BioMarin Pharmaceutical Inc (BMRN) 2022 Q3 法說會逐字稿

Welcome to the BioMarin Third Quarter 2022 Financial Results Conference Call. Hosting the conference call today from BioMarin is Traci McCarty, Group Vice President of Investor Relations. Please go ahead, Traci.

Thank you, Ross, and thank you all for joining us today. To remind you, this nonconfidential presentation contains forward-looking statements about the business prospects of BioMarin Pharmaceutical Inc., including expectations regarding BioMarin's financial performance, commercial products and 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.

On the call from BioMarin's management team today are JJ Bienaime, Chairman and Chief Executive Officer; Jeff Ajer, Executive Vice President, Chief Commercial Officer; Hank Fuchs, President Worldwide Research and Development; Greg Guyer, Executive Vice President and Chief Technical Officer; and Brian Mueller, Executive Vice President and Chief Financial Officer. I will now turn the call over to our Chairman and CEO, JJ Bienaime.

Thank you, Traci, and good afternoon, everyone. Thank you for joining us today. BioMarin's results in the first 9 months of 2022 represent record year-to-date total revenues of more than $1.56 billion. In the third quarter, total revenues grew 24% year-over-year and increased 31%, excluding KUVAN. VOXZOGO revenues of $48 million in the third quarter and $102 million year-to-date led to today's increase in full year 2022 VOXZOGO guidance. Planning these impressive results is continued strong demand from across Europe and the United States for VOXZOGO, a significant increase in overall patients treated and notable uptake in Japan since launching there in August. With no lower age restriction on VOXZOGO treatment in Japan, we are thrilled to share that one of the first patients treated in the third quarter was a 3-week- old baby.

Turning on to our second and most recently approved large product opportunity, ROCTAVIAN, gene therapy for the treatment of hemophilia A. Since receiving European approval in the third quarter, we are now in the final stages of negotiating outcome-based agreements for OBAs with the key payers in Germany. And with ROCTAVIAN pricing in Germany, business and labeled commercial product in our warehouse and ready to ship, we expect to treat the first patients there in the fourth quarter and in additional EU countries beginning in the first quarter of next year. Jeff will provide an update on the European launch in a moment.

Briefly on ROCTAVIAN in the United States, the BLA is under review. We were very pleased to have received acceptance of the BLA from the FDA 2 weeks ago and with a PDUFA date of March 31, 2023. The FDA also recently informed us that they plan to hold an Advisory Committee meeting. As we have said before, we have been preparing for a potential outcome for some time. We believe it is a good opportunity to discuss the demonstrated clinical benefits and established safety profile of ROCTAVIAN from the largest gene therapy clinical program ever conducted.

As we near the end of 2022, I'm awestruck by what has been accomplished in the last 12 months by BioMarin employees. On the top of list is our transition to profitability and the approval of our 2 largest product opportunities. While some of the approvals late last year enabled the most successful product launch in the history of the company and underscore our capabilities across research, development, regulatory, commercial and manufacturing. Having seen the same capabilities, we intend to extract maximum value from ROCTAVIAN beginning with our European launch this quarter.

I want to thank my colleagues for their contributions to achieving those significant milestones, which have solidified our foundation for growth. We will build on this momentum for the remainder of 2022 and beyond as we complete our transition to an earnings growth story, a unique accomplishment in our industry.

For sure, thank you for your continued support, and I will now turn the call over to Jeff to discuss the commercial business update. Jeff?

Thank you, JJ. I am very pleased with our performance in the third quarter, resulting in $505 million in total revenues, which represents 24% growth year-over-year including KUVAN and 31% growth excluding KUVAN. Year-to-date and in the third quarter, all brands marketed by BioMarin, with the exception of KUVAN and PALYNZIQ, demonstrated double-digit revenue growth year-over-year.

Starting with VOXZOGO, we are pleased to share that as of September 30, an estimated 713 children were being treated across 29 active markets, including a number of children in Japan. Japan is unique in having high awareness and an established treatment network for achondroplasia based on the existing use of growth hormone, and we expect it to be a material contributor of future growth.

As a result of robust VOXZOGO uptake across all commercial markets, we are increasing full year guidance to between $140 million to $170 million for the full year. We are thrilled with the reception and interest from families seeking VOXZOGO treatment. With 12 months of experience launching the world's only approved genetically targeted treatment option for achondroplasia, we are on our way to recording the most successful launch -- commercial launch in BioMarin's history.

The successful global launch of VOXZOGO is an excellent primer for the next product launch of 2022, ROCTAVIAN in Europe. As part of the initial launch, we are in the final stages of negotiating outcomes-based agreements with payers in Germany. These agreements allow us to capture full value for ROCTAVIAN and will allow patients to be treated while we go through the full price and reimbursement process.

We are targeting payers that we estimate cover 85% of hemophilia A patients in Germany. These are multiyear agreements that cover payer risk of patients potentially returning to prophylaxis through direct BioMarin financial commitment in return for substantial and full upfront payment. We expect to treat our first German patients in Q4 and look forward to sharing progress at our next update.

On the ROCTAVIAN EU approval call on August 24, we committed to update you on the European list price. On September 15, the first European price was listed in Germany in the amount of EUR 60,781 per vial, which, for an average patient consuming 32 vials, would equate to EUR 1.94 million.

It is important to note that our net revenues will include the mandatory rebate, currently 7%, to the German health care system; some additional negotiated discounts; and a reserve to estimate our obligations against the outcomes-based agreements, resulting in expected net revenue per patient less than EUR 1.5 million net of all discounts and reserves.

