Earnings Call Transcript - BMRN Q4 2021

Operator, Operator

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

Traci McCarty, Vice President of Investor Relations

Thank you, operator. Thank you all for joining us today. To remind you, this non-confidential presentation contains forward-looking statements about the business prospects of BioMarin Pharmaceutical Inc., including expectations regarding BioMarin's financial performance, commercial products, and potential future products in different areas of therapeutic research and development. Results may differ materially depending on the progress of BioMarin's product programs, actions of regulatory authorities, availability of capital, future actions in the pharmaceutical market, and developments by competitors and those factors detailed in BioMarin's filings with the Securities and Exchange Commission, such as 10-Q, 10-K, and 8-K reports. On the call today from BioMarin's management team are J.J. Bienaime, Chairman and Chief Executive Officer; Jeff Ajer, Executive Vice President and 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 and Chief Financial Officer. I will now turn the call over to our Chairman and CEO, J.J. Bienaime.

J.J. Bienaime, Chairman and Chief Executive Officer

Thank you, Traci, and good afternoon, everyone. Thank you for joining us on today's call. I'm very pleased with our performance and progress in 2021 and also pleased to share our outlook for the year ahead for 2022. So last year, we laid the foundation for our transition to sustainable GAAP profitability beginning in 2022. The addition of our seventh commercial product, VOXZOGO, is expected to drive a meaningful step-up in revenues beginning this year. As indicated in the increase in full year 2022 VOXZOGO revenue guidance announced today, $2.1 billion or 14% growth year-over-year represents the midpoint of our 2022 full year guidance and demonstrates the return to a significant double-digit sales growth for BioMarin. It is important to note that our anticipated top-line growth in 2022 is expected despite the reduction in contribution since the loss of exclusivity in the United States in late 2020. This further underscores the strength of our base business and the opportunity that lies ahead with VOXZOGO, especially considering how early we are in the global launch. Jeff will provide more details on the launch in a moment. But also, I guess you noticed in our release that we generated $5.8 million in Q4 for VOXZOGO. There was a first quarter that the product was in the market, mainly in Europe. And the vast majority of the sales were in Europe, and that does show that once you have the right products, European sales can take off pretty fast. So beyond the strength of our robust launch of VOXZOGO, the recent update from our pivotal study with ROCTAVIAN provides further evidence of the transformational nature of gene therapy treatment for people with severe hemophilia A. The results from our 134 subject pivotal study that we shared in January demonstrated durable, consistent control with annualized bleeding rates reduced by 85%, and with 95% of participants remaining on Factor VIII therapy through two years. To summarize, we have set the stage for transformational growth for the Company and the people we seek to treat. In 2022, we expect to turn the corner to sustainable GAAP profitability, ramp up our largest pediatric opportunity to date with VOXZOGO, advance our applications in Europe and the United States with ROCTAVIAN and achieve progress across our pipeline within the history of BioMarin. The financial, commercial, and regulatory momentum at BioMarin has never been stronger, and we want to thank you for your continued support throughout our foundation-building journey. I especially want to thank our BioMarin colleagues for their commitment to developing the essential medicines that help so many. So I will now turn the call over to Jeff to discuss the commercial business update. Jeff?

Jeff Ajer, Executive Vice President and Chief Commercial Officer

Thank you, J.J. I am pleased with the team's performance across all brands and regions during 2021, and I'm very excited about our outlook for 2022. As noted in today's press release, 2021 VOXZOGO revenues were $5.9 million. And today, we increased VOXZOGO 2022 full year guidance to between $90 million and $115 million based on strong prescription demand seen so far this year. We continue to believe that VOXZOGO represents our largest brand today. As J.J. already noted, the underlying demand for our products is expected to drive double-digit sales growth this year, with VOXZOGO being an important contributor to the growth story. Starting with the VOXZOGO launch, we are pleased to share that by February 15, 2022, or midway through Q1, an estimated 210 children were being treated with commercial VOXZOGO across 10 active markets with an estimated additional 54 children in process in the United States. The active markets include Germany, France, the U.S., Switzerland, Austria, Israel, Singapore, Argentina, Luxembourg, and Chile. In Europe, we have been fortunate to have access to the two largest markets, Germany and France. This has resulted in rapid uptake early in the European launch, which we expect will continue through 2022. As noted in the list of active markets, we are also seeing uptake in smaller individual countries, which collectively will contribute to meaningful revenue uptake this year. We are pursuing reimbursement in other key European markets such as Italy and Spain and expect that it will take time to reach pricing and reimbursement approvals in these markets. Outside of the EU, Russia and Middle East markets are also expected to come online this year. In the U.S., we have the ability to quickly respond to prescription demand following approval. While U.S. payers are numerous and diverse, we have been successfully navigating the medical exception process to facilitate access to commercial VOXZOGO. We have seen the first coverage policies being published by U.S. payers, the details of which are consistent with our expectations. As expected, we are seeing prescriptions mainly from genetics and pediatric endocrinologists, which is a new and targeted call point for VOXZOGO. In summary, we're very pleased with the pace of uptake during this ramp year for VOXZOGO, launching in the EMEA region ahead of the United States was the first for the dual launches as planned. We look forward to registrations in Japan and Australia later this year as these markets are expected to generate a high level of demand for VOXZOGO. Turning now to our enzyme replacement therapy brands, Vimizim, Naglazyme, and Brineura, we were pleased to have achieved 8% growth year-over-year in 2021 for these brands in total. Starting with Vimizim, revenues in 2021 were robust as expected and benefited from additional Q4 ordering to end the year at $623 million or 14% growth year-over-year. As mentioned, Naglazyme's year-over-year results were impacted by the timing of large orders from Latin America in 2020. We remain encouraged by high compliance rates and year-over-year patient growth of approximately 5% and 1% for Vimizim and Naglazyme, respectively. For Brineura, 16% revenue growth year-over-year and sales of $128 million represents continued growth in North America and the EMEA regions principally, children on Brineura therapy increased by approximately 18% year-over-year. Moving now to Palynziq; net product revenues grew 39% in 2021 as compared to 2020 and reached $238 million for the full year. Sales were driven in the U.S. by a combination of new patient initiations and patients achieving maintenance dosing. Patients on therapy increased approximately 15% in 2021 as compared to 2020. We are seeing the majority of growth from the U.S. market, which continues to be impacted by reduced PKU clinic bandwidth due to the pandemic. Continuing with the PKU franchise, Kuvan decreased 38% year-over-year compared to the full year 2020 and primarily due to the U.S. loss of market exclusivity in October 2020. We continue to expect a material contribution from Kuvan in 2022 as noted in our full year guidance. Lastly, with the CHMP opinion on ROCTAVIAN expected in the second quarter, launch readiness activities continue to progress. The team is aboard and well-prepared to launch, assuming regulatory approvals later this year. We are encouraged that our longer-term data results offer an attractive value proposition and treatment option for those with severe hemophilia A. We look forward to providing you with more detailed updates about the launch. In conclusion, in 2022, we anticipate increased demand for all of our commercial brands, with the exception of Kuvan. Our MPS products are expected to contribute significantly to revenue growth this year. We also expect our newest brand, VOXZOGO, to be a meaningful factor in this ramp year. The global launch is on a strong trajectory, and while it is early days, we believe the robust early prescription demand represents the foundation for continued growth, including new markets through 2022. The commercial team is energized to be in a global launch post with VOXZOGO, our largest potential revenue opportunity to date. And we look forward to keeping you apprised of our progress over the year. So thank you for your attention, and I will now turn the call over to Hank to provide an R&D update. Hank?

