BioMarin Pharmaceutical Inc (BMRN) 2002 Q1 法說會逐字稿

Welcome to the call everybody. As I will be making some forward looking statements, I would like to direct everybody to our SEC documents. I would like to make a few statements in the beginning some bullet number points and then I will turn over to a Q&A and I will try to get the numbers, number points as fast and as quickly as possible.

The first point is that, as many of know, our Aldurazyme BLA is expected to be finished by the end of the third quarter. This will include six months of extension data. We believe this makes for a much stronger filing. This is later than what we had thought; but if we get priority review, which we are all hopeful for, the delay is really not significant. I would just like to add that the delay was not due to activities at BioMarin or Genzyme.

The second point I would like to make is with regard to Aldurazyme, also the MAA was filed in Europe in March, and I want you all to note that the market for MPS I patients is significantly greater in Europe than it is in North America.

As a result, we are likely to have Aldurazyme on the market by the middle of next year. The manufacturing facility for Aldurazyme has been built which means no more investment has to go in. It is ready to go for commercial production. The same materials used for Phase III in the commercial use are from that plant. The total amount that we invested in that plant was about $30 million.

Switching gears to Neutralase it is on track to initiate a Phase III trial in the third quarter. This will probably be a 600 patient trial in CABG, Coronary Artery Bypass Graft comparing Neutralase to [protamine]. We hope to finish this trial either at the end of this year or early in 2003, and then promptly start a second Phase III trial also in CABG. To the extent that that is successful, we will then go on to other indications including angioplasty. It has been a little over six months since we acquire Neutralase, and we have improved the manufacturing process significantly. It is greater than the 50 percent reduction in just six months, and we are well on our way, on track to getting the gross margins to where they would be in greater than 80 percent, which by the way is our corporate goal for all of our products.

We are not at the present time going to be building a manufacturing facility for Neutralase the way we did for Aldurazyme, and we are going to use third party contract manufacturing. As a result, we have lowered our internal projections for the use of cash for 2003 by a considerable amount. One of the reasons we have been able to do this, which means to go to the outside, is because of a tremendous cost reduction process improvement program. We think we are going to get it well below where we have it today and hopefully we will be well above the 80, perhaps pushing 90 percent for cost of goods. That makes contract manufacturing affordable.

Moving on to Aryplase which is a product for MTS VI, we are progressing on scheduled. We are in a Phase II. If it all goes well, we will start a Phase III in the first half of next year. I would also like to note we will use the same manufacturing facility for the commercial Aryplase product that we are using for Aldurazyme.

We hardly ever talk about [Virbrilasin] for burns. It is in a Phase I trial. It is progressing well. It is in the UK. We anticipate this trial will be completed by the end of the year, and we will talk about the results early next year.

I would also like to note that we have made in the two acquisitions that we have made that they have been seamless. We did the IBEX acquisition in October, and the Synapse acquisition closed in March in terms of the people, the products, the technologies, and the facilities, and the integration programs are well ahead of schedule; we are quite please. We have renamed the Synapse blood brain barrier technology and call it now [Neurotrans]. It is going well. I do not want to talk about that today. We will have much more to say about that in the not too distant future.

At the end of the first quarter we had about $115 million in cash in the bank, and right now I would like to reaffirm the goal of [burning] less than $60 million for 2002. We anticipate we will have more than $72 million in cash at the end of the year. We will provide guidance for cash use for 2003 in the third quarter.

The last point I would like to make before I open it up to Q&A is that we are actively in discussions with other companies regarding possible partnerships. As you know, we cannot predict whether we will enter into one; but this is important to us. The goals of a partnership include reduced time to get a product to market, reduced risks by having resources and the experience of another company, increased cash, and of course a reduced [burn] rate.

With those points what I would like to do is to turn this over to Q&A. so I would ask Brian to step in and conduct that part of the program please.

Thank you. Ladies and gentlemen the question and answer session will now begin. If you are using a speaker phone, please pick up your handset before pressing any numbers. Should you wish to ask a question, you may do so by pressing star 1 on your pushbutton phone. Should you wish to withdraw your question, you may do so by pressing star 3.

Your questions will be taken in the order they are received. Please stand by for your first question. Your first question comes from Matt Geller [phonetic]. Please state your affiliation followed by your question.

Hi, it is Matt Geller from CIBC. Can you talk a little bit about the twelve month data, what can we expect, timing, et cetera, any thoughts about it that you can and any information you can add about it?

We will presenting in Paris over the summer the six month data from the double blind placebo control portion of the Aldurazyme trial, but the twelve month data we do not have a, selected a specific venue that will come in the latter part of the year however. No, I cannot answer that question right now Matt.

