BioMarin Pharmaceutical (NASDAQ:BMRN) Q2 2020 Earnings Call

0:01 Welcome to the BioMarin second quarter 2020 financial results conference call. Hosting the conference call today from BioMarin is Tracy McCarthy, Vice President of Investor Relations. Please go ahead, Tracy.

0:18 Thank you, Lori, 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 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 10Q, 10K, and 8K reports. On the call remotely from Biomarin Management today are JJ Bien-Aimé, Chairman and Chief Executive Officer, Jeff Ager, Executive Vice President, Chief Commercial Officer, Robert Baffey, President of Global Manufacturing and Technical Operations, Hank Fuchs, President Worldwide Research and Development, and Brian Mueller, Executive Vice President and Chief Financial Officer. We hope to keep this call to one hour, so we respectfully request that you limit yourself to one question during the Q&A portion of the call.

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

1:31 Thank you, Tracy. Good afternoon and thank you all for joining us on today's call. We hope that you and your families have been well during these uncertain times. For BioMarin, we continue to manage the business in new ways to ensure access to our essential therapies around the world. I want to commend our employees for their extraordinary commitment to our mission of providing innovative treatments to people with rare diseases, which has been especially challenging in the COVID-19 world. Our second quarter results of $430 million in total revenues or 11% growth over last year is a testament to the importance of our therapies, our diversified product base, and far-reaching commercial food practice.

2:20 Consistent with our commentary in Q1, we experienced impact from COVID-19 In the second quarter, we hope to return to normal demand patterns by the end of 2020, barring any significant deterioration of the pandemic situation before year-end. We continue to expect to achieve full year revenue and operating expenses guidance as communicated on our first quarter call. Moving now to the most anticipated milestones of the year, the advancement of our two product candidates Under regulatory review, Roctavian gene therapy for the treatment of severe Haemophilia A and Rosoritide for the treatment of achondroplasia. In June, we were pleased to share the four-year Roctavian data update at the World Federation of Haemophilia's virtual summit. Following a one-time infusion of Roctavian, all study participants who received the 2B marketed dose remain off exogenous factor VIII prophylaxis therapy and demonstrated a greater than 90% reduction in bleeding episodes four years after treatment.

3:29 With our PDUFA target action date later in August, we are going to continue our policy not to comment on the status of the review of our BLA. I want to thank you for bearing with us as we look forward to potential FDA approval later this month. Stay tuned. Moving to Missouri Tide, two weeks ago we submitted the marketing authorization application to the European Medicine Agency for the treatment of children with achondroplasia. I want to thank everyone across the organizations who worked on this application under unusual and difficult circumstances due to challenges faced by COVID-19. It seems there is nothing the teams can't accomplish.

4:15 Once the application is validated, We expect the NDA review to begin later this month. We are on track to submit the Rosoritide NDA to the FDA later in this quarter. If approved, Rosoritide would be the first and only medicine designated for the treatment of achondroplasia, the most common form of dwarfism in the U.S. and in the EU. These key events, combined with our goal of turning profitable on a cap pace since this year, for the first time in the company's history, has had us very busy. It is no coincidence that BioLine is at a significant inflection point in 2020. We have been growing the company for many years, honing our R&D platform, advancing our manufacturing capabilities, expanding our commercial footprint, and working with health authorities around the world to develop essential medicines for people with rare diseases.

5:14 We have positioned ourselves for substantial success

5:28 Thank you, JJ. As we discuss results from the second quarter of 2020, I'd like to begin by saying I'm very proud of the team's performance across all regions during this quarter, which has challenged the entire world to think, react, and operate differently than ever before. When we provided our Q1 quarter results to you, the COVID-19 situation was still developing, yet we were already focused on assessing and forecasting near and longer-term impact from what remains today a dynamic and unpredictable situation. These Q2 results are in line with the revised guidance that we provided previously and reflect the strength and resiliency of our business.

6:14 They are also a testament to the ability of our teams globally to quickly employ mitigation efforts to reduce the impact of COVID-19 as much as possible. Further, these results underscore the recognition worldwide that we are providing essential therapies to patients with high-end medical needs and that prioritizing access to these products is vital to their long-term outcomes. As JJ mentioned, we achieved quarterly total revenues of $430 million and net product revenues marketed by Biomarin of $387 million in the quarter. Year-to-date total revenues were $932 million, representing an 18% increase over the same period in 2019.

6:59 On to specifics in the quarter from a brand perspective and starting first with Palantzeek. We are reporting Q2 revenues of $41 million, a 116% increase compared to Q2 last year, and year-to-date total revenues of $75 million, a 142% increase from the first half of 2019. As expected, the majority of that revenue came from the U.S. For patients that had already started Palindex therapy prior to COVID-19, they have been stable on their treatment without any significant increase in discontinuations. The material impact on Palantique has been the new patient starts.

