BioMarin Pharmaceutical Inc (BMRN) 2003 Q1 法說會逐字稿

Good afternoon and welcome, Ladies and Gentlemen, to the BioMarin Pharmaceutical's First Quarter 2003 Earnings Release Conference call.

At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the company, we will open up the conference for questions and answers after the presentation. At the request of the management of BioMarin Pharmaceutical, the following statement is being read.

This now confidential presentation contains forward-looking statements about the business prospects of BioMarin Pharmaceutical Inc., including potential future products in different areas of therapeutic research and development. Results may differ materially depending on the progress of BioMarin's product programs, actions of regulatory authorities, availability of capital, future actions in the pharmaceutical market, and developments by competitors, and those factors detailed in BioMarin's filings with the Securities and Exchange Commission, such as 10-Q, 10-K and 8-K reports.

I would now like to turn the conference over to Mr. Fredric D. Price, Chairman and CEO of BioMarin.

Thank you very much. I'm going to make a few comments and then I'm going to turn most of the session over to Q&A. I'm here in Nevada with Emil D. Kakkis, M.D., Ph.D., Senior Vice President, Business Operations; and Josh Grass, Manager of Financial and Investor Relations.

Just to review briefly a few of the things that have happened in the first quarter and right after the first quarter, as most of you know, on April 30 we got FDA approval Aldurazyme. Working backwards, on March 14, we announced positive Phase II data for for MPS-VI. On February 21, the gave us a positive opinion on Aldurazyme in Europe.

We also announced the completion of the Vibrilase Phase I trial. And we raised a little over $86 million net from financing activities in the first quarter.

Upcoming, we look forward to a EU decision on Aldurazyme in the second quarter; the U.S. launch of Aldurazyme in a few weeks. We look to commence the Phase III trial early in the second half of this year, and to complete the Vibrilase Phase trial in the third quarter of this year.

I know you're all eager to hear about commercial guidance with regard to Aldurazyme. And I'd like to make a few comments on that.

and Genzyme will be providing detail on the commercial aspects of the launch in a few weeks.

What you're going to hear in a few weeks is going to be issues of pricing. The product will be priced on a milligram per kilogram body weight basis.

You're going to hear about reimbursement, distribution, the size of the treating physicians' population, what we'll call market preparation activities and infusion center setups and the number of sales reps. This is all what I would call the commercial guidance.

The financial guidance with regard to Aldurazyme will come on European approval. And what you will get at that point in time is a range of expected sales for 2003 for the U.S. and Europe, the number of identified patients and the number of patients on therapy. And that you'll get at the end of the first full quarter of activity in both the U.S. and E.U..

From a post marketing commitment point of view, I want to let you know that the majority of patients in the post marketing studies will be commercial. The under five study, which was started in December in Europe -- there are about 20 patients -- those are not commercial.

There's a dose optimization study to be carried out outside of the U.S. and outside of the E.U.. There are 32 patients. This is not commercial as well. I would like to point out, we'll not compete with the commercial pool since it'll be outside the U.S. and outside Europe.

The Phase III extension study, which we have to do until the third quarter of '05 -- some patients will rollover to a paying status at some point in time. We can't predict which ones when. This will be about 40 patients.

The biggest part of the post marketing studies will be the registry study. The natural history of MPS-1, long-term monitoring of efficacy and safety. This is many patients. This is all commercial.

From a financial point of view, we ended the first quarter with 149 million in cash. We started the year with 74 million. We did an $86 million net of financing, which would have gotten us to 160, but we burned a little over $11 million in the first quarter.

I want to emphasize, however, that the 11 million is not a savings from what I've been talking about is 16 to 18 million per quarter this year. That there were about 4 to 5 million in accounts payable that got paid in early April.

So if you -- you will see, in fact, the second quarter a little high. And that's because of those payables. The first quarter was a little low. We should be in the first half of the year right on the target of 16 to 18 million per quarter.

In about three months we'll give you further guidance on the financial aspects of what we estimate we'll be doing this year. What I'd like to do is I'd like now to turn it over to the question and answer period.

