NOVATO Apr 30, 2020 (Thomson StreetEvents) -- Edited Transcript of Biomarin Pharmaceutical Inc earnings conference call or presentation Wednesday, April 29, 2020 at 8:15:00pm GMT
* Brian R. Mueller
BioMarin Pharmaceutical Inc. - Senior VP of Finance, Acting CFO & CAO
* Henry J. Fuchs
BioMarin Pharmaceutical Inc. - President of Worldwide Research & Development
BioMarin Pharmaceutical Inc. - Chairman & CEO
BioMarin Pharmaceutical Inc. - Executive VP & Chief Commercial Officer
* Robert A. Baffi
BioMarin Pharmaceutical Inc. - President of Global Manufacturing & Technical Operations
BioMarin Pharmaceutical Inc. - VP of IR
Evercore ISI Institutional Equities, Research Division - Senior MD & Equity Analyst
* Kennen B. MacKay
RBC Capital Markets, Research Division - MD & Co-Head of US Biotechnology Research
* Peter B. Kim
* Philip M. Nadeau
William Blair & Company L.L.C., Research Division - Co-Group Head of Biopharma Equity Research
Sanford C. Bernstein & Co., LLC., Research Division - VP
Welcome to the BioMarin First Quarter 2020 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, BioMarin Pharmaceutical Inc. - VP of IR [2]
Thank you, May, and thank you, everyone, for joining us today. To remind you, this nonconfidential presentation contains forward-looking statements about the business prospects of BioMarin, including expectations regarding BioMarin's financial performance, commercial products and potential future products in different areas of therapeutic research and development.
Results may differ materially depending on the progress of BioMarin's product programs, actions of regulatory authorities, availability of capital, future actions in the pharmaceutical market and developments by competitors, and those factors detailed in BioMarin's filings with the Securities and Exchange Commission, such as 10-Q, 10-K and 8-K reports.
On the call remotely from BioMarin management today are J.J. Bienaim, Chairman and Chief Executive Officer; Jeff Ajer, Executive Vice President, Chief Commercial Officer; Robert Baffi, President, Global Manufacturing and Technical Operations; Hank Fuchs, President, Worldwide Research and Development; and Brian Mueller, acting Chief Financial Officer. We hope to keep this call to 1 hour and also give everyone the opportunity to ask a question today, so we request that you limit yourself to one during the Q&A portion of the call. Thank you for your understanding. I will now turn the call over to our Chairman and CEO, J.J. Bienaim.
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Jean-Jacques Bienaim, BioMarin Pharmaceutical Inc. - Chairman & CEO [3]
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Thank you, Traci. Good afternoon, and thank you for joining us on today's call. We hope you and your families are healthy and managing through these unusual circumstances brought about by the COVID-19 virus. So these are unprecedented times, but the essential nature of our medicines to the patients who need them has enabled BioMarin to weather the challenge of COVID-19 quite well. Equally as important, I want to underscore the extraordinary dedication of our employees who have kept operations running smoothly in order to maintain access to our therapies around the world.
Our first quarter record results of $502 million of total revenues or 25% growth over last year, the testament to the importance of our therapies and our diversified product base and commercial footprint. Due in part to the sale of Firdapse, GAAP net income in the first quarter was $81.4 million, exceeding our current full year guidance range of $20 million to $80 million.
In the first quarter, we experienced minimal interruptions due to COVID-19, but we do anticipate the potential for more meaningful business disruptions for the remainder of 2020 due to the pandemic. As a result, we have chosen to reduce our full year total revenue guidance by around 5% or a total of $100 million, while maintaining both GAAP and non-GAAP income fully estimated provided earlier this year. Despite potential near-term impacts to our commercial business on COVID-19, our next blockbusters, BMN 270, valoctocogene roxaparvovec, (inaudible) valrox for hemophilia A and vosoritide for achondroplasia continuing to advance, and Jeff will reveal our recently approved brand name for BMN 270 in a moment.
Briefly on vosoritide for achondroplasia. In the quarter, we announced that based on recent meetings, a successful meeting with health authorities in the U.S. and Europe, we plan to submit marketing applications to the FDA and EMA in the third quarter of this year. If approved, vosoritide will be the first medicine for the treatment of achondroplasia in the U.S. and Europe. So we are delighted that this potential therapy proceeds a step closer to regulatory.
