BioMarin Pharmaceutical Inc (BMRN) 2003 Q3 法說會逐字稿

Good morning and welcome, ladies and gentlemen, to the BioMarin Pharmaceutical's third-quarter earnings release conference call. At this time I would like to inform you that all participants are in a listen only mode. At the request of the Company we will open the conference up for questions and answers after the presentation. I will now turn the conference over to Josh Grass, Manager of Investor and Financial Releases. Please go ahead, sir.

The participants on this call for Biomarin include Fred Price, Chairman and CEO, Lou Drapeau, Vice President and Chief Financial Officer, Emil Kakkis, M.D., Ph.D., Senior Vice President of Business Operations and Jeff Cooper who recently joined BioMarin as Vice President and Controller. The presentation we are about to give 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 program, actions of regulatory authorities, availability of capital, future actions in the pharmaceutical market and development by competitors and those factors detailed in Biomarin's filings with the Securities and Exchange Commission such as 10-Q 10-K and (indiscernible) reports.

With that, I'd like to hand the call over to Fred Price, Chairman and CEO of Biomarin.

First, I will briefly review our most recent announcements and then I'll provide an update on our programs and financial results for the quarter. Following that, I will open up the call to questions. First recent announcement - on Sept. 22nd, we announced termination of the Neutralase program. Data Safety Monitor Board for the Phase III Coronary Artery Bypass Graft commonly referred to as CABG trial notified us of a disproportionate number of adverse [indiscernible] [inaudible]. Based on the early (indiscernible) it was highly unlikely that Neutralase would have demonstrated superior risk benefit profile compared to protamine (ph) and CABG surgery.

Clearly we are disappointed Neutralase will not become a successful product. We are fortunate, however, to have learned this relatively early in the Phase III trial. In a few moments I'll review the reduction in our net loss and cash burn estimates as a result of halting Neutralase development in all indications. In total we spent approximately 25 million on this program. This is down about 2 million from what I indicated on the Neutralase call six weeks ago.

As a result of our decision to discontinue working on Neutralase, we are accelerating our Phenylketonuria program -- Phenylketonuria is commonly referred to as PKU. Later this quarter we will make an announcement outlining our PKU program. And at that time we will also host a conference call to discuss it in detail.

Now I want to give you an update on our other programs. As you know, the U.S. and European launch of Aldurazyme is underway. [indiscernible] Aldurazyme for the three months ended September 30th for 3.4 million. Genzyme has indicated it expects 2003 sales to fall within the previously stated range of 10 to 13 million.

Aldurazyme is also now approved in Norway and Iceland and applications are pending in New Zealand, Australia, Canada, and Israel. Additionally, Genzyme expects to submit applications in six additional countries by the end of this year.

As of October 15 there were about 100 patients on commercial therapy. Genzyme continues to make progress in identifying patients and securing reimbursement for patients. As you know, Genzyme recently stated that there are about 3000 MPS I patients in the U.S., Europe, and Japan.

When you include other smaller countries, the number's a little larger - up to about 3400 patients in the developed world.

Our press release contains references for the epidemiological studies that we used as a basis for prevalent estimates for both MPS I and MPS VI. There's no new information or other reason to change estimates for the patient populations of these diseases.

Please contact Josh at JGrass@BMRN.com, if you would like copies of these papers or have questions on the prevalence and the incidents of these diseases.

Moving on to MPS VI, we've completed enrollment in the Phase III trial of Aryplase. And we expect to report data from this trial in Q2 '04 right on time. If the data is positive, we will plan on regulatory filings in about a year from today.

Just to remind you, Aryplase has orphan status and is designated as fast-track in the FDA. We have a good start on patient ID for Aryplase, so that if we're able to launch in 2005 we will really hit the ground running.

To date, we have already enrolled 170 MPS VI patients in our clinical and disease survey study. We estimate that there are approximately 1100 MPS VI patients in the developed world. The epidemiological studies cited in the press release also support this estimate of MPS VI (indiscernible). And again, as in the case with MPS I, there is no new information or other reason to change estimates for the patient population with MPS VI.