7:46 The impact was most pronounced in the months of March and April, with an encouraging uptick in May and early June, followed by a regression that correlated with increasing COVID-19 infections. We're still optimistic about our ability to drive additional business with Palantique, Thank you very much. contributed $123 million in revenue in the second quarter for year-to-date revenues of $245 million, which represents 11% growth year-over-year for the first half of the year, again, with most of that growth coming from the United States. Moving now to our MPS products, as expected, COVID-19 had an impact on both new patient starts as well as continuity of infusions for patients already in therapy. In Europe, COVID-19 impact occurred earlier and impact of the Latin American region occurred later.

9:11 So the overall impact of the business has been variable by geography and by product. As a result, our response has been problem solving specific to the relevant local situations. The overall impact of the current business has been modest and is captured in the current guidance. We still have been able to identify and start new patients on therapy However, the pace of that activity is slower than prior to the pandemic. Consistent with that dynamic, VimZoom revenues contributed $117 million in the second quarter, a 5% decrease year over year, which is attributed to a combination of COVID-19 impact and also order timing that was previously anticipated.

9:58 Year-to-date revenues of $250 million, which represents modest growth, Thank you very much. for this 16-year-old brand. And finally, Brandura contributed $50 million in net product revenues year-to-date, $26 million of that total added in the second quarter.

10:48 The brand is maintaining the strong growth trajectory we've seen in the last year. This contribution and growth are driven by strong adherence to therapy throughout the pandemic and strong 25% growth in patients on commercial therapy year-to-date. Lastly, a few words on launch readiness for Roctavian. Following potential approval, Roctavian would be the first and only gene therapy available for people with severe hemophilia A. Our U.S. team is prepared and ready, having pivoted quickly to optimize virtual and digital interactions with healthcare teams, patient advocacy organizations, and payers over the last few months. Thanks, Jeff. Thanks, Jeff.

12:02 As JJ mentioned, we'll not be commenting on the status of the review of our Roctavian VLA given how close we are to the PDUFA target action date of August 21st. Thank you for bearing with us.

12:14 In Europe, our marketing authorization application filing remains under accelerated assessment at this time. However, and as we've previously communicated, the review procedure has been extended by at least three months due to COVID-19 related delays. However, as is the case, and further, I should say, 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 late in this year or early in next year. Another key pillar of the Rockabian program coming soon is our 134-subject Phase III studies completion. Subjects in this study will have completed 52 weeks of observation by the end of November, with data readout anticipated soon thereafter.

13:09 Given the strength of the Ractavian annualized bleed rate data observed today, we're very optimistic that our phase three results will demonstrate superiority over standard of care factor replacement therapies in controlling bleeding episodes, our primary endpoint. As most of you know, the full four-year Roctavian results were shared in June by Professor John Caffey during the World Federation of Hemophilias Virtual Summit, which demonstrated continued hemostatic efficacy at all factor levels from lowest to highest. On the investor call following the WFH presentation, our clinicians conveyed increasing confidence in the robust treatment effect observed in many of their patients. Both professors recounted stories from their individual clinical trial subjects who have been living differently since receiving their gene therapy.

14:01 The clinicians have witnessed firsthand the contrast in the burden of hemophilia between patients fully treated with standard care prophylaxis and a post-gene transfer hemophilia patient. This community has been waiting for decades for gene therapy and this desire has been a driving force for years. We're all eager to offer this as an option for patients. The four-year study of data demonstrating dramatic leak control following treatment with gene therapy versus standard of care, it is difficult to dispute the highly innovative and transformational profile of Octavian. Importantly, as we think about the durability potential, commercial Octavian dose of 6E13 vector genome per kilo, the three-year results from our four-year, 4E13 vector genome per kilo dose provides additional comfort about longer-term outcomes for bleed control at even lower factory levels. As part of the virtual WFH update, three years post-infusion with the 4E dose, subjects demonstrated an in-factor activity level of 9.9 IU per deciliters measured by the chromogenic assay, and the result was a cumulative annualized bleed rate of less than one, representing a 93% reduction in bleeds from baseline at year three.

15:18 Factor VIII usage in the 4E13 cohort was reduced by 96% over three years. The takeaway for us is that the slowing decline observed in Factor VIII activity levels with our potential commercial dose of 6E13 may result in bleak control for ractavian patients well beyond the years that have been demonstrated in state. It's truly inspirational and a big reason why we are so passionate about the work we are doing for patients with hemophilia A. Turning now to the sort of treatment of achondroplasia, As JJ mentioned, we submitted the marketing authorization application to European health authorities two weeks ago and plan to submit the NDA later this quarter. The submissions include extensive data from our four prime development program, which includes approximately five years of phase two results in five to 18-year-old children, comprehensive natural history data, the highly statistically significant placebo-controlled phase three results, and finally safety data from the ongoing phase two study of newborns through five years of age. We continue to look forward to publishing and presenting the full data from the Phase 3 study set later this year, so stay tuned for that update coming soon.

