enzyme Therapies business unit into a $2 billion-plus franchise over the last 12 months with continued growth anticipated. In the Skeletal Conditions business unit, our first indication with our first product, VOXZOGO, the treatment of achondroplasia, is expected to generate more than $900 million in revenues this year, leading us to reaffirm our full year 2025 VOXZOGO outlook and representing 25% growth at the midpoint of our guidance range. As the established standard of care in achondroplasia, VOXZOGO revenue has increased 24% year-to-date compared to 2024. Now in the fourth year of its global launch, VOXZOGO has represented a breakthrough therapy for families seeking treatment for their children with achondroplasia. Building on this innovation, we are excited to bring VOXZOGO's second indication forward for the treatment of children with hypochondroplasia. We have high confidence in the upcoming pivotal data readout for hypochondroplasia expected in the first half of next year based on proof-of-concept data and more than 10,000 patient years of safety and efficacy data in achondroplasia. Building on the rapid and successful global commercialization of VOXZOGO in achondroplasia, now available in 55 countries, we are well positioned to execute a strong global launch in hypochondroplasia, targeting 2027 should the data be supportive. Cristin and Greg will provide more details in a moment. Turning now to our broader strategic objectives. Over the past 18 months, we have undertaken a series of initiatives designed to prepare BioMarin for future growth and expansion. As part of this effort, we have made difficult decisions, including the discontinuation of multiple research programs that did not meet our criteria for advancement. Accordingly, today, we are announcing the decision to pursue options to divest ROCTAVIAN and remove it from our portfolio as we focus on the business units aligned with our strategic priorities. ROCTAVIAN is an innovative gene therapy that holds potential within the treatment landscape for severe hemophilia A. As a result, we are working to find an alternative that will allow for ROCTAVIAN to reach its full potential by ensuring access to those interested in a gene therapy treatment. In the meantime, ROCTAVIAN will be commercially available in the United States, Italy and Germany. Throughout this process, we will support and monitor patients who have received ROCTAVIAN as their well-being is our top priority. As we look to the future, we are pleased that our breakthrough medicines are in high demand and reaching thousands of patients around the world. Our financial performance so far this year reflects strategic investments in the enzyme therapies and Skeletal Conditions business units, both of which remain central to our growth strategy, along with increased business development opportunities and our own advancing internal pipeline. Building on this momentum, we look forward to the many data readouts and potential new approvals ahead, along with new business development opportunities as we focus on the next stage of BioMarin's growth. With that, I will now turn it over to Brian.

Thank you, Alexander. Please refer to today's press release for detailed third quarter 2025 results, including reconciliations of GAAP to non-GAAP financial measures. All 2025 results will be available in our upcoming Form 10-Q, which we expect to file in the coming days. Starting on Slide 7, strong global demand across our portfolio of innovative medicines drove a year-to-date total revenue increase of 11% compared to the same period in 2024. Revenues from VOXZOGO and PALYNZIQ each increased by more than 20% on a year-to-date basis. As we shared last quarter, we anticipate VOXZOGO revenue in Q4 to reach its highest level of the year due to the timing of contracted orders as well as increasing numbers of patients on therapy, and we expect full year 2025 VOXZOGO revenue of between $900 million and $935 million. We are pleased with 8% year-to-date growth of the Enzyme Therapies business unit led by PALYNZIQ. Due to large orders for NAGLAZYME and VIMIZIM in the second quarter, we note that Enzyme Therapies revenue was lower in Q3 quarter-over-quarter. And compared to Q3 2024, Enzyme Therapy revenue in the quarter was relatively flat, primarily due to a higher volume ALDURAZYME quarter last year. Given the strong top line performance so far this year and our expectations for the fourth quarter, we are raising the lower end of our full year 2025 total revenue guidance to $3.15 billion, with the midpoint of the range representing double-digit year-over-year growth. Now moving to Slide 8. Q3 2025 results include a charge of $221 million for acquired in-process research and development, or IPR&D, on a pretax basis related to the Inozyme Pharma acquisition completed on July 1 of this year. This acquisition-related expense represents an approximate impact of $1.10 on a per share basis. The IPR&D charges significantly increased both GAAP and non-GAAP R&D expenses in the third quarter and, along with higher SG&A investments across our Skeletal Conditions and Enzyme Therapies business units, resulted in lower year-over-year operating margin and diluted earnings per share, both on a GAAP and a non-GAAP basis. However, looking past the IPR&D charge, BioMarin's underlying strong revenue performance and operational efficiencies drove increased year-to-date GAAP and non-GAAP diluted earnings per share. Further, we recognized lower tax expense during the third quarter due to the timing impact of the Inozyme IPR&D charge on our quarterly estimated tax rate as well as some tax benefits from the recently enacted tax law. Taking these dynamics into account, alongside our expectations for strong revenue growth and continued operational execution in Q4 2025, we are updating full year 2025 non-GAAP operating margin guidance to between 26% and 27% and non-GAAP diluted earnings per share guidance to between $3.50 and $3.60. BioMarin continues to generate robust operating cash flow, reaching $369 million in the third quarter and $728 million year-to-date, contributing to the company's total cash and investments balance of approximately $2 billion at the end of Q3. We expect this momentum to continue, both solidifying the sustainability of our profitability and cash flows and building incremental capital to invest in future growth through business development. Now moving to Slide 9 and to summarize, we have updated our full year 2025 guidance across total revenues, non-GAAP operating margin and non-GAAP diluted earnings per share, incorporating the impact of the Q3 IPR&D charges. This update reflects a net improvement in our expected financial performance, net of the IPR&D charge of about $0.15 per share for non-GAAP diluted earnings per share. We are executing on our business plan so far this year, and today's guidance updates reflect both our year-to-date performance and our confidence in strong top line and profitability growth in the final quarter of 2025. Finally, we are sharing an update on our previously provided 2027 revenue outlook given the high level of interest. Based on the many unknowns and variables impacting our revenue over the next 2 years, mostly the impact of VOXZOGO potential competition, we recognize that there are a range of outcomes from which a single scenario cannot be predicted with enough certainty at this point in time. We have developed a number of scenarios and we will share that the lower end of our range of estimates is in line with current 2027 top line consensus for FactSet, excluding ROCTAVIAN. And on the higher end of the range of estimates, there are scenarios that reach $4 billion in total 2027 revenues, also excluding ROCTAVIAN. But again, given the many unknowns between now and then, we are not providing a specific estimate or more narrow range. Going forward, we will continue to execute on our strategy and monitor the most impactful variables. However, we do not plan to provide additional estimates of 2027 revenues, and we plan to follow our usual process of providing full year guidance at the beginning of each year with the usual quarterly updates. Thank you for your attention, and I will now turn the call over to Cristin for a commercial update.