This week, we will be presenting long term data from the Phase I and Phase 2 trials of Aryplase at the annual meeting of the American Society of Human Genetics, commonly referred to as the ASHG meeting. That will be in Los Angeles.

This includes two-year data from the Phase I trial and one-year data from the Phase 2 study. BioMarin and Genzyme investigates will also be presenting nine abstracts that include data from varying clinical studies for Aldurazyme and MPS I at this meeting. Our press release issued earlier today contains a listing of these presentations. 9 for Aldurazyme and 2 for Aryplase.

We continue to make progress with our NeuroTrans program and, to date, we have completed much of the proof of [indiscernible]. Just to remind you NeuroTrans is our technology to deliver enzymes and other therapeutic molecules across the blood brain barrier by traditional intravenous infusion. We've successfully engineered a process to conjugate NeuroTrans to a license [indiscernible] enzyme and also to an additional therapeutic protein which to date has not been able to demonstrate activity in the brain by means of peripheral administration.

The conjugate is made up of a transporter protein linked to a therapeutic protein, resulting in one molecule. Manufactured and biological systems so it's really quite an accomplishment in and of itself.

We've also seen positive data from our in vitro receptor binding and uptake in perfusion experiment. As such we're ready to scale up production and test these conjugates in well-known and accepted animal models of the [indiscernible] storage disease and also a non lysosomal storage disease associated with age. The results from these studies are positive which we expect to know by the end of 2004. We plan on filing an IND in 2005 for one or more NeuroTrans programs.

Finally, we expect the [indiscernible] Phase Ib burn (ph) trial to be completed by the end of the year. To review it a Phase I a randomized placebo-controlled double-blind study evaluates three doses of Vibrilase in 118 healthy subjects. Results indicated the Vibrilase produced no evidence of contact sensitization or irritation for up to 8 days. This is well beyond expected one to three-day treatment period in which Vibrilase will be applied.

The current Phase Ib study was initiated one clinical site and was recently expanded to two additional sites. Phase I believe study is an open label dose escalation and safety study, evaluating in total of 15 patients with partial thickness burns with five patients at each of three doses - 100, 250, and 500 units per gram.

We completed the two lower dose cohorts and are enrolling patients in the third. Once we complete the study, we will explore outlicensing opportunities for Vibrilase.

I'd like to move on from products to corporate activities. First, there are two biotech industries investment conferences at which we will be presenting in the fourth quarter - CIBC World Markets conference on Nov. 10th in New York and also in New York the Harris [indiscernible] Girard conference on December 11th.

Now, briefly give you the highlights of the financial results for the quarter and the nine months ended September 30th, 2003.

Comparing the net loss in the third quarter. Compared to the third quarter of '02, you'll note it was $4 million greater. This was due primarily to increases in R&D costs, associated with the Neutralase program. Net loss for the nine months ended September 30th decreased by 8 million compared to the same period in 2002. This was due primarily to the onetime milestone payment we received from Genzyme of 12.1 million per U.S. Aldurazyme approval.

R&D for the first nine months 2003 increased by about 17 million over the same period of 2002. Of the 17 million about 10 million was related to Neutralase and 5 million related to [indiscernible]. G&A for the nine months was lower due to -- G&A was lower for the nine months due to accounting change that's a onetime change. Be back to the traditional growth in G&A in the fourth quarter.

And we ended the third quarter with 242 million in cash and cash equivalents.

Going back to corporate numbers again, we're back on track for net loss guidance 76 to 78 million. This was reduced by 5 million from our August 5th guidance of 81 to 83 million. We're also on track for cash and cash equivalent balances of 206 to 210 million at the end of the year. This is in line with our revised 74 to 78 million cash burn, which was down 6 million from our August [indiscernible].

In terms of our guidance for 2004, we have not changed from what we indicated a month ago. That's 68 to 70 million for net loss, 69 to 73 million for cash burn. We defined cash burn as operating net cash flow excluding capital markets [indiscernible] [inaudible].