Okay great, thanks.

Your next question comes from Peter Ginsberg. Please state your affiliation followed by your question.

Yes hi, it is Peter Ginsberg from the US Bankcorp Piper Jaffray. Good afternoon. The first couple of questions are on Neutralase. You mentioned a Phase III trial that is being lined up now, and I believe Fred that you mentioned that you had finished that trial around year end or early ’03? Did I hear that correctly?

That is correct.

Okay, so that will be the full enrollment of [inaudible] patients plus follow up in that in really probably three or six months then?

That is correct.

Okay, great. And you mentioned that you are going to be using a contract manufacturer for Neutralase. Have you chosen that contract manufacturer and is there an agreement already in place?

There is not an agreement in place, but we have got two and three who will be, who certainly will be good. So we will probably choose one reasonably soon and then have a backup.

And will that manufacturer produce the product for the Phase III trial?

That would be for the second Phase III but not for the first. We already have inventory for the first Phase III trial that came with the acquisition of Neutralase, but more than likely it is the second Phase III and then going forward.

Good. Now a couple of real numbers questions. SG&A was up in the first quarter --

[Interposing] Yes.

-- of ’02. Should we expect this to be run rate for going forward or is this just some one time items there?

No it is a good question Peter. Actually there are a couple of answers to that. We announced that we were going to be acquiring Glyko Biomedical, and we incurred about $800,000 of one time expense in the first quarter related to that. So that obviously will not repeat again.

We also put in a new computer system, a new software system which was about $300,000 which is also a one time thing. So those were . . . that is $1.1 million of the increase which from last year was about $1.8 million in total. So about 60 to 70 percent with two one-time things. We are growing; and as a result, the general administrative expenses of the company are growing and probably at a rate that is going to be between 25 and 35 percent this year exclusive of one time events.

Okay, good; and last question. Interest income, we had thought that it might be up a bit in the first quarter given the new cash that you got in the fourth quarter, but it was down a bit. Was that just solely due to the interest rates going down?

It was during, much so doing, going to interest rates going down. Also it was not until the very end of the quarter that we changed our policy a little bit to allow us to invest in securities that had slightly longer maturities and therefore higher yields. So we were invested in mostly weekly and monthly securities and now we have still at top grade securities but we are into six month and one year maturities as well. So we would expect that number to go up.

Okay, great. Thanks a lot.

Okay.

Again ladies and gentlemen a brief reminder. Should you need to ask a question, you may do so by pressing star 1 on your pushbutton phone at this time.

Our next question comes from Dan DiPietro. Please state your affiliation followed by your question.

Hi, Dan DiPietro from SCO. Fred, a question on the MPS VI trial. I wonder if you can give us a timeline on when we can expect data from that and how large a trial it is expected to be and maybe any details you can give us on that?

You are talking about the Phase II trial?

I am sorry, the Phase II, right.

All right. Well we would expect that this trial will end either the end of this year or early next year, and it is a maximum of 15 patients. It is an open label trial. So I would expect data by the end of the first half of next year. Assuming that goes well, we could proceed right into a Phase III.

So we are hoping, you know the old adage Dan, you do Phase I and Phase II for the FDA and you do Phase . . . excuse me, Phase I and Phase III for the FDA and you do Phase II for yourself? This is our first real legitimate Phase II.

We have learned that that is probably a good idea.

[LAUGHTER]

I think so. So we are going to take a little bit longer, but we are looking at in great detail at all the different parameters that we can use to determine which of those are going to be the appropriate ones for the Phase III trial to make sure we have the strongest Phase III possible protocol that we can imagine.

Switching the MPS I to Aldurazyme trial --

[Interposing] Yes.

-- maybe you could tell us how many, approximately how many patients have been on drug for twelve months as of today?

I do not have an answer to that as of today for twelve months. Certainly all of the patients who were, I am trying to count back, in March of last year, the last patient of the, those who were on drug received the last dose or the first dose, I am sorry. So for the 22 patients who were on drug, they have all had at least 13 months.

Okay.

So last patient to have gotten a placebo would have been August of last year. So of those 23 patients -- August, September, October, November, December -- we are talking about --

[CROSS TALK]

[Interposing] So that in August all the patients that are on placebo would have been on drug for a year?

For a year. So it is a minimum of eight months for that section of the group, but I do not actually have an exact number in front of me.

Yes, okay great. Thanks a lot.

Okay.

Your next question comes from Mark Schillenbaum [phonetic]. Please state your affiliation followed by your question.

