BioMarin Pharmaceutical (NASDAQ:BMRN) Q1 2020 Earnings Call

0:00 Welcome to the Bayou Marine First Quarter 2020 Financial Results Conference Call. Hosting the conference call today from Bayou Marine is Tracy McCarty, Vice President of Investor Relations. Please go ahead, Tracy.

0:14 Thank you, May, and thank you, everyone, for joining us today. To remind you, this non-confidential 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 Securities and Exchange Commission, such as 10Q, 10K, and 8K reports. On the call remotely from BioMarin Management today are JJ Bien-Aimé, Chairman and Chief Executive Officer, Jeff Acher, Executive Vice President, Chief Commercial Officer, Robert Baffey, 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 one 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.

1:25 I will now turn the call over to our Chairman and CEO, JJ Bien-Aimé.

1:29 Thank you, Tracy. 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 the last year, the testament to the importance of our therapies and our diversified product base and commercial footprint.

2:26 Due in part to the sale of fur daps, gap net income in the first quarter was $81.4 million, exceeding our current full year guidance rate of $20 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 $100 million while maintaining both GAAP and non-GAAP income full-year estimates provided earlier this year. Despite Potential near-term impacts to our commercial business from COVID-19.

3:12 Our next block festers, BMN270, VeloxarcoGene, Voxaparbovex, VaroRox for hemophilia A, and Vozoritide for achondroplasia continue to advance. And Jeff will reveal our recently approved brand name for BMN270 in a moment. Briefly on Vozoritide for achondroplasia. In the quarter, we announced that based on recent meetings and successful meetings 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, Rosaritide 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.

4:02 In conclusion, bio-brain 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 remain strong and our manufacturing and supply chain resilient. We have built a durable base business with essential medicine, transitioned the pipeline to address larger rare indications, diversified risk, and positioned 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.

4:48 I'd like to say a few words about Robert Baffey, who has made tremendous contributions to the organization over the last 20 years. During his time at Balmain, he has manufactured the most complex biological products in the world and built the most advanced commercial-scale gene therapy manufacturing capability You know, his leadership, technical expertise, foresight, and dedication have 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 Biomarines through the review of TMN270 VAROX and the Valsoritide marketing applications to ensure manufacturing continuity as his successor, Greg Guyer, begins his journey with us in May, coming from Bristol, Maastricht.

5:41 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? Thank you, JJ.

5:50 Innovation has always been at the core of Biomarin's success. During my 20-year tenure as the head of technical operations, I've instilled 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 three tenets, 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.

6:45 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 products. 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.

7:33 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 places us squarely at the forefront of the emerging technological advancement in precision medicine. Our transition and technical operation leadership provides the opportunity to build on our innovative approach to drug development to fuel our growth. When I first saw 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.

8:24 In many ways, while a different journey, it shared a lot of commonality with my own and to now let us both to Biomarin. I'm confident and committed that the transition and 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.

9:18 This inspection involved a detailed review of the facility equipment, process, and analytical studies and relevant documentation generated in support of validation, production and testing. Following this inspection, a CGMP certification was granted, allowing for commercial production and distribution of BMN270 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 for licensure in the U.S. of the facility consistent with the August 21st PDUFA Action Day.

10:03 We have more than 400 doses of commercial BM-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.

10:31 Jeff? 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 JJ 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 Palantir.

11:16 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 Palantique 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 Palantique, and early uptake signals are encouraging.

12:04 During the quarter, we made significant progress in Germany, adding clinics that now have some experience prescribing Palantique, 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 and important steps toward getting price and reimbursement approvals in other high priority European markets. Kuban contributed $122 million in revenues in the quarter, or 14% growth year over year, with most of that growth coming from the United States.

12:55 Vimism 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 Vimism. Turning to Naglazyme, revenues totaled $114 million, a 32% year-over-year growth for the well-established brand. As with Benazim, the impact from uneven large order patterns makes a 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.

13:41 Nearly 15 years later,

13:43 since being approved. And finally, Brunura 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 Umea region in Q4. Importantly, the growth in Brunura revenues compared to prior year reflects an underlying growth of 86% in commercial patients. We are seeing a net increase in patients benefiting from Bernara 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.

14:32 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 blow 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 to new patient starts as well as to ongoing infusion center visits from existing patients are expected to continue.

15:18 As a result, we are reducing total revenue guidance by 5% at the midpoint to between $1850 million to $1950 million for the full year 2020. The vast majority of today's updated total revenue guidance reflects adjustments to inline brands including Vimism, Naglazyme, and Palantzeek. 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. 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, Rocadian.