Relative to our experience with VOXZOGO and previous brands, we believe that this level of net pricing in Germany will be closer to the final net price to be negotiated with GBA for federal reimbursement because instead of using the prepricing period in Germany, we are going through robust negotiations as part of initial market access.

With our first commercial ROCTAVIAN update and for 6 quarters, we look forward to providing a number of metrics to help you understand the progress of launch. These include total quarterly revenue, name and number of active markets, milestones of numbers of patients treated and other color commentary relative to the launch.

Considering that individual patients are substantial contributions to revenue, to simplify our external tracking, we plan to provide updates on patient uptake by numeric milestone, which will include the first patient treated, the first 5, 10 and 25 patients treated and then in increments of 25 that follow.

Turning now to the U.S. With the ROCTAVIAN BLA under review, we are preparing for potential launch based on the March 31 PDUFA date. The cost of therapy for the treatment of severe hemophilia A in the United States is high and well understood by payers. Based on this and the potential for ROCTAVIAN to provide significant savings to the health care system, we were pleased with the draft evidence report issued on September 13 by the Institute for Clinical and Economic Review, or ICER. At a presumed price of $2.5 million, the report referred to ROCTAVIAN as a dominant treatment relative to emicizumab on cost-effectiveness. ROCTAVIAN was projected to have lower costs of $4 million, slightly higher quality adjusted life years and slightly lower bleeds. This report by a neutral third party underscores our belief that cost savings to payers will be a significant contributor to ROCTAVIAN uptake and an overall opportunity in the United States.

Turning briefly now to our enzyme replacement therapy brands, which collectively achieved record year-to-date results. As noted last quarter, and due to uneven ordering patterns, we do continue to expect a higher concentration of revenues in the first half of the year compared to the second half, with VIMIZIM trending to the lower end of full year guidance and NAGLAZYME trending toward the higher end of full year guidance.

For BRINEURA, 15% growth year-over-year and revenue of $38 million in the third quarter was driven by 20% growth in commercial patients versus 1 year ago.

Moving now to PALYNZIQ. Net product revenues grew 9% to $66 million in the third quarter as compared to the third quarter of 2021. 5% revenue growth year-to-date, while positive, trails our overall growth expectations and what we continue to believe PALYNZIQ can achieve in the longer term. Looking ahead, while PALYNZIQ is expected to continue to grow from year to year in the future, resuming substantial growth rates next year will likely be constrained until our new strategies gain momentum. This year, while we have not updated full year PALYNZIQ revenue guidance, we do expect full year revenue to be at the lower end of the guidance range.

Continuing with the PKU franchise, KUVAN contributed $57 million in revenue in the third quarter of 2022, relatively flat compared to the second quarter of this year. As we have stated previously, KUVAN nears the end of its life cycle. So closing market exclusivity in the U.S. in October 2020, we are gratified to be able to retain meaningful market share and resulting revenues.

Going forward, we anticipate generic competition to enter the European KUVAN market in mid-2023, somewhat sooner than previously expected and with the assumption that this will further reduce our market share and revenues.

In conclusion, we expect to end the year strong and anticipate increased demand for all of our commercial brands with the exception of KUVAN. We believe that robust prescription demand for VOXZOGO represents a foundation for continued growth, including in new markets for the remainder of the year. The team in Europe is very excited to be launching the world's first gene therapy treatment for hemophilia A with ROCTAVIAN, and we look forward to updating you on launch progress at our next quarterly update.

So thank you for your attention. And I will now turn the call over to Hank to provide any update. Hank?

Thanks, Jeff, and thank you all for joining us today. With ROCTAVIAN approved in Europe and the successful BLA resubmission, we look forward with great anticipation to patients in Europe experiencing the life following -- the life-altering treatments that follow with the world's first gene therapy product for the treatment of severe hemophilia A.

The journey to ROCTAVIAN European approval has been both unpredictable and gratifying, and I want to thank my team, teammates and colleagues for their tenacious pursuit of the ROCTAVIAN advancement in the face of many headwinds throughout the process.

We now turn our focus to the U.S. review and are energized and inspired by what has been achieved in Europe. As JJ mentioned, FDA recently informed us of their plans to hold an Advisory Community meeting to discuss ROCTAVIAN. And although no date has been set for this meeting, this is something that we've been preparing for, for over the last few months. We believe the AdCom will provide a good forum to review the demonstrated bleeding control and established safety profile of ROCTAVIAN.

We're also encouraged that FDA has so far approved 11 original BLAs for cell and gene therapies, 5 of which had AdComs and were approved. On a related note, in an effort to manage expectations throughout the review process, we plan to only update those milestones that are material to the ROCTAVIAN journey. For example, we do plan to share the date of the Advisory Committee meeting when available.

Thank you for your understanding as we focus our energy on quality communications with the agency, Advisory Committee preparations and all other elements of the BLA review process.

Turning now to the recently presented filings of the more in-depth whole genomic analysis of the leukemia case discussed in September from a subject in our Phase III study. As presented at the European Society of Cell and Gene Therapy Congress in Scotland, the more in-depth sequencing analysis from the patient sample did not detect any integration of ROCTAVIAN vector DNA in the subject's leukemia cells. Furthermore, we identified a collection of mutations across the patient's genome that are often observed in this form of leukemia. This was substantially the outcome we expected based on prior findings that have been already submitted to the FDA. Now that we've completed our genomic studies in this case, we're finalizing our correspondence with global authorities again in the coming days.