Hi, it is Mark Schillenbaum from CIBC. This is a follow up to Matt’s question. Can you remind us please about [Virbrilasin] and how it works and what is the design of the trial that is currently in roughly how many patients?

It is a small trial. It is . . . I do not have the exact number, but it is a relatively small number of patients. I will get the exact number for you Mark, and I will be happy to . . . anybody else who wants it just e-mail me. It has escaped my mind right now.

It is being conducted in the UK. It works by eating up the [eschar] or the burned skin. It is a maximum of being on the skin for three days. The trial is difficult to predict when it will be over because of the inability to predict severe enough burns to enter the trial. It is not for wounds. It is only for burns. It is expected that we would finish the trial certainly by the end of the year, and then the determination will be made as to what we do next. Do we in fact go into a Phase II or do we seek to out license the product? We do not know yet.

I think the determination as to what to do with regard to [Virbrilasin] relates a lot to how other programs are doing and how successful [Virbrilasin] looks in and of itself.

And can you help us understand the market opportunity that [Virbrilasin] presents?

Yes, that is also a difficult, that is a very good question, a difficult one that we have been wrestling with ourselves because if you look at some of statistics on the number of severe burns, they are fairly significant.

So we are talking about . . . our best estimate is to those severe burns that would require some sort of transplantation or skin transplant. So we estimate there are about 100,000 patients on an annual basis who would qualify for this, but that number is a soft number. We would not be upset if somebody said it is 75 or 125. We just do not know. It is a very difficult thing.

In terms of the market opportunity, it could be significant because of the pricing. Obviously we are going to price on value and not simply price on comparison to an existing product which may have a decidedly inferior efficacy profile. So if we are talking about something that is a thousand or two thousand dollar a treatment, we could have a substantial market opportunity of about $100 million to $200 million; but I think we are a little soon to be talking about market size until we see the results of the trial because as you know, Mark [inaudible] the thing speaks for itself.

If it does what we think it can do, and if it does in humans what is has done in animals, it could be an extraordinarily good highly profitable rapidly growing product.

It seems like this is something that could be marketed with a relatively small sales force. If you were to keep it yourself, yourselves, I think the earnings part could be substantial. If you were to license it, have you given any thought to what that partnership or license agreement may look like?

Well that is also a good question because it a legitimate debate for a small company which always has to make the decision that if it wants to create a commercial organization and which product is the first product it does so and why. One of the things that you would want to do is if you decided to commercialize [Virbrilasin] would be that you have made a decision that you are going to go hospitals.

Then within hospitals you are going to make a decision to get into that same center or ward or emergency room. So it is a difficult decision. It is easier if we decide that the first products that we want to make on our own, commercialize on our own are hospital products. Then it could be that [Virbrilasin] is a relatively easy product to commercialize.

But if it is also an office based product, then it will probably lead us to conclude that we ought to do some sort of a joint venture. The structure of that joint venture would clearly be with a company that knows its way around burn centers and emergency rooms; and if it did not know that, I do not think we would be interested in joining up with somebody that had to learn how to do that because the advantage of having a commercial partner is rapid market access and the way to do that is somebody with experience.

Great, thanks a lot, and we will see in June in Paris.

Okay.

Bye-bye.

You won't see me, but you will see some of our people.

Thanks a lot Fred.

Okay Mark.

Our next question comes from Buddy Lyons. Please state your affiliation followed by your question.

Yes, Buddy Lyons of Morgan Keegan. Fred, would you address what you are going to do about the IND [phonetic] for MPS IV-A?

We did, we have not talked about that in quite a long time. The decision has not been made whether to go ahead with the IND on MPS IV-A. We are debating that inside, and I think we will make that decision within the next three to six months.

It is a difficult disease to treat, and we want to make sure that when we go forward with an IND that it is with the full commitment that we believe that we have the right product that will be, that stands a very good chance of being successful. To be candid, we are not a hundred percent that we have that right. So we do not want to go ahead with a commitment to a program unless we are sure of a greater degree of success.

The reason Buddy that we have been, we have had to make some of these triage decisions, because as you know a year ago we were, MPS IV-A was in fact on the radar screen at a higher level, is because of the acquisition of IBEX which gave us Neutralase and Phenylase and the acquisition of Synapse now called [Neurotrans] which gives us blood brain barrier technology.

So in the great scheme of things now what happens is you do have to triage and you have to make a decision as to which program has to integrate or lesser degree of success and put your resources behind it. We have clearly voted, no question about it, that Neutralase is an extraordinary program and should get an amazing amount, a disproportionate amount of resources over the next year or two.