Hank Fuchs, President, Worldwide Research and Development

Thanks, Jeff. We in the organization echo your enthusiasm. I appreciate all the hard work of the commercial team in making available the first and only treatment option for children with achondroplasia following VOXZOGO approvals in Europe and the United States last year as well as other territories based on the targeted mechanism of VOXZOGO, which promotes independent bone growth while growth plates are open. Treatment can have a meaningful and lifelong effect on children with achondroplasia. For families in Europe seeking treatment, we're very pleased that health authorities approved VOXZOGO for ages 12 years and up, underscoring the importance of beginning treatment as early as possible to provide maximum benefit. Today, we provided a top-line update from the Phase II randomized double-blind placebo-controlled VOXZOGO study in infants and children up to five years of age with achondroplasia. We are encouraged to share that 52-week results trended in favor of VOXZOGO compared to placebo on height Z-score and annualized growth velocity, with no worsening of proportionality in the overall study population. This is a relatively small Phase II study when one considers the high variability between age cohorts. Regarding the safety profile, it was generally consistent with older subjects from the Phase III VOXZOGO-301 study in the current label population. Serious adverse events were higher in the placebo group at 18% compared to VOXZOGO treated children at 7%. All serious adverse events, including a fatal event of sudden infant death syndrome in the treatment group, were deemed by investigators to be unrelated to treatment. A small increase in events of sleep apnea was reported in the treatment group that were mild or moderate in severity and did not require treatment discontinuation. These events will be fully assessed when sleep study and MRI data are available. Our next step is to engage with regulatory authorities to discuss next steps regarding efforts to expand access to VOXZOGO treatment for this younger age group. We plan to share more detailed results at a medical meeting as we received these data less than 24 hours ago, so please stay tuned. Briefly on ROCTAVIAN, as J.J. said, 2022 regulatory milestones are tracking to plan; CHMP opinion is expected in the second quarter, and resubmission of the biologics license application is planned for this June. This resubmission will be followed by an expected six-month review period should the resubmission satisfy the FDA's thresholds and appreciating that there has been inconsistent communication in this field regarding this novel platform. Based on the dramatic reductions in bleed rates and Factor VIII infusion rates at year two following treatment with ROCTAVIAN as shared in January and again at EHA earlier in February, we remain confident in ROCTAVIAN's potential to be an important treatment option for those with severe hemophilia A. Turning now to BMN 307 gene therapy for phenylketonuria. As we announced last week, the FDA has requested data from additional new nonclinical studies to assess oncogenic risk to human participants, which is expected to take several quarters or more. As a reminder, the hold was based on safety findings from a nonclinical non-GLP pharmacology study in immunodeficient mice. As we said when we announced the clinical hold that we remain committed to understanding this fine. We are in the process of collaborating with the FDA on specific next steps and will provide you with an update when we have meaningful information to share. Finally, turning to the earlier-stage pipeline at our R&D Day last November, we were very pleased to have shared a detailed overview of the many products currently under development, including BMN 331 gene therapy for hereditary angioedema. That trial is currently open for enrollment, and for BMN 351 for Duchenne muscular dystrophy, we expect to file the IND in the first half of this year with the goal of treating the first Duchenne boys in the fourth quarter of this year. We also hope to advance studies following BMN 255, which addresses a subset of chronic renal disease in the second half of the year. We look forward to keeping you apprised of our progress across the R&D organization throughout the year. Thanks for your support, and I'll now turn the call over to Brian to update on financial results in the quarter. Brian?