Thank you, sir. The question and answer session will begin at this time. If you're using a speaker phone, please pickup the handset before pressing any numbers.

If you have a question, please press star one on your push button telephone. If you wish to withdraw your question, please press star two. Your question will be taken in the order it is received.

Please standby for your first question. Our first question comes from Navdeep Jaikaria with Leerink Swann. Please state your question.

Hi good afternoon. Good morning to you there and congratulations on Aldurazyme approval.

I had a quick question. Can you, Fred, tell us about the R&D expense? It was unusually high, higher than last quarter, and is this the kind of run rate that we should look forward to, even for the rest of the year?

What you're seeing in R&D is the ramp-up of the Neutrolase program. And, in fact, you will not , and that's why the 16 to 18 million in cash spend this year is higher than the cash spend last year. Most of it is related to Neutrolase. We've estimated that the amount of money that we're going to spend on Neutrolase this year is about $19 to $20 million. And we spent considerably less on that last year.

And the G&A should remain pretty constant, as the rate we are seeing here?

The G&A is going to grow modestly over the year. There will be no huge ramp-up in G&A, but it will increase.

OK. Thank you so much.

You're welcome.

Our next question comes from Yaron Werber with SG Cowen. Please state your question.

Hi. Congratulations on a great quarter. I had a quick question. Are you going to be going forward in your P&L? Are you going to report a JV line, and should we assume that all the costs of what previously, I think the I Model under the G&A line for sales and marketing should be now under part of the JV ?

What's going to happen, Yaron, in a very short period of time is that we're changing the accounting, as many of you know, from, the only way in which we show it on the P&L is one line, what you might call the JV line. And now we're going to be incorporating our sales, we're going to be changing the nature of the reporting such that, we will sell to Genzyme, and Genzyme will sell to independent third parties. And that will take place shortly after launch. But you will see in each company's T&L the effect of Aldurazyme, and then what will happen is that, because the joint venture is on a 50/50 basis, we'll make adjustments at the end of every quarter if it doesn't work out to be a perfect 50/50 profit split.

OK. And the adjustments are going to be under a separate line or will that be done, rolled into the revenue line in the top?

What we're going to do is, when we put this into place, we're going to put out a release, and that will explain exactly what we're doing and how we're doing it. And we'd be happy to give examples at that time so it becomes very clear.

OK. And then, could you just maybe give us an update on what are your filing strategy and timing for, I know there's many MPS I patients in Brazil and then also Japan?

Genzyme has full responsibility for the filings, regulatory filings outside the United States, and they will be giving an update on this in the not too distant future.

And then just to remind me, would you, are you starting to get royalties for Japan and Brazil or is that Genzyme's territory only?

I'm not quite sure of the question. It's a world wide joint venture, so, every activity is treated the same regardless of where it is.

OK. Thanks very much.

OK.

Thank you. Our next question comes from Matthew Geller with CIBC World Markets. Please state your question.

Hi. Thanks. I just managed to get on, so, I hope this is not repeating anything. But if you could give us as much help as possible in getting a feeling for what the launch and buildup is going to be, like, which patients do you think will get onto Aldurazyme first? What kind of wait do you think, you know, there will be a bias in terms of what, how much these patients will weigh, how you see a development Hurler - Hurler-Scheie. And Scheie, as you can be , and any feeling you have about identifying these patients of , identifying how close are you to getting them on the drugs. And also, in terms of the timing for reimbursement, how that should work out.

Matt, your telephone came through very, very difficult - with great difficulty. I think I heard most of it, but a lot of it I don't - I might have missed. Let me just make some general comments with regard to this.

That anything that we would put out in terms of what we think or believe or is logical may not have any effect in the real world. We may think that a certain group of patients might be the ones that first go to physicians, and it may be that they don't. It may be that the physicians do their own triage for whatever reasons that they want as to how to queue up the patients.

So I just actually don't think there's any value in speculating because we could be wrong, and it probably doesn't matter. Our guess is that with the communications network that's out there that most parents know about the approval of Aldurazyme, and that there's going to be a great eagerness to get as many people on drug as rapidly as possible.