Moving to VOXZOGO. During the third quarter, we met with both the FDA and the EMA to collaborate on the path forward for the submission of the supplemental applications for VOXZOGO to expand the age range for which VOXZOGO is indicated. Based on the feedback that we've received, we're on track to submit both applications by year-end.

Turning to new VOXZOGO indications beyond achondroplasia. In 2023, we look forward to reviewing the 52-week data set for Dr. Dauber's investigator-sponsored Phase II study in other genetic statural conditions. This data will be the combination of the exciting preliminary data presented at the end of meeting this past May and will form the basis of potential new indication selection and Phase III planning for VOXZOGO and other statural conditions.

Finally, turning to the earlier-stage pipeline. We look forward to activating our IND with BMN 351 for the treatment of Duchenne muscular dystrophy in the first quarter. With BMN 255, which addresses a subset of chronic renal disease, we have moved forward with the multiple ascending-dose portion of our Phase I/II study. While the BMN 331 for hereditary angioedema, we've dosed patients in the Phase I/II HAERMONY study to evaluate this investigational AAV5 mediated gene therapy for people with hereditary angioedema.

We have recently progressed through escalation of the 6e13 vector per kilo dose group, where our nonclinical studies progressed project therapeutically relevant expression of C1 esterase inhibitor.

Our preclinical studies of BMN 349 continue to build our enthusiasm for its potential to dramatically improve liver health in people living with alpha-1 antitrypsin deficiency. We expect to file an IND with BMN 349 in the second half of '23.

BMN 293, formerly referred to as DiNa-001, is on track to be our very next gene therapy clinical candidate, in this case, for the treatment of hypertrophic cardiomyopathy caused by mutations in the myosin-binding protein C3. Our preclinical studies continue to generate exciting evidence for the potential of BMN 293 to improve cardiac hypertrophy and diastolic dysfunction in patients living with hypertrophic cardiomyopathy. We also expect to file the IND for BMN 293 in the second half of 2023.

It's been quite a busy time in the R&D organization that's inspiring to reflect on all that's been accomplished. And again, I want to thank my team for their unwavering perseverance moving our important medicines through preclinical, clinical and regulatory review on behalf of patients we serve. We look forward to keeping you apprised of our progress with ROCTAVIAN in the U.S. and look forward to potential approval in 2023.

Thank you for your support, and I will now turn the call over to Brian to update financial results for the quarter. Brian?

Thank you, Hank. Please refer to today's press release summarizing our financial results for full details on the third quarter of 2022. Since JJ and Jeff spoke to our revenue performance for the quarter and future revenue outlook, I will primarily focus on the remainder of our P&L and other key financial updates this quarter. As usual, all results will be available in our upcoming Form 10-Q, which we are on track to file over the next couple of days.

Our 2022 key financial objectives of delivering double-digit annual revenue growth, together while achieving our operational goals while controlling expenses, is resulting in solid GAAP profitability through Q3 and significant growth in non-GAAP income consistent with our plan for the year. One more comment on total BioMarin revenue is that while most of our commercial brands have been tracking within our expectations this year, the strength of the global VOXZOGO launch, driving our increased VOXZOGO revenue estimates over the course of 2022, has compensated for the impact of foreign currency exchange rates as well as the restricted growth of PALYNZIQ. These factors have balanced each other, and we're pleased to maintain our total 2022 revenue guidance of $2.06 billion to $2.16 billion.

On the impact of foreign currency exchange rates, while we have a robust hedging program that has offered material protection during 2022, the strengthening U.S. dollar impacted our year-to-date revenue growth by approximately 3%. On a constant currency basis, Q3 year-to-date revenue growth was 15%.

Lastly on foreign currency, our disciplined hedging program has a small amount of hedge contracts at favorable exchange rates in place for 2023. However, our non-U.S. dollar-denominated revenue base remains largely exposed to the current environment. While we expect solid patient growth in both the base business and our newly launched product next year, we also expect that the current foreign currency exchange rates will continue to be a headwind against 2023 revenue growth.

With respect to operating expenses for the third quarter of 2022, R&D expense came in lower than we expected, mostly due to the timing of certain expenses that moved to the fourth quarter, and SG&A expense fell in line with our expectations. R&D expenses for the third quarter were $158 million, exactly flat with the third quarter of 2021, and SG&A expenses for the third quarter of 2022 were $217 million as compared to $183 million in the same period last year.

The largest component of the increase in SG&A expense are the global VOXZOGO and European ROCTAVIAN launches, some balance sheet foreign currency remeasurement as well as expenses related to our recently announced organizational changes. While we expect those organizational changes to bring significant operational and financial benefits to the future, we estimate the onetime charges associated with the changes to be approximately $20 million to $25 million, of which $5 million was recorded in the third quarter.

Moving to bottom line results for the third quarter and 9 months of 2022. While we are on track to report GAAP net income for the full year 2022, the company recognized a small loss for the third quarter. The Q3 GAAP net loss was mostly due to the timing of revenue and expenses on a quarterly basis over 2022, plus the onetime costs associated with the corporate reorganization just noted.

Despite some unplanned expenses and the negative impact of foreign currency exchange on the full year, it is noteworthy that we're maintaining our 2022 GAAP net income guidance of $105 million to $145 million.