Brian Mueller, Executive Vice President and Chief Financial Officer

Thank you, Hank. Please refer to today's press release summarizing our financial results for full details on the fourth quarter and full year 2021. Since Jeff touched on many of the top-line results from the commercial business, I will primarily focus on operating expenses, bottom-line results, and our 2022 guidance. As usual, all results will be available in our upcoming Form 10-K, which we are on track to file over the next few days. At the beginning of last year, we referred to 2021 as a 'hold the line year' for our financial performance, meaning that our goal was to navigate a handful of revenue growth headwinds with expense control and a focus on operating performance. We are pleased to have accomplished that objective. Despite 2021 revenue dynamics that included a decrease in Kuvan revenues of $172 million year-over-year, total revenues were essentially flat in 2021 as compared to 2020. We had modest 2021 expense growth, which resulted in a full year GAAP net loss of $64 million, landing at the midpoint of our guidance and a full year non-GAAP income of $243 million within the top half of our guidance. BioMarin's strong operating performance in 2021 also translated into substantial cash flow for the year. Total cash and investments grew by $171 million in 2021, finishing the year with over $1.5 billion, fueled by over $300 million of positive cash flow from operations. Contributing to those bottom-line results were operating expenses that fell in line with our expectations for the fourth quarter and full year 2021 and were mostly consistent with 2020 levels. R&D expenses for the fourth quarter and full year 2021 were $161 million and $629 million, respectively. SG&A expenses for the fourth quarter and full year 2021 were $218 million and $759 million, respectively. SG&A expenses increased in the fourth quarter of 2021 as compared to last year, mostly due to the global launch of VOXZOGO and some year-over-year increases in administrative costs. Now moving to 2022 guidance. As noted by J.J., the expected continued strong growth of our base business, plus a significant contribution from VOXZOGO in its launch year, we expect total revenues in 2022 of between $2.05 billion and $2.15 billion, which at the midpoint represents 14% growth over 2020. Within that revenue guidance, we observed that our base business marketed brands, except for Kuvan, are growing by 13% year-over-year at the midpoint. And as Jeff highlighted, we're pleased to improve our 2022 VOXZOGO total revenue guidance from the preliminary guidance that we shared earlier in the year based on our observations of the VOXZOGO launch these first two months of 2022. And lastly, regarding revenues, given the estimated timing of ROCTAVIAN approvals and launches in the second half of 2022, we anticipate that ROCTAVIAN will be a modest contributor to 2022 revenues. Moving to our expectations for expenses and bottom-line in 2022. Consistent with our plans to increase leverage from the operational foundations built in recent years, our estimated increases to SG&A and R&D expenses in 2022 are at rates significantly lower than our expected revenue growth. And importantly, as we recognize the importance of fueling our innovation into the future, R&D expenses are increasing at a rate higher than SG&A expenses. This measured growth in expenses is a key component of our transitional GAAP profitability objectives for 2022, where we estimate earning GAAP net income of between $95 million and $135 million. Noteworthy is that our GAAP profitability expectations for 2022 are expected to benefit from, but are not dependent upon the after-tax gain from the expected sale of our recently obtained priority review voucher announced earlier this month. With respect to non-GAAP income, we plan to adjust out the gain on the expected sale of the PRV and a further illustration of our journey into P&L leverage in 2022. We expect non-GAAP income for the year of between $350 million to $390 million, which at the midpoint is over 50% growth as compared to 2021. In closing, while 2022 is expected to be a transitional year in our long-term strategy, we are pleased to see our long-time goals for BioMarin start to materialize, which includes building an enterprise that can support both continued product approval and innovative pipeline growth, while at the same time generating sustainably increasing profits and positive operating cash flow. We believe that the strength of our base business, the recent approvals and launches of VOXZOGO, and the commercial prospects of ROCTAVIAN after observing the two-year Phase III data represent three strong pillars of near-term growth. These are followed by the increasing number of opportunities in our early-stage pipeline that have the potential to drive BioMarin's growth further into this decade. Thank you for your attention, and we'll now open for questions. Operator?

Operator, Operator

For the first question, we have Salveen Richter of Goldman Sachs. Your line is open.

Salveen Richter, Analyst

One on VOXZOGO. How are you progressing with expansion to the dedicated achondroplasia centers versus the initial targeting of skeletal dysplasia or genetics? And then secondly, on the clinical hold that's playing out with the PKU program, could you just talk about what exactly the FDA is requesting and whether there is something about PKU itself that makes it more of a concern or less amenable to gene therapy?

Jeff Ajer, Executive Vice President and Chief Commercial Officer

Hi, Salveen. I'll address your first question about VOXZOGO. So far, our experience aligns with our expectations, indicating that a small portion of children with achondroplasia are being seen by genetics specialists, including those in skeletal dysplasia clinics. We have strong established relationships with these prescribers, which provides us with quick access to this group of patients. However, since most achondroplasia patients in the United States are not actively managed by this prescriber group, we believe that targeting pediatric endocrinologists as a new treatment pathway is a fitting strategy. Pediatric endocrinologists specialize in growth disorders and have capabilities that we currently find lacking in genetics clinics. Early on, many children in the United States are being referred to us by geneticists and skeletal dysplasia clinics, which is encouraging. Additionally, other children are entering a referral network and being seen by a new and engaged group of pediatric endocrinologists who specialize in growth disorders and show a strong interest in treating achondroplasia and prescribing VOXZOGO. So, we have positive developments on both fronts.

Hank Fuchs, President, Worldwide Research and Development

It's a bit challenging to determine exactly what the FDA is looking for regarding their letter. While we addressed some of their concerns, they seem to be seeking more direct evidence about the mechanism behind the cancer's causation. Consequently, they have requested additional preclinical experiments. We will share updates as we have more specific information to provide. Regarding the role of PKU in this context, I can only mention that the agency has made it clear they view gene therapy approaches for conditions with available therapies differently from those without. However, how this fits into their overall decision-making process is not entirely clear to us at this time.

J.J. Bienaime, Chairman and Chief Executive Officer

Hank, you might want to comment also on the fact that gene therapy for PKU will be for adults only and adults with PKU, and there's less of a need for treatment in some parts of the world.

Hank Fuchs, President, Worldwide Research and Development

Yes. And putting this in a positive way, I mean I think the burden of illness is really quite substantial for children with phenylketonuria. And for adults with phenylketonuria, there's less compelling evidence of effectiveness of the products. But all that said, I think it's hard to dial in exactly how much as a therapeutic indication contributes to the agency's conservatism around the 307 findings.

Operator, Operator

Thank you. And then for the next question, we have Cory Kasimov of JPMorgan. Your line is open.

Cory Kasimov, Analyst

Hank, I was hoping you could provide some more details on the VOXZOGO data in the zero-to-five-year-olds. I'm curious, was this powered for statistical significance and then intended to be a registrational Phase II? Or was it too small for that? And on the safety front, it's nice to see overall adverse events lower than placebo, but can you just address the sleep apnea in a single case of SIDS just kind of any description or color around that would be helpful?