16:28 Moving on to BMF307, our Investigational Gene Therapy for PKU. We're continuing to prepare new sites, and depending on the ongoing impact of COVID-19, we believe we could begin dosing in the Phase 1-2 study, named Fearless, later in the third quarter. We're excited about the prospect of BMN307 as it represents a potential third PKU treatment option in our PKU franchise and a second gene therapy development program leveraging our learnings and capabilities from Roktavian. As we prepare for the potential approvals and launches of Roktavian and subsequently board Sorotide, our earlier stage pipeline also continues to progress. In July, we began IND enabling studies for BMN331 gene therapy for hereditary ONG edema. We expect to benefit from our experience with Roctavian and BMN307 to drive an even more efficient development program with BMN331.

17:20 In addition, we're pleased to announce in the second quarter our preclinical collaboration and license agreement with Dynacor, a gene therapy platform company, to develop gene therapies to treat rare genetic cardiomyopathy. These are large opportunities to buy mRNA, given the tremendous unmet need in both indications, where we can benefit from our growing expertise in gene therapy development and manufacturing. Before turning the call over to Brian for the financial update, I would also like to acknowledge our colleagues across the organization for your continued commitment and contributions during these challenging, but no less busy times. The extraordinary effort undertaken to submit marketing applications during a global pandemic is something the team accomplished without missing a beat. I've been impressed by your flexibility and focus that you've demonstrated to be our progress moving forward under very challenging conditions.

18:11 Now I'll turn the call over to our weekly appointed and very new Chief Financial Officer, Brian Mueller. Take it away, Brian.

18:19 Thank you, Hank. Please refer to today's press release summarizing our financial results for full details on the second quarter of 2020. As usual, our comprehensive report on the quarter will be available in our upcoming Form 10-Q, which we are planning to file later today. Starting with revenues, we've observed that the impact of COVID-19 on our commercial business is overall consistent with our expectations back in April. As Jeff mentioned, we experienced some modest top-line impacts from the COVID-19 pandemic in the second quarter that have continued into the start of the third quarter. We note that much of our business is beginning to stabilize and is on a trajectory toward normalized demand paths. We considered this level of COVID-19 impact on our business when we revised guidance in April, and we remain committed to full-year 2020 revenues of between $1.85 billion to $1.95 billion.

19:15 Moving on to operating expenses, R&D expense for the second quarter was $182 million, slightly lower compared to R&D expense for the second quarter of 2019, which was mostly due to reduced R&D activity for Ractavian, given its late stage of development. SG&A expense for the second quarter of 2020 was $175 million, which was slightly higher than SG&A expense for the second quarter of 2019. As expected, the year-over-year increase is due to commercial preparation for the launch of Roctavian and the continued global launch of PoundZ. Turning to bottom line results, we reported a gap net loss of 29 million in the second quarter of 2020 compared to gap net loss of 37 million in the second quarter of 2019. The net loss in the second quarter was expected due to the COVID-19 impact on revenue and the overall timing of our quarterly revenue expenses for the year.

20:11 This quarter's net loss was considered when we provided our 2020 GAAP net income guidance earlier in the year. With higher revenues and essentially flat SG&A and R&D expenses, non-GAAP income of $57 million in the second quarter of 2020 also grew substantially as compared to Q2 2019. Both of these second quarter 2020 bottom line results Keep us on track towards achieving our 2020 goals of full-year gap net income for the first time in Biomarin's history and considerable growth in non-gap income. With respect to total cash and investments, we ended the second quarter of 2020 with $1.7 billion compared to $1.2 billion at the end of 2019. The increase in cash in Q2 was related to our May convertible note offering that brought us $535 million of net proceeds.

21:03 executed primarily to pay down the $375 million of convertible notes due in October of this year. Beyond the May convertible note issuance, and despite the COVID-19 impact on our business, we generated $28 million of positive operating cash flow in the second quarter of 2020. This solid cash position, coupled with Bahmarin's business fundamentals, put us in good standing to both manage through the uncertainty related to COVID-19 as well as launch rock caving and vasorotide should they be commercially approved. Finally, I would like to discuss a significant one-time item that we anticipate will impact GAAP net income in the second half of 2020. As I mentioned on the Q1 conference call back in April, we may recognize a tax benefit related to transfers of intangible assets between biomarin entities.