In conclusion, BioMarin employees have risen to the evolving challenges of the COVID-19 pandemic, demonstrating a high level of commitment and dedication to the patients we serve. The underlying fundamentals of our business remains strong and our manufacturing and supply chain resilience. We have built a durable base business with essential medicines transition the pipeline to address larger rare indications, diversified risk and positions ourselves for substantial success in both the near term and the long term. We are confident in our ability to manage through this ongoing global health crisis, while staying grounded in our long-term strategy for success.
I'd like to say a few words about Robert Baffi, who has made tremendous contributions to the organization over the last 20 years. During this time at BioMarin, he has manufactured the most complex biological products in the world and visits the most advanced commercial scale gene therapy manufacturing capability. His leadership, technical expertise, foresight and dedication has played a key role in where we stand today, and we want to acknowledge his many contributions. Thank you, Robert. And we are pleased that he will remain with BioMarin through the review of BMN 270 valrox and the vosoritide marketing applications to ensure manufacturing continuity as the successor, Greg Guyer, begins his journey with us in May, coming from Bristol-Myers Squibb.
Thank you all for your continued support. And now I would like to turn the call over to Robert to say a few words. Robert?
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Robert A. Baffi, BioMarin Pharmaceutical Inc. - President of Global Manufacturing & Technical Operations [4]
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Thank you, J.J. Innovation has always been at the core of BioMarin's success. During my 20 years, as the Head of Technical Operations, and has instill in the company a few guiding principles to foster a culture of innovation: first, let science inform and lead decision-making; second, let compliance focus our efforts on patient safety and clinical outcomes; and third, let ingenuity create adaptivity and resiliency in our approach to drug development. These 3 tenants, infused with the talents of the most dedicated people I've ever worked with, have consistently enabled us to take research ideas rapidly through development, navigating the complexity of the regulatory approval process in a highly effective and differentiated manner to meet the needs of patients.
BioMarin's leadership team has shared and supported the vision for creating a fully integrated company with technical operations, powers clinical studies and commercial demand, and is an integral component of strategic technology development paradigms for assuring the timely delivery of an uninterrupted supply of product.
Furthermore, innovative and appropriately implemented CMC strategies linked to a faster clinical design allows for rapid development and high success rates that benefit both patients and shareholders alike. As a company, we are going through multiple transitions simultaneously, challenging in some ways, invigorating in others. Our transition to profitability this year provides the resources to develop more innovative therapies. Our transition to gene therapy product leverages our clinical manufacturing and commercial capabilities and place us squarely at the forefront of the emerging technological advancement in precision medicine. Our transition and technical operation leadership provides the opportunity to build an innovative approach to drug development to fuel our growth.
When I first saw that to Dr. Greg Guyer's CV, I could not help but be impressed with the scope of his responsibility and the experiential variety and diversity of his career. In many ways, while a different journey, it shared a lot of commonality with my own and that is not to let us vote to BioMarin. I am confident and committed that the transition in technical operations at BioMarin from me to Greg will build on the legacy of science, compliance and ingenuity, for our patients that will benefit from the products that will emerge from our efforts, for our employees and their careers, and for our shareholders as we become profitable.
In terms of licensure of our gene therapy manufacturing facility in support of BMN 270 approval, I'm pleased to share that the Health Products Regulatory Authority of Ireland conducted, on behalf of the European Medicines Agency, a pre-approval inspection in Q1. This inspection involves a detailed review of the facility, equipment, process, and analytical studies and relevant documentations generated in support of validation, production and testing. Following this inspection, a CGMP certification was granted, allowing for commercial production and distribution of BMN 270 in the EU when the product is approved.
At present, the inspection of the facility by FDA is expected to be completed during Q2, allowing full licensure in the U.S. of the facility consistent with the August 21 PDUFA action date. We have more than 400 doses of commercial BMN 270 ready for potential launch later this year, and remain very enthusiastic about the prospects for introducing the first gene therapy product for a bleeding disorder to the hemophilia community as soon as possible.
I thank you for your support throughout my time at BioMarin. And now I'd like to turn the call over to Jeff to discuss the commercial business update. Jeff?
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Jeffrey Robert Ajer, BioMarin Pharmaceutical Inc. - Executive VP & Chief Commercial Officer [5]
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Thank you, Robert. As we begin 2020, I'm very pleased with the team's performance across all brands and all regions during the quarter. As J.J. mentioned, we achieved our highest quarterly revenue on record, with total revenues of $502 million in the first quarter with net product revenues marketed by BioMarin, up 24% to $433 million. This achievement reflects the fundamental strength and growth of our business despite near-term challenges related to COVID-19, which I will address in a moment.