Hank Fuchs, President, Worldwide Research and Development

We are hopeful about obtaining strong results from the 206 study, and we are encouraged by the trends we observed. It appears that the various age groups present some complexities regarding the signal and noise. We have just received the data, and we need to analyze it further to form hypotheses about why we didn't see a significant effectiveness signal. We encourage you to stay tuned on that front. On the safety side, we noted low rates of clinically significant hypotension, which aligns with the trends seen in older individuals. In this older group, we also did not observe a significant imbalance in sleep apnea occurrences. We are disclosing this information as these were adverse events reported to us, even though we have yet to fully analyze laboratory or MRI results for the affected children. I apologize if I spoke too quickly earlier, but the sleep apnea events reported were mild to moderate and were considered unrelated by the investigators. A significant factor is that sleep apnea is relatively common in this patient group. We have recorded some instances of sleep apnea in the older population as well. Whether this is associated with the medication or just a matter of chance is still under investigation. The good news is that the events were mild to moderate and did not lead to treatment discontinuation, as deemed unrelated by the investigators. Regarding the child who experienced sudden death, the event was also ruled unrelated by the investigators. It's important to note that the mortality rate for children with achondroplasia is significantly higher than that of unaffected children, resulting in unfortunate events like this. At the very least, we can determine that the child did not respond to the treatment, but we will need to examine the overall safety pattern from the trial more closely with additional laboratory evidence yet to be reviewed.

Operator, Operator

Your next question is from Chris Raymond of Piper Sandler. Your line is open.

Ally Bratzel, Analyst

This is Ally Bratzel on for Chris today. So just on VOXZOGO, could you talk about your expectation for the geographic patient split that's embedded in your 2022 guidance? I think just by our math on VOXZOGO patient numbers, if you include those 54 U.S. patients in process, the split right now is around 20% in the U.S., 80% rest of the world. So should we expect that split to hold up for the full year? And related, I know you talked about Japan actually being a more important country for you with the VOXZOGO launch. Could you sort of talk about what's driving your optimism on the VOXZOGO opportunity there? I guess how you expect launch dynamics there to play out compared to the U.S. and EU?

Jeff Ajer, Executive Vice President and Chief Commercial Officer

Okay. Good question. So the Q4 revenue that we reported was predominantly from ex-U.S., as you would expect, because we got a U.S. approval late in Q4, whereas we were able to start patients in Q4 in Europe and start driving that revenue. As we begin the year, we're off to a quick start in the United States. But we're also off to a quick start in Germany and France, which are the two largest markets in Europe. And we've got smaller contributions coming now from a number of smaller countries outside of the United States. And as you noted, we are expecting an approval in Japan around midyear. So the picture is going to be pretty diverse. I'm not going to help you sort out the specifics of geographic mix. I am going to point you back to our revenue guidance for the year starting out this year. Relative to Japan specifically, Japan is depending on how you measure it, either the second or third largest pharmaceutical market in the world and a market where BioMarin has long invested in having capabilities to operate on our own. It happens that with the rare disease portfolio that we have, we haven't had the right opportunity to have a brand that would be representative of the second or third largest market in the world. That picture is about to change with VOXZOGO, where we have a relatively uniform incidence and prevalence of achondroplasia, meaning that Japan is a large market with a large population, and we expect a large population of achondroplasia children. We know that Japan is developed already for achondroplasia, the only place in the world where growth hormone is approved for the treatment of achondroplasia. I think the prevailing opinion there would be pretty straight from prescribers that growth hormone is not particularly effective, if at all. And there's a lot of excitement, including from clinical investigators in Japan about VOXZOGO. So that's what's driving our enthusiasm about the Japanese opportunity.

J.J. Bienaime, Chairman and Chief Executive Officer

Before the launch, we highlighted that the market outside the U.S. was significantly larger than the U.S. market, with ratios of 80-20 and even 85-15. Therefore, it’s likely that over time, sales in Europe outside the U.S. will surpass U.S. sales. Additionally, as Jeff mentioned, we only received approval in the U.S. in late 2021, giving the European market a considerable lead. However, the demand and enthusiasm for VOXZOGO treatment among the U.S. patient community is quite strong and comparable to that outside the U.S.

Operator, Operator

Your next question is from Phil Nadeau of Cowen. Your line is open.

Phil Nadeau, Analyst

A couple on ROCTAVIAN. First, you had been guiding to an FDA meeting during the first quarter of this year, a pre-submission meeting. Any update on the status of that meeting, whether it's happened or what's likely to be discussed? And then second, in the recent presentation of the updated Phase I/II data for ROCTAVIAN, there was a disclosure of one salivary gland cancer, that was deemed unrelated to ROCTAVIAN. We’re curious to hear more about that case: how long after dosing and any other information around that patient that you have would be interesting. Thanks.

J.J. Bienaime, Chairman and Chief Executive Officer

Regarding our interactions with the FDA, we will provide updates only upon reaching significant milestones such as when we submit our file and when the FDA sets an action date. Given the history of inconsistent communication from the agency, it would be imprudent to offer internal updates, as they can be easily misinterpreted. Therefore, we will focus solely on the essential facts related to the U.S. review and action. Concerning the scientific report presented at EAHAD about the individual patient, this patient experienced a serious adverse event of cancer during the clinical trial, but the investigator determined it was unrelated to the trial. We conducted a thorough internal review of the case, partly due to our extensive preclinical data regarding safety considerations. We also conferred with our independent data monitoring committee and decided, due to caution rather than specific regulatory requirements, to communicate our findings regarding the case, which we did in late November or early December. The agencies have been informed of this case since then. It’s important to note that this individual was treated over five years ago and has a rare form of salivary gland cancer. We plan to perform genomic analysis on the tumor to investigate any potential molecular connections between the cancer and the presence of the ROCTAVIAN virus. This analysis is still ongoing, and we will share our findings in a scientific context once completed. However, it currently appears to be an unrelated adverse event involving a patient dosed five years ago, who has been closely monitored by the investigator, our independent data monitoring committee, us, and health authorities worldwide. Importantly, the ROCTAVIAN trials remain open for enrollment.

Operator, Operator

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

Geoff Meacham, Analyst

Just had a couple on ROCTAVIAN. I know Hank, you obviously don’t want to give a play-by-play but just to be clear, are there any other ongoing CMC or preclinical or any other parts of the filing that will be new beyond the second Phase III and the two-year data? And then the second question more commercially. I know in the past, you guys have talked about COVID still being a bit of a headwind in PKU clinics. How is that progressing? Do you still see that having a bit of a lingering effect in 2022? Or is that going to generally work itself out as we move to the middle part of the year?