21:54 As I mentioned previously, you may have seen similar transactions completed by some of our larger peers over the last year. Our previous 2020 GAAP Net Income Guidance of between $20 to $80 million noted that it excluded the potential impact of these intangible asset transfers. We now expect these transactions to occur in the second half of 2020, which we estimate will result in a one-time, non-cash income tax benefit of approximately $700 million to $900 million in 2020. Therefore, we have adjusted our full-year GAAP Net Income Guidance for this one-time tax benefit and now project that full year 2020 gap net income will be between $720 million and $980 million. The range acknowledges that we've not yet completed the intangible asset transfers and therefore the final value cannot be determined with certainty and considering the high value of the underlying bomber and product, the amounts are significant.

22:48 Importantly, we note that our base business performance, excluding this one-time item, remains on track to generate gap net income for the full year for the first time in the company's history. Also, as this transaction impacts the income tax line item in our financial statement, we expect to exclude it from our non-GAAP income, for which guidance remains unchanged at $260 to $310 billion. In closing, our second quarter results and trends towards normalization in the second half of the year, in addition to the potential approval of Roctavian, indicate that 2020 should be a transformative year for the company on many levels. Thank you for your support and we'll now open the call to your questions.

23:57 I was just wondering if you're planning to employ any special tactics in order to support a successful launch of Ractavian during a pandemic period. Is there anything based on your wealth of experience launching different products that you think you might want to bring out of your bag of tricks or any new strategies given the new world we're operating in?

24:25 So, Josh, you want to answer that question?

24:28 Yeah, happy to. Thanks, Joe, for the question. And this is going to sound deceptively easy to say, harder to do in practice, but what we're having to do is to shift from largely, not exclusively, but largely from live interactions to virtual interactions and in the absence of having and many more live interactions and we're increasingly turning to digital assets to help us communicate with different commercial stakeholders. And I might comment that the virtual interactions have gone pretty well. With payer groups in particular, the payers have shifted very nicely to virtual interactions that are not too different in quality from live interactions.

25:24 We've got a team on the ground, a commercial and sales organization on the ground that are connecting with patient associations, providing educational opportunities on gene therapy. Those virtual interactions give us an opportunity in some case to cast a broader net than we would if we were doing a live programming event and there's been enough live interactions with hemophilia treatment centers and their associated infusion center locations that have allowed us to pursue launch and infusion readiness activities for Roctavian in advance of launch with a smaller but perfectly adequate Your next question is from Salveen Richter of Goldman Sachs. Your line is open.

26:33 Good afternoon. Thanks for taking my question. On roctavian approval, could you just walk us through the process for a patient to receive the gene therapy outside of the payer process? So basically how blood tests, sites of excellence, and any other factors would come into play.

26:51 Yes. So, Savi, we have, you know, our commercial organizations and medical affairs has been working on actually guiding and helping the patients through the whole process. And Jeff can describe that to you.

27:07 Jeff? Thanks for the question, Salvin. And in fact, a lot of what happens with the patient journey for Roctavian will be very similar to the kind of patient journey that we've become accustomed to dealing with with the launch of Brinura and Vimism, for example. So patients already fortunately have a diagnosis but they need to go through a diagnostic process to check for AAV5 seronegativity so there's a co-diagnostic in there but again relative to our enzyme programs there's also this diagnostic step that we're adept at facilitating education about the therapy I mentioned in response to Joe's I also noted that like we would do with the enzymes, we're focused on having a number of treatment centers that are educated and ready to initiate therapy upon or shortly after launch.

28:15 So there's that step. And then there's some preparatory steps that the patients need to take to get ready for infusion. In parallel with that, then probably the biggest rate limiting step would be would be going through the reimbursement approval process. And again, this is stuff that we have a team that's been doing this in the United States and are very adept at that. We've been doing this for many, many years. And then getting the infusion scheduled at an infusion center. It's only one infusion. Again, not too dissimilar with our experience with the enzymes. And one thing worth noting is there's a significant patient follow-up. for 52 weeks following infusion. And again, this looks a lot like the kind of patient support that Biomarin provides for our other enzyme replacement therapies.

29:08 So there are a lot of really new and innovative aspects about Roctavian from a commercial perspective and relative to patients' baseline standard of care. There's also a lot of parallels between what we'll need to do with Roctavian and what we already do with our base business, Sophie. We feel like we're leveraging a lot of competencies here. Thank you, Salvian, for the question.