Thank you, Brian. I want to begin by acknowledging the exceptional work from our teams across the world, whose dedication has delivered strong year-to-date results for BioMarin's commercial portfolio. Now moving to Slide 11. We are pleased that PALYNZIQ’S strong performance resulted in another quarter of more than 20% growth, reflecting more patients reaching efficacy and adhering to therapy. PALYNZIQ’S sustained growth demonstrates the PKU community's continued belief in its unparalleled efficacy profile and the importance of reaching normal Phe levels for effective treatment. We are pursuing approval of PALYNZIQ for adolescents aged 12 to 17 in the United States and Europe in 2026, potentially enabling this younger group of people to have access to therapy during an important period of transition to adulthood. Beyond PALYNZIQ, year-to-date revenue growth across our enzyme therapies portfolio reflects increased new patient starts across all products and strong adherence to therapy, reinforcing the durability and high penetration of these treatments despite quarter-to-quarter order timing dynamics. Now moving to Slide 12. VOXZOGO for the treatment of achondroplasia was available in 55 countries as of the end of the third quarter with new launches across multiple geographies. Global expansion and demand drove year-over-year VOXZOGO revenue growth of 15% in the third quarter and 24% year-to-date with growth in patient numbers quarter-over-quarter. For the remainder of 2025, we expect large contracted outside U.S. orders, deeper penetration across our growing VOXZOGO footprint and quarter-to-quarter new patient starts to result in Q4 being the highest of VOXZOGO revenue for the year. Outside the U.S., with a large majority of children eligible for VOXZOGO located, our global footprint remains a powerful growth engine, and we saw strong uptake across key large markets during the quarter. With approximately 75% of year-to-date VOXZOGO revenue generated outside the U.S., we expect significant opportunity ahead as we open new countries and more deeply penetrate countries that currently have access. Leveraging VOXZOGO's best-in-class evidence package of health benefits beyond height, international treatment guidelines recommending treatment as early as possible and broad age label, we are focused on increasing access to VOXZOGO for more children around the world and keeping them on therapy to realize the greatest health benefits. In the United States, the team has been laser-focused on initiatives to expand VOXZOGO treatment. These efforts drove new patient starts across all age groups during the third quarter with the majority of new starts from children under 2 years of age, and we expect that trend to continue. Due to the geographical dispersion and management across a range of specialties for older children in the U.S., we have implemented initiatives to address slowing uptake in that age group, noting that the initiatives will take time to show results. We have expanded this prescriber base across the country and increased the number of children on therapy across all age groups in Q3 versus Q2. Importantly, the strong adherence rates observed among families with children receiving VOXZOGO remain a key indicator of the product's value proposition. Now moving to Slide 13. We look forward to building on the momentum we have established with the breakthrough treatment of achondroplasia as we pursue the next five indications in our skeletal conditions business unit. Achondroplasia represents the first of six indications we are pursuing for treatment with VOXZOGO and/or BMN 333, our long-acting CNP. With the pivotal data readout just around the corner in hypochondroplasia, we are preparing for a strong global launch should those data be supportive, and I'll share more about that in a moment. We are also advancing our CANOPY clinical studies with VOXZOGO across four additional indications, including Phase II studies in idiopathic short stature, Noonan syndrome, Turner syndrome and SHOX deficiency. These Skeletal Conditions represent a total addressable population or TAPP of approximately 420,000 patients, acknowledging our focus will be on the most severely impacted subset of these children, representing a modest proportion of the total TAPP. We are expanding our leadership position in skeletal conditions, building on VOXZOGO as the standard of care in achondroplasia with future potential indications, the second in hypochondroplasia and four follow-on indications across the CANOPY trials. Our next-generation product, BMN 333, offers the promise of even greater efficacy, not just the convenience of the extended dosing interval, and we look forward to starting our Phase II/III study in the first half of 2026. Now moving to Slide 14. Our experience launching VOXZOGO for the treatment of achondroplasia has given us a strong foundation to scale globally. We've built the infrastructure, the relationships and the expertise to execute effectively as new indications come online, and VOXZOGO for the treatment of hypochondroplasia represents a potential significant breakthrough for patients. Hypochondroplasia is underdiagnosed because children with growth delays often do not receive a full diagnostic workup for various reasons, in part because hypochondroplasia presents with a wide range of symptoms and no single sign confirms the diagnosis. And families often face a complicated referral process and barriers to genetic testing, which slows down the path to diagnosis. These challenges mean many children go undiagnosed for too long, and that is why one of our priorities is improving early diagnosis for hypochondroplasia worldwide. We're driving initiatives like genetic reclassification, clinician education and patient and caregiver awareness, all aimed at driving earlier diagnosis. We're also optimizing diagnostic pathways so that in the future, children can potentially access therapy as early as possible. Importantly, we're seeing robust engagement from health care providers across multiple specialties. That enthusiasm reflects growing recognition of the unmet need in hypochondroplasia. This positions us well for the next phase. Our Phase III program in hypochondroplasia is progressing with data expected in the first half of 2026 and a potential launch in 2027. I'll now turn the call to Greg to provide an R&D update.