Hank Fuchs, President, Worldwide Research and Development

Yes. So I'll start with the first part. The thing I can say, Geoff, about the submission plan in the United States that, again, getting into the blow by blow is challenging, and we plan to update you at submission and FDA reviews, maybe not a whole lot in there. But what I can say is it’s practically March, we're targeting a submission in June. That doesn't leave a lot of time for a whole lot of new studies to be assembled and digested. I think we feel, especially with the two-year efficacy update, we've really got the evidence that we believe would support a positive benefit-risk conclusion, and we'll be providing that to the agency in the first half of this year if all goes well.

Greg Guyer, Executive Vice President and Chief Technical Officer

Yes. From a U.S. perspective, we anticipate an inspection later this year after the filing and before the six-month period concludes, likely in the third or early fourth quarter. We are prepared for that. Regarding the CMC, as Hank mentioned, most of the refile will be clinical, with only minor details, but nothing significant from a CMC standpoint will be included in the file.

J.J. Bienaime, Chairman and Chief Executive Officer

Do you want to remind that we were expected by the EU?

Greg Guyer, Executive Vice President and Chief Technical Officer

Yes. So that facility has been inspected by Europe. So as you know, we're in the midst of that review right now. There's no reinspection necessary for Europe. So that's not an additional step for approval there. But it will be a step for the U.S. since they have not inspected that facility yet.

Jeff Ajer, Executive Vice President and Chief Commercial Officer

Moving on to the question about the pandemic's impact on PKU, we are pleased with the revenue growth and have seen an increase in the number of patients receiving therapy. However, the rate of growth in patients has been slower than expected due to the pandemic's effects on PKU clinic capacity. Initially, we hoped that as the pandemic transitioned from an acute to a post-acute phase, PKU clinics would reopen further. Unfortunately, the situation has not unfolded as we anticipated, and we are disappointed that many PKU clinics have not returned to full operation, particularly for adult patients. This is partly because genetic and PKU clinics are often found in tertiary medical centers in major metropolitan areas, which have been affected by the pandemic. Additionally, for the available clinic resources, geneticists may prioritize severely ill children over adults looking to start Palynziq therapy. Despite this, we do expect continued patient growth and are implementing tactical measures to alleviate the bottlenecks in PKU clinics to assist more adult patients in starting therapy.

J.J. Bienaime, Chairman and Chief Executive Officer

So that being said, we reported revenues for Palynziq in '21 of $237.5 million in our guidance. For '22, it's $280 million to $310 million. So we do anticipate some pretty significant growth here in '22.

Operator, Operator

Your next question is from Gena Wang of Barclays. Your line is open.

Gena Wang, Analyst

I have one regarding ROCTAVIAN safety data. So for the PKU program, if we ask you to do the preclinical studies, do you have the same data package for hemophilia A? And then the second related question is what is the latest human biopsy data regarding the AAV integration analysis from current patients? Like what is the longest data you have from these patients?

Hank Fuchs, President, Worldwide Research and Development

That’s a complex question. Let me see if I can clarify. Regarding the ROCTAVIAN preclinical data and its similarity to the FDA's requests for 307, we just received a clinical hold letter from the FDA on 307, which means they are asking for additional studies, although they haven’t specified which studies are needed. We will be collaborating with them to determine what those additional studies might entail. It's difficult to compare the requirements for 307 with what we have available for 270. However, it’s important to note that whatever the FDA is requesting for 307 is not obstructing enrollment in the ongoing 270 or 331 trials. This clinical report seems to be specific to the vector used in the United States. And then the second part of your question, remind me.

Gena Wang, Analyst

The AAV integration analysis, the patients say taking ROCTAVIAN. What is the longest data set? How many years do you have?

Hank Fuchs, President, Worldwide Research and Development

Yes. Off the top of my head, I want to come back to you on more specifics. And Traci and I will do that. But here's an important consideration. It's been known that AAV could be found to be integrated into the genome of different species. The question is, what's the relationship between any of those molecular findings and the occurrence of cancer? It's almost impossible to answer that question in the context of human biology because there are no cancers that have been tied to AAV in humans. So at this point, that would be a scientific curiosity of undefined significance. Now I mentioned that we’ll be sequencing this tumor, and we fully expect to find evidence of AAV integration. That sort of thing. As to whether that's causal, we don't think it will be, obviously, but that's why we're going to do the additional analysis. Just to remind you, with uniQure, they did it in a tumor analysis of integrations in the HCC individual they found. And they found pretty much what was expected, which is a non-clonal dominant relatively low-frequency event of integration. And with those results, the agency lifted the clinical hold for uniQure. I suspect that, until we have all these data in hand, that our case is going to follow a similar trajectory.

Gena Wang, Analyst

And do you think the FDA will ask you for that data? Or do you think other data will be sufficient enough to show there are no concerns?

Hank Fuchs, President, Worldwide Research and Development

We're currently going through the regulatory cycles, and any specific question might be misunderstood. Regarding the U.S. submission process, I will simply say that we plan to submit in June, as scheduled in six months.

Operator, Operator

Your next question is from Kennen MacKay of RBC Capital Markets. Your line is open.

Kennen MacKay, Analyst

A question on the VOXZOGO launch. First, I know you're doing a lot of patient access early in the launch. Can you help us understand the impact of gross to net in the quarter and how we should think about that as the launch continues? And second, just hoping you could help us with some color on the U.S. launch and really towards the types of patients that are now on commercial drug and what your reps and MSLs are hearing from as they're seeking out treatment? Are there any commonalities for instance, based on age or size or disease severity or stature versus normal ranges?

Brian Mueller, Executive Vice President and Chief Financial Officer

Kennen, this is Brian. I'll begin by addressing your question about the gross to net figures. While we are pleased with the nearly $6 million in Q4, it is a relatively small amount overall, making the gross to net figures even less significant. We anticipate that the gross to net for VOXZOGO will be similar to that of our other products. Regarding your question about early access territories, we initially set a price and later negotiate a final price over time. We provide our best estimate of the final price, which is reflected in the net sales we report.

