BioMarin Pharmaceutical Inc (BMRN) 2003 Q4 法說會逐字稿

Good morning and welcome, ladies and gentlemen, to the BioMarin Pharmaceutical fourth quarter 2003 year-end conference call. (OPERATOR I will now turn the conference over to Joshua Grass, Manager of Investor Financial Relations. Please go ahead Mr. Grass.

Today on the call we have Lou Drapeau, Vice President, Chief Financial Officer; Fred Price, Chairman and Chief Executive Officer of BioMarin; and Emil Kakkis, Senior Vice President of Business Operations at BioMarin.

This nonconfidential presentation will contain forward-looking statements about the business prospects of BioMarin Pharmaceutical, 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 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 will turn the call over to Fred Price.

First I will review the progress of our product development programs, and along the way I will highlight some of milestones of of 2004. Then I will go over the financial results for the quarter and the year just ended for BioMarin and the BioMarin Genzyme LLC. I will summarize our guidance for 2004, which hasn't changed. Then I will open up the call for questions.

First a little bit on Aldurazyme. On January 12th our joint venture partner Genzyme announced that fourth quarter sales Aldurazyme for MPS I was 6.7 million, and their sales for 2003 were 11.5 million, which was within the guidance range of 10 to 13 million. At the time of that announcement there were 220 patients on drug, of which about 145 were on commercial therapy. The rest are included in post marketing approval trials.

Genzyme continues to receive good feedback from physicians as they get more experienced treating patients. We're hearing that some patients are now able to arrange for infusions at local hospitals, and a few are receiving infusions at home. The decision is up to the treating physician and is made on a case-by-case basis.

From a global perspective, Aldurazyme was recently approved in the Czech Republic. And patients in Taiwan and Latin America have recently begun to receive reimbursement for treatment. Applications for product approval are pending in Canada, Australia, New Zealand, Israel and Russia. And Genzyme expects a steady stream of regulatory activities and news throughout the year.

Turning to Aryplase. Last November 6th we announced positive long-term data from our ongoing Phase I and Phase II clinical studies of Aryplase, our enzyme replacement therapy for the treatment of MPS VI. Long-term data from both studies indicated that Aryplase is generally well-tolerated, and the patients continue to benefit from Aryplase treatment.

Our Phase II data for Aryplase were very positive. Results from both the 6 minute and 12 minute walk tests were very good. And we're using the 12 minute walk test as our primary endpoint in the pivotal Phase III trial. We're on tract to release results from the Phase III trial in the second quarter. And if the data are positive, we will file the BLA/NDA in the fourth quarter this year.

Prior to the release of this pivotal Phase III data we will present more long-term data from the ongoing Phase I and Phase II studies. The data presented will be for Phase I patients on drug for 144 weeks, and Phase II patients on drug for 72 weeks. This will be presented at the American College of Medical Genetics meeting March 4 through 7, and at the Society for Inherited Metabolic Diseases' annual meeting being held March 7 through 10, both in Orlando, Florida.

The abstract titles and meeting information are also in the press release that we issued today. There will also be some data from ongoing clinical studies of Aldurazyme presented at these meetings. Details of this are also in the press release.

I would like to spend some time on PKU. Late last year we announced plans to accelerate development of Phenoptin, our enzyme cofactor for the treatment of phenylketonuria, or PKU. PKU is a metabolic disorder for which no drugs are currently approved and affects at least 50,000 people in the developed world. We're making good progress and anticipate a steady stream of news related to this program over the year.

We have entered into a manufacturing partnership with Merck Eprova, a wholly-owned subsidiary of the German Merck, for clinical and commercial supplies of Phenoptin. Merck Eprova specializes in the synthesis, development and commercial manufacturing of pterins, which is a class of molecules that includes Phenoptin.

Just yesterday we announced the formation of a PKU advisory board to guide and participate in the development of Phenoptin. Phenoptin and Phenylase are two product candidates for the treatment of PKU. I would describe this group as the equivalent of a metabolic All-Star -- disease All-Star team. This board is comprised of the leading thought leaders in PKU, and to a large extent the field of metabolic disease. We have already had our first advisory meeting, and their contributions to our PKU program have been invaluable in terms of clinical and regulatory strategies and tactics.

We are increasingly optimistic about our clinical development plans for Phenoptin, which could proceed quite rapidly. There's a large body of clinical data for the nonproprietary version of this agent. And we expect the development costs for Phenoptin to be much lower than the costs to develop an enzyme replacement therapy.