Thank you, Cristin. Now moving to Slide 16 and to provide a little more color, hypochondroplasia is a serious condition with a potentially broad impact on the health and daily life of those affected. Children and adults with hypochondroplasia can face significantly higher rates of comorbidities and procedures when compared to the general population, covering areas like respiratory, orthopedic, ear nose and throat, and mental health. As a result, they often undergo more surgeries, adding to the overall burden of the condition. Beyond the medical challenges, the condition can affect quality of life in very real ways, making everyday tasks harder and creating social and emotional strain. These insights reinforce why it's important to advance treatment options for hypochondroplasia, a condition for which no approved therapies are broadly available today. Now moving to Slide 17. At ASBMR in September, we presented important spinal morphology data for children under five years old with achondroplasia. These children were treated on our Phase II CANOPY study with either vosoritide or placebo. Spinal morphology is one of the factors that contribute to spinal stenosis, a leading cause of morbidity in achondroplasia. Spinal stenosis, particularly in the lumbar region, is a serious and all too common medical complication in achondroplasia, resulting in pain, muscle weakness and reduced mobility in the most severe cases. Since measures of spinal canal reach near final size by age five, early intervention is essential to prevent complications. Radiographs of the spine in our CANOPY study demonstrated that children who received VOXZOGO experienced improved spinal measurements across all lumbar vertebrae and an overall improved curvature of the spine after just one year of treatment. As a reminder, these improvements were seen as compared to placebo rather than simply describing the natural history of growing children. As these anatomic measures are often predictors of complications later in life, we intend to follow these patients in our CANOPY extension study to confirm that they translate to reduced morbidity or the need for surgical correction. Importantly, with these results, VOXZOGO is the only approved therapy with data showing a positive impact on spinal morphology, and these findings add to the extensive body of evidence supporting VOXZOGO's health benefits beyond improving growth. Now moving to Slide 18 and BMN 333, we will focus on our next-generation therapy for achondroplasia. Last call, we shared that multiple cohorts from our Phase I study had demonstrated superior pharmacokinetic measures of free CNP as compared to another long-acting CNP agent. We're advancing the program and are targeting initiation of Phase II/III in the first half of 2026. We have a strong conviction that the multifold increases in free CNP AUC that we observed with the BMN 333 can translate into clinical benefit. That confidence comes from three pillars: preclinical data showing roughly double the attributable growth versus VOXZOGO at high free CNP exposures, human genetics, where natural CNP pathway overactivation leads to extreme height without unexpected safety issues, and clinical dose response data from other long-acting CNP agents suggesting that additional growth may be possible at higher exposures. BMN 333 is the right agent to test this hypothesis. In our Phase I study, we observed multiple cohorts, which met our modeled PK requirements to deliver superior growth. From a design standpoint, the upcoming study will include a dose-ranging Phase II portion followed by a Phase III comparison against VOXZOGO, assessing safety, growth and resulting functional outcomes. Our goal is clear. BMN 333 is designed to deliver superior efficacy versus VOXZOGO without additional safety signals. We've engineered the molecule to safely achieve these higher free CNP levels and our target product profile reflects that ambition. We've aligned with regulators on this approach, and our strategy is to establish a new standard of care for achondroplasia. BMN 333 represents a major opportunity to build on VOXZOGO's success and further strengthen our leadership in skeletal conditions. Finally, on Slide 19, here's a snapshot of a few highlights expected across the pipeline through the coming quarters. As mentioned, in our skeletal conditions portfolio in the first half of next year, we're excited for the Phase III data readout for VOXZOGO in hypochondroplasia as well as the initiation of our Phase II/III registrational enabling study for BMN 333 in achondroplasia. For enzyme therapies, we look forward to extending PALYNZIQ access to younger populations with a potential approval in 2026 of the PALYNZIQ label extension for adolescents aged 12 to 17. In the first half of 2026, we also expect Phase III data for BMN 401 in children aged one to twelve, providing a potential first-in-disease medicine for ENPP1 deficiency. Our earlier-stage pipeline is also advancing, and we plan to share a clinical update by the end of the year for BMN 351 for the treatment of exon 51 skip amenable Duchenne's muscular dystrophy. At this next update, we intend to share whether data from our 6 and 9 milligram per kilogram cohorts supports our stated ambition to reach mean muscle dystrophin increases of 10% at steady state. And a reminder, this is without additional adjustment for muscle content. Safely achieving this target defines our go criteria for a potential registrational study. In summary, we have multiple data readouts and regulatory milestones ahead, and we look forward to keeping you updated as we execute on these opportunities to drive growth and deliver value for patients. Thank you for your attention today. We will now open the call to your questions.