With regard to our guidance for the Aldurazyme joint venture with Genzyme, we projected our share of the loss of the [indiscernible] will be approximately 18 million for this year which is already reflected in the [indiscernible] 2003 projected net loss of 76 to 78 million. The 18 million loss for the JV (ph) does not include the 12.1 million we received from Genzyme for milestone payments for U.S. improvement of [inaudible].

The nine months ended September 30th [indiscernible] share the loss JV was 16.6 million. And our share of loss for the quarter coming quarter quarter 4 expected to be disproportionately small relative to the loss in prior quarters of 2003, primarily due to increased sales of Aldurazyme in the fourth quarter.

One final comment on transactions before I open it up to Q&A. We remain committed to looking for partnerships for all of our products. We're also evaluating opportunities to license in products through technologies that fit within our technology or commercial focus.

I'd like to now open the call up for questions.

[Operator Instructions]

Yaron Werber from SG Cowen.

First question is actually for Emil relating to -- could you perhaps discuss what's the current [indiscernible] MPI VI?

Can't quite hear you, can you speak up a little bit?

Sure. The first question relates to the MPI VI - what is the state of the [indiscernible]?

What is the [indiscernible]

Most patients receive only [indiscernible] treatment symptomatic treatment per individual problems. There have been a few patients that have been transplanted but, in general, they are not transplanted.

Okay. Do they typically manifest mental retardation or are they -- is that not the primary symptom?

No, they don't have any brain disease in MPI VI[indiscernible] just [indiscernible]

Okay, and then, could you just discuss a little bit your postmarketing studies for Aldurazyme and how many of those patients are expected to be in commercial product or I guess the other way. How many will not be in commercial progress over the two studies that you are have been mandated to do by the agencies?

That is a complicated question because different patients, different countries. We are doing extension studies which we announced - in other words extension of the Phase III patients and those are obviously in the Europe and U.S. commercial markets where we are obligated to continue to those patients. And we have about another year or so for those patients. On the under five study is being done in Europe and that's also potentially commercial patients that are in that study but they're not getting commercial drugs. The dose customization study which we talked about is going on countries where [indiscernible] [indiscernible] affecting commercial patients. Some of the other substudies involved [indiscernible] substudy patients who would be on commercials drugs and being in the study would not preclude them from getting commercial products.

Matt Geller from CIBC World Market.

Emil and Fred, could you talk a little bit about in terms of the population you're talking about -- 3000 and 1100 for MPS I and VI, respectively. What percentage of those patients -- are do you have any numbers in terms of how many would be the type that would come in for treatment with Aldurazyme? And or Aryplase? And how it would break down into the various forms of MPS I from what you know thus far?

We don't really have that degree of clarity on the variations and forms of these patients to know whether they would come in for therapy or not. We believe that for the phase of an effective drug by large patients would want to get treated. But those numbers are based on prevalent estimates and based on estimates of mortality of the patients and so we don't have the kind of data you'd like to see. Now we're currently at Genzyme [indiscernible] commercial partner for the product is actively identifying patients and characterizing them in that way and that is one of the processes [indiscernible] in the launch. But we don't really have that parity both [indiscernible] to know who would come on the drug or not but we believe the drug [technical difficulty] in Aldurazyme's case being [indiscernible] active most patients would want to come onto therapy and we believe the same will be true for Aryplase assuming that we have [indiscernible] Phase III trial to get approved.

Could you talk about some [indiscernible] drug -- cam you talk about steps you're taking at this point to identify patients, to get a registry of patients to start working on reimbursement for patients to have a jump on the launch?

We are making an active effort at Biomarin to identify patients and have an active program in which we are actually identifying patients by their locations and or characterizing their situation. From a financial standpoint, we're putting together a commercial planning organization looking at issue regarding reimbursement and driving the [indiscernible] patients in location. As Fred noted earlier in the call we had about 170 patients identified (indiscernible) active program expected to identify substantially more patients by the time we launch. We hope to be very well-prepared - both in knowing where the patients are, what their situation is ahead of launch with Aryplase -

Matt, we are at 170 identified patients on a very modest effort two years before launch.

That's with MPS VI.