With respect to non-GAAP income, Q3 2022 non-GAAP income of $83 million was more than double, with $34 million of non-GAAP income in the third quarter of 2021. Likewise, non-GAAP income guidance for the full year 2022 remains unchanged at $350 million to $390 million.

Turning to total cash and investments. We ended the third quarter of 2022 with approximately $1.65 billion, which is an increase of over $100 million compared to both year-end 2021 and the second quarter of 2022. While the company continues to experience quarterly timing difference in several cash flow categories, mainly working capital, BioMarin generated $169 million of operating cash during the first 9 months of 2022, which is a positive indicator of the progression and maturity of the business in this transformative year.

In closing, with just 2 -- with just over 2 months to go in 2022, we look forward to closing out a potentially record-breaking revenue year and solid footing for sustainable and growing profitability into the future. We look forward to providing further insights into our 2023 expectations early next year, which we expect will include substantial revenue growth driven by VOXZOGO and ROCTAVIAN despite the headwinds of foreign currency and continued KUVAN erosion from generic competition.

Together with the improvements to our operating model through the reorganization, we expect continued leverage in our business that can support both our growing R&D pipeline and strong top and bottom line financial performance.

Thank you for your attention, and we'll now open up the call to your questions. Operator?

(Operator Instructions) And our first question comes from Phil Nadeau from Cowen & Company.

Congrats on the progress. Hank, one for you. You mentioned that you've been preparing for the FDA AdCom for ROCTAVIAN for quite some time. We're curious to know what issues you anticipate will be discussed at the meeting, kind of what questions are you preparing to field. And has the FDA in any way indicated what discussion topics they're likely to bring up?

Thanks for the question, Phil. It's really too early to anticipate any of that stuff. They just got a huge file for review and they're just underway. And in any case, as the days go by, and I get asked this question, I'm going to have to defer answering it because so much of the questions are about things to speculate about rather than to know. But we'll tell you what there is to know about when we know about it, as I said in my prepared remarks.

Any -- could you give us any sense what you're preparing for now, what the key...

Well, I mean, from our side, it's -- we have an enormous amount of efficacy data, safety data, well-being data, information about optical concomitant steroid strategy, information about optimized monitoring of patients, relevant safety information for package insert post-approval plans. So we have -- and the reason I said that we have months of prep already underway is because we have so much stuff that it's important that in addition to preparing the documentation of the BLA that we're also preparing for a presentation of the essential story of the BLA.

And AdCom, as you know, is a great opportunity to go through the cumulative information in a very fulsome way. I mean it's amazing on the one hand, we can summarize findings in a 2-page press release and top line things for you in like 4 charts. But the reality of review and an approval process is they're looking at -- somebody told me that we printed the BLA with the equivalent of 7 Teslas. So they're looking at 7 Teslas worth of data.

Our next question comes from Salveen Richter from Goldman Sachs.

Two for me here. Just one on ROCTAVIAN and the launch in Europe. Could you talk about how quickly you can get the 2 key payers -- the 2 key remaining payers in Germany onboard? And any guidance as we start to think about the cadence of launch starting in 4Q? And then secondly, what are your outcomes here with regard to your discussions with the FDA on moving VOXZOGO into younger patients?

Salveen, I'll take the first question. So as we've described probably at length over the last 6 months or so, we have devised in consultation with German payers prior to the approval outcomes-based agreement, which basically cover a payer's risk of failure to respond or failure to be durable through a multiyear period.

And we've previously advised at multiyear period, we're targeting 5 to 8 years spending on the payer in Europe. So while we go through the federal process of reimbursement with GBA, during the free pricing period in Germany, we've determined that it would be favorable to being able to treat patients early to negotiate outcomes-based agreements with individual payer groups in Germany that we think will look largely like the eventual federal outcomes-based agreements in terms of the outcomes-based terms and also likely the discounts that we negotiate.

We think we're close with 2 of the 3 largest payer groups in Germany. We don't have ink on those agreements yet, but we think that we're close. And that will facilitate patients to be tested with our co-diagnostic in Germany and to go through liver function testing to be treated.

It's worth noting that we've got some really important things done in Germany. JJ noted that our price was listed on September 15. That was an important step. Our tops organization has done an amazing job. We've got commercial label approved products sitting in a warehouse ready to ship. Our commercial and medical teams have been doing site readiness work with the key treatment centers in Germany that we're targeting for first patients to be treated, and we're well on our way for site readiness. At least one side is 100% ready to go at this point.

So we're poised and ready. We've got that -- those outcomes-based agreements that need to just get signed up and we'll start moving patients in. So that's what the cadence looks like. I think you've seen some data from maybe another analyst that said indications of patients that are kind of in queue with these key treatment centers. We think that's true, and we're looking forward to letting those patients get moving in Q4, get treated.

And to the second part of your question on VOXZOGO and regulatory interactions, just a reminder of the 3 large pharmaceutical markets into VOXZOGO. The ages that we would be seeking for additional expansion are 0 to 5 in the United States and under in 2 in Europe because we already have the full range of ages approved in Japan.

And I think the key feedback that we've got and the key avenue to pursue is based on positive trends observed in growth. The safety profile that's been characterized in much larger population at this point now. And the recognition that treatment from birth in genetic conditions is of most immediate relevance, especially something like achondroplasia, where you're talking about severe skeletal dysplasia and it's not a process that's undone. And so getting in early is really important to families, as was illustrated quite nicely by JJ's comments about our first patient in Japan. So we think we have pretty good strong package, and there's a pretty good basis for health authority acceptance of that package for review.