On to results in the quarter and starting with Palynziq. In the U.S., the trend of increasing revenue based on a steadily growing base of patients on commercial therapy, including progression from induction and titration to daily maintenance dosing, continued in Q1. In the early part of the quarter, we did experience a seasonal slowing of new patient enrollments and patient starts, somewhat mirroring our historical experience with Kuvan in the United States. We are reporting $35 million in Palynziq revenue for the first quarter, with the majority of that revenue coming from the U.S.
In Europe, in the first quarter, multiple clinics across Germany continued to actively treat patients with Palynziq and early uptake signals are encouraging. During the quarter, we made significant progress in Germany, adding clinics that now have some experience prescribing Palynziq and managing patients through the induction and titration phase to daily maintenance dosing. As the number of commercial patients in Germany steadily grows, we anticipate meaningful revenue contribution from the EU starting this year. We anticipate finalizing price and reimbursement negotiations in Germany by mid this year, an important step toward getting price and reimbursement approvals in other high priority European markets.
Kuvan contributed $122 million in revenues in the quarter or 14% growth year-over-year, with most of that growth coming from the United States. Vimizim revenues grew 9% year-over-year, contributing $137 million in the first quarter, driven by an 11% increase in patients year-over-year. This is reflective of the continued anticipated growth potential we expect for Vimizim.
Turning to Naglazyme. Revenues totaled $114 million, a 32% year-over-year growth for the well-established brand. As with Vimizim, the impact from uneven large order patterns makes the quarterly comparison difficult. The number of commercial patients on Naglazyme grew by 6% in the past year, and is indicative of the ongoing growth potential for this brand, nearly 15 years since being approved.
And finally, Brineura contributed $24 million in net product revenues, which represented 97% year-over-year growth. These revenues were essentially flat over Q4, and that was driven by a modest year-end inventory build in the EMEA region in Q4. Importantly, the growth in Brineura revenues compared to prior year reflects an underlying growth of 86% in commercial patients. We are seeing a net increase in patients benefiting from Brineura treatment due to the success of our disease awareness and patient identification programs.
Taken together, we are pleased with first quarter results and demand for our products. And while we experienced minimal financial impact in the first quarter due to COVID-19, we anticipate the potential for a higher degree of impact during the remainder of 2020 as disruptions of day-to-day operations of clinics and hospitals flow through our business.
Our global commercial teams will continue to adjust to implement innovative approaches to engage with clinics and patients to ensure continuity of access to our medicines. Where possible, we are supporting home infusion efforts to help mitigate impact. However, some COVID-19 disruption, the new patient starts as well as to ongoing infusion center visits from existing patients are expected to continue. As a result, we are reducing total revenue guidance by 5% at the midpoint to between $1,850 million to $1,950 million for the full year 2020. The vast majority of today's updated total revenue guidance reflects adjustments to in line brands, including Vimizim, Naglazyme and Palynziq. And assumes our business will return to normalized demand patterns in the second half of 2020. Although we did not give BMN 270 2020 revenue guidance in February, our 2020 total revenue guidance did assume some contribution from BMN 270 in Europe.
And now I'd like to end my remarks with an update on our hemophilia gene therapy program and introduce you to the intended brand name, ROCTAVIAN. In previous calls, you've heard references to valrox, which was an abbreviated form of our INN or international nonproprietary name, valoctocogene roxaparvovec or alternatively, our program identifier, BMN 270. Both the FDA and the EMA have accepted ROCTAVIAN as our brand name, and we look forward to adopting ROCTAVIAN as we get closer to launch. In the meantime, we will cease to use valrox, so as to not confuse it with our intended brand name.
Other key launch readiness activities have continued to progress. We have essentially built out the commercial team in the United States, and have added key individuals to support priority in markets in the EU. The majority of these new employees have substantial and diverse experience in hemophilia. Our brand campaigns also continue to develop as anticipated and teams have pivoted to virtual and digital platforms, allowing for ongoing engagement with the marketplace in lieu of face-to-face interactions. Obviously, certain activities are more amenable to virtual engagements than others, and where COVID-19 is challenging us most in the short-term is with gene therapy educational programs and site readiness.
Fortunately, with the team already on board, we anticipate being well prepared to launch if we receive regulatory approvals. In the meantime, we have recently finished some very positive pricing research, which validated payer willingness to embrace ROCTAVIAN with the current data set, and we'll look forward to providing you with updates on our pricing at launch.
Thank you for your attention, and I will now turn the call over to Hank to provide an R&D update. Hank?
