BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) Q2 2022 Earnings Conference Call August 3, 2022 4:30 PM ET
Company Participants
Traci McCarty – Vice President of Investor Relations
J.J. Bienaime – Chairman and Chief Executive Officer
Jeff Ajer – Executive Vice President and Chief Commercial Officer
Hank Fuchs – President, Worldwide Research and Development
Brian Mueller – Executive Vice President and Chief Financial Officer
Conference Call Participants
Operator
Welcome to the BioMarin Second Quarter 2022 Financial Results Conference Call. Hosting the conference call today from BioMarin is Traci McCarty, Group Vice President of Investor Relations. Please go ahead, Traci.
Traci McCarty
Thank you, Rob. Thank you, everyone, for joining us today. To remind you, this nonconfidential presentation contains forward-looking statements about the business prospects of BioMarin Pharmaceutical Inc., including expectations regarding BioMarin’s financial performance, commercial products and potential future products in different areas of therapeutic research and development. Results may differ materially depending on the progress of BioMarin’s product programs, actions of regulatory authorities, availability of capital, future actions in the pharmaceutical market and developments by competitors and those factors detailed in BioMarin’s filings with the Securities and Exchange Commission, such as 10-Q, 10-K and 8-K reports.
On the call from BioMarin’s management team today 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 BioMarin’s Chairman and CEO, J.J. Bienaime.
J.J. Bienaime
Thank you, Tracy, and good afternoon, everyone. Thank you for joining us today on the call. So the first half of ’22 is our strongest 6-month results to date with over $1 billion in combined total revenues from our record-breaking first and second quarters. VOXZOGO revenues of $34 million in the first half — sorry, $54 million in the first half of the year contributed to these results, and they were driven by continued rapid expansion of global commercial access for [indiscernible] achondroplasia. VOXZOGO growth led to today’s increase in top and bottom line guidance for the full year, despite ongoing economic challenges, including considerable foreign currency exchange rate fluctuations and the strength of the dollar.
Turning now to some of the key highlights in the second quarter, all of which were first in our industry. In late June, we were thrilled to have received a positive CHMP opinion for Europe for ROCTAVIAN. We continue to expect European Commission approvals in the third quarter, which will be opening access to thousands of people with severe [indiscernible] who are interested in a onetime infusion of ROCTAVIAN gene therapy. This will be the first gene therapy to treat any hemophilia recommended for approval in Europe. Jeff and his team are ready to launch ROCTAVIAN in the front, potential EC approval later this quarter. And in the U.S., we remain on track to resubmit the BLA by the end of September, the end of next month. Another first [indiscernible] approval of VOXZOGO in Japan for children of all ages with achondroplasia and no age restriction. This approval represents our largest commercial opportunity today in Japan, and we look forward to working closely with the achondroplasia community there. We also received approval in Australia for children ages 2 years and older. These important additions to the global access footprint are expected to be meaningful cures with revenues throughout Japan beginning later this year. With BioMarin’s financial outlook and robust global launch of VOXZOGO tracking to plan and ROCTAVIAN approval on the horizon in Europe, we are on our way to achieving the goal set forth at the start of the year.
Turning the quarter to sustainable GAAP profitability, ramping up our largest opportunity today with VOXZOGO and then progressing ROCTAVIAN to approval in Europe and pursuing approval in the U.S. and also advancing the broadest early-stage pipeline in our history. I would add that as compared to where we were a year ago, we have made major progress to substantially reduce regulatory risk for BioMarin with the global approval of VOXZOGO and upcoming approval of ROCTAVIAN in Europe. And we are — and with our successful launch of VOXZOGO as the commercial, which is also significantly reduced. We will continue to build on this financial, commercial and regulatory momentum in the second half of 2022 and beyond as we make the transition to an earnings call story.
Thank you for your continued support and our — we’ll now turn the call over to Jeff to discuss the commercial business update. Jeff?
Jeff Ajer
Thank you, J.J. I’m very pleased with our record performance in the second quarter of 2022, resulting in $534 million in total revenues, which represents 6% growth year-over-year, including in Kuvan and 13% growth, excluding Kuvan, which continues to experience decreasing market share from prophylaxis in the United States. Year-to-date, all brands marketed by BioMarin, with the exception of Kuvan, experienced revenue growth year-over-year. Starting with VOXZOGO, we are pleased to share that as of June 30, 2022, an estimated 446 children were being treated with commercial VOXZOGO. This includes 282 children and countries outside of the United States and 164 children within the United States. At the end of the second quarter, VOXZOGO sales were spread across 20 active markets, including sales in new markets that previously reported in Brazil, China, Hong Kong, Qatar and Russia. Outside of the EU, we are thrilled to have received approvals in Japan and Australia during the second quarter, giving us a strong foothold in the Asia Pacific region with revenue contributions expected to begin later this year from Japan.