Which should further fuel the growth of VOXZOGO starting likely in the second half of next year.

And our next question comes from Jessica Fye from JPMorgan.

Is it possible to give the VOXZOGO patient number at the end of 3Q broken down by U.S. and Rest of World? And within that strong revenue number you reported, how much of that VOXZOGO revenue represents demand versus maybe some initial products sent to new markets as they come online?

Jessica, I'll field that question. So we actually have not committed to breaking out geographically patient numbers. We committed at launch to providing global patient numbers. Last quarter, we did that as a way of enhancing the color commentary on the U.S. launch, which at that point was 6 months underway. But the cadence of patient growth is strong across markets, as we've noted.

The question was demand versus initial stocking.

Yes. So good observation. We've made the same observation. And we sell into some important markets where there's distributors and where we think that there could be some forward demand that is put into stocking. So examples of markets that we've had significant orders for -- that fall into that category include Japan, Brazil, Russia, for example.

So we do think there is some forward buying. It's a little difficult based on how dynamic the situation is to adequately characterize how much of those sales are forward buying and how much is responding to patient demand. But we've estimated in the revised guidance range -- we've estimated at Q4 that probably looks like continued strong growth in patient numbers and a little bit of deep pipelining of initial inventory stocking. And sorry, I can't be more precise than that.

But again, we had pretty strong growth in the number of patients in Q3 over Q2 and that is going to continue in Q4 and next year.

And our next question comes from Geoff Meacham from Bank of America.

Just a follow-up on ROCTAVIAN. You guys have given some perspective now on payer conversation in Germany, but do you expect the rest of the larger countries to look that dramatically different in terms of outcomes-based agreements? I wasn't sure if at this point different payers had different metrics on risk benefit or cost benefit profile.

And the next question is just when you look at the AAV antibody profile, just talk about -- a little bit about the -- how you characterize that and maybe how you expect ongoing monitor to really happen as you roll out across Europe.

Geoff, I'll take the first part and maybe turn over to Hank for the AAV5 antibody profile question. So in terms of the outcomes-based agreements, the details of those agreements, which are not really the main point in my view, the details can vary a lot. In terms of the terms, this is simple. So what we're covering in these agreements is a risk of failure to respond, which, by the way, in our clinical studies, we've not actually experienced a failure to respond to initial therapy. But anyway, that's a risk that we can cover.

And a return to prophylaxis is the second piece during an agreed-upon time window, and that time window is proving to be variable by country. So it's kind of simple. We're guaranteeing that the product -- patients are going to respond to ROCTAVIAN and that they won't be bleeding and returning to prophylaxis through an agreed upon window of time, which is variable.

The other piece that's variable, we think, is whether or not we get upfront payments or payments over time. And this has been kind of a dynamic situation. We've been expecting in Germany and also in the U.S., assuming approval next year, that we'll be looking at upfront payment recognizing revenue upfront. And some other markets -- and some of this has been a little bit surprising and new and dynamic. Some other markets have said back to us that they'd like to get in on a pay-over-time model. And maybe I'll just briefly ask Brian to comment on his views on revenue recognition if that occurs.

I think if I heard it properly, your question related to other peers in Germany maybe and not just Europe. And in other peers in Germany, it's just like -- we are in a free pricing period right now. But in probably 6 to 9 months from now, there will be a final federal German price and every -- all the payers will be aligned on that price. So this is a question of whether the deals we're doing with some payers right now related to the initial pricing, not that the final pricing will be the same for all payers in Germany we think by Q3 of next year.

Okay. Sorry, if I misinterpreted that.

Was that your question, sorry?

Yes. No, that was. Not just Germany, but across -- obviously, I recognize that it's pretty early in the launch, but looking at other...

Yes. Yes. It varies from country to country. I think we've said maybe in previous calls or -- for instance, in France, they are now -- although 2, 3 years ago they seemed to be interested in just upfront payment and then outcome-based agreement, they're still interested in outcome-based agreement, but they want to pay over time instead of upfront. So -- but at the end of the day, financial year, as Brian is going to explain, it doesn't make much of a difference.

Yes, that's right. So while hearing over the last couple of years that systems weren't set up for pay-over-time and they were interested in pay upfront, as we get deeper into these actual OBA negotiations and exploration, it ends up that some of the countries in Europe are just didn't pay over time. But importantly, under the U.S. GAAP revenue recognition rules, we would still recognize the entire ROCTAVIAN revenue upfront instead of over time. If the payment's over time, we'd be carrying that receivable so there could be a cash flow element for those pay-over-time ROCTAVIAN customers. But importantly, revenue would be recognized upfront.

There was a question about the AAV antibody program.

Yes. And you had an element of your question that pertained to ongoing monitoring. Maybe, Geoff, you want to -- maybe you could help me reset on the question you were asking.

(inaudible) He's not...

Yes. Sorry, Hank, I recognize obviously AAV testing is for the launch, but I'm just thinking about ongoing diagnostic obligations like Factor VIII, for example.

This is all basically standardized clinical assay commercial lab kind of stuff. As regard to AAV diagnostic testing for the companion diagnostic, we do have a CE marked product that has conformed to the trials that we conducted and is going to be available in a commercial lab with a short turnaround time and a very simple report to study.

And in addition, we have ongoing work to study the population of patients who are AAV positive by this test to see if they are also amenable to ROCTAVIAN therapy, and that could be a potential label expansion sometime down the road if we can get it to work. But by and large, things like ALT monitoring and Factor VIII monitoring, et cetera, are really all just local lab kinds of things.

