Earnings Call Transcript - BMRN Q1 2023

Operator, Operator

Welcome to the BioMarin Pharmaceuticals First Quarter Investor Update Call. Hosting the conference call today from BioMarin is Traci McCarty, Group Vice President, Investor Relations. Please go ahead, Traci.

Traci McCarty, Group Vice President, Investor Relations

Thank you, Ross, and thank you all for joining us today. To remind you, this nonconfidential presentation contains forward-looking statements about the business prospects of BioMarin Pharmaceutical, including expectations regarding BioMarin's financial performance, commercial products and potential future products in different areas of therapeutic research and development. Results may differ materially depending on the progress of BioMarin's product programs, actions of regulatory authority, 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 JJ Bienaimé, 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, 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, JJ Bienaimé.

Jean-Jacques Bienaime, Chairman and CEO

Thank you, Traci, and good afternoon, everyone. Thank you for joining us today. So we are very pleased with BioMarin's progress in the first quarter as more families gain access to the VOXZOGO logo as well as our other essential medicines. Our financial performance in the quarter was strong, especially in light of ongoing macroeconomic challenges across the globe. 15% growth of the top line and 15% non-GAAP income growth on the bottom line puts BioMarin firmly on track to achieving our 2023 financial goals. These results included $88 million in VOXZOGO revenues and strong Q1 profitability of $51 million on a GAAP basis, and all this is from our fully owned portfolio of commercial products. With Q1 total revenues coming in at just under $600 million, we are on the path to achieving our 2023 objectives of double-digit revenue growth and significant operating leverage, driving approximately 30% growth in bottom line profitability in 2023, as communicated in February. We are very pleased with the continued cadence of VOXZOGO take worldwide. VOXZOGO is now being used in around 1,500 patients in 35 different geographies, and we have seen significant growth of VOXZOGO in Japan since approval there. As a result, we are raising again our 2023 full-year guidance midpoint by $50 million at the midpart level based on increasing expectations for the brand. Based on the still very limited market penetration, we believe VOXZOGO is on its way to becoming a blockbuster. Turning to ROCTAVIAN, in Europe today, we have begun working directly with a single national German insurance fund, or GKV, on a final federal German price and therefore, we will not pursue any additional Outcomes Based Agreements with sub-insurers at this time. We believe that the highly innovative profile of ROCTAVIAN offers an attractive treatment option for those people with severe hemophilia A interested in an efficacious alternative to chronic therapy. We believe that working directly with a primary health insurance provider in Germany will facilitate access. We also believe the German health care system will recognize our payment value based on the transformational efficacy observed in a majority of participants across our extensive development program with ROCTAVIAN. Our initial interactions with GKV have been positive, and we anticipate a final German reimbursement price that would be representative of the full value ROCTAVIAN delivers to patients, especially based on our recent PDUFA update of our Phase III trial. Over the long term, we don't expect today's updates to impact our expectations for ROCTAVIAN as we continue to hear feedback from German hematologists that they are ready to treat despite some of the challenges BioMarin has experienced with German regional funds reimbursement in the very short term. So we are pleased to share that other markets in Europe and outside of Europe are actively pursuing access to ROCTAVIAN, which Jeff will review in a moment. With the U.S. PDUFA action date only 2 months away, we are cautiously optimistic for what lies ahead in the second half of the year. The commercial team is working hard to prepare for another successful product launch. As we communicated during our Q4 conference call a couple of months ago, in the United States, roughly 300 patients from the bleeding disorders community have engaged with BioMarin directly to learn more about ROCTAVIAN, which is a very positive sign. So we believe 2023 is the year of ROCTAVIAN, and we are looking forward to continued progress ahead in both Europe, the U.S. and the rest of the world. In summary, we are very pleased with BioMarin's performance in the first quarter and our outlook for the remainder of the year. The momentum behind VOXZOGO continues driving record financial results. We are making good progress on the European launch of ROCTAVIAN, and we look forward to the outcome of the June 30 PDUFA milestone. In the U.S., we are ready. Importantly, we have made the transition to an earnings growth story, a unique accomplishment in our industry, and we thank you for your continued support. I will now turn the call over to Jeff to discuss the commercial business update.