One of the reasons for this is that there's a simple reliable standardized diagnostic test to measure phenopality in the blood, which is the definitive test for diagnosis and management of the disease today. There is also a large body of evidence that correlates high blood Phe levels to poor clinical neurological outcomes, all suggesting the blood Phe level will be an important efficacy measurement for our clinical trials. We expect to begin our first trial in the next couple of months, and begin one or more additional trials by the end of 2004.

The evidence to date suggests that Phenoptin will be most effective in patients with mild to moderate PKU. We are also working with Phenylase, an enzyme replacement therapy, for the more severe subset of PKU patients. Our pre-clinical models have shown a rapid and sustained reduction in Phe with a sub-Q (ph) formulation. We are now working on a formulation that enables less frequent dosing, and are evaluating PEGylated versions of the enzyme. If the results are positive, we will look to an IND filing for Phenylase in 2005.

Just a few words on Vibilase. We expect to complete patient enrollment in the Phase Ib trial of Vibilase, a topical enzyme therapy under investigation for the debridement of serious burns, by the end of this quarter. The wound care field is highly specialized and complex from a clinical development perspective, which is the basis for our decision to out license the product to a company with a commercial interest or expertise in wound care. We believe there's a good market opportunity for the treatment of burns, and perhaps even a bigger opportunity for this type of product in treating chronic wounds, such as diabetic foot ulcers, decubitus ulcers, which is bed stores, phenostasis (ph) ulcers in which surgical debridement techniques are the only alternative.

That is it for products. I would like to take a little bit of time for our platform technologies. This past December 29th we announced the positive preclinical data on our Immune Tolerance platform technology was published in PNAS. This program was spawned from our research in lysosomal storage diseases.

However, we believe the real value of this technology lies in its potential to reduce immune responses that limit the efficacy of protein therapeutics that are not necessarily lysosomal enzymes. For example, immune tolerance problems are common for patients receiving Factor 8 for hemophilia A, and interferon for multiple sclerosis. We will be evaluating our Immune Tolerance technology for indications such as these. And we will be seeking development partners if the data are positive.

Our second platform technology, NeuroTrans, is in preclinical testing to deliver molecules to the brain via conventional IV infusion. We will be conducting animal studies throughout the year. And by the end of year should have enough data to make a go or no go decision on filing an IND in 2005.

Outside of lysosomal storage diseases, we will evaluate opportunities for product development partnerships primarily for proteins that look like they have efficacy in the brain, but lack the method to achieve adequate concentrations and distribution in the brain.

Now for a couple of other dates. On the personnel front we're pleased to announce that Pierre Lapalme, former Chairman and CEO of Rhone-Poulenc in Canada, and Senior VP General Manager of the North American Division of Rhone-Poulenc Rorer, has been elected to our Board of Directors. Pierre has got more than 30 years of pharmaceutical sales and marketing experience.

In addition, Vijay Samant, President and CEO of Vical has announced his decision not to seek reelection when his term expires at the shareholders meeting this coming May.

Regarding conferences, in the upcoming months we will be providing updates at several conferences, including the Merrill Lynch conference, which if I get out of here on time, is about 45 minutes from now; the Wachovia Convertible Debt Conference, February 29th in Miami; the Cowen Healthcare Conference, March 8th, in Boston; the CIBC Conference, April 28 in New York; and the Rodman and Renshaw conference to be held on May 12th through 14th in London.

Turning to financial results, first for the quarter and the twelve months ended December 31, 2003. The net loss for the fourth quarter was 25.7 million, and was 75.8 million for the year. This translates to a per-share loss of 40 cents for the fourth quarter and $1.22 for 2003. This is a little better than the guidance provided earlier this year of a loss of 76 to 78 million.

From a cash perspective, we ended the year with about 206 million in cash and short-term investments. We burned 35.5 million and 77 million for the fourth quarter and for the year, respectively. The fourth quarter cash burn was about two times what we think the current run rate will be for 2004. It was high in the quarter primarily due to closing down the Neutralase program, which was a one time event, costs associated with starting and completing enrollment for Aryplase Phase III, and the timing of payment of our payables. Cash burn for 2003, 77 million, was right within the guidance of 74 to 78 million.

R&D expenses were 17.6 million for the quarter, and 54.8 for the year. Again, fourth quarter R&D expenses were higher due to Neutralase and Aryplase Phase III study costs, and winding down all of our Neutralase activities.

G&A expenses were 5.5 million for the quarter, and 14.4 for the year. We expect G&A to run slightly higher in 2004 based on increasing activities related to pre-commercialization efforts for Aryplase, and for the upgrading of our research facilities.