16:11 In previous calls, you have heard references to Valrox, which was an abbreviated form of our INN, or International Non-Proprietary Name, Belactatogen Roxaparvavec, or, alternatively, our program identifier, BMN270. Both the FDA and 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 first priority markets in the EU.

16:58 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 approval. 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?

18:05 Thanks, Jeff.

18:06 I'd also like to echo JJ'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 Roktavian and Vansorotide 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.

18:56 Starting with Roktavian and what a strong and memorable brand name. Congratulations, Jeff. The FDA is committed to meet the August 21st 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 three 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 MAA 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 a four-year update of the 6E13 vector genome per kilo dose, as well as the three-year update on the 4E13 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.

19:58 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 timelines for completion of the Roctavian Phase III trial. Enrollment was completed in November of last year, and one of the benefits of being a one-time 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 out of a sore touch with the treatment of achondroplasia, as JJ mentioned, we plan to submit a global marketing application in the third quarter of this year, a multi-pronged development program including a long-term phase two clinical results in five to 18-year-old children, comprehensive natural history data, The ongoing study of newborns through five years and the highly statistically significant placebo-controlled Phase III trial makes for a very comprehensive data package spanning more than five years of treatment with children with achondroplasia.

21:12 Again, we're the beneficiary of fortunate timing in that our pivotal submission data read out prior to the pandemic, and now much of the work can be concluded remotely. If approved, the SORTIDE would be the first and only medicine designated for the treatment of achondroplasia in the U.S. and in the European Union. We continue to look forward to publishing the full data from the phase three 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 one year growth velocity, high T-scores, body proportionality, safety and subgroup analyses, so stay tuned for more specifics as to when and where those data will appear. The phase two study of us who are tied in zero to five year olds, referred to as study 206, is proceeding well and we are very pleased that safety data from children ages six months to five 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.

22:15 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 safe to do so given the COVID-19 circumstances. We're excited about the prospect of the MN307 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 in 2020. The R&D organization is energized by the opportunities before us in 2020 with both roctamin for severe hemophilia A and the sort of children with achondroplasia advancing towards potential approvals. We are hopeful that these innovative treatments will be available in the very near future.

23:00 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.

23:12 Thank you, Hank. Please refer to today's press release summarizing our financial results for full detail on the first quarter of 2020. and as usual, our comprehensive report on the quarter will be available at our upcoming form 10Q, 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 spend projection and make adjustments that allowed us to maintain our prior GAAP and non-GAAP income guidance, despite the lower revenues.

24:07 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 Palantzeke 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 Palantzeke. 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 in some of the more volatile global currencies.

24:59 Turning to bottom line results, we reported gap net income of $81 million in the first quarter of 2020, compared to a gap 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 deferred ABS 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 company's history and considerable growth in non-GAAP income.

25:47 I'd also like to touch on a 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 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 one-time non-cash 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 of 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, there's a significant improvement over the first quarter of 2019, where total cash and investments decreased by $105 million.

26:50 This solid cash position, coupled with Biomarin's business fundamentals, put us in good standing to manage through the continued uncertainty related to COVID-19. In closing, the strong 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 Ractavia and Visoratide, if they are approved commercially, give us enthusiasm about our future. Thank you for your support, and we will now open the call to your questions. Operator? Thank you, sir. To ask a question via the telephone, please press car 1. If you would like to withdraw your question, press the pound key. Please limit yourself to ask one question.

27:35 Our first question is from the line of Robin Karneskas from SunTrust. Your line is now open.

27:42 Hi, everyone. Thanks for taking my question. 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 biotech universe. So thank you so much. I learned a lot. I guess I'm going to start off with some questions on Roktavian. 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 timeline for that? If it goes into fourth quarter, could we see further delays? And third question is, what are you hearing as far as people willing to have gene therapy procedures done in the COVID environment as early as fourth quarter? Are people open to it?

28:37 Is it separate from the hospitals? What are you hearing from the ground?

28:41 Thank you. Okay, thanks. You want to answer the question on the no delays with the FDA?

28:53 Okay. Thanks, Robin, for the questions. The confidence from the FDA is that we're tracking to our milestones, and in some cases, they are accelerating their work. So having been through a bunch of these recently, all the signs are pointing favorably. As far as willingness to dose, as you know, we completed our dosing in our VALROX clinical trials, and we're experiencing a bit of a delay in the PKU program. I do expect that there is some hesitance from the gene therapy clinical trial world. I don't know if Jeff Ager wants to make any comments about it. I mean, he's heard about what might happen in the fourth quarter when we're approved.