Jeffrey Ajer, Executive Vice President and Chief Commercial Officer

Thank you, JJ. I'm very pleased with our record-breaking performance in the first quarter, resulting in $596 million in total revenues and representing 15% growth year-over-year, including KUVAN and 19% growth excluding KUVAN. Solid contributions from our enzyme products resulted in year-over-year growth of approximately 5%, which is in line with expected seasonality and ordering patterns for certain brands. Overall, the enzyme product revenue base is tracking as expected, and we anticipate it will provide meaningful contributions to BioMarin's full year total revenues this year. Turning to VOXZOGO, as underscored by our guidance increase today, we are very pleased with the continued acceleration of growth. Today, we'll raise full-year VOXZOGO revenue guidance to between $380 million and $430 million, a $50 million increase at the midpoint and representing 140% growth over 2022. At the end of the first quarter, approximately 1,500 children with achondroplasia in 35 different markets were being treated with VOXZOGO within the currently approved age ranges. Uptake to date represents 9% penetration of indicated patients in BioMarin's commercial footprint, highlighting the significant growth potential that remains. This includes Europe for children 2 years old and older, the United States for children 5 years old and older, and in Japan, where VOXZOGO was approved with no age restrictions. Japan was a key driver of growth due in part to the availability of VOXZOGO treatment for children of all ages. We also saw significant contributions in the quarter from Europe, the United States, and certain markets in the Latin American regions. Looking ahead for the remainder of 2023, we expect growth across markets with continued uptake in existing markets and expansion into new markets. We look forward to learning in the coming months if European and U.S. health authorities are supportive of extending access to VOXZOGO to younger children, which would make it available to more than 1,000 additional children in those markets. Taken together, we continue to believe that VOXZOGO has the potential to be our first $1 billion brand. Turning now to ROCTAVIAN. To remind you, upon European approval of ROCTAVIAN late last year, our plan was to quickly facilitate access for patients in Germany through the use of Outcomes Based Agreements. At the time of approval, the prepricing window in Germany was 12 months, but was changed to 6 months in January. With a 12-month prepricing window at the time of launch, it made sense to pursue Outcomes Based Agreements with the goal of facilitating access to ROCTAVIAN prior to final federal reimbursement. Now that we are already working with GKV on a final federal price for ROCTAVIAN, we will not pursue additional Outcomes Based Agreements. GKV is the umbrella entity that is responsible for health insurance for approximately 90% of the German population, and we believe this path will facilitate the broadest access. While we work to finalize a German price with GKV, reimbursement for people treated with ROCTAVIAN is possible under Named Patient authorizations through individual insurers. Those sales would be subject to the final price once it has been established. Patients treated under executed Outcomes Based Agreements will benefit from the terms of that agreement at least until the German price is finalized. As JJ shared, we expect the GKV negotiations to yield the price for ROCTAVIAN that incorporates durability and other benefits that would be paid in a one-time upfront payment and without bespoke Outcomes Based Agreements. Turning to CDx testing in Germany, we are pleased to see a significant pipeline of patients building as more tests are in motion. As of the most recent data, 18 people had been screened for AAV5 seropositivity, an important eligibility criteria for treatment with ROCTAVIAN. We expect that our first treated patient in Germany will be sourced from this pool in the second quarter. And while not all patients tested will be eligible and choose treatment with ROCTAVIAN, we are encouraged by the level of interest from patients in Germany. Beyond Germany, our applications seeking price and reimbursement approvals as well as other launch preparation activities are making progress in both France and Italy, where we expect negotiations to conclude by Q4 of this year. In Italy, we were pleased that ROCTAVIAN was recently awarded conditional innovation designation, a positive signal that should facilitate pricing and reimbursement. We are also encouraged by early interest in ROCTAVIAN in other markets, including Argentina and Saudi Arabia, where we have the potential to provide access to ROCTAVIAN through Named Patient authorizations. We are aware of 11 completed CDx tests in Argentina and a recent prescription for ROCTAVIAN treatment. Taken together, we are pleased with the progress we are seeing outside of the United States, especially noting some key differences in reimbursement and launch dynamics between the U.S. and other markets. Touching briefly on some of the differences that we believe will positively impact the ROCTAVIAN U.S. launch upon potential approval in June. First, we intend to implement a single warranty, which will allow us to offer a uniform agreement to all purchasers in the U.S., avoiding the need to negotiate bespoke contracts. Next, we plan to leverage the value-based assessment from the Institute for Clinical and Economic Review, or ICER, which noted that ROCTAVIAN was a dominant treatment with substantial cost savings, along with projected gains in quality adjusted life years at $2.5 million per one-time treatment. ICER's conclusion of value is consistent with the results from payer research conducted recently in the U.S. As in prior launches, we believe it will be possible to navigate reimbursement approvals following approval for individual patients on the basis of medical exception until coverage policies are issued. Finally, in Europe, we are not permitted to promote ROCTAVIAN directly to patients, whereas in the U.S., we intend to use all channels available to raise awareness of ROCTAVIAN. That is a good segue to our update on U.S. commercial preparedness. Our teams have worked with treatment centers to ensure site readiness, conducted discussions with payers, worked through a refinement of our warranty, and our promotional campaign is ready. The supply of ROCTAVIAN to meet demand has been manufactured, and we stand ready to go upon potential approval. We have identified and are focused on a relatively small number of the largest and most capable hemophilia treatment centers to be ready to treat with ROCTAVIAN in the U.S. at or shortly after launch. We understand the value of and are committed to hemophilia treatment centers being the site of treatment for ROCTAVIAN for the reasons of appropriate patient selection, post-treatment follow-up and monitoring, and more generally due to the complexity of hemophilia management. In conclusion, we are off to a strong start in 2023, delivering record-breaking results in the first quarter, which underscores demand for our essential medicines. Based on the challenges faced securing additional Outcomes Based Agreements in the quarter to facilitate patient access to ROCTAVIAN and the updated U.S. PDUFA action date from March to June, we have lowered full year 2023 ROCTAVIAN guidance to between $50 million and $150 million. Thank you for your attention, and I will now turn the call over to Hank to provide an R&D update.