Your first question comes from Phil Nadeau with TD Cowen.

My question is on the 2027 guidance. Can you talk a little bit more about the scenarios you see? And maybe more specifically, why are you rescinding the guidance now? What has changed over the last year since it was initially issued?

Phil, this is Brian. Thanks for the question. I'll take that one. Since we shared the original $4 billion 2027 outlook last year, we've had a year to assess the various factors that have arisen since then, including the impact of potential VOXZOGO competition. There are other puts and takes. We've got our acquisition of Inozyme and the potential for BMN 401 to launch in the pediatric indication in '27. We've also incorporated today's announcement that we're pursuing options to divest ROCTAVIAN. We've developed a number of scenarios to capture what we believe are different outcomes across these key variables across the entire portfolio. But given the many unknowns and their impact on predicting 2027 revenue, instead of taking an official position on those key assumptions, what we've done is outline the range of our lower case estimates and our higher case estimates. I'll share that in the lower case estimate, that reflects the scenario with two competitors successfully launching and taking significant share by 2027. And I'll share in the high case, that reflects the scenario where there's a significant delay in the competition, for example, successful intellectual property events for BioMarin. And again, in between there, there are a number of outcomes, highly uncertain at this time, and therefore, narrowing the range or coming up with more specific point-in-time estimates at this time isn't appropriate. Again, I'll just finish by saying, reiterating my comments in the prepared remarks that in that lower case estimate for BioMarin, we are still at consensus for 2027.

And maybe just a follow-up. I think when you issued the guidance a year ago, you suggested that competition was factored into the guidance. Do you now have a different appreciation or a different concern about how much share that competition could take, specifically against VOXZOGO?

Yes. Thanks, Phil. We did the initial work last year following Investor Day when the competitor data was released and at the time, modeled some competitive impact. There was some ability to absorb that into our original forecast at the time, and we did have some other upsides last year. We have taken a different view. We've observed trends in the marketplace, both what we are experiencing in these markets as well as, again, different potential competitor scenarios. And this is not a single point in time estimate. It is not our forecast. We merely wanted to reflect what the range of outcomes could be from our view.

The next question comes from Salveen Richter with Goldman Sachs.

Could you speak to why VOXZOGO sales were down quarter-over-quarter? And then also just help us understand here the business development strategy, just given that there seems to be so much of a focus on VOXZOGO and how that plays out, but you're kind of stuck from just given all these various dynamics competitively, when can we start to see that business development lever or levers kind of emerge to really add to your portfolio?