Jeff Ajer, Executive Vice President and Chief Commercial Officer

And maybe I can address your question about color on the U.S. launch. I would start by noting that the most striking thing about the U.S. launch is the diversity that we're seeing in patients and prescribers and geographies and payers. So we're seeing patients being referred in by a mix of prescribers and parents. In the case of patients that get referred in by parents, we have an opportunity to help those families get connected with an appropriate prescriber of VOXZOGO. As I mentioned earlier, we're mainly seeing a mix of geneticists and pediatric endocrinologists in terms of prescribers. We're also seeing some pediatricians in the terms of age segmentation; I've been a little surprised to see really a variety of age segmentation, including in a gratifying way older patients that are referring and starting on therapy. As for disease severity, that's not something that we have access to, so I can't really comment on that. And as I said, geographically, we're getting patients from all over the United States. As you might expect, we're seeing some correlation with how the population is distributed in the United States. So I would characterize the U.S. as being highly diverse and probably strong in its diversity.

Operator, Operator

Your next question is from Debjit Chattopadhyay of Guggenheim Securities. Your line is open.

Unidentified Analyst, Analyst

This is Robert on for Debjit. Two questions from us today. Can you provide any details on updated cadence for the earlier stage portfolio, such as BMN 255 or 331? And two, any current thoughts on capital allocation framework now that the company is clearly on the path to GAAP profitability would be helpful?

Jeff Ajer, Executive Vice President and Chief Commercial Officer

There's a word in the 255 and 331 question that I didn't quite get. Could you comment?

Unidentified Analyst, Analyst

Cadence, maybe.

Jeff Ajer, Executive Vice President and Chief Commercial Officer

So 255 is in human clinical trials, and we're looking to establish a dose to take forward into efficacy trials, which we hope to complete the dose finding by the end of the year so we can initiate studies of efficacy. And then on 331, that trial is open for enrollment. We haven't guided specifically on timeline expectations. As with many of these things, it depends on how many dose level expansions or escalations you have to go through to find your target dose. So we tend not to give specific timeline guidance for those kinds of studies. So stay tuned.

Brian Mueller, Executive Vice President and Chief Financial Officer

Yes. Great. And thanks, Robert, for the question on capital allocation. This is Brian. First of all, it’s good to have a question like that after years of dilutive financing, cash burn, and losses. We're talking about profit and positive cash flows now, so great to take that question. And similar to the journey into our long-term profitability growth and leverage, we're at the early stages of our capital allocation strategy journey as well. You can imagine as we grow and we start to generate true free cash flow that we're going to explore all the traditional capital allocation mechanisms that you've seen in our larger profitable peers. But just a reminder, in the near term, while we're pleased and thrilled to be generating operating cash flow and making this transition to GAAP profitability, we do have over $1 billion of debt on books with our convertible debt maturities coming in '24 and '27. So those would likely be the top priority, and then we'll think about more strategic alternatives. So thanks for the question.

Operator, Operator

Your next question is from Paul Matteis of Stifel. Your line is open.

Paul Matteis, Analyst

On the new vosoritide data in patients up to five years old, can you comment a little bit more on the efficacy signal you saw? How big was the effect size compared to what you observed in the Phase III study? And do you think it will be convincing to regulators and clinicians? I guess maybe more of a direct way of asking, do you feel like these data are fileable to expand the label in the U.S.?

Hank Fuchs, President, Worldwide Research and Development

Well, I think it's premature to talk about what the impact of the data on the health authority response is going to be because we just got the data, and we need to have a next round of interactions with them based on the data. And as far as the specific data, what I don't want to do is get in the way of scientific investigators presenting their scientific data at medical meetings. So stay tuned to updates from us in terms of where those data can appear. I think when you examine the transcript and you realize that you used the word trend. What that's going to come to mind is sort of a signal and noise. And I mentioned this is a noisy heterogeneous population. So I think bear that in mind when you're looking at the data, and you'll have your own interpretation about how strong and robust the evidence is I think the context of this investigation is people are most importantly keen to say that there was no cardiovascular safety excess in these very young children. I think we feel really good about that, and I think most people think that earlier treatment of genetic conditions is warranted. But again, you've got to put the data side-by-side with those questions and beliefs and come to your own conclusions. For now, it’s premature to comment on what health authorities are going to do.

J.J. Bienaime, Chairman and Chief Executive Officer

And what I mean for competitive reasons is we don't want to get into specifics at this time.

Operator, Operator

Your next question is from Joseph Schwartz of SVB Leerink. Your line is open.

Joseph Schwartz, Analyst

When do you think we might see data for VOXZOGO in other non-achondroplasia statural conditions? And how much more of a patient population could that represent relative to achondroplasia? Can you talk about your plans for VOXZOGO outside of achondroplasia?

Hank Fuchs, President, Worldwide Research and Development

Yes, I'm very excited about that. Dr. Andrew Dauber has participated in our R&D days, and he is particularly enthusiastic about exploring growth deficiencies caused by various factors beyond just the achondroplasia mutation. He believes that the achondroplasia mutation is a significant driver and may be challenging to surpass. However, when study 301 yielded positive results, his excitement grew significantly because he thought that if we could make a difference there, it opens up possibilities for other growth conditions that may have genetic links and could respond to VOXZOGO. He has begun a study focusing on genetically defined patient subsets, which serves as a signal-generating study. He presented at our R&D Day in November to remind everyone that the trial is ongoing and has been pleased with enrollment. While he hasn't examined the data yet because the study is preliminary, he hopes to discuss it further at a medical meeting in the first half of next year, although I cannot specify the dates at this moment. We plan to analyze the data and develop a strategy. One of the considerations is whether to target specific mutations or pursue a broader condition. We also want to ensure we do not diminish the value of the achondroplasia opportunity we've pioneered while recognizing that there are patients with substantial growth deficiencies who could benefit from VOXZOGO. To provide context, investigating children with a height deficiency of four standard deviations at adult height would represent about 0.1% of the incident population, indicating a relatively sizable group. We will need to clarify the eligibility criteria for future trials, which are still to be developed. Let's wait to see Dr. Dauber's data when it's ready, and then we can determine the company's approach to this opportunity while safeguarding our achondroplasia indication.