Henry Fuchs, President, Worldwide Research and Development

Thanks, Jeff, and thank you all for joining us today. BioMarin's worldwide R&D organization has been gratified to see the enthusiasm from families interested in benefiting from VOXZOGO treatment for their children with achondroplasia. In the coming months, we look forward to learning the outcome of our request to potentially expand the label, both in Europe and in the United States, to offer the possibility of treatment to children of all ages where VOXZOGO is currently available. Also, later in 2023 with VOXZOGO, we look forward to results from the investigator-sponsored trial evaluating VOXZOGO's potential to treat other genetic forms of short stature, including, for example, hypochondroplasia, mutations in the NPR2 gene, and Noonan syndrome, just to name a few. We are also engaged in active discussions with top authorities concerning the opportunity to leverage VOXZOGO, a natural regulator of bone growth, for these other conditions characterized by impaired bone growth. Moving to ROCTAVIAN, as we announced in March, the United States Food and Drug Administration extended their review of the Biologics License Application for ROCTAVIAN. As anticipated, the FDA determined that the submission of the 3-year data analysis from the ongoing Phase III Generic 1 study, as requested by the agency, constituted a major amendment due to the substantial amount of additional data and set a new PDUFA target action date of June 30, 2023. We continue to engage with the agency and look forward to our June 30 PDUFA action date. Briefly on the earlier stage pipeline, we shared a few incremental updates in our press release today on BMN 255 for hyperoxaluria and chronic liver disease; BMN 331 gene therapy for hereditary angioedema; and BMN 349 for alpha-1 antitrypsin deficiency. We look forward to providing updates across our advancing development pipeline at our R&D Day in New York on September 12. Starting with BMN 255, we have concluded the multi-ascending dose in the healthy volunteer study. In January, we shared early data that demonstrated a rapid and potent increase in plasma glycolate following treatment with BMN 255. Oral daily dosing at all tested levels for 14 days was safe and showed sustained elevations in plasma glycolate, which is predicted to have a profound reduction in oxalate excretion in patients. Based on these early signals, we now plan to initiate and enroll an expanded study in patients with chronic liver disease and hyperoxaluria later in 2023. We believe the availability of a potent orally bioavailable small molecule like BMN 255 may be able to significantly reduce disease and treatment burden in a patient population with significant unmet needs. Turning to our next gene therapy, BMN 331 for hereditary angioedema, which is like hemophilia in the sense that it poses a chronic lifelong burden of therapy due to the risk of breakthrough attacks that are extremely burdensome and potentially life-threatening. The disease is due to the genetically determined loss of the key protein regulating the inflammatory cascade responsible for these attacks. The available therapies on the market have confirmed the effectiveness of replacement much like in the case of replacement Factor VIII therapy in hemophilia. We've shown in three studies with BMN 331 gene therapy that a similar dose to that employed in clinical studies of ROCTAVIAN can provide ample and constant expression of C1 inhibitor within the therapeutic range in patients. We expect to continuously express levels of protein will provide improvements in the disease course of hereditary angioedema over existing therapies. In March, the second patient was dosed safely at 60 30 for kilo following an encouraging response from the first participant, who demonstrated an early increase in C1 inhibitor that may ultimately be therapeutically relevant, and this is exciting. With BMN 349 for alpha-1 antitrypsin deficiency, preclinical studies have demonstrated oral bioavailability in a small molecule that potentially sequesters the mutant protein preventing polymerization in the liver cells that drive the progressive liver disease form of the illness. In preclinical studies, BMN 349 is titratable to effect with rapid onset and high potency. Preclinical results have strong implications for potential improvement of our current management, particularly for severe liver disease requiring rapid action. IND-enabling studies are underway, and BioMarin is close to submitting an IND for BMN 349 in the second half of the year. Stay tuned for updates on these as well as 351 for Duchenne Muscular Dystrophy and BMN 293 for myosin binding protein C3 hypertrophic cardiomyopathy at our R&D Day in New York in September. Thank you all for your continued support. And I will now turn the call over to Brian to update financial results in the quarter.