Our next question comes from Chris Raymond from Piper Sandler.

A couple of questions. I guess first on VOXZOGO and the decision to submit for marketing in this younger age group. Just I know you've described a dynamic in the past, Jeff, with the original labeling that favors faster uptake in Europe. Should we be expecting and modeling a similar dynamic with this age group, U.S. versus Europe? Or is there some other nuance?

Thanks for the question, Chris. I think that the -- since we are talking about a label change that will be taking effect 1.5 years to 2 years after launch, I would guide towards kind of incremental material, but incremental increase in market opportunity in existing markets. So in European markets, that's largely going to look like gaining access to the 0 to 2-year-old patient population, which is probably like a 12% additional market opportunity.

And by the way, the initial experience in Japan where we have an age-agnostic label has been pretty positive so far with very young patients. So if you might be considering, hey, are prescribers and parents going to be moving really slow in that age segment, we'll have to find out. But the early returns from Japan would suggest that -- expect some uptake there.

And then in the U.S., that 0- to 5-year-old age segment, if we can get it, expands the available opportunity there by like 30%. So that could be a material increase to an existing -- by then an existing patient base that's pretty large.

Yes. Great. And then maybe a follow-up for Hank on the ROCTAVIAN AdCom. And this is maybe another question you can't answer, but we're being asked by folks so excuse me. But do you have any indication if the agency -- from them if they're going to want to hold this AdCom with or without the 3-year data?

Don't have any indications.

And our next question comes from Matthew Harrison from Morgan Stanley.

Great. I guess 2 for me. So the first one is just a follow-on on how to think about dynamics in Europe for ROCTAVIAN. I guess the first part of this one is just you've talked about patients in the fourth quarter, obviously. Can you just give us some sense, and I know other people have asked this, but how much the system is actually set up in terms of being able to handle throughput in the fourth quarter versus how much of that capacity for demand could get taken up, say, in first half of '23 if there are patients that are waiting?

And then the second question is just related to some of the pipeline candidates. And I just wanted to -- Hank, if you could just maybe broadly comment on some of the gene therapies that you have in the clinic now, just where you are in terms of dosing with those and how much safety data you have broadly.

So safety data broadly on gene therapies in the clinic, not including ROCTAVIAN?

Not including ROCTAVIAN. Hank, I guess, the basis of the question obviously is with PKU, we saw some questions. And I think just people are just wondering in some of your other sort of next programs where you are in terms of building a safety database.

Yes. So I think zooming out macro big picture, I'd say a couple of things have been learned across the platform because we do have a handful of patients who have been treated with 307 and we do have a short handful of patients treated with 331.

So we do have sort of 3 different indications, 3 different products essentially and -- preclinically and learning a lot about 293 as we get there. But I'd say across all of them, infusion-associated reactions are the most common adverse events. They tend to be generally mild and moderate or managed. There's a frequency of transaminitis post-dosing for all of them, but nothing particularly severe that has been observed with some of the other captives. Generally well tolerated.

Yet generally, you can get expression maybe not at the very first dose level you go into the clinic with, but pretty efficient in the scheme of health authorities and patient advocacy groups don't really want a lot of dosing to occur at lower dose levels that are going to be effective.

So I would say, overall, pretty happy with the AAV5 platform as a general matter. Pretty happy through a range of doses that I think can deliver therapeutic effectiveness. The only other thing to say is 307 isn't stuck because of an outcome in humans. It's stuck because of a preclinical outcome that we don't actually think or know is translatable to the human situation. But because we're careful, we want to debug what is going on in mice that received 307 and so we're doing research on that topic at some level. But in general, when we put it into the clinic in humans, it's proved itself to be safe in humans.

Okay. And Matt, I'll try to address your question about the dynamic European situation and kind of cadence of patients in Q4 versus H1 2023. The first thing I'd say is really focused on Germany as the first place where we think we can get reimbursement through these outcomes-based agreements that we've talked at length about. We're on the cusp of having those. That's one of the 2 big last pieces of many that have already fallen in place -- need to fall in place to treat patients commercially. So the second one being site readiness, which we're also either there or on the cuff with our indebted treatment sites.

Once those 2 pieces are in, we start pushing patients through the system. And what I would say is with essentially 2 months left to go in this quarter and the holidays, I'm more interested in proof of concept and ensuring that the system is ready to go and primed in Q4. Once we have that established, I think pushing additional patients through that system is a relatively small lift compared to what we've gotten to already in Germany.

And I would add because it's a question we've had because I think investors and analysts are more familiar with the U.S. health care market than the European. Once we have an agreement in place, and it should happen pretty soon now, there is 0 impediment left regarding reimbursement of ROCTAVIAN for any patient.

Like in the U.S., even when the product is approved and officially reimbursed, it appears sometimes that patients go through a lot of hoops in terms of statement of medical necessity and they try to slow these down. On a single-payer system, once the product is approved and approved for reimbursement, there is no paperwork, no impediment anymore. It's already based on patient demand and health care provider demand and our ability to supply it, but we have that.

And our next question comes from Joseph Schwartz from SVB Securities.

I have a couple of questions about the steroids that may be used with ROCTAVIAN. It seems like the EMA recommended that physicians use them for a couple of months, which is much shorter than what was done in Phase III, where I think it averaged over 8 months and half of patients were still receiving immunosuppression at 1 year. So how should we interpret this difference? Is there any risk that this leads to subpar responses in the real world?