29:36 Yeah, Jeff, you want to give your perspective on, you know, how we would launch the product? I mean, obviously, if we had to launch today, it would be a little bit challenging, but, you know, we're seeing news every few minutes that the businesses are starting to reopen in the U.S., and around the world, Germany, France. France is reopening their schools in a couple of weeks. So things are changing now. It's very hard to predict when things are really going to go back to normal or as close to normal as possible. We cannot anticipate this to happen at the beginning of the third quarter, but it's hard to tell today. But Jeff, you want to give your perspective on the willingness of the patients to be treated and and how our commercial team is going to go about addressing this?

30:24 Yeah, it's a great question and of course nobody can predict the future. So our team has been focused and maybe I'd start with saying fortunately we have a team in the United States that is comprised largely of people with existing relationships in the hemophilia community. So those people are busy making connections with clinicians, with hemophilia treatment centers and with patient advocacy organizations, all with the objective of continuing to introduce Biomarin as an organization to those audiences and provide opportunities for gene therapy education, very important and highly in demand in the community, and also working on site readiness.

31:16 I think one of the most decisive variables will be the ability and willingness or not of certain hospitals to do infusions if we are so fortunate to have an approved Roctavian product in Q4. That will probably be somewhat dependent on the course of the COVID-19 situation. But we would also note that while we've seen A lot of disruption to our infusions of the enzyme products. The disruption hasn't been anything close to total. And in fact, we've seen less disruption with Brunura infusions, which are indicative of the situation where hospitals and physicians can prioritize infusions. If they're motivated and they find them to be particularly important.

32:18 So that's our approach for Roctavian, pursuing education, site readiness, and we'll see where we can do infusions when we get that far. I personally haven't gotten a signal that patients are going to be reluctant to take infusions when we get that far. and that may be reflective of the fact that our patient engagement is pretty limited in the pre-approval setting. I'll turn that back over to you, JJ, if you want to direct on the resume to normal question.

32:56 No, I mean, I think I kind of tried to answer that. Maybe do you want to give your perspective on the resume to normal? Jeff?

33:05 Yes. So, Robin, I don't think that we're saying that our business will be back to 100% normal starting the second half. I think we're using the second half to give some flexibility in terms of the timing of that. My own sense is that we're expecting to see the biggest impact to our business in Q2. We would be rebounding in Q3, and with some luck, we would be back to normal pre-COVID levels of demand in Q4. Thank you. We have our next question from the line of Salvina Richter from Goldman Sachs.

33:50 Your line is now open.

33:53 Good afternoon, and thanks for taking my questions. And Robert, good luck with everything. So as you look towards the Valrox launch, can you comment on patient screening, such as the website that stood at about 400 individuals, I believe, back in February, and an update on the companion diagnostic? And then secondly, how should we think about the four-year Phase I-II upcoming data, and do you anticipate it will impact payer discussions?

34:20 Hank, do you want to answer the companion diagnostic? Are things moving along here? and then you had a question on the Phase 2 update?

34:30 Yeah, and the opt-ins. I can start with the companion diagnostic and the four-year update and then turn it back to you guys for the impact on payers or the opt-ins. Companion diagnostic, Salveen, doing great. Everything's on track. Fully expect to have an approvable companion diagnostic at the time of Valrox approval in the United States. Fully expect to have it CE marked for use in in Europe when Roctavian is approved. For your update on Roctavian, the expectation is a main focus is going to be obviously on bleed control and secondary emphasis is going to be on the evolving pattern of factor expression and whether there are anything in individual patients at mark who were vulnerable to losing factor expression, if that's occurring or not.

35:24 So, as you know, the study has been overseen by a data monitoring committee, and they have not reported anything particularly one way or the other to us about Study 201, so we continue to follow the patients as the protocol described and look forward to presenting the data in the middle of the year.

35:42 So, Jeff, do you want to talk about the payers and the impact, I mean, the Phase 2 update impact or lack thereof on the payers?

35:50 Yeah, thank you, JJ, and thanks, Alvin, for the question. The four-year data point is an important part of the emerging clinical data picture. I think I had mentioned on the previous call that our payer launch was begun in Q4 of 2019, so we've got a full payer management team on the ground. They've been They've been conducting calls for the last four months, and we've been using the data that we have. We've been using the three-year data from last spring, and we've been using the data from the Generate One interim data cut.