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 first quarter of 2023. Since JJ and Jeff spoke to our revenue performance for the quarter and future revenue outlook, I will primarily focus on the remainder of our P&L and other key financial updates this quarter. As usual, all results will be available in our upcoming Form 10-Q, which we are on track to file by the end of this week. We referred to last year as a transformational year for BioMarin with the growing base business of enzyme products plus the successful launch of VOXZOGO, together with operating expense control, driving meaningful GAAP net income and a foundation for our financial growth strategy into the future. We are pleased that the strong start of the business in the first quarter of 2023 is supportive of our 2023 and long-term objectives of substantial revenue growth, margin expansion and increasing earnings. BioMarin's $596 million of total revenue in the first quarter of 2023 is an increase of 15% compared to the first quarter of 2022. Regarding our revenue outlook for the rest of 2023, Jeff commented on the increase to our 2023 VOXZOGO revenue guidance and decrease to our 2023 ROCTAVIAN revenue guidance, which offset each other in aggregate, resulting in no change to our total revenue guidance for 2023, which is annual growth of 16% at the midpoint. Across the rest of the P&L, Q1 2023 gross margin was 78.8%, which is an improvement of 1.3% as compared to the first quarter of 2022. R&D expense in 2023 started at a moderate rate in the first quarter, which was expected given the planned increase in R&D investment in our early-stage pipeline and the lifecycle management development efforts for ROCTAVIAN and VOXZOGO that we expect to ramp up over the course of this year. SG&A expense in the first quarter of 2023 of $223 million increased as compared to $195 million in the first quarter of 2022, which is in line with expectations as we continue to invest in the global VOXZOGO commercialization, the EU ROCTAVIAN launch and the commercial launch preparations for ROCTAVIAN in the U.S. Back to the bottom line, we delivered on our commitment to profitability with the $51 million of GAAP net income in Q1 2023 and $116 million of non-GAAP income, which sets up BioMarin well to achieve our full year 2023 profitability objective. GAAP net income decreased in Q1 year-over-year. However, it is important to note that GAAP net income in the first quarter of last year included the gain on the sale of the priority review voucher received in connection with the U.S. approval of VOXZOGO, which was approximately $89 million after income tax. Today, we reaffirmed our 2023 GAAP and non-GAAP income guidance of $155 million to $205 million and $360 million to $410 million, respectively. Total cash and investments in the first quarter of 2023 was close to $1.5 billion, which decreased during the quarter due to some milestone payments, the timing of accounts receivable collections and known seasonality of operating accrual net pay down. As we believe these cash flow timing events were front-loaded to the beginning of the year, we expect to resume positive cash flows over the course of 2023. In closing, we are pleased to observe a solid start to 2023 and are keenly focused on maximizing the potential of the global VOXZOGO and European ROCTAVIAN commercial launches, measured operating expense investments and the resulting leverage profitability growth that we anticipate for the full year and beyond. Thank you all for your attention, and we'll now open up the call for your questions.

Operator, Operator

Our first question comes from Salveen Richter from Goldman Sachs.

Salveen Richter, Analyst

Can you provide more detail here on how the GKV facilitates discussions on the final price and any impact on this price given that additional OBAs will not be pursued? And then in the interim, do you expect patients to actually be treated through either Named Patient authorizations or the one finalized OBA? Or is it really just GKV here?

Jeffrey Ajer, Executive Vice President and Chief Commercial Officer

Salveen, I will be happy to take that one on. So the GKV process that we've described here that takes essentially 12 months to get to a final reimbursement price and broad reimbursement access. This is normal. So this is the same process that we've gone through for all of our previous brands.

Jean-Jacques Bienaime, Chairman and CEO

I think 12 months from approval, not 12 months from today.

Jeffrey Ajer, Executive Vice President and Chief Commercial Officer

Yes, 12 months from our price listing, which was September 15 of last year. So we're very familiar with that process. And we are pretty deep into that process by now. So we submit a full price and reimbursement dossier. We did in the fall of last year, that takes a while to get processed with GKV. We've had our first meeting to review that. There's usually a series of 4 meetings and reviews before we get to a final answer. We think that, that first meeting was set up a very favorable tone, including testimony from key positions in Germany on behalf of ROCTAVIAN. What's different with ROCTAVIAN than our other brands is our other brands have all entered into a situation where there is no existing standard of care. In the case of hemophilia, we knew that we are launching into a situation where there was an existing, indeed an evolving standard of care. And so our strategy was to contract with sub-national insurer umbrella organizations, what we're calling sub-insurers, here to put Outcomes Based Agreements in place, get agreement on preliminary price to facilitate rapid uptake of ROCTAVIAN. When we launch, we believe that the prepricing period in Germany as it has been for years and years would be 12 months. So what changed? The first thing that changed is, late last year, there was new legislation that changed the 12-month to 6-month prepricing period. And that's new. While some people saw that coming, as we did, what's new about that is nobody really knows how the parties will behave at the end of the 6-month repricing period and before we have final price and reimbursement approval from GKV. The second thing that changed according to our plan was we saw more than we were expecting from the sub-insurer groups to engage in finding a path forward and defining OBAs, which are new for ROCTAVIAN. So now that we are well into discussions on a final price and reimbursement arrangement that covers all of Germany, we think it just does not make sense any longer to pursue additional Outcomes Based Agreements with those so-called sub-national insurers. Instead, we think we've got some patients covered under an existing Outcomes Based Agreement, which covers a part of the population. And we know that patients can be submitted through their health insurer for essentially a one-off or a Named Patient approval while we work to get the final price and reimbursement. Sorry for all the detail, but you did ask for it.

Operator, Operator

And our next question comes from Geoff Meacham from Bank of America.

Geoffrey Meacham, Analyst

Just two quick ones on ROCTAVIAN. So I guess a follow-up on Germany. So you have to go back to square 1 and the communication of kind of cost benefit to GKV. And I guess, was the 6 months of OBA negotiation a total waste here? And then secondly, in the U.S., just commercially, what's left to help streamline access and reimbursement, obviously, aside from formal FDA approval?