MPS VI.

170.

I think if you can imagine within the next two years a much greater effort will go on and that patient identification is not going to be a significant issue for brand MPI VI.

Great. Just as I don't know MPS VI as well as MPS I at this point, are these people -- how do they compare with MPS I? Are they for the most part really sick, do they really need treatment, are there mild forms of the disease. Can you just shed a light on that?

Maroteaux-Lamy Syndrome is a very severe disorder and most the patients are comparable to the severity of the disease you might see with a [indiscernible] [indiscernible] more prepared. They don't have the brain disease but it's a very severe physical disease and there are milder forms as well but by and large patients have a very severe disease and most of these patients die by the time they're teenagers with a significant number of years of severe disability, so there is -- it is very seriously on a par with MPS short of having any brain disease. So we feel that if there's a high [indiscernible] medical need in that population we believe the data we have so far we hope to see in Phase III will support the patients at getting on the therapy after approval.

Dr. Anthony Pfaffle from Black Diamond Research.

I had several questions, I guess, for Emil and Fred. One would be in terms of expanding the opportunity for Aldurazyme if, indeed, the data is indicating increased success in children under 5. If the additional data concerning in the future potential use, (indiscernible) with bone marrow transplant is essentially positive, and that that becomes possible to use Aldurazyme [indiscernible] with bone marrow transplant (indiscernible) opposed for both, how would that affect the number of patients and the volume of usage with Aldurazyme? And then, another question. The Aryplase seems to have the study -- seems to have a good combination of clinical and [indiscernible] and the mix is sort of similar to the data obtained with Aldurazyme. And how is that sort of leading in the Phase II one-year data -- how is that leading toward your feeling about its provability and, thirdly, the NeuroTrans opportunity. Is this something that's being targeted specifically for Aldurazyme? And is it -- does it have an applicability to other enzyme replacement therapies across the board, yours and/or Genzyme's etc. and I guess, lastly, I understand that you guys are working on the strategy to reduce immunogynicity (ph) [indiscernible] resistance in enzyme replacement therapy. Could you please elaborate on that if you can? Thank you.

This is Fred and I'm going to take a couple of them and then I will turn it over to Emil. I am going to turn the first and the fourth question to Emil. With regard to NeuroTrans, we will be talking a lot more about this next yea,r and we had not specifically identified either of the glysosomal (ph) storage disease product or the products that is not a license glysosomal storage disease product. But we hope to be in position to be able to file INDs at the end of next year for one or both of these. And I would state it is going to take a little more time for us to be putting out more announcements on this. We are excited about this but we can't -- don't want to get ahead of ourselves. We have some good animal data but we need larger animal data in order to generate - I think - the kind of enthusiasm that we all would like to see.

But so far, we are quite, quite pleased with what we've got and these would be programs that certainly on the programs that is not the lysosol (ph) storage disease drug would be partnered out, that would be way beyond our capability to take this to fruition.

Your second question was on, I believe, approvability and the issue for us is that we've -- although our data that we've seen is and that we've demonstrated to the public in Phase I and Phase II, MPS VI Aryplase program is what we believe quite good (ph) and we think the clinical protocol for Phase III is extremely well-designed. And that you'll see for yourself in a couple of days what the data looks like on the long-term data - the two-year and the one'year data for Aryplase. It's really difficult for us to put a quality of assessment on it.

You'll have to do that yourself. I think, in many ways, the data will speak for itself. I'd like to turn over the first and the fourth questions to Emil.

So your first question related to, I believe -- to summarize it whether use of enzyme in combination with DNT (ph) or another part of the spectrum will be supported by other studies and whether that how much that will impact Aldurazyme? It's a little difficult to predict how that will affect Aldurazyme's exact sales but we believe there is a [indiscernible] interest among [indiscernible] use the drug in combination with BNT. But we also believe there is interest in using it for other indications as well within the MPS I patient population.

At this point in time, Genzyme is charge of commercialization and is actively interacting with investigators in the field and looking at a proposal to study [indiscernible] combinations of the enzyme. We believe the enzyme has benefited patients whether transplanted or not.