J.J. Bienaime, Chairman and Chief Executive Officer

Joe, it's likely that Dr. Dauber will present this data at a medical meeting in Q2.

Operator, Operator

Your next question is from Akash Tewari of Jefferies. Your line is open.

Unidentified Analyst, Analyst

This is Anil on for Akash. Thank you for taking our question. So I have two questions. One is related to ROCTAVIAN. So, is it possible that ROCTAVIAN may have a black box warning around the integration risk on this label? And if so, how much of this commercial impediment would that be? The second question is about achondroplasia and the prototype. So based on your current data, it looks like over half of the achondroplasia market is ex-U.S. and EU5. Could you walk us through your plans to commercialize that market? And what is the scope of opportunities in places like EMEA and versus the U.S.?

Hank Fuchs, President, Worldwide Research and Development

Well, just starting with the safety issue, it's a little premature to talk about what the label might look like in any territory given that we're under review. Although what I would say is that so far, we have not observed anything that would warrant a black box warning. But as to how health authorities process potential uncertainties related to ROCTAVIAN remains to be determined at the tail end of the review.

Jeff Ajer, Executive Vice President and Chief Commercial Officer

Yes, happy to. So the question was about the market potential as defined by patient populations with achondroplasia in different markets around the world. I think more specifically, how about beyond ex-U.S. or the U.S., and you referred to the EU5, I think you meant EU4 now. If you recall from our launch call, we characterized the available population in the EMEA or Europe, Middle East, Africa operating region as roughly three times the size of the North American opportunity. Fortunately, we have two things going for us to tap into that opportunity over time. The first is we have an experienced commercial team, including medical, regulatory, and other functions that support our existing business in those markets. So in short, we are operating in those markets. We have the know-how to get into those markets. It will be a combination of registrations where we require them, pursuing the patient sales channels where they are available, and having the commercial capabilities to promote VOXZOGO in those markets. We've got all that. It's going to take some time to properly tap into that big opportunity, but that's consistent with how BioMarin has operated with all of our previous products. We capitalize on rapid uptake in markets like the U.S., Germany, France, and others where they exist. Then the long-term growth is driven by getting penetration into those other markets around the world, which would include markets like Latin America, Brazil, Argentina, Chile, Australia, where we have a file under review, and we have a very engaged investigator, and Japan, which I've already commented on, so all of those opportunities will be pursued over time.

Operator, Operator

Your next question is from Matthew Harrison of Morgan Stanley. Your line is open.

Avatar Jones, Analyst

This is Avatar Jones on for Matthew. A couple of questions. Firstly, not to beat a dead horse, but just to clarify, specifically, has the FDA asked you to investigate cancer risk of valrox? Second, what KPIs do you plan to provide going forward for VOXZOGO? And then finally, how do you see the financial leverage profile of the company developing in the near term?

Hank Fuchs, President, Worldwide Research and Development

Yes. So, on the first question without getting into specifics of back-and-forth dialogue with the agencies, what I can tell you about ROCTAVIAN and cancer risk is that trials are open for enrollment, and the agency apparently is, therefore, happy with the submitted preclinical plan. As to what that means in the context of the larger question of regulatory review or a commercial authorization reviews, internationally, again, we're not going to comment on that because we're in the middle of the review.

J.J. Bienaime, Chairman and Chief Executive Officer

The second part of your question: VOXZOGO KPIs. A reminder, as we noted in the approval call, we are going to report for you in addition to quarterly revenues for six quarters. We will report on the quarter end number of patients on commercial therapy, we will note the number and the identity of active commercial markets, and we will provide other color commentary intended to help you gauge the success of our launch. We'll do that; those additional figures of patients on therapy in active markets will be for six quarters starting with the Q4 of 2021.

Brian Mueller, Executive Vice President and Chief Financial Officer

And the last question was on our views on financial leverage going forward. Thanks for touching on a few dynamics there. So first, it's important to note that when we talk about the foundations that we’ve built over the last few years that we’re now getting leverage from, this was our growth. If you think about how we doubled the size of the company from $1 billion to roughly $2 billion in revenue, with that came the construction of fully end-to-end integrated capabilities, whether it be the early-stage research, clinical research, manufacturing, and commercialization, through to commercialization. That same infrastructure that we've built while we'll continue to invest in it is the point of leverage for now these larger market-sized opportunities. So the base business is still growing, as I mentioned, VOXZOGO as our new potentially largest brand opportunity is generating leverage from that infrastructure that’s already been built. So a long way of saying revenue will continue substantial growth, and we're seeing the return to double-digit growth this year. But importantly, expenses are growing at a much slower rate. You look at our SG&A growth in a sort of growth year for BioMarin. But importantly, it's still growing R&D at about 10% this year because we need to make sure that the R&D engine is sustainable as well. The leverage story is a combination of growing revenues faster than expenses, continuing the investment in R&D which over time is going to create P&L capacity. Just back to the capital allocation question earlier, with more P&L capacity, we plan to increase our internal R&D, but it's also going to open us up to external collaboration opportunities. But again, this first year is transitional year; we expect a relatively modest amount of GAAP profit, but this is how we're going to plan the future.

Operator, Operator

Your next question is from Robyn Karnauskas of Truist Securities. Your line is open.

Unidentified Analyst, Analyst

This is Nicole on for Robin. I have a broad question regarding the competitive landscape of gene therapy companies. Can you discuss your next-generation capsid and how you plan to distinguish yourselves from competitors? When can we expect to see these enter the clinic?