36:36 That's the data that we have. Payers are interested in the question of durability. That's a key question for them. I haven't gotten any signals from payers that they think that the answer to that question is a binary one based on what we see mid-year from the four-year data cut, but obviously that will be an important part of the picture and payers care about the question of durability. We have our next question from the line of Josh Shimmer from Evercore ISI. Your line is now open.

37:14 Thanks for taking the questions. Have you started to see any change in the days receivable in the start of the second quarter, and how do you expect that to evolve over the course of the year? And can you comment a little bit on the insurance coverage shifts you may be seeing in the U.S. and how you think that may impact the business, if at all? Thanks.

37:36 Hey, Brian, you want to answer the day receivable questions? And then Jeff, the insurance mix?

37:42 Of course, yeah, thanks, Josh. We're watching that closely, including throughout March and April here. We've not yet seen actual disruption to our payments. You know, we've got a stable base of customers, stable supply chain and relationship from a cash flow standpoint with those customers. So we're hopeful that that will continue, but, you know, recognize that there's going to be some uncertainty with the pandemic and its impact on healthcare systems. So we're watching it, but no impact to date.

38:15 And Josh, like other companies, we're very watchful for signals that look like patients are losing access to private insurance because of being laid off and what happens to those families and patients. I would say we don't have anything that constitutes a signal on that to to this point. There have been a couple of anecdotal reports that we've collected and we are deliberately collecting any signals that we can from our rare connections hub program. So we've gotten anecdotes of patients calling and saying that they're anxious about the potential loss of insurance.

39:06 We've seen one patient family We have our next question from the line of Corey Kasimov from JP Morgan. Your line is now open.

39:29 Hey, good afternoon, guys. Thanks for taking the question and congrats to Robert on your retirement. So my question is for Hank. I'm just curious, is there a reason other than COVID why the EMA may revert the Roctavian MAA to standard review from accelerated assessment, especially since you already successfully completed the pre-approval inspection? Was there any new data or new analyses that were requested by the agency? Anything else you can say there?

39:59 I think the key thing about accelerated assessment is that most products fall off accelerated assessment. And I think that this is also further compounded by the fact that this is an advanced medicinal agent. So I don't think today's comment about accelerated assessment should be interpreted meaningfully differently than when we initially filed the application. Okay. Thank you. Yep. Your next question is from the line of Jeff Meecham from eBay. Your line is now open. Hey, guys. Thanks for the question. I just wanted to ask a little bit more about the dynamics in the base business. I guess when you think about the diagnostic path for new patients on a number of different products, be it Venazem, Vernuria, Palantir, et cetera, obviously it's a pretty long cycle.

40:49 I just wanted to Thank you. Jeff, do you want to take that one? Yeah, I'd be happy to. So relative to the base business and the dynamics, I would say we anticipate the near-term impact from

41:19 Thank you very much. The incremental new patients coming on will have a smaller impact. And there are anecdotal reports that clinics are shifting their interactions with patients to virtual visits. That's something that is obviously outside of BioMarin's purview.

42:13 We only have incidental reports on that and that's not something that we would seek to get involved in. However, I think for certain aspects of the identification and patient start pathway, we do see patients moving forward. So that process has not ground to a halt exactly, but it has been disrupted. and thanks, Chef, for that question. I hope I've addressed your concerns. Next question is from the line of Akash Tiwari from Wolf Research. Your line is now open.

42:55 Hey, thanks so much. Can you give some color on how the FDA may use that new PROFI trial on Valdorox you recently announced? Would it be possible to have that data pooled with your Phase 1-2 data as a part of a separate efficacy analysis in your label? and how long would that take to happen? And I just wanted to clarify something. Your 2020 guidance included the impact of Valrox in sales only in Europe. I just wanted to make sure I heard that correctly. Thanks.

43:24 So, Akash, you want to start on the FDA coffee?

43:28 Yes. Yep. Hi, Akash. You know, that study start is going to be delayed because of the pandemic. And in any case, It was ancillary to the initial application and registration. The way I think about it is in the initial reviews that the agencies are looking at, they have some data in patients treated with on-demand steroids. They have some patients that are treated with prophylactic steroids. Doctors are kind of split, some like prophy, some like on-demand. We've just dosed 130 patient clinical trial with on-demand steroid use, and so therefore we were thinking about increasing the sample size of the experience that we have with prophy steroid use.