And then could you talk about the steroid regimen or regimens that are being studied in Study 303? And what do you hope to learn here given its relatively small size, short duration and single-arm design? Are there any different scenarios coming out of Study 303 that you foresee playing out?

So the euro label reflects a sort of reasoned conclusion to comparison of the 20-something patients who are directly enrolled into the pivotal clinical trial. And they weren't prospectively filed. That's what separates them from the other 112 patients that were subsequently enrolled after enrollment in (inaudible) trial. And when we conducted the interim analysis of the first 17, 20, whatever patients and saw Factor VIII activities levels that were lower than in the prior trial, investigators intensified their use of steroids with the belief that perhaps that transgene loss -- losing activity could be recovered with additional steroids. And what we learned was that more steroids isn't necessarily better by just comparing the outcome of those 2 populations, both from annualized bleeding rate, but also Factor VIII levels at 1 and 2 years.

And so when the Europeans looked at the inaugural data, they saw some is good, more is not necessarily better. And so they trimmed back to a regimen that's more like what you -- what was -- what's described in the label and what's calling for a shorter overall exposure to corticosteroids principally by virtue of less sort of aggressive maintenance as opposed to tapering. And therefore, we expect the real-world version of this to be actually similar to the trial world because heavy steroids, light steroids don't make a difference in outcome and lightening on the steroids. It's going to be better for patients than more facile.

Now the -- shifting gears, we said, okay, well, there still is this difference between the Phase I outcome and the Phase III outcome as regards to maximum Factor VIII activity and we'd like to understand that a little bit better. It wasn't -- the answer isn't in the intensity of the steroid maintenance once an individual has transaminitis because that's essentially what we already showed in 301.

The question is if we started corticosteroids as early as we started them in the prior trial before -- the concept would be before the transaminitis has begun. Would those patients have higher Factor VIII activity levels and would they have a lower overall steroid use because you'd be ahead of it? That trial is not fully enrolled. Data is going to read out in the first quarter of next year.

And I'd say the evaluations the health authority has undertaken as exemplified by Europe is that on this application with the information that's in our hand, we have to come to a conclusion on the balance of benefits and risks on the available uncertainties, and the European Commission came to a positive benefit in the absence of the 303 data. And the FDA has now accepted our application in the absence of the 303 data. That's the study number for the corticosteroid study.

So I think what we hope to learn out of that, we hope to learn if what we've got is good and maybe even a little bit better than where we would have ended if we'd only done the heavy steroid version because I think we do -- we are able to substantially lighten up on steroid exposure. So we have this pretty good. The question is, can we do better? And the main readout of that in 20 patients is going to be like, is there a Factor VIII activity level more like it was in the 301 study, the pivotal trial, or is it more like in the Phase I/II study? Hopefully that answers it.

And our next question comes from Gena Wang from Barclays.

I have 2 on ROCTAVIAN. For the U.S., just wondering, do you plan to submit to the FDA additional genomic analysis data from the leukemia case? And also for AdCom, since PDUFA date is March 31, 2023, do you expect that will be some time for AdCom in January, February time frame?

And for EU monitoring tests, just wondering, do you have any feedback from the doctors regarding those monitoring tests? It seems like pretty lengthy -- like initially will be weekly for first 26 weeks and then it will be every 2 to 4 weeks for the next 26 weeks. Any feedback from the doctor regarding this testing?

First in whole genome sequence, if we haven't submitted it already, it's going to be annually submitted. I don't think that that's going to really create much of a surprise one way or the other the health authority. As regards AdCom timing, I mean it would be entirely speculative to offer when I thought the AdCom was going to be and what they might be looking for. So that would be useless to do.

And then maybe I'll say something about the monitoring and Jeff can say something about the monitoring if he wants. Obviously, everybody would love to just swallow a pill and go away. This is not quite that simple. But at the same token, because most of the labs are fairly routine types of labs, we should be able to put some systems in place to help patients access laboratory testing. And then it gets tapered as the patients get a bit a further out.

And so the doc's perception of all that, and especially in Germany, is we got it. This is what we're supposed to do. And then they're -- it's all like part of the deal for them. Because you step back from that, net of all of that screening people and counseling people and whatnot, they live an amazing life after they got their transgene. So big picture-wise, I think people are very much willing to put up with the short-term hassle.

And just to elaborate, we're going to make it as easy as possible for the patients to have this monitoring done. We already have some contracts with some at-home care supplier. So Jeff, you could explain.

Yes. Thank you, Gena. Good observation on monitoring. As Hank said, everybody is interested in a monitoring schedule that is modest as possible but while maintaining appropriate safety and monitoring of those patients. So we've extensively researched this as an issue. As Hank said, these tests are routinely available. That's not much of an issue. We have programs in place to help make testing convenient to patients. Examples would be patients can't get routinely to a lab for blood draws. We have programs in place in Germany. We will in the United States also to help facilitate testing that essentially comes to the home or even to the workplace to facilitate convenience.

And we think that there's not much more to it than that beyond influencing the buying decision. And we think that the benefits on that buying decision are very powerful with respect to cost associated with monitoring. So I think we're in good shape.

Definitely lighter than once or twice a week 1 hour to do the Factor VIII.

Our next question comes from Paul Matteis from Stifel.

I wanted to just clarify 2 quick things. On the ROCTAVIAN price in Europe, can you just give a little bit more color about what exactly changed over the past, say, 6 weeks between when you talked about EUR 1.5 million per treatment and now EUR 1.25 million? And how confident are you that as you go past Germany you're going to be able to hold price in other countries like you have with other products in your portfolio?