J.J. Bienaime, Chairman and Chief Executive Officer

I think the short version of our next-gen capsids and even next-gen delivery strategies is we have a lot of research going on in that area. We have some interesting ideas. But we're also a little bit waiting for there to be an unmet need to be addressed. At EAHAD this year, we presented the second year of the post-ROCTAVIAN transduction data. Just to remind you, in year one of 134 dose patients, only two of those patients were returned to prophylactic Factor VIII administration. And so, could even conceivably be eligible for a redosing approach. That number was reexamined at the end of year two. If it turned out that half the patients have lost control of their bleeding, this might be a much bigger issue and a bigger opportunity. In fact, the number of patients who returned to prophylaxis two years after a single dose of ROCTAVIAN gene therapy was an additional four people. So there's just not that compelling right now. The reason we're aware of the potential consideration in the far future is because we're doing a lot of research in that area but not pulling the trigger on anything in particular this yet.

Operator, Operator

Your next question is from Joel Beatty of Baird. Your line is open.

Joel Beatty, Analyst

First one is on the recent request from the FDA on 307. Earlier in the Q&A, if I heard right, I think it was mentioned that this is a vector-specific concern in the U.S. Could you elaborate on what you mean by vector-specific? And is it specific to the vector in 301 or more broad to AAV5 vectors? And then the second question is, in the prepared remarks, you mentioned that ROCTAVIAN is expected to be a modest contributor to revenue in 2022. Can you discuss that, given that gene therapy and gene therapies may have the opportunity to have front-loaded revenue compared to more traditional drugs?

Hank Fuchs, President, Worldwide Research and Development

So maybe just a little nomenclature. The vector consists of a bunch of packaging parts, promoter, spacer, and then the gene of interest. Most of our vectors have different genes of interest in them. What I meant by vector-specific is their questions pertain to the 307 vector with the gene of interest encoding the phenylalanine hydroxylase. We think the questions that they have are vector-specific because the trials of 270 with a gene of interest for hemophilia Factor VIII product and 331 with the gene of interest being C1 esterase inhibitor are ongoing trials that are not under clinical hold. So that's why we think that this is specific to the vector being used in 307 and not to the components that overlap among other vectors.

Jeff Ajer, Executive Vice President and Chief Commercial Officer

Then the second question was related to front-loading of revenues. You're right; we are expecting gene therapy as being a one-time and durable treatment that will generate substantial upfront costs, which are not repeatable chronically as we see with our other chronic therapies. So there will be a different revenue pattern associated with them. I’ll ask Brian if he wants to comment further, but we are similarly expecting that for the most part, we will be recognizing revenue at or around the time of treatment and not recognizing that revenue over time in some fashion. So yes, expect a different pattern of revenues from ROCTAVIAN when ROCTAVIAN is approved and we're in the market relative to our base of chronic therapies.

Brian Mueller, Executive Vice President and Chief Financial Officer

That’s right. There is nothing else to add on that specifically. Thanks, Jeff. But it's not like the question you were trying to reconcile that revenue recognition pattern with our comments around 2022 ROCTAVIAN revenue. So those aren't related. The comment that we made on 2022 expected ROCTAVIAN revenues is mostly due to the timing of the anticipated approvals. I almost look similar to VOXZOGO; if you think about it, a potential second quarter CHMP opinion would mean a third quarter European launch and then end of year U.S. launch, so modest contribution, but we are expecting revenues just not mentioning specifics at this point until the product gets approved.

Operator, Operator

Your next question is from Tim Lugo of William Blair. Your line is open.

Unidentified Analyst, Analyst

This is Larson on for Tim. I was wondering on the VOXZOGO launch in the U.S. you've previously mentioned that most patients are already diagnosed, so identification isn't as much of an issue here as it has been in prior launches. So, I mean, can you talk about how many of these patients or those physicians you've actually been able to access so far, and what that looks like? And then secondly, just on Kuvan, it seems like it's stabilizing a bit. Do you think we're reaching a pretty stable level this year, or would you expect continued erosion in 2023?

Jeff Ajer, Executive Vice President and Chief Commercial Officer

Good questions. I'll start with the question about VOXZOGO and the U.S. launch. As mentioned on our approval call, one of the challenges we faced with our enzyme replacement therapies was helping patients obtain a diagnosis. However, this issue does not occur with achondroplasia, as nearly all children diagnosed with it are identified around birth, meaning that they and their families are aware of their diagnosis. The challenge in the United States lies in connecting with the physicians caring for these children and their families, as there is not typically a well-established medical home for treating achondroplasia beyond limb lengthening, which is quite specific. Prior to VOXZOGO, there was essentially no standard treatment available, so it’s understandable that a medical home did not exist. Therefore, our challenge in the diverse U.S. market is to reach prescribers, whether they are pediatricians, endocrinologists, orthopedists, or geneticists who manage patients under their care, and guide those patients to appropriate prescribers of VOXZOGO. So far, we’ve made good progress, and I'm pleased with the results, which I expect will continue. In contrast to our enzyme replacement therapies, which we tracked in smaller patient counts, we're not implementing a similar tracking system for VOXZOGO because it represents a larger market opportunity. We have seen significant progress, and I anticipate that to persist. Regarding Kuvan and its stability, as Brian pointed out, we lost considerable revenue from Kuvan in 2021, following a loss in Q4 of 2020, primarily due to its removal from the U.S. market. We do expect the erosion to decelerate, partly because much of the U.S. business base has transitioned to generics, as expected at this stage in the generic cycle. This means the erosion will slow down from a higher point moving forward. I recommend reviewing our full-year revenue guidance for further expectations.

Operator, Operator

And no further questions. I would like to turn the call back to J.J. Bienaime for final remarks.

J.J. Bienaime, Chairman and Chief Executive Officer

Yes. Thank you, operator, and thank you all for joining us today. We are pleased with our performance last year. We look forward to a year of momentous growth in 2022, especially thanks to the addition of VOXZOGO, which again, we expect will be our largest opportunity to date. We have transitioned to the development and commercialization of innovative therapies for larger generic conditions. Our R&D engine has never been more productive, and we expect to put forth many early-stage candidates as development advances over the coming quarters. The financial health of the Company has never been stronger. We are turning the corner to sustainable GAAP profitability in 2022. This is an important achievement, and it marks the beginning of the next stage of growth for BioMarin. Thank you all for your continued support, and we look forward to seeing you soon.

Operator, Operator

And this concludes today's conference call. Thank you for participating. You may now disconnect. And presenters, please stand by for your post-conference.