BioMarin Pharmaceutical Inc (BMRN) 2003 Q2 法說會逐字稿

Good morning and welcome, ladies and gentlemen, to the BioMarin Pharmaceuticals second-quarter 2003 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. This nonconfidential presentation contains forward-looking statements about the business prospects of BioMarin Pharmaceuticals 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 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. Frederic Price, Chairman and CEO of BioMarin. Please go ahead, sir.

Thanks very much. I'm here today with Emil Kakkis, Senior Vice President Business Operations; Lou Drapeau, CFO; and Josh Grass, Manager of Investor Relations. What I would like to do is just spend a minute to reviewing some key highlights of the quarter and the first half; and then turn it right over to Q&A. As you all know, on July 17th we started enrollment of our Phase III trial for Aryplase. We will have the results of that at the end of the first quarter of next year. And if all goes well, we will be in the position of being able to file an NDA late in the third quarter of next year.

On June 17 we raised 125 million in a convertible subordinated Note. As a result, our cash balance at the end of the quarter is 266 million. On June 11 we and Genzyme announced that we had approval in Europe for Aldurazyme with MPS I; and on April 30 we also announce that the two of us had gotten approval in the U.S. for Aldurazyme.

We have recently put John Urquhart on our Board to fill a vacancy. John will also be the liaison to the Science Advisory Board. He is a current member of our Science Advisory Board. We are creating a new corporate campus out here. We've just at leased two new buildings. I want to stress this is not a Taj Mahal. Those of you who have been out here know we have quite modest facilities. We have taken over four buildings that are on the Bay; two we currently lease and two we are adding to our leasehold; and we are going to put together a corporate campus there. The manufacturing facility is about 100 yards away and will not change.

There are some investment conferences coming up that I'd like to inform you about. The BioCentury conference on September 4; the Bear Stearns conference on September 8 and 9; UBS, September 22 and 23; Rodman and Renshaw, October 21 and 23; and CIBC on November 10 through 12. We're going to be presenting posters and other kinds of presentations at scientific conferences, at the International Congress of Inborn Errors of Metabolism in Australia September 2 to 6; so please refer to the press release for the details of the presentations. And also at The American Society of Human Genetics meeting in L.A., November 4 through 8; also please refer to the press release for the kinds of presentations we will be making there.

And many of you have probably also listened in to the Genzyme call a few weeks ago. You know that sales for the first six months were 1.6 million, and Genzyme is expecting a range of sales for Aldurazyme for this year of 10 to 13 million people. On their call they announced that 66 patients were on Aldurazyme therapy in the U.S. and E.U; and there are about 70 additional patients working their way through the queue in the U.S. And they have identified well in excess of 200 patients in Europe, as well.

We continue to enroll patients in the first of our two Phase III Neutralase trials for the reversal of heparin in CABG surgery. We expect to have the trial completed in early in the first quarter of next year, and we will produce data shortly thereafter. If the trial results are positive we anticipate starting the second Phase III trial in the middle of 2004.

As I mentioned earlier, Aryplase is enrolling patients in its pivotal Phase III trial; there will only be one Phase III if all goes well. And we expect to have the data in the second quarter of next year. We expect Vibrilase, which we don't talk about very much, it is a Phase I product for burns, to be completed by the end of the year. We will anticipate that we will not go into a Phase II, and that we will probably look to out license this product.

Want to give you a little guidance for the year. Last year, 2002, for the full year we had a loss of 77.5 million. We are expecting a loss this year of 81 to 83 million. Last year the total cash burn was 57 million. This year expecting the cash burn to be 80 to 84 million. That cash burns excludes our financing activities; but it does certainly include the 12.1 million milestone payment we got from Genzyme on U.S. approval of Aldurazyme.

What does this translate to? From an earnings per share point of view, a loss of $1.30 to $1.33 per share. The main reason for the increase in the loss from 77.5 to 81 to 83 million is due to a tremendous increase in the amount of expenses for Neutralase. It is clearly the most important product that we have. We have increased the amount of spending of $23 million versus last year. An enormous effort is going in. We are approving up to 75 sites, more than 600 patients. We have expanded into Europe, as well. Very, very important program for us.