Jeffrey Ajer, Executive Vice President and Chief Commercial Officer

Thank you for the question, Jeff. To clarify, right after we submitted our price and got listed on September 15 of last year, we also submitted a full price and reimbursement dossier to the GKV, as we typically do for our brands. It usually takes 4 to 6 months for GKV to prepare for negotiations due to the extensive dossier review. The work we did with the subnational insurers was not entirely unproductive; we managed to secure proof of principle with one major insurer, which means that patients under that insurance group benefit from an Outcomes Based Agreement. As I've mentioned before, we are over 6 months into this process and making progress towards a final federal reimbursement price. Once established, this price will be retroactive to any patients treated from March 15 onward, coinciding with the end of the prepricing period. The situation in the U.S. is quite different. We have a warranty agreement that does not necessitate negotiations with each individual payer, allowing us to offer a standardized agreement to all purchasers of ROCTAVIAN. This streamline’s the process, significantly reducing the time spent on custom agreements. Additionally, similar to our other launches in the United States, we know how to manage individual payer approvals for patients under the medical exception process while coverage policies are still being developed. Coverage policies can take anywhere from 1 to 12 months to be established, depending on the payer. This is how we plan to approach the process right after the launch.

Operator, Operator

And our next question comes from Chris Raymond from Piper Sandler.

Christopher Raymond, Analyst

If I could ask another question about ROCTAVIAN. I'm curious that you mentioned 18 patients have undergone antibody testing, up from 10 last quarter. It doesn't seem like you're seeing a higher or accelerated response in Germany. Can you discuss that dynamic? Is it facing any unforeseen reimbursement barriers? Also, regarding the guidance change with an adjustment of $50 million on both ends, I understand you weren't expecting that amount in Q1. I know your original plan didn't depend on a March U.S. approval, but can you explain how much of this reduction is due to the challenges in Germany compared to a reassessment of the U.S. opportunity?

Jeffrey Ajer, Executive Vice President and Chief Commercial Officer

So let me start out, and I'll ask Brian or JJ to round out anything I missed, Chris. First, with respect to the CDx test completed, you're right, it was 2 months ago that we reported that we had 10 patients that had been submitted for CDx testing. So you could look at that and say, over the past 2 months, we've seen an additional 8. I can tell you because I review the situation with the team every week that we already have additional patients in motion this week. So what I'm seeing is the development of a patient pipeline and it was slow to get started. It was for sure impacted by patient awareness or lack of patient awareness immediately following approval and our ability to influence patient awareness in Germany. The cadence of when patients come in to see their hematologists for hemophilia guidance, which is anywhere from every 3 months to every 12 months, didn't change just because ROCTAVIAN was approved. So I would say that that building of the patient funnel and all the things that are happening underneath the top of that funnel are really encouraging to me. I'm seeing movement literally every week now and that movement every week that I'm seeing is picking up pace. So I'm pretty encouraged by that. In terms of guidance, guidance was impacted for ROCTAVIAN by the pace and timing of getting the first patient treated, which is different from what we were expecting at the beginning of the year, and the change of the PDUFA date in the United States from the end of March to end of June.

Brian Mueller, Executive Vice President and Chief Financial Officer

That's correct. This is Brian. Thank you, Chris. To add to that, we observed that the upper limit of the prior range was related to the current March PDUFA. Additionally, I want to remind everyone of what the March PDUFA was at that time. Although there has been a three-month shift, with a product like ROCTAVIAN, we anticipate increasing revenue over time. However, this three-month shift means we lose what would have been our last quarter of revenue in 2023, which is likely to be the largest quarter. Furthermore, there is indeed a compounding effect from the challenges in Germany. We have made efforts to consider all possible scenarios in our updated guidance.

Operator, Operator

Our next question comes from Phil Nadeau from TD Cowen.

Philip Nadeau, Analyst

One more question regarding Germany. It remains unclear why patients who have undergone CDx testing have not started therapy. You have been very clear about the pricing and reimbursement negotiation process, but you have also mentioned that some patients are covered through OBA or Named Patient use. So for those patients who have completed CDx testing, what is preventing their treatment? Is it related to concerns about reimbursement timelines, or do physicians have other reservations? Furthermore, you mentioned in your prepared remarks that you expect the first patient to be treated in the second quarter. What leads you to be confident in that expectation given that no patients were treated in the first quarter?

Jeffrey Ajer, Executive Vice President and Chief Commercial Officer

Phil, I'll start with that and see if JJ wants to add anything. Regarding CDx testing and treatment, CDx testing is one of the key eligibility criteria and likely the most critical step. There's also liver health testing involved. It is probable that anyone undergoing CDx testing is considering potential treatment with ROCTAVIAN. Some German physicians have indicated that the timing of decision-making may not solely depend on whether the CDx test result is positive or negative. Patients often return to discuss options with their family, may have further questions for their doctor, and sometimes schedule additional appointments for counseling about ROCTAVIAN as a treatment option. Therefore, while CDx testing is vital, it’s not the only factor in a patient’s decision-making process regarding ROCTAVIAN. In response to what gives us confidence in treating the first patient in Q2, I explained earlier that we currently have a growing patient funnel with 18 individuals. The onset of a patient in this funnel is marked by sending a sample for CDx testing, followed by further steps like additional liver testing, family discussions, and weighing the decision, possibly leading to further counseling at the clinic. Patients are progressing through this funnel towards a treatment decision. As I mentioned earlier, I receive weekly updates about patient movement in Germany, and the pace is increasing. This activity gives me confidence that we will soon have our first patient, or potentially more than one, ready for treatment.