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Henry J. Fuchs, BioMarin Pharmaceutical Inc. - President of Worldwide Research & Development [6]
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Thanks, Jeff. I'd also like to echo J.J.'s expression of deep and heartfelt appreciation for the time Robert has spent with us. And also to welcome Greg Guyer, to the organization where the secret sauce is bottled.
The R&D organization is delighted that our next significant product opportunities continue to progress, particularly under the circumstances brought about by COVID-19. The ability to come to work mostly virtually and focus on the advancement of our innovative products to date, ROCTAVIAN and vosoritide has been especially gratifying and a welcome distraction from the ongoing pandemic. I want to acknowledge and thank our teams for their commitment and contributions during these challenging times. I have been impressed by your flexibility and your ability to keep the story going while we are dealing with the pandemic.
Starting with ROCTAVIAN, and with a strong and memorable brand name, congratulations, Jeff, the FDA is committed to meet the August 21 PDUFA action date. In Europe, our marketing authorization application filing remains on accelerated assessment at this time. However, the review procedure is to be extended by at least 3 months due to COVID-19 delays. Further, as is the case with most filings that initially receive accelerated assessment, we believe there is a high possibility that our M&A will revert to a standard review procedure from accelerated assessment. Based on these assumptions, we expect the CHMP opinion by late '20 or early '21.
We continue to plan to share our 3 -- our 4-year update of the 16, 13 vector genome per kilo dose as well as the 3-year update on the 40, 13 vector genome per kilo dose in the middle of the year, but the form is as yet to be defined given the changing environment for medical meetings. We have a data analysis plan in place. We'll move forward with business as usual, but the venue and method for providing the update is still fluid at this point. So thanks for bearing with us.
Importantly, we do not expect COVID-19 to impact the time lines for completion of the ROCTAVIAN Phase III trial. Enrollment was completed in November of last year, and one of the benefits of being a onetime treatment is that patients do not need to receive therapy on a chronic basis. We're also confident that the integrity of the ongoing data collection for the study -- for this pivotal study is being sufficiently maintained as home health care solutions align nicely with the collection of the primary endpoint annualized bleed rate data.
Turning now to vosoritide for the treatment of achondroplasia. As J.J. mentioned, we plan to submit a global marketing applications in the third quarter of this year. Our multipronged development program, including a long-term Phase II clinical results in 5 to 18-year-old children, comprehensive natural history data, the ongoing study of newborns through 5 years and the highly statistically significant placebo-controlled Phase III trial makes for a very comprehensive data package spanning more than 5 years of treatment with children with achondroplasia. Again, we're the beneficiary of fortunate timing and that our pivotal submission data read out prior to the pandemic, and now much of the work can be concluded remotely. If approved, vosoritide would be the first and only medicine designated for the treatment of achondroplasia in the U.S. and in European Union.
We continue to look forward to publishing the full data from the Phase III study later this year, and we're pleased to let you know that our late-breaker has been accepted in an upcoming medical Congress. The presentation will include 1 year growth velocity, height Z scores, body proportionality, safety and subgroup analyses. So stay tuned for more specifics as to when and where those data will appear.
The Phase II study of vosoritide in 0 to 5 year olds, referred to as study 206, is proceeding well, and we are very pleased that safety data from children ages 6 months to 5 years participating in that study will be available as part of our registration package. We're grateful that the timing of key studies has aligned well with our pre-COVID-19 plans.
Moving to BMN 307, our investigational gene therapy for phenylketonuria. We're continuing to prepare new sites to open in order to enroll patients when it is safely do so given the COVID-19 circumstances. We're excited about the prospect of BMN 307 as it represents a third treatment for phenylketonuria in our PKU franchise and a second gene therapy development program, leveraging our learnings and capabilities from ROCTAVIAN. Currently, we expect the study to start later -- we expect to start the study later in 2020.
The R&D organization is energized by the opportunities before us in 2020, with both ROCTAVIAN for severe hemophilia A and vosoritide for children with achondroplasia advancing towards potential approvals. We are hopeful that these innovative treatments will be available in the very near future. We look forward to updating you on our progress over the coming quarters, and thank you for your continued support.
And I'll now turn the call over to Brian to review the financials.
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Brian R. Mueller, BioMarin Pharmaceutical Inc. - Senior VP of Finance, Acting CFO & CAO [7]
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Thank you, Hank. Please refer to today's press release summarizing our financial results for full details on the first quarter of 2020, and as usual, our comprehensive report on the quarter will be available in our upcoming Form 10-Q, which we are on track to file over the next couple of days.