Now I will just spend a minute on the results of the BioMarin Genzyme joint venture. As previously mentioned, Aldurazyme sales were 6.7 million for the fourth quarter and 11.5 million for the year, in line with guidance of 10 to 13 million for the year. BioMarin's share of the loss was 2.1 million for the fourth quarter and 18.7 million for the year. We exited the year with approximately 220 patients on therapy. And about 145 of those were receiving reimbursement.

Now for BioMarin's 2004 financial guidance. Our previous guidance for 2004 hasn't changed. We projected our net loss will be in the range of 68 to 70 million. And it will burn 69 to 73 million in cash, to end the year with approximately 133 to 137 million. The guidance for 2004 Aldurazyme revenue will be provided by Genzyme on its February 19th conference call.

Okay. With that behind us, operator, I would like to open up the call for questions.

(OPERATOR INSTRUCTIONS) Matt Geller from CIBC.

I need a little help with an arithmetic problem that we're having here. We're trying to figure out what the patient distribution is like. And Genzyme has talked about a patient distribution for Aldurazyme. But if there are 145 commercial patients, and the revenues are 6.7 million, we come out with that given that it wasn't 145 all through the quarter, it was probably somewhere around 125 or 130 in the middle of the quarter, that the average patient is paying about $200,000 a year for treatment. And we come up with an average weight of something like close to 80 pounds per patients, which doesn't make any sense to us.

What are we missing here? Are there some patient revenues from other countries that would bring the average up to 200,000 without the weights being high? Can you help us at all in understanding, from what you have heard from Genzyme and what you know, what the weight distribution is, and what kind of patients are getting the drug here?

Yes. Matt, I can't talk about the weight distribution only because I just don't know it. I can tell you that our estimated launch pricing, which was 175,000, in some cases has been a bit conservative. So that in some areas they are getting considerably more than $175,000. But I cannot give you the weight distribution at this time. I just don't have that data.

Do you have any sense of -- I know they're saying that most of the patients are -- whether these are healthier or less healthier or any sense of what kind of people are being treated at this point?

I think you're going to have to wait for that kind of detailed information for the Genzyme call on the 19th.

Cynthia Davis from Charis Company (ph).

I was just wondering whether or not you could quantify the R&D changes in Q4 a little bit more for me, so I can see a run rate for going forward? How much do you think the Neutralase shutdown actually affected numbers in Q4?

Sure. I think the best way to think about Q4 is to think that Aryplase was about two-thirds of it. And next year Aryplase will go down a little bit. We will have a reduction in R&D spending next year. We generally do not give specific product or program forecasts, but I can tell you that there will obviously be no Neutralase for next year. What has made up the difference in the loss of not having Neutralase, is Phenoptin and Phenylase. But you're going to see a reduction in the R&D programs for next year because of getting rid of the Neutralase, and the Aryplase program will slightly abate once the pivotal trial is over in May. And these will be augmented to some extent by the Phenoptin and Phenylase trials. But you will see a decline in total R&D spending for 2004.

Yaron Werber from SG Cowen.

Fred or Emil, could you give us a little bit of a sense as to what kind of patients would you be enrolling in the Phenoptin study? Are these patients going to be currently on a diet restriction? And then what should we expect from the next trial to be like?

The first trial, or the trials that we're planning, will include patients that are older patients that have come off diet. And the majority -- many PKU patients try to be on diet, but actually cannot maintain the diet because it is so unpalatable. And so many of these patients who are out there are actually off diet and are older patients. And those are the type of patients we would be studying in our -- we would expect to be studying. Of course, we will be talking with the regulatory authorities to decide what the total scope of the program would be. But that is our expectation at this point in time.

And this is going to predominantly a PK and safety study, also looking at the blood Phe levels?

Are you talking about the first study that you just talked about?

Right.

The first study is -- the primary purpose is to establish the nature of the BH4 induction tests, the tests that test for responsiveness. We're testing various protocols for optimizing how to determine that a patient is responsive to BH4. That is the purpose of the first study.

And then would the second study potentially -- could not be a pivotal or could that be sort of an equivalent to a Phase II?

We don't want to really go into the detail of the rest of the clinical program. We will be in the clinic. We believe there's substantial data on this compound in humans. And so we will be working with regulatory authorities to get clarity on the plan. But you can expect us to be in the clinic with other trials later this year.

Yaron, a little color on that. We're going to do at least two and maybe three trials this year. And we will be having a steady stream of announcements with regard to Phenoptin throughout the year. And I would anticipate that within three or four months we will be able to give a much more detailed description of the kinds of trials we're going to be doing, but expect that this program is going to ramp exceedingly quickly, because so much gave data, human data, has already been out there.

If I remember correctly, you have filed for orphan drug both in the U.S. and in Europe?

That's correct.