44:19 When those study data are available, we would certainly make them available medically and medical communications, and then we'd think about also how that might be tied together with the Phase I-II prophy study to support a label supplement. That's pretty far down the road from where we are. And I think we have a really strong data package at launch in regard to steroids and how to use them.

44:41 So getting the guidance, Akash, so to make it clear, our original 2020 guidance, which we gave when we reported Q4, included some anticipated revenues in Valrox in Europe. The revised guidance we're just giving today assumes no Piper Sandler, your line is now open. Thanks. I just wanted to drill down a little bit on Pal and Zeke.

45:31 So Jeff, I think I heard your commentary on the slowdown in new starts happening at the beginning of the quarter. As memory serves, I think there was a bit of a slowdown that started also in Q4. And just noting that when you look at the product-specific guidance changes, that this kind of stands out as I think by my math, midpoint to midpoint is down 10%, whereas the others that you changed were down less. I wonder if you could just maybe give a little bit more color. Is there something more endemic, I guess, going on with Pallant Week?

46:12 Thanks for the question, Chris. So in the Q1 earnings call, we pointed to a little bit of a seasonal slowdown in Q4. for Palenzeke in terms of patient starts and patient enrollments. And we have historically seen that also with Kuvan. That's basically a seasonal of the holidays. So from Thanksgiving in late November through Christmas and New Year, we see disruption to clinic activity and slowed patient enrollments. So we saw a little bit of that in Q4. Kevin Eggan, Greg Guyer, Greg Guyer, and in some cases patients switching to new policies and in a lot of cases the need for a new prior authorization for patients.

47:36 That was really an early Q1 phenomenon. By February we were seeing new patient enrollments and starts picking up That was really an encouraging sign for Palantir in February and March. And then as the clinics in the United States and Germany began to be shut down in March from the COVID situation, we're experiencing now a real slowdown in patient enrollments and patient starts. And I expect that will continue largely until the clinics are back up and and able to continue their operations again. Recalling that with Palenzeke, patient starts are directed to be under the supervision of a healthcare professional that can manage potential adverse events, at least for the first injection.

48:34 I hope that answers your question, Chris.

48:36 Yeah, and also for Palenzeke, both the patients and the clinicians have to be certified that the patient can receive the product and know how to self-inject and then that the physician can know about how managing the potential side effects. That's why there definitely has been in late March and in April a slowdown in the new patients, but we believe it's temporary and when the PKU clinic reopens, we hopefully will see an acceleration of new patients here. We have our next question from the line of Phil Nadeau from Colin and Company. Your line is now open.

49:13 Good afternoon, thanks for taking my questions and congrats on the progress. I also wanted to ask a question on the guidance. It looks like the Vimazine guidance was cut by about 30 million and Nagazine by 20. I'm just curious, one, what have you been seeing in April? How far apart can those infusions be pushed before patients see some impact on their symptoms? And two, what proportion of patients worldwide are able to get these infusions at home? and so therefore maybe won't have much of a disruption to use.

49:48 Jeff?

49:51 Tim, thank you for the question. So, and, you know, the reduction in guidance on Vimism and Naglozyme is proportional to the base of sales that we're talking about. So what we're seeing is a relatively uniform impact so far relative to the size of the business for each of Neglazyme and Vimazem. We're seeing more disruption in loss infusions in markets where home infusion is not a well-established practice. So we know normally that home infusion, where home infusion is an established practice that compliance rates are higher, and we've seen less disruption in those markets where patients are home-infused.

50:44 Now, we've got a very diverse global business for both NaglaZym and Vimazym, so I don't want to try to report high-level numbers of what percent of patients are home-infused or not, but our tactics have been in markets where to intervene and try to keep our business on track. In markets where we've got home infusion as an established practice, we're trying to push more patients into that channel and that channel is relatively open. In markets where home infusion is not an established practice, we see this as an opportunity in some places to try to get it established. And so we've had some success in places like Brazil and Argentina and Colombia in Spain, for example, in pushing patients into home infusion where it's not an established practice or alternate infusion sites, those being maybe a smaller hospital that's closer to home, less impacted by COVID-19 situation, or in some cases, something like a retail infusion clinic where patients can go.

52:00 And we're seeing some, of Thank you for joining us. We're fortunately seeing a much higher level of compliance and less disruption with that part of the business. I hope I've addressed your question there, Tim. Thank you.