29:33 Thank you. The next question is from Corey Kasimov of JP Morgan. Your line is open. Hey, thanks. Good afternoon, guys. Thanks for taking the question. Saw that the WFH treatment guidelines for hemophilia A were just updated, and I'm just curious whether this timing poses Any potential problem for Roctavian since it came out pre-approval or would you expect him to be updated following potential commercialization? And on that note, do you have any color in terms of how meaningful guidelines might be on uptake curves for hemophilia A or what we've seen in the past?

30:18 I mean, could you be more specific as to what's changing those guidelines, Corey? Well, they just came out. It was sent around earlier that World Federation of Hemophilia updated treatment guidelines. And for it to happen now just in front of the approval, there's commentary on gene therapy, but obviously nothing specific. And so I didn't know if you interact with them at all or if they update these guidelines somewhat regularly or when important new products are approved. So I'm just trying to get a better understanding of what the dynamics might be on that front and whether it should be You know, a potential tailwind if they update it on the heels of it. It's kind of irrelevant in the data speak for itself in a setting like this.

31:02 Again, I'm not aware that these guidelines are creating any kind of impediment for us. So, Hank or Jeff, are you aware of this?

31:15 Yeah, I can take a first comment on this one and see if Hank wants to augment Thanks for noticing those treatment guidelines, Corey. In fact, treatment guidelines in the world of hemophilia are longstanding. They're very important, and they do get updated periodically. So I don't think it's a problem that those treatment guidelines have updated in advance of an approval of Roctavian. I might expect that there would be another cycle in a reasonable period of time, perhaps prompted by the availability of gene therapies and approved gene therapy or therapies would be incorporated in those treatment guidelines.

32:03 In the meantime, I don't think that's an impediment to the launch of Lactabian. As Hank stated in his prepared remarks, this community has been waiting for gene therapy for decades. There's a huge amount of interest in Rocktabian, and gene therapy in general. And I think we've got some tailwinds in that regard already and without having new guidelines that actually incorporate gene therapy. Okay. That's what I assume. Thanks for that, Dr. Doja.

32:37 I think the other thing just to add would be, you know, we've dosed 134 patients in the Phase III trial, so we've got a lot of hands-on experience now to share with the community. And we've been in a lot of conversations Medical Symposia, etc. Because there's a great educational opportunity and as Jeff says, it's almost like a sponge, a dry sponge for the information. So we've been doing a lot of the work that you do in between guideline periods anyway. Okay. Thank you, guys. And your next question is from Robin Karnowskis from Trust Securities. Your line is open. Hi, guys. Thank you for taking the question. So it sounds like you're making a lot of progress getting facilities up and ready for gene therapy. Two questions on that point.

33:29 So what are your expectations? Do you have any updated thoughts on the eligible patient population? I know you said 400 before, I believe, and you gave some color around that last quarter. Any additional numbers there or thoughts? And then on the viral testing for the virus, Are there any patients that are getting that done, or they're possibly getting it done and getting it reimbursed ahead of the launch, or should we expect that that will have to take place as you work through the reimbursement process and be another step in the delay? Thank you.

34:00 Yes, those are two good questions. I mean, I could answer them, but Jeff is the expert there, and I'll let Jeff answer those questions. I want to preempt it.

34:10 Okay. Thanks, JJ. Great questions, Raman. So just to reiterate, We've modeled what we think is an appropriate eligible patient population at launch of 2,400. It's worth noting that every six months the CDC numbers that estimate the people with hemophilia in the United States are updated and they bounce around a little bit, so those numbers could change over time. And our modeling and estimates would be based on whatever is finally an approved label for Roctavian. But even if there's some variation around that, 2,400 I think is a pretty solid number we're sticking with.

35:00 And that's just at launch. And so a reminder that with life cycle management activities, we would hope over time to broaden that eligible patient population. And then regarding your comment about the the co-diagnostic to test for AAV5 seropositivity. We're waiting for that co-diagnostic to be approved, probably temporally in line with a Roctavian approval. And so to my knowledge, there's not been an opportunity to test for that in advance of the launch. Hank may have more specifics on that point.

35:49 All technically correct what Jeff just said about the companion diagnostic. We're planning that we're going to be approved with the requirement of companion diagnostic. We've been working with CDRH and our laboratory partner to assure the availability of the companion diagnostic at the time of Roctavian approval. You can't get the companion diagnostic without the companion being approved. They're hinged together, and the agencies where the centers work together to time that. So it's not possible to be testing somebody for the companion diagnostic prior to its approval. Great. And one follow-up. Any color around the 400? You said you identified 400 people through family and friends. It's kind of like a hodgepodge number. Has that increased as you've really drilled in with hospitals and got to know in preparation for this launch?

36:34 Is that number increasing? or is it in general trending in an upward direction or a downward direction? Yeah.