Brian here. I'll address the first part of your question regarding Q3 VOXZOGO. Yes, we experienced a slight decline quarter-over-quarter. Looking back to our previous remarks, we anticipated that VOXZOGO revenue for the second half of the year would be more heavily weighted towards the fourth quarter. We mentioned a couple of significant larger orders that were impacted by timing shifts, and our market-by-market forecasts for Q3 and Q4 also reflected this. In Q3, the situation was somewhat more pronounced, and the timing shifted further. I want to emphasize two points. First, we are reaffirming the total VOXZOGO revenue range for the year of $900 million to $935 million, which is primarily due to the timing between Q3 and Q4. Second, and most importantly, we are steadily increasing the number of patients across all markets and age groups in Q3, which serves as a key indicator of long-term demand. We anticipate continuing to experience some fluctuations in order timing from quarter to quarter.

Salveen, thanks very much for your question. It's Alexander. I'll answer the part of your question around business development. First off, I would say we've got strong underlying business performance in both Enzyme Therapies and in Skeletal Conditions. I mean, 11% year-to-date growth across both business units. But we are also producing significant cash flow. Our balance sheet is very strong, and we have conviction that assets are worth more in our hands than they are right now. So business development is a very important part of our strategy right now. We have a number of deals that we're in pursuit of. We've always been a company focused on early-stage collaborations. But what is different or how our strategy has evolved is we're also looking at Phase III pre-commercial and commercial assets because, again, we think we can add value to all stakeholders with those in our hands. So we have a number of deals in the works and in sight. I mean, obviously, business development is never completely within your control, but it remains a very high priority for us, and we're looking forward to sharing more information when we have that.

The next question comes from Cory Kasimov with Evercore.

I guess I have a follow-up on two questions that were asked. First of all, Brian, I appreciate the commentary you made on the previously issued '27 guidance. I think the way you framed it is helpful. However, I'm curious if you have any qualitative commentary you could also share on your prior long-term mid-2030s guidance with regard both to the opportunity for VOXZOGO as well as the anticipated CAGR for the Enzyme Therapies business. And then a follow-up for Alexander's capital deployment commentary. Given the pretty big cash balance and good operating cash flow generation you alluded to, have you given much consideration to share buybacks? Or are you really just holding that capital for other uses like BD as you were talking about?

Thanks, Cory. This is Brian. Appreciate the question. And it's a similar analysis, as I shared with the 27 range of estimates there. We are absolutely planning on continued sustainable growth across the business. I'll share that we are still targeting a high single-digit sustainable growth rate for the enzyme therapies over time. VOXZOGO, we do plan to continue to grow the brand by deepening patient penetration across all markets, plus the indication expansion opportunities where we will always have a lead. However, the offsets to that, most notably being potential competition are still very uncertain at this time. So we and the investor community will watch all of these variables very closely, and we'll keep you updated in terms of what we're seeing along the way. But again, we feel it's prudent to avoid taking an official position on a forecast with so many uncertainties. So not quoting a long-term growth rate at this time for that reason.

Cory, this is Alexander. I'll address the second part of your question about capital allocation. This is a topic we frequently discuss with our Board, as it's crucial for us to be responsible stewards of the substantial capital generated by our business success. We believe that business development presents the greatest opportunity for us to achieve significant incremental growth on the top line, which is closely linked to stock appreciation. We have a strong financial profile and capabilities in rare diseases, including research, development, manufacturing, and commercialization. We firmly believe that the assets are more valuable in our hands than they are currently. In the current U.S. biotech market, many rare disease companies lack sufficient capital and resources, and those assets would have more value with us. Therefore, as you can see, we strongly believe that business development should be our primary focus for capital. This remains a priority that we consistently evaluate as a Board.

The next question comes from Joe Schwartz with Leerink Partners.

For the upcoming BMN 333 PK data, what specific exposure levels would give you confidence that you can achieve clinical superiority over VOXZOGO? And as you move into a head-to-head superiority trial against VOXZOGO, what is the minimum annualized growth velocity delta over VOXZOGO that you believe could be required to demonstrate clear clinical superiority, drive patient switching and reestablish standard of care in the face of potential competition?

Thanks, Joe. This is Greg. I'll take a stab at both of those. With regard to the exposure levels, the stated level that we were looking for from our Phase I PK study was while we were looking at the free CNP levels. So in the case of VOXZOGO, of course, that's the drug itself. In the case of other molecules, it would be the released active quantity. We were looking for increases of at least 3x on the AUC. And as I mentioned in our prepared remarks, we actually saw three different dose levels where we achieved that in that ongoing Phase I study. So in our dose-ranging, again, we'll have an opportunity to test a variety of levels that met that criteria. With regard to the change in AGV over VOXZOGO, not ready to comment today on an actual number. Sorry to disappoint you there. I will add, though, that we have looked at this very closely, spoken with both clinicians as well as patients, and we've determined a level of differentiation that we think will be not only clinically meaningful, but also has the potential to pull through to the endpoints that really count, which are not just linear growth, but are all of those measures of health and wellness and function that we think, again, these patients deserve from a next-generation therapy.