Schircks Labs in Europe, do they not have orphan drug status for their compound?

Their compound is not actually approved.

And maybe just a final question for me. Would you by any chance know what kind of magnitude of sales that their products does in Europe?

Yes. Let me explain a little bit for some people. You are talking about Schircks?

Schircks? That's correct, yes. Schircks Laboratory, their BH4.

Yes. Schircks has a product that is enormously costly to make, and is not the same product that we have. And they do make it available for some physician under physician IND's. The sales are very, very small. I don't even know if they are actually net sales as opposed to just supplying product to people for some physician IND's. But they are not a commercial organization.

Joy, from CCL Partners.

Just wondering about the remaining 75 or so patients that are on clinical material. When do you expect those to sort of come -- move onto commercial drug in terms of the time line?

Those patients aren't part of an extension trial that was part of commitment -- part of our post approval commitment. We would expect them to come off -- it was a four-year commitment -- four years of extension. So we expect them to come off in '05.

You expect all of them to come off in '05?

(inaudible) yes.

All of the Phase III extension patients -- there is 43 of them, Joy.

The other patients may be on other trials. There are under 5 trials, and some other trials are ongoing, which are ending at various points in time. I was speaking of the Phase III patients, which is the majority of that group.

The other patients would come off presumably after that?

Well, probably in '05 as well. There about, as Emil said, there are 43 patients in the extension for the Phase III, and the commitment is through '05. And there are 20 patients in the 5 and under trial. And the commitment is through approximately the end of this year, early '05 as well. So that is essentially all of the patients, the difference between the patients on commercial drug and the patients on drug. So by various times in '05 those patients should peel off the post approval commitments and get onto commercialization.

(OPERATOR INSTRUCTIONS) Nerab (ph) from UBS.

Could you let us know about the inventory level of Aldurazyme at the end of the quarter, especially international?

Lou, do we have an inventory number that is handy?

Fred, I don't have the inventory number with me. Our total investment in the joint venture at the end of the year is about 16 million. And I would guess about half of that would be the inventory.

Excuse me, I didn't make myself clear about sort of expanding on the question that Geller had asked at the beginning of the call, the revenue per patient seemed to have increased quite dramatically from the third to the fourth quarter. One possible explanation, as he mentioned, is that you are now enrolling much heavier patients. Another possible explanation is that there is some increase in inventory, especially in the international markets. I was wondering if you have any color in that regard?

No, there is no increase in inventory that is out in the field. It is all sitting at the -- we maintain our inventory on the books at the joint venture. And it is physically sitting with us. So there is no correlation between the question and the issue of sales or pricing per patient.

We produce -- for everybody. We produce inventory not for a specific quarter, but because there is a about a four to five month process for the whole cycle to go through. So we have to produce inventory based on essentially six to nine months forecasts. So you won't see a correlation between the amount of inventory we hold in the joint venture and that particular quarter's sales.

(OPERATOR INSTRUCTIONS) If there are no further questions, I will now turn the conference back to Mr. Price.

Thanks very much. Just as a quick comment. I have really never felt were confident about the Company's future. We've got a drug approved. Sales are building. We're getting good feedback from physicians as they gain more experience with Aldurazyme.

In the latter half of last year we were able to reach full enrollment in our Phase III Aryplase study promptly. And if the results are positive, we will file BLA/NDA in the fourth quarter of this year. In May, I think -- May 22nd or so, we will report those results. And there is a good chance if the data are positive, we will have a launch in the U.S. and in the EU of '05.

As I mentioned before, when Yaron asked a question, you will hear a lot more about the PKU programs over this year. We will have two and perhaps three clinical programs this year with our first small molecule drug, that is Phenoptin. We have had a lot of preclinical development that is quite important over the last six months, both in Tolerance, NeuroTrans. At the end of year we could be in a very good position to be filing INDs for these products next year.

I just want to emphasize we will not be spending significant amounts of money on technology platforms. If we get good proof of principal data, we will discuss partnerships, development partnerships, with larger companies.

In addition to these development programs, we're actively evaluating strategies to develop a modest, but important, U.S. commercial infrastructure of the Company. We anticipate making some progress on this initiative this year. We will be talking about it later in the year. And the reason for taking a share in our U.S. commercialization efforts is we believe that we will have an ability to capture a larger share of the market for our drugs earlier on in the life cycle.

Thanks very much for the call. I hope I will see some of you over at another conference in the not too distant future, meaning a matter of minutes. Thanks again everybody.

Ladies and gentlemen, if you wish to access a replay for this call you may do so by dialing 1-8000428-6051, or 973-709-2089 with an ID number of 327406.

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