36:44 Yeah, I think, Robin, if I heard you correctly, you were inquiring about the number of opt-ins for further information that we've been collecting over time. And, yes, the number of opt-ins for further information has been increasing rapidly. Commensurate with the kind of educational activities that we've been doing on a virtual basis and also commensurate with people accessing our digital assets and opting in for further information. So I don't have specific numbers to share with you today, but it's an encouraging indicator of interest and hopefully future demand.

37:30 Great. Thank you guys. Thanks a lot. And as a reminder to ask one question at a time. And your next question is from Matthew Harrison of Morgan Stanley. Hi, all. Thanks for taking the question. This is Connor on for Matthew. So just too quick from us, how are you guys thinking about pricing for Ractavian? And could you just comment on what kind of impact generally you expect to see with being able to dose patients due to COVID? and then just quickly on PKU, what are the steps that you need to complete to start dosing for the PKU gene therapy studies? Thank you.

38:12 I'll start then. Jeff can talk about pricing and Hank about the PKU gene therapy trial initiation. I just want to make one comment regarding the ability to treat patients with Octavian In the current environment, in one of the issues and questions we've had related to that was, I know, using steroids, you know, with potentially with Rotavian in the COVID environment. As you might know, some of you, there was actually a publication a few weeks ago in the UK using steroids for the treatment and the management of COVID-19 patients. And that study actually showed that the steroid has a beneficial effect on on COVID-19 management, although I'm not personally recommending you do that, but my point here is that it appears that, if anything, the need or the likely need to use steroids in the early days of following treatments with roctavians should not be an impediment to using roctavians based on this. I feel the fact that steroids are actually recommended and approved in the UK for The Management of COVID-19.

39:30 So with that little preamble, maybe Jeff, you could answer the pricing question and then Hank can talk about PKU2 therapy. Jeff?

39:38 Okay, thanks, JJ. So relative to pricing, as we have with our other recent launches, we'll disclose pricing when we have the good fortune of having a product launch, which we hope will be soon. So stay tuned for that. I'll turn it over to Hank regarding the gene therapy question.

40:04 Next steps are for clinical trial sites to finish the paperwork that's involved. We've had to revise consents in the COVID pandemic, and so those are going through revisions. And as soon as sites are open and ready for dosing, we're starting. We project that will be in the third quarter. Understood. Thank you. and your next question is from Phil Nadeau of Collin and Company. Your line is open. Good afternoon. Thanks for taking my question. Just one question on Roctavian reimbursement. Jeff, I know you said during your prepared remarks that you've been able to engage with payers virtually. Can you talk a little bit more about what you've been able to show them, whether they understand the value of gene therapy and hemophilia and maybe lastly what type of reimbursement paradigm is going to predominate.

40:56 Is there any desire to do alternative reimbursements or is it likely to be a one-time upfront fee? Thanks.

41:08 Okay. Thanks for the question, Phil. Yeah. Our payer launch actually started in Q4 of last year under a safe harbor provision provided by the FDA for these types of situations. So if We have a payer team that is very experienced, same payer team that launched Palantique in the United States and that launched Brunura in the United States. So good working relationships and access with payers. We were able to put together the standard in the U.S. so-called AMCP dossier, which is the basis upon which all payers evaluate new drugs. We've been able to educate them on data related to our investigational program to date.

41:59 We've been able to talk to them about their hemophilia book of business, which has been really positive in the sense that for all payers, their hemophilia book of business is large, it's material, they all want to do something about it. And combined with the The whole outcomes-based agreement concept in the United States to date has been limited by government Price reporting rules related to Medicaid, and that's kind of limited the options. There's a proposed rule out from CMS that intends to address that.

43:03 As a proposed rule and the way it's proposed, it's not going to be relevant to our Roctavian launch. We've been working in the background to try to find a way of having a meaningful outcomes-based agreement that stands behind what we expect to be the performance of Roctavian and that the payers will find meaningful. We're intending to go out to lunch with that. Details are confidential at the moment, and we expect that that would likely result in a one-time recognition of revenue for Roctavian as opposed to recognition of revenue Your next question is from Chris Raymond of Fiber Sandler.

43:59 Your line is open. Great. Thanks. This is Allie Bratzel on for Chris. Another question on roctavian and the hemophilia A landscapes. We noticed that last month Roche took an impairment on the SPARC gene therapy asset on the rationale that Hemalibra has shifted the goalposts for gene therapy efficacy and safety. So just curious to get your thoughts on this based on your interactions with the physician and patient community ahead of launch. Is it your sense that Hemalibra has meaningfully changed patients' willingness to be dosed with Ractavian or other gene therapy approaches? or how does that actually come into the patient-level decision-making on gene therapy? Thanks.