The next question comes from Jessica Fye of JPMorgan.

I had a couple on the guidance and a couple on the pipeline. On the guidance, I don't have FactSet. What is the 2027 FactSet consensus, excluding ROCTAVIAN, just we know what that lower bound is? And then the second one on the guidance, maybe just asking about the other two elements of the longer-term targets that I don't think Cory mentioned. Should we still expect 40% non-GAAP operating margin starting in '26 that could expand to the low to mid-40s and the greater than $1.25 billion of CFO starting in 2027? Or were those sort of top-line dependent and more in question now? And then the two on the pipeline, for 351, my understanding is we'll get 6-month biopsy data for the 6-milligram cohort. What should we expect for the 9-milligram cohort? And second one on the pipeline is for hypochondroplasia, can you remind us of the powering for that trial? And is that figure sufficient in your mind? Or is there some minimum delta on efficacy you want to see to meet your target product profile?

Thanks, Jess. This is Brian. I'll speak to those first couple. So first, just to clarify that FactSet math for you, we are showing FactSet total revenue consensus for 2027 of $3.725 billion, and that includes $75 million of ROCTAVIAN. So that without ROCTAVIAN consensus would be $3.65 billion in '27. And then with respect to the 40% operating margin target next year, that does remain our target. Just a reminder that we've grown profitability and operating margin significantly over the last two years due to our strong underlying execution and the focused cost transformation, we do expect that to continue heading into next year and hold that 40% target. I will say that our operating margin objective is rooted in driving efficiency in the business through cost and process transformation, but without compromising value-creating activities. So in the event, in the lower end scenario over time, if we do face a trade-off, and this is less next year or more beyond, if we face a trade-off between preserving those value-creating activities and hitting the 40% margin, we will prioritize value creation to maximize long-term shareholder value. But right now, cost transformation and the target for next year is on track. We'll be prepared to update that again when we issue '26 guidance early next year.

Thanks, Jessica, and this is Greg. Let me take your two pipeline questions. With regard to 351, just as a reminder, what you can anticipate is a top line result that will be a combination of all the safety data that we have. That will be the 6-milligram and the 9-milligram per kilogram cohorts as well as the early data that we have, we'll be looking at the 12 milligram per kilogram, which is currently enrolling. What we will be also looking at is biopsy results and dystrophin levels from muscle biopsies in both the 6 and the 9-milligram per kilogram cohort. Our goal, again, is to have a level that predicts it steady state that we would be hitting this 10% level, which is a quite ambitious target. That's not correcting for fat and muscle content. That is a level that has yet to be seen in programs targeting exon 51. With regard to hypochondroplasia, we powered the study to measure for an AGV delta similar to what's been seen with VOXZOGO with achondroplasia, though as a quick reminder, the Dr. Dauber data would suggest that growth in hypochondroplasia may be on the order of 1.8 centimeters per year, a little bit more, which gives us confidence again that this is a well-powered study for hypochondroplasia.

Sorry, Jess, this is Brian. I want to revisit your question about the 2027 cash flow and the amount exceeding $1.25 billion. To clarify, that is dependent on top-line performance and would be somewhat proportional in lower-case scenarios relative to overall revenue. I would like to highlight that we are generating significant operating cash flow, nearly $370 million this quarter and over $700 million year-to-date. We are implementing several working capital optimization initiatives across the company in the next two years. As Alexander mentioned regarding our capital allocation strategy and business development, these cash reserves and the ongoing cash flow are positioned to be utilized as growth capital moving forward. This is a top priority for the company. In summary, the $1.25 billion is connected to the $4 billion.

The next question comes from Paul Matteis with Stifel.

This is Julian on for Paul. You talked about how your views have changed on the market as well as in thinking about some of these best-case scenarios and some of these more bearish scenarios. Can you talk about the contributions of potential commercial competition versus the risk to some of these competitors entering the market? And how much do you think could be attributed to your overall view on being able to have a positive outcome in litigation? Just curious on what you think about that. And then further, on the DMD program, can you just talk a little bit more about the 10% bar that you're sort of setting for yourselves there? Obviously, I think a lot of investors believe that the bar for regulatory approval is meaningfully lower when thinking about exon skippers that are currently approved. So just thinking about what sort of informs that view and if there's any sort of outside case that you could push a program forward that doesn't meet that bar.

Thank you for your question. This is Brian. I will begin by summarizing the lower and higher estimates again. After that, I will turn it over to Cristin to discuss some specific market trends we are noticing. For the lower end of our estimates, we are assuming that two competitors will enter the market and successfully launch by the end of 2027, capturing a significant share. On the other hand, the higher estimates account for varying outcomes, including potentially less competition or success in defending our intellectual property. It's important to note that these scenarios are not our official forecast; rather, we are illustrating the potential revenue impacts over time. We are comfortable with the current consensus at the lower end, and at the higher end, we believe we can still reach $4 billion, excluding ROCTAVIAN. Cristin, would you like to add anything?