In addition the 16 million of incremental spending this year versus last year on Aryplase. You can well imagine we are into the throes of the pivotal trial there. And the biggest decrease in expenses is on Aldurazyme. The $23 million in 2002 is going to be down to 5 million this year. That 5 million is comprised of a $17 million actual loss, netted against the $12 million payment from Genzyme.

As many of you know, our joint venture with Genzyme is now put together on an equity basis. And you will see one line on the P&L that has an income or loss from the joint venture. Each company will lose about 17 million this year. For us, that is exclusive of the $12 million payment from Genzyme. And we will of course report the full P&L in our financial statements as the equivalent of a product P&L. You will see everything from net sales down to operating income for Aldurazyme. I would like to open the call to questions now.

(CALLER INSTRUCTIONS) Bob Yaron, with S. G. Cowan.

Nice quarter. I had a question regarding Aryplase. The study you are doing is going to be a six-month study. And the previous data was very impressive. What worst-case scenario, if you have to extend the study, how is that going to impact your understanding with the FDA regarding filing?

I understand the English of the question, but I am not sure where it's coming from. We have no intention of extending the study. It is a six-month trial and that is what we're going to do. What we did do with Aldurazyme, and of course we will certainly -- and have done on all the trials we've done in enzyme replacement therapies, we continue patients on open-label extension following the primary treatment phase. We will certainly do that as well. But there is no reason to extend the trial beyond six months.

Okay, and then can you give us an update as to how many sites are currently active for Neutralase? And I don't know if you are willing to comment to how many patients you have already accrued up to now.

We don't give information on those. We are on track to do everything I said. To qualify all 75 sites and to get all 600 patients done early next year. We are on a very good ramp up rate, and we are just not going to give out each quarter or each month numbers of patients or numbers of sites. But we are quite satisfied with what is going on. We're quite excited about the program.

And then finally in terms of Aldurazyme further data from the open-label, when do you think we might see that?

For Aldurazyme there is a member of presentations that are planned at the American Society of Human Genetics meeting, which is in the release. And in there, there will be some data from attention (ph). But we don't have any other plans at this point to present. But the American Society of Human Genetics.

Okay, thanks very much.

Meirav Chovan, UBS.

Could you provide us a breakdown of the JV line, in terms of R&D, SG&A, the numbers we don't know? Also on the timeline for Neutralase, what needs to happen in order for you to proceed with the second Phase III? In the past, you have said you would not proceed with a second Phase III unless you had a partner. Is this still the case?

No, we didn't quite say that. What we said was we would prefer to have a partner to do the second Phase III, but we are fully prepared to do the entire thing ourselves. We have the resources and the personnel and the cash to be able to do that. Neutralase has to do two things. It has to, one, reverse heparin; and second, it has to not have the problems associated with Protamine. So we would only not go into a second Phase III if we fail to meet the end points in the first Phase III. We will consider a partnership outside the United States following, if we get positive Phase III results in the first trial. And we would also consider some sort of a co-promotion or other kind of arrangement in the U.S. at that time or later.

In regard to the breakdown of expenses, what we have is -- we provided summarized financial; I am going to turn this over to Lou Drapeau.

We are providing our 10-Q summarized financial statements, which include revenues, cost of sales, operating expenses, and other income and net loss.

What we don't have broken down in there, obviously, intimate details of the operating expenses. And we probably won't do that for a while. Most of the expenses that you can imagine, however, are related to the commercialization of the product; with a lesser percentage going to the ongoing maintenance of patients in the clinical programs that we have agreed to do.

Okay. Going back to Neutralase, it seems to me that there has been a change in your attitude since a few months ago. My sense was that your stand was that you do intend to partner the product in the United States.

Well, what we've said, a lot of things depend upon how much cash we have. And since the beginning of the year we've raised over 220 million in cash, and that can certainly affect our attitude. So we have the confidence, I want to make this clear, that if we decide not to go forward on a partnership, we have the capability to do that. That is the most important thing.