Turning to launch dynamics in the United States. We continue to see prescription demand ramp up. We have been able to rapidly convert patient referrals to patient starts. In the quarter, we saw prescriptions mainly from genetics and pediatric endocrinologists. As expected, we are making continued progress in creating the referral pathway to pediatric endocrinologists. We also see more payer coverage policies published, which are largely consistent with our label or our clinical trials criteria and are aligned to our expectations. We also continue to experience patient growth in European markets consistent with what we have seen in the previous quarter, including new patients from new markets as reported. As a result of the continued strong VOXZOGO ramp, we are increasing full year guidance once again to between $130 million and $160 million for the full year 2022. In summary, for VOXZOGO, we are very pleased with the pace of uptake during the first half of this year and note that we are well into the global launch cascade of logo. These results underscore the ability of our experienced commercial teams to tap into large market opportunities regardless of location. Launching in the EMEA region, Head of the United States provides the team an important framework for a potential ROCTAVIAN launch on the coming month should the European decision be supportive.
Turning now to our enzyme replacement therapy brands collectively achieved record results in the first half of the year with Q2 sales lower than Q1, due to the volume of large irregular orders placed in Q1 relative to Q2. This is consistent with our experience of uneven quarterly revenue patterns, particularly for Naglazyme and Vimizim. In 2022, for both brands, we expect a higher concentration of revenues in the first half of the year compared to the second half. Our expectations for the full year are reflected in today’s updated guidance where we have narrowed the range for both Vimizim and Naglazyme and increased the top of the range of Naglazyme by $10 million for the full year. For Brineura, 24% growth year-over-year and revenue of $38 million in the second quarter was driven by 18% growth in commercial patients versus a year ago. Renewal guidance remains unchanged.
Moving now to Palynziq. Net product revenues grew 4% to $62 million in the second quarter as compared to the second quarter of 2021. While we expect meaningful year-over-year growth and saw continued net patient growth in the quarter, Palynziq performances trailed our expectations, resulting in an adjustment to full year guidance downward to between $250 million to $275 million. We expect Palynziq patient trends to continue to grow, albeit at a slower pace than initially expected. It is clear that the capacity of PKU clinics, particularly in the U.S., to treat adult PKU patients with Palynziq has not recovered the capacity loss due to the pandemic. As a result, we have an active initiative to identify alternate prescribers in parts of the United States where clinic capacity is at a deficit compared to adult patients that could benefit from Palynziq. We are targeting endocrinologists for this initiative, and our research indicates both an interest in treating PKU and the ability to manage treatment with Palynziq. We are early on in this effort. We have REMS certified a number of new prescribers, and we will keep you informed as the impact of this initiative has on our business going forward. Continuing with the PKU franchise, Kuvan contributed $58 million in revenue in the second quarter of 2022, down slightly from the first quarter of this year. As we have stated previously, as Kuvan nears the end of its life cycle since losing market exclusivity in the U.S. in October 2020, we are gratified to be able to retain meaningful market share and resulting revenues. However, based on current trends, we are lowering full year 2022 Kuvan revenues guidance to between $210 million and $235 million. Lastly, with the potential positive EMA decision for ROCTAVIAN expected in the near future, we are ready for launch. Our team is prepared and encouraged that our longer-term data results offer a compelling value proposition and treatment option for adults with severe hemophilia A, and we look forward to providing you with more detailed updates upon approval. In conclusion, in 2022, we anticipate increased demand for all of our commercial brands with the exception of Kuvan as just described. Our NPS products are expected to contribute significantly to revenue growth this year. We also expect VOXZOGO to be a meaningful factor in this ramp here as noted in today’s increase in full year revenue guidance. We believe that robust prescription demand represents the foundation for continued growth, including in new markets throughout 2022.
Thank you for your attention. And I will now turn the call over to Hank to provide an R&D update. Hank?
Hank Fuchs
Thanks, Jeff, and thank you all for joining us today. With the European decision for ROCTAVIAN now on the horizon following the positive CHMP recommendation, we are working fastidiously on the BLA for resubmission by the end of September. Our belief in the potential for ROCTAVIAN to be transformational for people with severe hemophilia A only strengthens with each passing year. As we announced in May and also included in an oral presentation at ISTH in July, durable hemostatic efficacy was maintained over 6 years in our ongoing Phase I/II study of ROCTAVIAN in the 6e13 cohort with a mean cumulative annualized bleeding rate of less than 1, substantially below baseline levels on standard of care. The safety profile from the study remains consistent with previously reported data with no delayed onset treatment-related adverse events. Needless to say, we’ve been very pleased with the ROCTAVIAN results across the Phase III and Phase I/II programs and look forward to a potential marketing authorization in Europe in the third quarter.
Turning to VOXZOGO, in June, we were pleased to share favorable 52-week results from our global Phase II study in infants and young children with achondroplasia at the Endocrine Society’s Annual Meeting. The improvement observed in score and annualized growth velocity observed was consistent with what was observed in children over 5 years of age. We plan to meet with U.S. health authorities in the second half of the year to discuss expanding access to younger children. Finally, turning to the early-stage pipeline, all of the candidates under development continue to advance with BioMarin 255, which adjusts a subset of chronic renal disease. We’ve gotten the go ahead from the Food and Drug Administration to move forward with the multiple ascending dose portion of our Phase I/II study. With BMN 331 for hereditary angioedema, we have dosed patients in the Phase III HARMONY study to evaluate this investigational AAV5-mediated gene therapy for patients with hereditary angioedema. Concerning BMN 351 for Duchenne muscular dystrophy, we expect to file an IND this winter. Our preclinical studies of BioMarin 349 continue to build our enthusiasm for its potential to dramatically improve liver health in people living with A1AT deficiency. For BMN 293, formerly referred to as Dana 001, we are on track to be the next gene therapy clinical candidate, in this case, for the treatment of hypertrophic cardiomyopathy caused by mutant mutations in the [indiscernible] protein C3 gene. Last in, continue to advance BMN 349 and 293 towards INDs in the second half of 2023.