44:45 Hi, do you want to start? I mean, actually, we're not really – I think there was a question, as far as I know, there was a question about a potential impairment to be taken by Roche, but I don't think they have taken an impairment, as far as I know. That's just for clarification purposes. And that is related to – that would be related to their acquisition of – of SPARC, which has a somewhat different profile from Roktavian at this time. So, Hank or Jeff, do you want to make some comments or reply to the question here?

45:19 Well, one comment would be to I'm not familiar with the impairment either, but I would say that the 8011 data at ISTH didn't particularly exceed expectations. I mean, it is one thing that is interesting about the SPARC data is that can get gene transfer at relatively low, you can get hemostatic efficacy at relatively low levels of gene expression. So I think like at two years, their data was like half of our data at two years. So even if we drift down a little bit, the prognosis, the factor VIII data, yeah, they had bleeding control at half the factor VIII levels that we had. And so that prognoses well if our factor VIII levels do in fact drift down, we should be able to maintain hemostatic efficacy for a while. But I I don't think that their safety profile, I think their safety profile and efficacy profile warrants further investigation.

46:12 And as far as patients' preferences for hemophilia, you know, as I said in my comments, the community has been dreaming about having natural factor VIII made endogenously for years and years. HemLibra is a fantastic advancement. It's not for everybody. Patients have breakthrough bleeding and we think hemophilia gene therapy is going to be A really solid offering in this community. Maybe, Jeff, you want to add anything?

46:39 Yeah, I would just add that Hemlibra has certainly changed the treatment landscape. It has also broken through the myth that hemophilia patients are unwilling to change therapies. So that has kind of broken through The barrier of switching, that could also bode well for another big advancement coming to the market, namely Roctavian, if we're so fortunate with an approval. And your next question is from Josh Schimmer of Evercore ISI. Your line is open.

47:25 Thanks for taking the question.

47:27 Can you discuss your expectations for Kuvan erosion as generic center in the U.S.? What percent on brand do you think you can retain over the mid and long term and why? Thanks.

47:38 Jeff, you want to go over that?

47:43 Hi, Josh. Thanks for the question. I think just to ground everybody, we have a loss of exclusivity on Kuvan in the United States coming on October 1st. We've anticipated and prepared for this for a long time. Also, to remind and reinforce, about 75% of our business in Kuban is coming from the United States presently. So this is a big event for us. What's unclear, Josh, is how a generic erosion curve applies to a specialty product like Kuban. There's not very many good analogs to study. and the ones that we have have complicating factors.

48:29 It's a little bit difficult to guide to. In the background, you know that Bon Morin provides a lot of patient support services and reimbursement services to patients. We've worked really hard to build a value-added relationship that is recognized by all of patients, their providers and also payers. That said, we're expecting a significant erosion of our business. We don't think it will be the immediate catastrophic type of loss of share that you might expect for a retail pharmacy product going generic. And beyond that, I'm afraid we can't offer a lot more specific guidance, or at least I can't.

49:18 You covered it, Jeff, that This is only impacting the U.S. business. There are no generics, no loss of exclusivity at this time in Europe. Your next question is from Jeff Mission of Bank of America. Hey, guys. Thanks for taking the question. I know the focus obviously is on U.S., you know, Valrox, Roctavian launch. I wanted to ask you in Europe, though, you know, what do you need to do in advance of that launch? Maybe just help us with some of the nuances between the U.S.

50:03 and Europe in terms of how, you know, care is delivered for hemophilia and then just talk about maybe your visibility outside the U.S. Thank you.

50:14 Jeff, do you want to cover that? Sure.

50:17 Thanks, Jeff. Great question. There are a lot of similarities between how hemophilia is treated in Europe and in the United States. One thing to note is there's a greater concentration of care in centers of excellence in the major European markets. As we've worked with stakeholders in Europe to prepare for an eventual launch We've been encouraged in the major markets to work with a concentrated set of centers of excellence, which is actually working really well for us because it limits the number of resources that we need to have at launch out in the field working with treatment centers.

51:08 And then, as you know, the biggest gating factor is in Europe is going to be related to navigating price and reimbursement approvals. And as you know from watching our most recent launches of Balanzic and Brunura, even where there's a high need that's being addressed, those things can take time. Particularly, we're being slowed down from COVID-19 related issues on that front in Europe. The big upside in Europe, of course, is that there's a bigger patient population, so overall the patient opportunity in Europe is very large. And even if it takes a little while longer to tap into, if we're so fortunate of having a U.S. launch followed by an EU launch, we would expect more rapid uptake in the United States, but a bigger opportunity in terms of numbers of patients overall from Europe Thank you, Jeff.