We also believe that with Phenylase that we have a very good chance of having another breakthrough product here to treat PKU. There are no drugs on the market to treat PKU, and we are very, very high on our Synapse technology. As I said in my opening remarks, we will talk more about that.

It is not that we believe that the MPS IV-A program is a poor program, or that there is anything “wrong with it”. So in an absolute sense it is fine, but on a relative sense and with a finite amount of resources, it has trickled to the bottom. So as we produce our cash forecast for 2003, which we will talk about in about three or four months, that is when we will tell you what we are going to do with IV-A and what decision may be to hold it for a while, the second decision to proceed with the IND, and the third decision is to partner it out with somebody else.

Okay, thanks.

You are welcome.

Your next question comes from Pascal Mora [phonetic]. Please state your affiliation followed by your question.

Hi [inaudible] from [inaudible]. I have three questions. The first one you rate our attention on the potential partnership. Should we expect that [inaudible] 12 months [inaudible] or are we working on different timelines?

Well as you know Pascal, it is very difficult to predict. On average pharmaceutical strategic alliances do take about 12 to 14 months, but sometimes things can go very quickly and other times things can go on for two years. From the time of the first discussion with the principles at IBEX until the closing of the transaction took about eleven months.

Okay.

And on Synapse it was about ten months. So if you want to try to interpolate and say that that is a standard for us, we have been in discussions with people for a while; but I honestly cannot give you any feel for it.

But I can stress, as I did in my remarks, that it is very important to us and we are pursuing more than one simultaneously.

Okay. The next question regards the statement that you mentioned of potentially $6 million related to the Synapse technology. Can you remind us what figure are payments and what figures is actually stock payment?

It is in cash or stock at our option. These are milestone payments in the future to the former owners of the Synapse technology; and it is over a variety of potential IMDs and [NDAs]. So there is, my guess is that if it all goes well, it will be over the next two to three years in total.

Okay. Okay and the last question, I know it is also difficult to tell at the moment, but you mentioned some delay related to the Glyko story. Can you give us rough guidance regarding the timeline?

We were, we received a very, I guess it is called traditional. I have been in the industry for a long time, just kind of a random request to review the proxy. So that held up. We were all set to go for a May 29th vote at BioMarin, and I believe it was a May 31st vote at Glyko Biomedical.

Until we receive all the comments from the SEC and then respond back to them, which we will do very promptly, we cannot give you any guidance. If I had the comments from the SEC in front of me, and I could make some executive judgment as to how long I think it would take for us to both respond to them and to see the extent of the issues and then whether it is a matter of days or weeks, I just do not know since I have not received the comments back from them.

From their side do they have a certain time frame to [inaudible]?

No, but they, they are fairly diligent; and they do understand that this is an important process and that both companies have had to postpone their annual meeting as a result.

Oh.

So I would say they are working diligently and hard, and I wish I could give you a better sense. My hope is that it can be done certainly in June, but I even hesitate to say that because sometimes people will not hear the word I hope and they only here well gee Fred said it was going to be in June and then if it happens in July, they think there is some sort of a problem when the June clock starts ticking.

So we are, both sides . . . we are committed to getting our answers back very, very rapidly; but this was not a . . . nobody should be alarmed over this. This is a fairly usual . . . we have not been reviewed in two years on any document, on any registration. So it is a usual event.

Okay.

Ladies and gentlemen, a last reminder should you wish to ask a question, you may do so by pressing star 1 on your pushbutton phone.

If there are no further questions, I will now turn the conference back to Mr. Price to conclude.

Before everybody rushes and hangs up, I just want to give you kind of a summary statement.

We are all concerned about the stock price. We are as concerned as you are, and we just want to, I think, give the message that things are going extremely well in the company. We have done an enormous amount in the last year and a half. The acquisitions are going well, the product programs are all going well, the technology is first rate, you know actual property positioning gets stronger and stronger. Potential partners are quite eager to do arrangements with us, and we all believe that if we continue to work hard and continue to bring in results that if all goes well, we will have a product on the market next year, two products in Phase III, at least one in Phase II, an exceedingly good pre-clinical pipeline which will show IMDs in 2003 and 2004.

So I thank everybody very much, and we will do our best to continue to do everything that we should to make sure that it eventually does get reflected in the price of the stock. Thanks for your patience. We really appreciate it. Thank you Brian.

Ladies and gentlemen, that concludes your conference call for today. Should you wish to access a rebroadcast of this call, you may do so by dialing 1-800-428-6051; and for international callers, 973-709-2089 with a pass code ID 241367. Thank you all for participating and have a nice day. All parties may now disconnect.