Jean-Jacques Bienaime, Chairman and CEO

Maybe I want to add to what Jeff said. I mean, first of all about a year to get in Germany in competitive markets is the norm. So there is nothing that's surprising here. Again, we thought with an OBA, we would be able to get usage a little faster. But obviously, it's been difficult. So we did sign another year agreement mainly with one payer that only represents about 10% of the German covered life. So 10% of 18 patients will be like 1 or 2 patients. So it's not that surprising because the other patients are not covered by an existing OBA. So for the other patients who are dependent on a different insurance company. In Germany, physicians are personally liable financially for prescribing a treatment or a procedure that is not covered. And obviously, here, we're talking about a $1 million or so cost of therapy. So obviously, you understand why physicians want to double and triple-check that the health insurance company of the patients will cover the procedure before they move forward. I think all this is being debugged and it's going to be happening. So this is right now based on the growing pipeline of patients that we believe we're going to get a patient treated at least in Q2 of this year in Germany, and then there are patients potentially we can talk about in the rest of the world. The other thing that Jeff forgot to mention is regarding what happened in the past few months since we gave the previous update about the 10 patients that have been screened. In Germany, I understand we take Easter holidays very seriously. So for 2 weeks in early April, there wasn't much activity going on anywhere in Germany. So that also explains things. But it looks like since we passed Easter, it seems like things are picking up again in terms of test screening, which is very positive.

Operator, Operator

And our next question comes from Jessica Fye from JPMorgan.

Jessica Fye, Analyst

I have one more on ROCTAVIAN and then another on VOXZOGO. So I think you mentioned you expect the first German patient to get ROCTAVIAN in the second quarter. But maybe more broadly, can you just help us understand your expectations for ROCTAVIAN uptake in Germany between now and September when you get that final reimbursement? And I guess like apart from a patient here and there, does this update about not pursuing OBAs mean that we should expect very modest uptake in Germany until the fall? And then separately on VOXZOGO, can you share your latest thinking about the most likely path to approval for settings like hypochondroplasia?

Jeffrey Ajer, Executive Vice President and Chief Commercial Officer

I'll take the first part of that, Jessica. So relative to the subject of uptake, I started out by saying our plan was to facilitate early and more rapid uptake for ROCTAVIAN with these Outcomes-Based Agreements. We tried that, and I think it was a good plan, but things didn't work out according to that plan. So I think we're resetting expectations about the pace of uptake. The timing of the first uptake, which I think is likely in Q2 of this year. As JJ noted in the script, the fact that we're deemphasizing or deprioritizing those Outcomes-Based Agreements in favor of the full federal process probably means that we'll have slower uptake until we get that price finalized. It doesn't mean that we won't have any uptake because we've got one agreement in place and there is a process for physicians to submit patients that they want to treat to their insurer for individual review. So that's kind of our qualitative expectation there. I'll turn it over to Hank for the VOXZOGO question.

Henry Fuchs, President, Worldwide Research and Development

Path to hypochondroplasia and other new indications for VOXZOGO is pretty exciting because VOXZOGO's tremendous activity as a regulator of bone growth is clear and because of the unmet need of individuals who have severe impairments in bone growth, resulting in poor health outcomes. The path includes generating some additional pilot data, which we've shared a little of, but we're generating more of that data to increase our end user's confidence in the potential for VOXZOGO to add value to patients with skeletal impairments, and also dialogue with health authorities around requirements for registration. As far as our next steps with the stakeholders, probably the next real meaningful update you'll get from us about the back and forth that we're having with health authorities is going to be when we finalize our plans, and we can tell you what the trial is going to look like, when it's going to start, how many patients are going to be involved, what the endpoints are, and what if any of our comparators or concomitant medications in the trial are going to be. So pretty exciting time, and stay tuned. We're well underway.

Akash Tewari, Analyst

Just on the upcoming readout, is there a potential that the FDA may require you to run a trial head-to-head versus growth hormone? And kind of what's your confidence that efficacy won't drop off as we go to 1 year and beyond? Obviously, that didn't occur with achondroplasia, but with these new growth disorders, that's a question that does come up. And then I also noticed you had 11 patients in Argentina screened for AAV5 antibodies. Can you walk us through a reasonable launch time frame and price expectations for markets outside of the U.S. and EU5?