In the coming weeks, we look forward to the EC’s decision for ROCTAVIAN to be followed by resubmission of the BLA in the United States. Thanks for your support, and I will now turn the call over to Brian to update financial results in the quarter. Brian?
Brian Mueller
Thank you, Hank. Please refer to today’s press release summarizing our financial results for full details on the second quarter of 2022. Since Jeff touched on many of the topline results from the commercial business, I will primarily focus on operating expenses, bottom line results 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 over the next couple of days. As we have been highlighting over the course of this year, we believe that 2022 is an exciting and transformational year for BioMarin. Resuming a cycle of substantial revenue growth and expectations to transition to sustainable GAAP profitability are aspirational milestones that we have been working toward for years. We are pleased to be tracking the plan based on the company’s second quarter and first half results provided today.
Total revenue growth of 13% in the second quarter of 2022 as compared to the second quarter of 2021, excluding Kuvan, has put us on a path to achieve our 2022 GAAP and non-GAAP income goals. One comment on how our planned 2022 revenues are split between the first half and second half of the year is that while Naglazyme and Vimizim order timing were weighted to the first half of the year, as Jeff noted, second half revenues are expected to benefit from growing VOXZOGO and Palynziq revenues compared to the first half of the year, plus the potential for a modest amount of ROCTAVIAN revenue. As a result, total revenues in the second half of the year are expected to be roughly even with the first half of the year. The strong VOXZOGO launch and consideration of the trends observed across our other brands drove the increase to our full year 2022 total revenue guidance to between $2.06 billion to $2.16 billion.
Also, to comment on the impact of foreign currency exchange rate volatility on revenues, the strong U.S. dollar has impacted many companies’ foreign currency-denominated revenue in 2022. While BioMarin is not immune from the resulting decreases in mostly euro-based revenue, we are pleased to observe that our foreign currency hedging program is providing the intended protection. Based on current exchange rates, we project that the net impact on our full year 2022 revenues after hedging will be a relatively modest negative effect of approximately $15 million versus our original 2022 guidance expectations, which did incorporate some of the exchange rate volatility observed early in the year.
Moving to operating expenses for the second quarter of 2022, both R&D and SG&A expense fell in line with our expectations. R&D expenses for the second quarter were $158 million, a slight decrease as compared to the second quarter of 2021, reflecting decreased VOXZOGO development efforts after the marketing approvals in the second half of last year, which was mostly offset by increased R&D on our early-stage programs. SG&A expenses for the second quarter of 2022 were approximately — were $197 million as compared to $184 million in the same period last year with the largest component of the increase being the VOXZOGO global commercial launch efforts and ROCTAVIAN commercial launch preparation cost.
Moving to bottom line results for the second quarter and first half 2022. Just a reminder that during the first quarter of 2022, the company sold the priority review voucher received with the approval of VOXZOGO in the United States. While the gain on the sale of the PRV remains the largest single contributor to first half GAAP net income, we are pleased to report GAAP net income during the second quarter of 2022, totaling $28 million and $149 million for the first half of the year. Based on this strong first half 2022 performance, we have slightly improved our full year 2022 GAAP net income guidance range by $10 million to $105 million to $145 million.
While we have improved the full year guidance, we recognize that the full year math in light of $149 million of first half GAAP net income, but just that we may recognize a net loss for part of the second half of the year. This is due to some of the aforementioned revenue timing and some possible larger expense items in the second half of the year, and we remain confident in our core business, generating GAAP net income this year and beyond. With respect to non-GAAP income, Q2 2022 non-GAAP income of $109 million was slightly higher than 2021 second quarter non-GAAP income of $98 million and full year 2022 non-GAAP income guidance remains unchanged at between $350 million to $390 million.
Turning to total cash and investment. We ended the second quarter of 2022 with $1.5 billion flat compared to year-end 2021. The company continues to incur quarterly timing differences in several cash flow categories, mainly working capital timing. However, the business did earn approximately $56 million of operating cash flow during the second quarter of 2022. In closing, the BioMarin team is pleased to use this midway point of 2022 to both acknowledge the strong business performance through the first half of the year and the promising expectations for the rest of 2022. We continue to believe that our strategy of substantially growing revenues that drive increasing profitability and positive operating cash flow, while also investing in developing an innovative pipeline are the best financial levers to fuel growth further into this decade.
Thank you for your attention, and we will now open up the call to your questions. Operator?
Question-and-Answer Session
End of Q&A
This concludes today’s conference call. Thank you for attending.
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