52:38 Actually, if I may add, the virus situation is probably eventually going to be helpful to actually move a lot of the treatments from the countries that are behind U.S. and Western Europe, move the treatment and infusions from the hospitals around into either the homes or places that are closer to the patients, which actually overall is good news and might actually improve compliance in the long term. We have our next question from the line of Matthew Harrison from Morgan Stanley. Your line is now open.

53:14 Great. Good afternoon. Thanks for taking the question. Just too quickly from me, I guess, for Hank. Hank, I didn't see a comment in the press release, and I'm sorry if I missed it. Maybe you commented during your remarks, but any impact to enrollment in the last group of patients that you need for the full pivotal study for Valrox. And then on PKU gene therapy, is there anything you can do by adding some more sites or anything to maybe speed up or reduce the delay that you're going to face here before you start or is this basically just a delay until you're able to start? Thanks.

53:53 Hi, Matt. 270, I'm sorry, Raktavian Phase 3 enrollment, I think you were asking about, we completed in November. And so we're not presently enrolling anyone further as regards our initial approval. So good news on Raktavian, the confirmatory trial, fully enrolled. And as far as the sort of the generalized restart, we have a lot of conversations with investigators and There's reopening happening in different ways and in different places at different times, and we're really trying to get a handle on where a site is going to be able to dose the first patients on the resumption of clinical trials.

54:41 Don't exactly have clarity on when that's going to be or where that's going to be. Next question is from the line of Paul Matys from Stifel. Your line is now open. Thanks. This is Alex on for Paul. Thanks for taking the question. Just wanted to see how your thinking has evolved on paper performance for gene therapy as a model in the U.S. Thanks.

55:09 Jeff, you want to address that one?

55:13 Yeah, thanks, Alex. It's a great question. We're really going into a new model for reimbursement with Ractavian, and the payers are very interested in keeping up with gene therapies that are coming to the market, Ractavian being perhaps one of the first meaningful gene therapy brands to hit. They want to make sure that they're not falling behind It's really the shift from how do you create a reimbursement environment for a one-time durable treatment in a model that is accustomed to paying for chronic therapies over time.

56:01 What the payers have told us is that, one, they understand that there's limitations so far in companies' abilities to pay for performance agreements. that don't create problems with government price reporting. And I'm sure you understand the issue there. Medicaid best prices and AMPs that would trigger a cascade of lowering price to government-paid patients. That's a problem. They understand that. They've also advised us, Biomarin, that outcomes-based agreements are important to them It's a way of shifting the risk from their shoulders back to the manufacturer for both response and durability over the time.

56:53 They've told us that it's important and they've told us that agreements that are limited to 23% or less of the purchase price don't particularly excite them. They don't consider that to be a solution. So we've been working on strategies for outcomes-based agreements for Rockpidian. We think that we've potentially got some things that will work for payers. We're out there talking to payers right now. And probably for competitive purposes, I won't go into the details of what that all looks like. But I think we have a potential path forward that would address outcomes-based agreements, desires from payers.

57:40 Thank you. Next question is from the line of Mohit Bansal from Citigroup. Your line is now open.

57:49 Great. Thanks for taking my questions and congrats and thank you very much for Rob as well from my side. Good luck with your next part of your adventures. Now, just wanted to get a little bit more color on the shape of recovery you are thinking in your base case. If I heard correctly, you were assuming You are assuming normalcy in fourth quarter in your assumptions. Is that fair? Or you are assuming that it could be like second quarter will be down, third quarter starting to recover, and fourth quarter could be completely normal? Or how are you thinking about that? It would be very helpful. Thank you.

58:33 Yes, Your Honor. I'll say a few words on that too later, but why don't you get started?

58:40 Yes, so thank you, Mohit. Everybody is busy predicting the future here, which is difficult to do in normal circumstances and probably fraught with even more difficulties to do precisely given the current situation. But we started seeing disruptions to our business at the end of the first quarter, which did not impact our financial performance in the first quarter. but as we began the second quarter, we knew that the disruptions that we're seeing would flow through to our business as described. We quickly got in gear to start taking mitigating actions, mainly on mist infusions as I've described and we think that those mitigating actions are having an impact.

59:38 So yes, we're We're anticipating that we'll see the biggest impact to our business in the second quarter and that the conditions relative to our business would be improving as we go through the end of the second quarter, through the third quarter. And our target is to have something that looks like pre-COVID-19 levels of demand that we're able to address and facilitate in the fourth quarter. You can tell from the level of our guidance reductions the magnitude of the anticipated impact to each of our different brands. So that's a way of kind of quantifying our expectations for each of the different brands relative to the dynamics that I've been describing.