Henry Fuchs, President, Worldwide Research and Development

I'll start, Akash. Your question had several parts, but I may not address them all. What will be expected of us regarding durability demonstrations for non-achondroplasia indications? Another aspect of your question is whether the agency will require comparators, such as growth hormone. The answers to both questions are still to be determined since we are discussing this with the agency. As I mentioned, we will provide clarity on this as it pertains to specific indications. You also highlighted the key issues we need to address. One of the exciting aspects of VOXZOGO as a natural regulator of bone growth is that even in severe skeletal dysplasia like achondroplasia, we demonstrated enough durability to satisfy the FDA that the changes observed in AGV are reasonably likely to indicate long-term clinically meaningful height benefits. I believe that forms a solid foundation. Additionally, regarding growth hormone, outside of growth hormone deficiencies, there is limited evidence about the cumulative benefits of growth hormone. While there is some evidence regarding height benefits in non-growth hormone deficiency syndromes, it is not very compelling, suggesting limited height gains from growth hormone for children. We do not have growth hormone deficiency. So, taking all that into account, these will be the types of discussions we have with the agency to map out the path forward for new indications for VOXZOGO. It won't be without complications, but the advantage of a medication like VOXZOGO is its property as a natural regulator of bone growth.

Jeffrey Ajer, Executive Vice President and Chief Commercial Officer

To your second question, Akash, about what's the significance or whether we read into those 11 CDx tests in Argentina. In the general sense, Named Patient sales in the absence of or even just prior to a registration is an important part of our commercial picture overall. Witness, for example, the rapid uptake across our commercial footprint with VOXZOGO, some of which, but not all of which, is in markets where we have registrations. We don't tend to talk about those markets a lot in detail because they tend to be smaller and come at a slower pace than, for example, the major markets in Europe, Japan or the United States, but they're important overall. I think Argentina, with early signals of patient movement, a first prescription is a good representation of what we might expect also in other markets where we get going one patient at a time on a Named Patient basis. We also mentioned that Saudi Arabia, which is also usually an early mover like Argentina on the Named Patient sales basis is, we also are underway, and there's interest in ROCTAVIAN in that market. So what we're trying to do here is highlight the fact that beyond where we have very specific plans, like in Germany, France, and Italy that I've mentioned, there is movement in those other important Named Patient sales markets.

Joori Park, Analyst

I have a question on ROCTAVIAN. I'm Joori dialing in for Joe. How is the process with the single public insurance funds in France and Italy going? And can you provide any more color around your expectations to secure reimbursement and access to ROCTAVIAN later in 2023?

Jeffrey Ajer, Executive Vice President and Chief Commercial Officer

The process in both France and Italy, given our capabilities, typically follows a similar timeline to Germany in terms of timing and prioritization. These markets usually require about a year or sometimes even longer to obtain price and reimbursement approval. After we received our price listing in Germany, we promptly submitted the complete price and reimbursement dossier and initiated the process last fall. Following that, we also submitted applications for France and Italy in the fall of last year. Both processes are currently underway. However, unlike Germany, where we can expect a conclusion in 12 months, there is no certainty for these two countries. Nevertheless, we believe we are on track in both markets and anticipate completion of this process by the fall of next year. Additionally, it is worth noting that last week we were granted conditional innovation status for ROCTAVIAN in Italy. While this status does not provide specific benefits, it serves as a positive indication of how Italy is considering ROCTAVIAN.

Gena Wang, Analyst

I wanted to ask about ROCTAVIAN again. For the 18 patients that completed the antibody testing, how many of these were eligible? Also in Europe, since now you're pursuing directly with GKV without pursuing Outcomes Based Agreement with the sub-insurers, does that mean your price will be much lower than EUR 1.5 million that you previously discussed? And then lastly, very quickly regarding the U.S., can you discuss on hemophilia A patients under the 340B program? And how does that mechanism impact the ROCTAVIAN initial launch?

Jeffrey Ajer, Executive Vice President and Chief Commercial Officer

Thank you, Gena, for those questions. Let me start with the 18 CDx tested and percentage that are eligible. The first thing to note is CDx testing is one eligibility test; liver health is the second. Relative to the AAV5 seropositive or negative status, the best thing that we can do to guide our expectations on that is the publication from our seroprevalence study in hemophilia A. In that study, which was published, the overall seropositivity rate for AAV5 in Germany was 35%. That's guiding our expectations on the percentage of patients that would be eligible based on AAV5 negativity. Relative to the GKV price negotiations and what we had guided to as net price of about EUR 1.5 million last fall, we think it is likely based on what the GKV is statutorily allowed to do, we think it's likely that they will not be putting into the agreement an outcomes-based component or a pay overtime component, but nothing is certain until we get done with that process. In that particular case, we think that the price negotiations with GKV would incorporate all of the aspects of value of ROCTAVIAN, including durability, for example. Then relative to the 340B question in the United States, in our script remarks, we mentioned that we're committed to this HTC model of treatment and follow-up hemophilia treatment centers or HCCs in the United States, our granted 340B eligibility, that's a way of funding the important work they do to care for hemophilia patients. So we think all or substantially all of our revenue in the United States would be subject to the 340B discount.

Jean-Jacques Bienaime, Chairman and CEO

What's your what that's going to do to the launch some respects, it's positive for us.