As Jeff mentioned, we are experiencing some modest impacts from the COVID-19 pandemic and as a result, we have updated full year total revenue guidance to between $1.85 billion to $1.95 billion. As Jeff noted,our updated revenue guidance is based on the assumption that our business will return to normalized demand patterns in the second half of the year.
Importantly, while we lowered our revenue guidance due to the impact of COVID-19 on our commercial business, we were able to analyze our 2020 spending projections and make adjustment that allowed us to maintain our prior GAAP and non-GAAP income guidance despite the lower revenue.
Moving to operating expenses. R&D expense for the first quarter of 2020 was $142 million and lower compared to R&D expense for the first quarter of 2019 of $184 million, mostly due to less R&D activity for ROCTAVIAN, given its late stage of development as well as Palynziq following its approvals in the U.S. and Europe.
SG&A expense for the first quarter of '20 was $187 million, which was higher than SG&A expense for the first quarter of 2019 of $162 million. The year-over-year increase was expected with the single largest driver, being the commercial preparation for the launch of ROCTAVIAN and the continued global launch of Palynziq. We also incurred some unpredicted foreign currency exchange losses during the month of March as the COVID pandemic negatively affected some of our assets denominated and some of the more volatile global currencies.
During the bottom line results, we reported GAAP net income of $81 million in the first quarter of 2020, compared to a GAAP net loss of $56.5 million in the first quarter of 2019. The improvement in GAAP income was primarily due to higher revenue, lower R&D expenses and the gain on the sale of the deferred tax assets. With higher revenues and lower R&D expenses, non-GAAP income of $117 million in the first quarter of 2020 grew substantially as compared to Q1 2019 non-GAAP income of $25 million. Both of these first quarter 2020 bottom line results gives us a great start towards achieving our 2020 goals of GAAP net income on an annual basis for the first time in the company's history, a considerable growth in non-GAAP income.
I'd also like to touch on the potential tax benefit that we mentioned last quarter that may be recognized in the second half of this year. Our current 2020 GAAP net income guidance of between $20 million to $80 million, excludes the potential impact of intra-entity intangible asset transfers between BioMarin entities. If these intangible asset transfers occur, we estimate that the tax effect could result in a onetime noncash income tax benefit of greater than $500 million. As I mentioned previously, you may have seen similar transactions completed by some of our larger peers in recent quarters.
Speaking to total cash and investments, we ended the first quarter of 2020 with $1.15 billion compared to $1.17 billion at the end of December 2019. The modest decrease in total cash and investments during Q1 2020 was largely due to some timing of operating cash flows. However, the significant improvement over the first quarter of 2019 where total cash and investments decreased by $105 million. This valid cash position, coupled with vibrant business fundamentals, put us in good standing to manage through the continued uncertainty related to COVID-19.
In closing, the stronger performance of the business during the first quarter of 2020, plus our positive financial outlook for the rest of the year, indicate that 2020 should be a transformational year for the company. And the prospects of value to come from ROCTAVIAN and vosoritide, if they are approved commercially, give us an enthusiasm about our future.
Thank you for your support, and we will now open the call to your questions. Operator?
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Questions and Answers
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Operator [1]
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(Operator Instructions) Our first question is from the line of Robyn Karnauskas from Suntrust.
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Robyn Kay Shelton Karnauskas, SunTrust Robinson Humphrey, Inc., Research Division - Research Analyst [2]
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And just first off, congratulations to Greg. But to Rob, it was lovely working with you. I think you brought a breath of fresh air to working with management teams in all of my buyers (inaudible). So thank you so much. I learned a lot. I guess I'm going to start-up with some questions on ROCTAVIAN, and I hope I get that correctly. So first of all, what gives you confidence that in the United States, that there won't be any more delays? People ask me this nonstop. And then when you talk about assuming normal operations go -- resume in the second half, is that in the beginning of the second half? Do you have a time line for that? If it goes into fourth quarter, could we see further delays?
And the third question is, what are you hearing as far as like people willing to have gene therapy procedures done in the COVID environment as early as fourth quarter? Are people open to it? Is it separate from the hospitals? Or what are you hearing from the ground?
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Jean-Jacques Bienaim, BioMarin Pharmaceutical Inc. - Chairman & CEO [3]
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Okay. Hi. (inaudible) do you want to answer the question on the no delays with the FDA? Hank?
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Edited Transcript of BMRN earnings conference call or presentation 29-Apr-20 8:15pm GMT - Yahoo Finance