1:00:29 So hopefully it's possible for you to connect the dots a little bit between the qualitative and the quantitative piece. Maybe I'd pause there and see if JJ has other thoughts.

1:00:39 No, I mean, just want to highlight that it is indeed very difficult for us to forecast where things are going to go. It looks like things are getting better in most parts of the world, but we're not, you know, we're not out of this complex situation that the virus has created. So again, we assume here the main impact being Q2, some recovery in Q3, and hopefully Q4 potentially back to normal, but It will depend a lot on how quickly the economies are reopening in different parts of the world. And also, you know, as some of you know, there are talks that there could be a second wave of the virus like there was for the 1918 Spanish flu. Hopefully, if there is one, it will be minor and there will be more therapies available by then. But all this is very hard to predict.

1:01:25 So here we don't assume a significant second wave of the coronavirus hitting the world in Q4. So if that doesn't happen, then we... Greg, you'll be confident in our guidance here. We have our next question from the line of Tim Ludo from William Blair. Your line is now open.

1:01:48 Thanks for taking my question. You know, we're almost two years into the approval of Palenzec here in the U.S., and we obviously have generic Cuvan approaching. Can you give us, you know, your updated thoughts of how many of the Cuvan patients will be transitioning on to Palenzec by the time the generic comes Tomarkey here in the U.S., given that we obviously have larger healthcare disruptions given COVID?

1:02:16 Good, Jeff?

1:02:20 Yeah, so great question. We have seen so far with the uptake of Palinzec in adult patients, we've seen almost 40% of Palinzec patients coming from patients that are on commercial therapy with Kuvan. And essentially what that is indicating are PKU patients that were being treated with Kuvan that were having a response but not seeing the magnitude of a response that they desired and seeking Palenzec as a more powerful alternative. So 40% is a pretty large proportion of our new PAL and ZEEK patients coming over from Kuvan. Obviously, in the United States, we're starting with a pretty big pool of adult patients on Kuvan.

1:03:18 So while we're seeing a material shift of that adult patient base over to PAL and ZEEK for reasons that I've described, I wouldn't say that that represents anything near a majority of those patients. As we go into a loss of exclusivity period later this year, one of the things that we're encouraged by is even if we have a Kuvan patient that goes on to a generic form of the product, we really haven't lost them forever. were connected to them through the clinics. We're connected to them from our hub services with their opt-ins and information. Our clinical coordinators are connected with them.

1:04:13 And Allendeek remains a viable option going forward for any patient, any adult patient that is not seeing the kind of response they're looking for on Kuven or a generic version of Kuven. So I think we're optimistic about our Thank you. Next question is from the line of Ken and Nakay from RBC Capital Markets. Your line is now open.

1:04:46 Hey, thanks for taking the question. And I want to say congrats to the entire team for these 2-1 results that really show that Biomarin is Operationally and clinically and commercially navigating these really unprecedented times ahead of really any of our expectations. So I also had another housekeeping question on guidance here. The full year 2020 guidance for a negative 5% headwind sort of implies $100 million hit here at midpoint. And again, it sounds like expectations of the vast majority of that is going to come in Q2, with the exception of maybe a little bit sort of dragging on through the rest of the year and Thanks. Thanks.

1:05:53 So I think Jeff kind of addressed that question again, that we do think indeed the majority of the hit on the revenues is Q2. There will be a hit in Q3 as compared to what we were expecting because, for instance, of some palliative patients that were supposed to be started and are being delayed, and then everything gets delayed with that, some misinfusion that will still be probably happening in late Q2 and maybe early Q3, although it's hard to predict. And maybe Brian can give his own perspective on all this, if you want to chip in, Brian, on this. Yeah, of course, JJ.

1:06:33 Yeah, of course, JJ, thanks. And I think what we commented on, Canada, is that the disruption will be worse in Q2. I don't think we can predict with certainty how that will actually translate into ordering patterns. We already point to our annual revenue guidance as the primary indicator for the commercial brands and less so quarter to quarter because we know that country by country specific ordering patterns shift greatly due to timing. So depending on whatever level of supply was on hand in these certain territories where we're experiencing some disruption and infusion, and whether and when they will order next, as well as how that spills into Q3. I don't think we can put our finger on the exact ordering pattern, so we would point you to the annual guidance.