But actually how this turns out is something we can't predict. And I know it's important to you because it's important to us. But I know it's important to you to be able to model for us, because it has a great bearing on, for example, the size of the children that come on because we it on a milligram basis. So per kilogram body weight there could be wild fluctuations in the beginning if, for example, all the kids were - most of the kids were 15 or 20 kilos as opposed to 60 or 70 kilos coming in in the beginning. We just can't predict what's going to happen with regard to that.

With regard to reimbursement, this is really done on a case-by-case basis. And certain organizations are faster than others in reimbursing. But I think the key thing is to note that Genzyme is keyed up on this. They have extraordinary experience, and I think you're going to see as rapid a reimbursement as is possible.

And I don't know if there were more, Matt. I just couldn't hear.

Can you hear me better now?

This is much better.

OK. Let me put this question in another funny kind of way, which is, why would any child with MPS-I not want to immediately seek treatment? I just can't understand that.

Well I think that's probably a sentiment that every parent in fact does have. And it makes sense, but I don't want anyone to think as a result of that that 100 percent of the patients will come flooding into the office on the first day and that everybody will start getting infused by the end of the first week. Life just doesn't work that way. But I think that it's overwhelming in discussions with medical geneticists and pediatricians that there are very few people who will probably not be on this therapy.

Is Europe a tougher market to penetrate or is it not that difficult? Is the word around in Europe, as well as the United States?

I can't give you a value judgment on which market is tougher. It's almost like a school system. You know, which one is better, or it only depends the individual teacher that you may happen to have. It can be a great school system and a rotten teacher, and you would say that you're not in a school system. So I really can't answer that question. I think the motivation of parents in Europe is no different than the motivation of parents in the U.S.

Great. Thanks a lot and good luck on the launch and hope the kids get treatment and soon.

Thanks, Matt.

Thank you. As a reminder, ladies and gentlemen, should anyone have any further questions, please press star one on your push button telephones at this time.

Our next question comes from at . Please state your question.

Hi. Yes, thanks for taking my call. Just a quick question. What is your share count at the end of the quarter?

Sixty-three point four million.

Sixty-three point four. OK. And I was just wondering if you could just refresh my memory in terms of the time line for this current trial in terms of when you expect to complete enrollment and then when you expect to have data?

The trial is 600 patients. As I said on the road show in February, we're doing absolutely everything we can to complete the trial in January of next year. It is possible because of holidays and the complexity of the number of sites that it may spill over into early February. But our goal is to finish it by the end of January.

We would hope, then, to have top line data relatively promptly after that. I can't give a specific date, but promptly.

It is possible that if our ramp rate goes a little sooner -- and I'm not making any commitments, but if we finish by the end of the year then we could be in a position in the middle of the first quarter to be giving some top line results.

That would be an optimal situation, but probably not the most realistic one. We are enrolling more sites than we originally planned. And we're expanding into Europe. We had thought that we would do this just in the U.S., but we now think it's prudent.

We're actually awfully excited about what we're hearing from physicians and so we're expanding the number of sites to get a broader base to be able to do the Phase III-B trial, which will make that trial easier and faster to ramp up as well.

Thank you.

Our next question comes from with . Please state your question.

Hi, Fred. I was just wondering if there had been any new developments with respect to the therapies? Are there patents?

That was tough, tough to hear. The question's on patents?

Yes. Have there been any new developments?

No, there have been absolutely no new developments.

Are you actively challenging those patents?

We have not made any public statement in two and a half years with regard to this. What our strategy or tactics would be. We've simply said that we have three issued patents and we believe that they are strong. And just to remind everybody, the patent situation is only a U.S. situation. There are no patents in Europe.

OK. Thank you.

You're welcome.

Our next question comes from with AK Capital. Please state your question.

Yes, hello. I have a few questions. First of all, wasn't there a milestone payment involved with approval of Aldurazyme?

Yes, there is a $12.1 million milestone payment from -- it's not included in these numbers, obviously.

When do you expect to receive it?

Oh, I think the contract says within seven days of approval.

They've already communicated as to getting that wired over.