Jeffrey Ajer, Executive Vice President and Chief Commercial Officer

Yes. We think that's very positive. So as I mentioned, the reason for being for HTC is to have access to the 340B discount is to have a source of revenue to fund their important operations. And as ROCTAVIAN would likely be eligible for those 340B discounts for all or essentially all of their patients, that's revenue that would accrue to those to fund their operations, and that revenue would happen at the time of treatment versus, for example, revenue that they might be getting from supplying factor replacement products, which they would see over time. An important point to note is that the HCC see a revenue component from factor replacement therapy only for a small proportion of their patients on average. So we think that this is actually maybe a motivating factor for treatment with ROCTAVIAN in the U.S.

Timothy Lugo, Analyst

You mentioned VOXZOGO is on its way to becoming the first blockbuster for the company. Will these other non-achondroplasia indications add to the market? And can you also update us maybe, I missed this, on converting the accelerated approval to a full approval?

Jean-Jacques Bienaime, Chairman and CEO

Tim, I'll start, and then Jeff can provide more echo. As we made in the prepared remarks, I think in Jeff's remarks, we only have penetrated about less than 10% of the market right now for VOXZOGO achondroplasia. So obviously, we can get past, and we are on a run rate already of $450 million or so. So obviously, in the market alone, there's a lot of room to grow. We could easily pass the $1 billion in revenues a lot. So obviously, other indications are going to make it even larger, but that's kind of my first comment to your question. Jeff?

Henry Fuchs, President, Worldwide Research and Development

Nothing new to report there. It's published post-marketing requirement and the specifics of the timing for that, we've kept those relatively proprietary. So stay tuned.

Operator, Operator

And our next question comes from Paul Matteis from Stifel.

Paul Matteis, Analyst

Surprised it took a long time to get a question on the FDA with ROCTAVIAN, but I thought I'd just throw it in there. You should be only a handful of weeks away from labeling discussions. Just curious if you could update us on the cadence of your discussions and how everything is going? And then if you do get approval in June, do you think these reimbursement warranties could be agreed upon and in place quickly enough to generate meaningful revenues for ROCTAVIAN in the U.S. in 3Q?

Henry Fuchs, President, Worldwide Research and Development

Thanks, Paul, for the question. I won't get into the specifics of the back and forth, but I would say that as a general matter. The things that we expect to be having at the stage of the review appear to be happening, which gives us optimism. I think we've also expressed some caution there because we don't have perfect visibility into everything going on in the agency and exactly where senior management and the people who signed the letters are, but we're optimistic.

Jeffrey Ajer, Executive Vice President and Chief Commercial Officer

Relative to the warranty, Paul, the nature of the warranty is that it is uniform. It is non-negotiable. It is available to all purchasers. Essentially, we don't have to negotiate; the purchaser essentially gets that warranty with purchase. So the timing is relatively trivial.

Jean-Jacques Bienaime, Chairman and CEO

No timing.

Jeffrey Ajer, Executive Vice President and Chief Commercial Officer

No delays.

Operator, Operator

And our next question comes from Robyn Karnauskas from Truist Securities.

Robyn Karnauskas, Analyst

So just clarify, for ROCTAVIAN, since you're not doing OBAs anymore, can you give us some sense of what price we should be using since that's been the fixation of a lot of us for Europe and how to think about that? And second for VOXZOGO, you're averaging now like 400 patients a quarter. You mentioned a lot of expansion, new indications, geographic. Should we think of it more consistent or choppy?

Jeffrey Ajer, Executive Vice President and Chief Commercial Officer

Let me start with the price aspect. We provided guidance last fall regarding net price expectations in Europe. The way we reach those expectations varies depending on whether there is an Outcomes-Based Agreement or not, and this is taken into account when assessing the value of durability and the upfront price. Ultimately, the outcome should not be significantly different regardless of the path taken.

Jean-Jacques Bienaime, Chairman and CEO

One of the reasons we chose to concentrate on the GKV and national price is our belief that an OBA with the German federal government is very unlikely. Therefore, these prices may be slightly lower than those we might have received with an OBA, but the net price should be roughly the same because we do not have to reimburse the payers for our patients returning to therapy after 3, 4, or 5 years. We do not expect any net debt. Our interactions with the GKV so far have been quite promising, and we do not foresee any significant differences with this approach, as Jeff mentioned.

Jeffrey Ajer, Executive Vice President and Chief Commercial Officer

Relative to your question about the cadence of VOXZOGO patient uptake, it has been quite steady over the last few quarters. Beneath that steady uptake, there are various individual market dynamics at play, but overall it is progressing smoothly. I would recommend modeling forward based on our most recent revenue guidance, which has seen several positive updates. So, I would emphasize that point.

Operator, Operator

And that is all the time we have for questions today. I would like to turn the call back to BioMarin's CEO, JJ Bienaimé, for closing remarks.

Jean-Jacques Bienaime, Chairman and CEO

So in conclusion, we are very pleased with the booming progress in the first quarter and the continued successful launch of VOXZOGO around the world. The importance of our medicines to the people who rely on them is clear. And while sometimes the development path forward is not always clear cut, we will continue to push that in the interest of our patients. Thank you for your support, and have a good rest of the day.

Operator, Operator

The host has ended this call. Goodbye.