1:07:30 We have our next question from the line of Gina Wang from Barclays. Your line is now open. Hi. This is Peter from for Gina Wang. Thanks for taking our question. I guess on the question on Velvox, if it switches to a standard review, would EMA want to see the full, the phase three data to make their decision? Thank you very much. Hi.

1:08:01 Hi, you there?

1:08:14 Yeah, I'm not sure I heard the full question. Is it possible to repeat it? Sure. The question was, in a case where EMA review switches to a standardized process, standardized review, would EMA would like to see the full phase three data to make their decision?

1:08:40 Certainly an imaginable possibility. I think it's a little premature to talk about what sort of turns might happen in a review. As you know, historically, we don't give very detailed comments about where we are in review because it can be very difficult to interpret and matters can get settled. So I think the message of today is because of COVID-19, While we're on accelerated assessment, the review has been delayed, and because accelerated assessment is complicated to stay on, complicated also by the advanced nature of the therapeutic, there may be a further delay. We feel comfortable guiding you to an expectation of an opinion in Q4 this year, Q1 of next year, but the review is certainly not complete and things may change further.

1:09:39 The good news is we're not like the company that put the accelerated approval study into the regulators and then have not even started the confirmatory study. We finished the enrollment in the confirmatory study. Next question is from the line of Ellie Merle from Cantor Fitzgerald. Your line is now open.

1:10:11 Thanks so much for squeezing me in and congrats on all the progress. Just a question on Visortide. From your recent discussions with the regulators around the filing, what was their latest perspective on how much efficacy data you need to have a label that covers ages under five? or whether sort of the safety data from the ongoing studies coupled with the phase three in ages over five would be enough for a broad label, thanks.

1:10:38 Yeah, these kind of, hi Allie, thanks for the question. These conversations are at a much earlier stage than where those kinds of questions get answered. The negotiation is gonna be what's in the package and what will be in the package will be the safety data on patients who are older than six months of age. and up to five years of age in addition to the pivotal study. They're very well aware of that and they're also very well aware that their advisory committee advised them that they should anticipate that use will commence in very young children at the time of the initial licensure but beyond that we haven't had concrete conversations about labeling.

1:11:18 By the way, the first two cohorts of the under five studies are fully enrolled The enrollment of the third cohort, which is patients from birth to six months of age, a couple of patients have been enrolled. It's been slowed down a little bit, of course, by the virus, but the first two cohorts are fully enrolled. Next question is from the line of Vincent Chen from Bernstein. Your line is now open.

1:11:48 Thank you very much for squeezing in, and congrats on all the progress. To follow up on Josh's earlier question on insurance coverage shifts, If patients were to shift from commercial to government insurance, roughly what net price impact would you expect to see to your portfolio and which products might be more affected, if any? Are there reasons to think that your portfolio might actually be somewhat more insulated than the, I guess, the biopharma sector as a whole?

1:12:12 Jeff, you want to try that one?

1:12:15 Yeah, that's a great question, Vincent. We have government prices. We have 340B discounts depending on where patients are getting their care. We've got commercial patients. For our portfolio in the United States, we don't contract for or discount our commercial portfolio. If we had a substantial shift in Patients moving from commercial plans to Medicaid, for example, you could see an individual patient generating less net revenue.

1:13:05 Based on the number of patients that we've got in the United States, we'd have to see a pretty big shift in patients and many more. Our enzyme patients. So I'm sorry for musing while I'm answering.

1:13:53 I think it's a great question. We haven't seen anything that even comes close to a signal of more than anecdotal reports of a patient here or there losing their private insurance and moving over to a safety net insurance. So I think it's a theoretical thing, but we haven't seen anything close to that yet happening. Thank you. There are no further questions at this time. I turn the call back over to our Chairman and CEO, JJ Bien-Aimé, for closing statements.

1:14:37 All right. Thank you, Operator. And I just want to, in conclusion, say that in this unprecedented time sense, Thank you very much. I remain very confident that Embalmer's ability to deliver on the tremendous opportunity for value creation that we have before us. So our underlying fundamentals remain strong and we're well positioned to successfully manage through this uncertain economic environment.

1:15:28 The critical growth drivers are in place. Having built a successful base business, transition our pipeline to address larger, rare indications and lay the foundation for significant profitability with Roctavian and Rosaritide approvals. All of those positions Biomarine for substantial success in both the near term and the long term. So thank you again for your continued support and stay safe. Goodbye. Thank you presenters. Ladies and gentlemen, this concludes today's conference call. Thank you all for participating. You may now disconnect. Presenters, please stay for the post conference.