Yes, we're not worried about receiving that money if that's your question.

OK. My next question is were any additional sales of common shares subsequent to the end of the first quarter?

Yes, there was a 286,000 or 287,000 share private placement.

OK. Are you planning to sell anymore shares?

We have no plans to sell anymore shares.

And my last question is, with regard to Neutralase and Aryplase, are you contemplating any marketing or any other relationship with other companies along the lines of what you did with Aldurazyme?

Let's break those down into the two components. With regard to Aryplase, we're starting the Phase III trial in the third quarter of this year, and we will be on track to finish that trial at the end of the first quarter of next year. At that time, on the assumption that the data in the Phase III is as good as the, I think, really outstanding data of Phase II, we will have put up 100 percent of the risk capital for that program. And at that point in time, we trial the NDA and go commercial with our Aryplase ourselves, on approval of Aryplase, assuming that the data shows the drug is safe and effective in the U.S.

Outside the U.S. I think we would get a distributor. I don't think we want, necessarily, a partner, because we will have taken, put 100 percent of all the funds into the program. But we certainly want a distributor as I think it's beyond our capability to set up a commercial organization outside the U.S.

With regard to Neutralase, it's a little different. We're doing the Phase III A studies ourselves. The Phase III B study, if the A study, the first one, goes well, we'll get going in the middle of next year. And that could be an even larger trial than the one that we're doing now. So, we estimate that the amount of money that that could cost would be anywhere from 20 to 25 million, whereas we're spending about 20 million on the Phase III trial.

We would like, I think, to get a partner in the assumption that the Phase III A data that we would hear about early next year, is positive. And in that case, we'd certainly want a partner, a full-fledged partner outside the United States. In the U.S. we may do something where it's a partnership, but that we keep some co-promotion rights in the U.S. As those of you probably know, Neutralase is not an orphan and the likelihood is, if it gets approval, there are up to 2 or 2 ½ million potential patients a year who could benefit from Neutralase. So, that's something we think we need the services of somebody who knows the cardiology Sweden hospitals very, very well.

I presume that you'll wait until you get the results before beginning any discussions.

That's true. Unless we get what I call a godfather type proposal, that we certainly would wait until we get those results. I think that the data shows that with positive Phase III results, the step up in value is significantly greater than what exists for Phase II. Of course, somebody could come in and anticipate, based on a positive Phase II data, they'd like to preempt the situation. And we would certainly talk to somebody about that, but the probability is that we'll wait to see what the Phase III A results are.

OK. Thank you very much.

You're welcome.

Our next question comes from with DWS. Please state your question.

Hello. I have a question with regards to the MPS I registry won by Genzyme. Can you tell us a little bit about how many patients are actually in the registry today? How many do you know are eligible for therapy? How many have seen BMT before? What the current status is of, in terms of how old the data or loss update of the patients are that are in and not registering?

Sebastian, these are really great questions that I'm not at liberty to discuss right now. And they'll have to be discussed at the time that Genzyme gives detailed commercial and financial guidance.

I can reiterate what was said three months ago, that there are over 750 patients three months ago identified. And I think now with the approval, and then some time in the second in the U.S. and some time in the second quarter with approval in the - anticipated approval in the EU, that the awareness levels go up even greater and the number of patients in registries go up. But the specifics on that will have to come from Genzyme.

Do you know by when we can expect them?

Well, what I indicated was that, with regard to the U.S., there will be commercial guidance given at launch. And with regard to financial guidance, that will happen on European approval. So anywhere from two to six weeks or so you should start to get some more meat on these bones.

OK. Thank you.

You're welcome.

Again, Ladies and Gentlemen, should you have a question, please press star, one at this time. If there are no further questions, I will now turn the conference back to Mr. Price for closing comments.

Just one final comment and then I'm going to start to hear all the clicks as you run off. We're firing on all fours, as they say. All our programs are going well. The company is in very good shape financially.

We are looking to do more and different things. And we look forward to sharing some of those events with you over the next few months. Thanks very much.

Ladies and Gentlemen, this concludes our conference for today. Thank you all for participating, and have a nice day. All parties may now disconnect.