We would, we have always maintained that outside the U.S. we would seek some sort of -- whether it's a partnership, a distribution arrangement or some other kind of joint venture; we are not going to create a commercial infrastructure to try to sell Neutralase outside the United States. There has been no change there. Inside the United States, first of all, quite frankly, the data is going to speak for itself. We have to see what the data is. If the data is good, we would consider some sort of an arrangement in the United States. What we don't know is whether that would be a true joint venture, a partnership, a license deal, a copromotion. We may also decide not to do it at the end of the first Phase III and wait until the end of the second Phase III. Because we have the resources now, there is going to be no rush. If we do a deal it will be -- the reason will be because it's an excellent deal at that time. We're not in the position of having a gun to our head.

So you would expect to have mortality data there?

We couldn't hear the question.

In terms of mortality data, when would you expect to have the mortality data?

Mortality is not one of the end points we are following. The primary end point is 12-hour chest tube drainage. But we are looking, in terms of looking at mortality, we look at Protamine-related morbidity as well, among our other end points. And so our expectation is to look at Protamine-related morbidity as part of the goal in showing that Neutralase would be an appropriate substitute for Protamine. I think that mortality data is something you could not get out of a 600-patient study, based on the expected incidence of mortality. You would require a substantially larger study.

Thank you.

Matt Gelle, CIBC World Markets.

I have two questions for you. First of all for Aldurazyme, can you go through the different numbers in terms of patients on drug, patients in the queue, etc.; and total number of patients identified? And just give some idea about how that would translate into actual usage of the drug, actual paying revenues on the drug. Anything you might be able to say on reimbursement. Second question is for Neutralase, can you talk a little bit about what your source of enthusiasm is for Neutralase? In terms of what have seen so far in terms of data, in terms of the end points or surrogate end points that might lead to success in the Phase III trial?

Well, let me take the second one first. The enthusiasm level for Neutralase is extraordinarily high. It is based upon not only the work that was done prior to the acquisition, but also the work that has been done since that. And it has been almost two years. There is no reason for us to believe that the product won't work, although we obviously can't predict that with any degree of certainty. We don't have any internal peeks; we're not looking at the data before the trial is concluded.

But I would say that you could, -- it is a clear indication of how we are voting with money. The amount of money that we are spending on Neutralase this year is extraordinary. And it is a testimony to the enthusiasm we have. The decision to go from just a U.S. and Canadian Phase III(a) trial of about 30 to 35 sites and double that by going into Europe is also, I think, a tremendous voting with our dollars with regard to this. Was there another Neutralase question, Matt?

Can you just remind us what data we've seen thus far on Neutralase that points in the right direction? Or is it in talking with investigators? What is the source of your enthusiasm about it? Just any data you might remind us of, or information about the drug.

This is Emil Kakkis. What we know from the Phase II study is that the new dosing that was studied, at 15 nominal dose plus supplemental doses, is the right dosing required in order to get appropriate reversal. And that is what we have implemented in this study. We can't talk about the current study. It is proceeding, but it is proceeding well. And as Fred said, we're very confident in terms of how we are investing in it. So we can't talk about data at this point in time on the current study; but our (technical difficulty) study data gives the confidence that the reversal of Neutralase would be adequate. It gave us some confidence that there are differences in hemodynamic stability; and we believe those will translate also into Protamine-related morbidity. So that is where our confidence comes. So far as the study is moving ahead, fine. And we have no reason to be concerned. Did I answer your question?

That helps. Thanks a lot, Emil.

The other question you had, let me try to give you a breakdown. This is as of July 16. With regard to Aldurazyme, that there were 66 patients who were on Aldurazyme therapy. Of the 66, 48 were paying and 18 are receiving free drug. This does not include some of the patients in the continuation, the Phase III, and the under-five (ph) study in Europe. But you've got 48 patients paying, and 18 receiving free drug; and you've got in the queue in the U.S. 70 patients working their way through, and 200 in Europe.

And any update on number of patients identified (multiple speakers) MPS I?

No, and that will come out on a regular basis, on quarterly or otherwise from Genzyme.

Thanks a lot, Fred.

You're welcome.

Cynthia Davis, Carus and Co. (ph)

I just had a quick question regarding research and development expenses for this quarter. I guess they seem quite a bit lower than the previous quarter. And when you add the two quarterly expenses up, they don't seem to match to what you have for the six months.