However we have not done studies in patients post (indiscernible) to show that there's further improvement in those patients. But we believe they [indiscernible] reason to believe that the drug could be used in any (indiscernible) population and that investors are looking at that and that positive [indiscernible] indications would support further sales (indiscernible) Aldurazyme. Telling you the exact number of spreadsheet, of course I cannot do that at this point in time.

Last question you asked about was on tolerance data or enzyme replacement therapy? At the Brisbane meeting, I presented data on a method to [indiscernible] intolerance during enzyme replacement therapy and the methodology is relatively simple and based on some research work we've done in the canine MPS I model. That is still canine animal work at this point in time, but what we're able to show is that we could prevent a clinically significant immuno-response (ph) during enzyme replacement therapy using these methods we developed. And we're continuing to explore that -- it's not a major focus [indiscernible] but it's an important avenue of study from the standpoint of applying enzyme therapies and potentially other therapeutics.

Cynthia Davis from Charis (ph) & Co.

I just have a few quick questions, I guess, personally, I was wondering just where you were, I guess, in terms of Aldurazyme cost of products right now? If you could just give a little bit whether or not that's been coming down you know as you've been producing more trends you may be seeing in that?

Yes. All questions that relate to the issues with Aldurazyme really have to come from Genzyme first on the financials. However we've always stated that our goal is to get at least 80 percent gross margin as a corporation. And we're comfortable with all of our products at approximately that level. And there have been no problems associated with the manufacturing process that would generate the increased -- substantial increase cost of Aldurazyme. So that we're in pretty good shape with regard to that. I would not view Aldurazyme cost of goods as an issue to be concerned about.

Thank you and then just actually a few questions regarding the SG&A and kind of estimates for Q4. I am just trying to get to your number for the all of fiscal year 2004 and I'm wondering whether or not after this accounting change SG&A is actually going to be higher maybe in Q4 than it was even in Q2? Is there some sort of rebound charge that might come true? And then also in R&D where you see that going because to get your number you would almost have to keep it constant with former numbers, which we would think it might be going down?

This is Lou Drapeau and in the third quarter, we reversed a lease accrual we made in the fourth quarter of 2002. That was about $2 million. And that reduced the general and administrative charge in the third quarter. We will have no such reversal in the fourth quarter and I expect that the fourth quarter G&A will approximate what we've incurred in the previous two quarters on average.

We're probably looking at a full year G&A of about $12.5 million which I think, directly, answers your question.

[Operator Instructions] Tilman Demrese from Bank Vontobel.

I have a quick question on the R&D line. Am I assuming it, correctly, that now all the costs associated with Neutralase have been put into the third quarter or do we have to expect that there are some cost still remaining which are booked in the fourth quarter? So could one expect that the R&D line is decreasing for the fourth quarter or what is your view on this one?

There will be some additional costs associated with Neutralase program shutdown that will be incurred in the fourth quarter, which we weren't able to accrue under generally accepted accounting principles in the third quarter. So I'm expecting about 2 million of that in the fourth quarter.

However, I just want to quickly add, that's not incremental. It's completely within our guidance of net loss for the year.

So, taking it together, one could expect that the R&D costs for this year would be something like around 55 million in U.S. dollars?

That's a reasonable number.

[Operator Instructions]. If there are no further questions, I will now turn the conference back to Mr. Price.

Thanks very much. We will be putting out a press release in a couple of days with regard to the results of Aryplase from the abstracts and presentations at the ASHG meeting - please look for that. Look also later in the quarter for a release on the PKU program. And just to kind of wrap up I just want everyone to now our pipeline is quite solid and you'll see with the PKU program we will be in a position to advance that pipeline to I think more than make up for the loss of Neutralase. Genzyme's on target for meeting its goals for this year and I want to emphasize that our epidemiological and other analytical data does clearly support the estimate of 3400 patients for Aldurazyme and 1100 patients for Aryplase.

And I want to thank our employees and our shareholders, our vendors and our partners for the work that they've done and we will be speaking to you again, shortly, in the coming weeks. Thank you.

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