Yes, Brian. And so yes, so looking at the overall trends, I just want to note what Brian, you said earlier and we said in the prepared remarks, and that is that we have continued to add patients on treatment with VOXZOGO quarter-over-quarter, and that is worldwide. Now if we dig a little bit into the U.S. market in particular, we do see that the majority of those new patient adds are for children under 2 years old. And we want to see that, right? This is patients getting on treatment early. The international guidelines also reiterate the importance of this. And what we see is our adherence rates are remaining strong. And importantly, we are expanding the prescriber base primarily or mostly in the pediatric endocrinology specialty. But what we've also seen in the U.S., and this is not unexpected for something in its fourth year into launch, we are seeing a slower rate of growth in the older patients. Now we expected this to some extent. One, many of these patients are geographically dispersed and in different parts of the country and therefore, harder to find. Not to mention, they're being managed by different specialties. But I will say that the team has been very focused on drawing out initiatives that will target these patients, and we expect that those initiatives will take a little bit of time to play out. But it's really important that we note that the U.S. is 25% of our overall revenues. And really looking to the ex-U.S., which comprises 75% of the revenues, we do reiterate our guidance of $900 million to $935 million this year alone. And if we look into the future, we continue to see VOXZOGO as a strong growth engine for us. This is a product that, as Brian has said, has been first to market in achondroplasia. We expect the same in hypochondroplasia, and we have a robust life cycle management plan behind it, launching in new indications over time, not to mention our asset BMN 333. So an important growth engine for us, but it's important to note the trends and the dynamics that we're seeing in the markets today.

Thanks, Julian. This is Greg. Just if I could tackle the DMD question, if that's okay. Yes, we have set a pretty ambitious bar with the 10% level. Just to back up a little bit, of course, Duchenne's muscular dystrophy, the name of the game is opening a therapeutic window in these patients and delivering meaningful results. We've made some choices with the way we've engineered this molecule. We've chosen to use so-called phosphorothioate chemistry instead of what most exon skippers use, the morpholino approaches. That opens this opportunity, again, to open a large therapeutic window for what we think will be a potentially dramatic effect. There are some challenges associated with that as well, though. Weekly administration is required. And the reality is that steady state because of the very long tissue half-life will be out at a year or more. And so what we've done is we've set an ambitious target. We know that we're looking at biopsies at the 6-month time frame. Now as a quick reminder, if we see something between about 3% and 5% at 6 months, that will translate in our model to 10% at steady state. We chose that number because of the human genetic data that suggests dramatically improved functional outcomes in patients that reach those sorts of levels, similar more to Becker's muscular dystrophy. And we think in the face of some of the characteristics of this molecule, we think that that sort of doubling of dystrophin as compared to some of the data that's been produced with other exon 51 skippers would be an undeniable advance in the field. And so while we also will be looking, of course, at functional data, we'll look at the totality of the data, that 10% bar is our true north right now to deliver something meaningful for patients.

The next question comes from Chris Raymond of Raymond James.

I have two questions. Brian, I understand you mentioned that the 2027 projections are not guidance but rather a range of possibilities. However, do you have increased concerns about TransCon CNP? Regarding the FactSet number being at the lower end, do you believe that Ascendis will receive first-cycle approval with just one year's worth of data when their PDUFA date arrives next month? Does that play a role in your considerations? I realize this is somewhat distant from 2027, but are you analyzing the situation in detail? For my second question, concerning M&A, you mentioned seeking assets that are under-resourced and could benefit from the BioMarin infrastructure. Could you explain how you have enhanced Inozyme's efforts regarding patient identification, outreach, and any other initiatives to improve that asset?

Thanks, Chris. This is Brian. I'll start by addressing your question. Regarding the two potential competitors, I don't think we will provide a comparison between them. However, it’s important to note that our lower case estimates are based on moderate assumptions about the timelines for their approvals. One company has a PDUFA date next month, as you mentioned. After considering those timelines and anticipated approval and launch dates for these competitors, we have modeled what a successful launch for them might look like. This leads us to our lower end estimate, although VOXZOGO is still expected to be a growth product for us over the next two years. That's all I have to share for now.

Chris, I'll address the first part of your question and then pass it to Greg. Currently, 401 is still in the development stage. Overall, BioMarin is effectively managing rare diseases on a large scale, operating in 80 countries with strong capabilities. We believe this will enhance our ability to impact and reach patients with genetic conditions worldwide. Our experience over the past 20 years has equipped us to identify patients, initiate therapy, and maintain them on treatment. We are confident that if this product is approved, we can utilize these strengths to achieve significant outcomes for 401. For now, we are focused on executing the clinical program, and I’ll turn it over to Greg.