When you look at the quarter to quarter comparison, first quarter to second quarter, you will find in the first quarter we were accounting for our joint venture with the Aldurazyme expenses in our research and development and other cost areas. In the second quarter we took those expenses out and netted them in a single line called equity and loss of BioMarin/Genzyme LLC. So if you try to look at first quarter of 2003 and the second quarter 2003, they will not be comparable. But in our 10-Q we do provide a reconciliation for the prior quarter in 2002; and also the first half in 2002 versus the first half in 2003.

Perfect, so the expenses for this quarter would be something you would expect more as a number going forward, then?

Yes, absolutely.

Thank you very much.

(CALLER INSTRUCTIONS) Tilman Dumrese, Bank Vontobel.

I have a quick question on the SG&A line. It seems to me that this line came in substantially higher in this quarter with 4.5 million. I am wondering whether this is now sort of a new basis? Or whether this is related to a one-time effect, probably to launch costs for Aldurazyme?

It is primarily not related to Aldurazyme. It is related to some facilities costs that we had; some additional nonresearch cost that we incurred this year, compared to last year. But it does not reflect any launch costs associated with Aldurazyme.

Do we have to expect that this is sort of the range for the rest of a year? Or will this line get back to the level of the first quarter?

No; it's a good question. And you can use the current quarter as a base. We believe that we underinvested in G&A over the last year, and we have been adding a few key people in the organization, filling out the management ranks. And in addition doing some of what I will call pre-commercialization programs for Neutralase and for Aryplase as well. I think you will see the benefit of this in some very well-coordinated strategic planning that comes out significantly in advance of when our next products have to be commercialized. You will see the benefit of that. But I would expect this number is going to go up from the current base as opposed to back from the prior year.

Thank you very much.

(CALLER INSTRUCTIONS) Susan Anderson (ph), AK Capitol.

Thank you very much. My first question deals with Aldurazyme. I was just wondering with regard to the sites in the U.S. and Canada, the 30 to 35 sites that you mentioned; are those now up and running? Have you fully enrolled your patients? And where does the status with regard to expansion to European sites stand?

I believe there is a mixed metaphor. You might have said -- we heard it as Aldurazyme, but your question relates to Neutralase.

I meant Neutralase, pardon me.

Okay. We are not giving out the details of how many sites we actually have patients enrolled. But we are confident that getting to the 75 in the correct period of time in order to be able to get all 600 patients done by late this year, very early next year; we are absolutely on track for that. I'm not sure, there might have been -- it was hard to hear, as well. Was there a second question?

My second question related to Aldurazyme. I did not hear, it was difficult to hear the information you were providing with regard to number of patients in the U.S. as well as Europe. Was there an update, were the figures you gave an update above and beyond what was provided by Genzyme on their call?

No, what we have done is reiterated what they said on their call.

I see. Could you provide some more detail then, since a whole month has gone by?

No, the full commercialization responsibility is vested in Genzyme, and they are taking the lead on this.

Okay. Thank you very much.

Meirav Chovan, UBS.

Could you give us guidance on the R&D budget for this year and maybe going into next year?

We're going to hold off on that. The guidance that we've given to the year in both net loss and cash burn, they are almost the same number; 81 to 83 on loss; cash burn is 80 to 84. There have been some changes in some of the buckets where some expenses go. And I would like to hold off on doing that.

Fred, the reason why I'm asking, it seems to me that in order to get to your net loss guidance you need to spend more than $50 million in R&D in the second half. Is this around the ballpark, or am I missing something?

Second-half expenditures in R&D will be, order of magnitude, will be about that. And going into next year, which you asked, (inaudible) to be able to give some guidance for next year, we will be talking about that on the next call in three months. But there is a greater weighting of R&D spending in the second half of this year than in the first half.

Okay. Thank you.

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

Thanks very much everybody. We are firing on all fours (ph ) here at company. All the programs are going exceedingly well. We look forward to giving you updated information at the investor conferences and the science conferences in the fall. We will speak to you for sure in three months on the next earnings call. Thanks.

Ladies and gentlemen, if you wish to access the replay for this call you may do so by dialing 1-800-428-6051, or 973-709-2089, with an ID number of 300-446. This concludes our conference for today. Thank you all for participating, and have a nice day. All parties may now disconnect.

(CONFERENCE CALL CONCLUDED)