52:12 Okay, thank you. Your next question is from Martin Alster of Credit Smith. Hi, everyone. This is Mark on for Marty. Thanks for taking my questions. So you mentioned earlier that there may be 2,400 immediately addressable hemophilia A patients in the U.S. at the time of Roctavian launch. Can you speak to what the process is to expand the label What those timelines might be, and ultimately, what portion of the population do you think could eventually become eligible for your drug? Thank you.

52:48 We have a whole program here over the next few years to expand the addressable population. Hank and Jeff can outline this if you're interested. But we anticipate a very significant increase in the eligible population over time. The number we're giving you is about 14% of the U.S. population, but the U.S. hemophilia A population, that's all comers, not just severe patients. I think this could expand to probably, you know, 40 or 50% of the population over time. But if you, Hank, you want to start describing what we're planning to do, and Jeff can add some comments. Sure.

53:32 Sure. The two biggest segments to go after immediately in terms of life cycle are patients who have pre-existing immunity to the capsid AAV5. And we actually have an ongoing study and we're collecting data on the impact of pre-existing immunity on factor V8 expression and bleed control. So that's ongoing. It's going a little slowly, but it's ongoing. A second major area for investigation would be in patients who have had inhibitors, about 25-35% The hemophilia patient population has inhibitors to factor. They've been excluded from clinical trials. We've talked about patients with preexisting liver disease. We've talked about starting to dose adolescents.

54:18 There could be quite a lot of excitement about bringing a drug like Ractavian to an earlier age population for better preservation of overall health. Those are just some of the life cycle thoughts, much of which is already underway. and, you know, the first thing to do, the first step to achieve label expansion is to finish the label. So that's where we are.

54:43 Perfect. Thank you. Jeff, I don't know.

54:45 Yep. Jeff, do you have anything to add?

54:48 Nothing further to add. That was complete. Thank you.

54:51 So before the next question, just a, you know, point of clarification like you have, we look into information regarding Roche products It looks like it took a $400 million write-off in the most recent quarter, which is, I guess, less than 10% of the acquisition cost of Spark. And it looks like in their filing, they say the main reason is the delay in the implementation of the Phase 2 and Phase 3 trials because of COVID-19, which is likely to result in lower sales. And we would agree with that. Next question. Your next question is from Akash Tiwari of Walt Research. Akash, your line is open.

55:39 Hi, sorry. Sorry, I was on mute. So can you walk us through the incentive structure for Octavian for doctors, particularly at the 340B level? Will they be getting a percent of the total cost of Octavian and how do you think that those incentives will impact the initial launch for 2020 and beyond?

56:01 Thanks a lot. I mean, I could start. I mean, the majority of, I understand the majority of the hemophilia treatment centers are 340B hospitals in the U.S. Consequently, indeed, most patients will be treated in 340B hospitals. Generally, 340B hospitals get a 21 or 22% Discounts for most drugs, we also understand that for Recovenant Factorase and also recently for Hemnibra, that discount has been reduced to 17%. So we'd like to start at 21%, we might eventually get reduced to 17%. These are payments that are made directly to the treatment centers.

56:48 I would say we don't believe there is a disincentive there to use Rotavion because Right now, let's say we price Octavian for about four years of value of the current set of care. So instead of the centers getting those 20% or so discounts over four years, they can get them entirely upfront, and those payments are made directly to the centers. Anything to add, Jeff?

57:15 That was well stated, JJ. Thank you. The only other thing I would add to that is... There may be a perception that these hemophilia treatment centers are concerned about losing revenue streams that are ongoing over time from existing patients receiving factor replacement therapy chronically. Our research indicates that hemophilia treatment centers have a 340B revenue stream from only a portion of the patients under their care. And that just kind of amplifies JJ's comments.

58:00 We think that, in fact, the 340B margin that these treatment centers would likely be able to take from Ractavian would be significant and would be a good incentive. That's really helpful. Thank you. and I would like to turn the call over to JJ Vianney, Chairman and CEO for closing comments.

58:25 Thank you, Operator. So now we are over halfway through 2020. I have continued confidence in BioMarine's ability to deliver on the tremendous opportunity for value creation that we have ahead of us. Our underlying fundamentals remain strong and we are well positioned for achieving our mission. We built a successful base business We've transitioned our pipelines to address larger or rarer indications, and we've laid a foundation for significant profitability with Octavian and with the retired approvals. All of this was issued by Wayne for substantial accomplishment in both the near term and the long term. So we are looking forward to the remainder of 2020. We apologize if we couldn't get to your questions because we limited the Q&A to one hour. Please, if you have questions that were not addressed here during the call, please reach out to Tracy McCarty and hopefully we can address your questions. So, thank you all for your continued support and stay safe.

59:33 And ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Presenters, please stay on the line for your post-conference. Thank you for watching.