Thank you, Alexander. Yes, Brian, just to quickly remind you, the deal closed on July 1, so we're not quite four months into the integration yet. It's too early to provide many examples of the impact our capabilities and resources can have on the overall program. However, I can assure you that we are utilizing all of our resources, whether that involves engaging with regulators globally or seeking additional indications. The first indication that we expect to discuss in future calls will be our ongoing preparations for an adult indication in the ENPP1 deficiency area. We are eagerly anticipating advancing this asset, especially since the Inozyme team has done an outstanding job recruiting these hard-to-find patients for a pivotal study. We look forward to revealing further details about the ENERGY-3 study in the first half of next year.

The next question comes from Sean Laaman with Morgan Stanley.

I just get your latest thoughts on orphan drug exclusivity, kids under 5 and what you think about the potential switching to a competitor as the first one. And the second one, if I'm getting the narrative right, without business development, BioMarin is a capital accumulator. Just to get your thoughts on what you think your balance sheet capacity is and what you see as an efficient balance sheet structure.

Cristin will respond to the first question. It really comes down to the factor of patients switching therapies. As we anticipate more treatments for achondroplasia becoming available, we believe there’s a clear distinction between patients who are new to therapy and those who are already receiving treatment and experiencing positive results. Our market research and discussions with physicians and families indicate that most patients who are satisfied with their current treatment are unlikely to switch therapies. While some may decide to switch, this choice is independent of orphan drug exclusivity; it’s ultimately a decision made by the physician, caregiver, and patient at that time. We believe the high adherence rates observed with VOXZOGO reflect the product's efficacy and safety, as well as the benefits recognized by patients and families. Therefore, the decision about switching therapies is likely to differ for patients who are new to treatment compared to those already involved in a regimen.

Sean, this is Brian. I'll answer the firepower part of your question there. We estimate that our total firepower is between $4 billion to $5 billion. We're just reporting $2 billion of cash investments on hand, a significant portion of which is available to invest in future growth. And then with our current and growing EBITDA profile, we do have a chance to leverage our earnings and assuming a reasonable ratio, we believe that in total, we've got $4 billion to $5 billion to deploy as growth capital.

Sean, I just want to jump in. Was your question about orphan drug exclusivity as well?

Sure. It was.

Okay. I apologize about that. Yes, I mean, we've submitted a petition to the FDA concerning the orphan drug exclusivity for VOXZOGO to assert that. The timing of that is we'll find that out at the time of PDUFA. So we feel evicted of the status and the importance of the incentive with regard to innovation in these orphan diseases, and that's very much in process right now.

The next question comes from Akash Tewari with Jefferies.

This is Zakiya on for Akash. So you talked about how the lower end of your 2027 scenarios is basically in line with top line rev for consensus, in part due to the changing competitive environment, which includes Ascendis, which had positive data shortly after your initial guide. And now it sounds like we're kind of revising the case estimate ahead of pending Phase III data from Bridge. So number one, why not just wait until the BridgeBio data comes out first half of next year? I mean, should we assume that the lower end of your '27 case is the most conservative case that has seen superior efficacy versus for Bridge? And then in the most bullish scenario, it sounds like you're either modeling at most $4 billion or lower in rev. Just wanted to confirm that I have that correct.

Thanks for the question. And yes, I tried to capture the primary takeaway from this exercise, which is that we've modeled a significant level of scenarios across all of our portfolio, across all markets and given the various key assumptions. We did that given the significant level of investor interest on the topic. We appreciate that when we gave the original $4 billion guidance at Investor Day last year, that was before seeing the first competitor data here and have made some updates along the way but really outlining the full range of outcomes and including a lower case that has two competitors launching successfully, but yet our revenue still landing at current consensus for '27, we thought would be useful. I am not characterizing that as a worst-case scenario, nor am I characterizing the $4 billion as a best-case scenario. We just decided to share with you a range of our lower case estimates and our higher case estimates. And on the upside, that would include, I mentioned as an example, intellectual property defense success, but it could also include success across the entire portfolio or competing successfully.

That concludes the Q&A portion of the call. I will now turn it back to BioMarin's President and CEO, Alexander Hardy.

Thank you, operator. We are pleased with the third quarter results across the business, leading us to raise full-year total revenues guidance at the midpoint and reaffirm our VOXZOGO revenue outlook for 2025. We have delivered expanding profitability and significant growth in operating cash flow, bringing our cash and investments balance to approximately $2 billion as of the end of the third quarter. Our financial performance so far this year reflects strategic investments in the Enzyme Therapies and Skeletal Conditions business units, both of which remain central to our growth strategy. Building on this momentum, we look forward to the many data readouts and potential new approvals ahead, along with new potential business development opportunities as we focus on the next stage of BioMarin's growth. Thank you for joining us today. We look forward to speaking with you all soon.

This concludes today's conference call. Thank you for joining. You may now disconnect.