And then just on the ROCTAVIAN review, just a quick question for Hank. I was wondering how you and the BioMarin management team are or are not looking to the FDA decision on the CSL, uniQure heme B gene therapy at the end of November and what read-throughs you see onto ROCTAVIAN and where there are limitations there.

Paul, I'm going to take a shot at the question on pricing, which is confidential, and we have not yet finally concluded these agreements, as you can tell. But in general, what happened is we determined that the payers that we are negotiating with were requesting additional discounts in addition to the 7% mandatory that all of our sales in Germany need to be rebated back to the German health care system and in addition to our obligations under the outcomes-based agreement.

We had previously modeled and expected the GBA to be demanding those discounts. And so as noted in the prepared remarks, where we think we're winding up is net-net, a little less than EUR 1.5 million and probably very close to where we'll wind up with the GBA with final federal pricing.

Now the pricing in Germany is usually a benchmark for the rest of Europe. And aside from certain named patient sales arrangements, usually, Germany is the high watermark for pricing in European markets. So it's one of the reasons it's important to get that German price established and out in the public domain when we get that far.

That's a very important point, the fact that basically, what we're negotiating now is the final price or close to the final price we anticipate to have in Germany after the initial pricing. That's the difference.

On the hemophilia B application that's pending before the agency with a PDUFA date coming up shortly, I would say let's talk about 2 scenarios. If they're approved, it speaks favorably. If they're not, we have to see what the basis of they're not being approved was in terms of what it could read in terms of ROCTAVIAN. Oftentimes, these are very product-specific kinds of considerations. So there may not be any read-through or the read-through may be covered by things that we've already done.

Our next question comes from Debjit Chattopadhyay from Guggenheim Partners.

This is Robert on for Debjit. On ROCTAVIAN, how confident is the company in expanding -- I'm sorry, on ROCTAVIAN, how confident is the company in expanding VOXZOGO to younger patients? And incrementally, how many patients will this add into the population?

Sorry, your question is a little confusing. Is that a VOXZOGO question or a ROCTAVIAN question?

Operator, maybe we'll go to the next question, and we'll try to get the caller back.

Our next question comes from Olivia Brayer from Cantor Fitzgerald.

I want to follow up on ROCTAVIAN. You guys have been pretty transparent around the likelihood for a 3-month PDUFA extension. So can you give us a sense for what else you plan to submit between now and March? I assume it'll include the 3-year data, but anything else you guys can give us color on?

And as for the European launch, any sense for the number of patients in some of those initial countries like Germany that are waiting and ready to get treated once those payer agreements are in place?

In terms of ongoing back and forth with the FDA, they can't file an application unless they deem it to be complete and sufficient to address the review. So we don't anticipate anything specifically because they haven't asked for anything specifically because they wouldn't have filed the application if they still have pending requests. I hope that made sense.

And then during the course of the review, they can ask them for (inaudible) information requests all the time. We don't generally comment on information requests that are going back and forth. There's oftentimes a variety of different types of questions that come up during the review that it would be impossible to share all of that. So we had -- I think the main encouraging thing is that, as I said, we dropped Teslas worth of data on them and they made their filing decision pretty quickly. So we're encouraged by that.

And on the other question, Olivia, regarding numbers of patients that might be in queue, between our market research and some of the other surveys that you may have seen from other analysts, there's certainly a signal that there are early adopters that are interested in treatment with ROCTAVIAN.

We don't have the same ability in Europe due to GDPR to get patient-specific data like we do in the United States so our numbers are a little rounded. And relative to our initial treatment centers, we think that there's certainly double-digits patients that could be early adapters, let's say, in the first few months following reimbursement approval that we could be pushing through the system.

And that doesn't count the second wave of intended treatment centers. And as we've spoken about previously, the hub-and-spoke model that we anticipate for Germany and other European markets, those centers, which would be characterized as spoke centers that have patients that would be pushing in towards treatment centers. So the very tip of the spear, let's call it, low-ish double digits, probably more when we get beyond to the next layer of treatment centers.

And we -- I'd like to make one point of clarification. I think there was someone who had a question, I don't remember who, who said that we set the German price -- net price would be EUR 1.25 million. That's not what we said. This is something that the person asking came up with. So I would say likely to be the final price to be under EUR 1.5 million, but we didn't say it was EUR 1.25 million. We don't know yet exactly where that's going to land, as we said, because we basically are trying to move towards the final price for ROCTAVIAN, which we anticipate to be a significant number.

Our next question comes from Tim Lugo from William Blair.

This is Lachlan on for Tim. Brian, I was just wondering on the FX. You quantified the impact on revenue year-to-date. But I may have missed this, but was there any commentary on the impact of expenses year-to-date for FX and how the sort of divergence may track going forward?

Yes. Thanks for the question. It's a good one. Obviously quantified revenue given the prominence and actually more of our revenue base is denominated in foreign currencies, mostly the euro, than is our expense base. We do have a decent operating expense level denominated in euro. We've got our primary commercial operations in Dublin. Technical operations in Southern Ireland. London Research Center, but -- so a decent level, but not the same as revenue. So I quantified the 3% number for revenue. It would be something probably about half of that as a benefit.

Our next question comes from Robyn Karnauskas from Truist Securities.

This is Kripa on for Robyn. I have a question on label expansion for VOXZOGO, especially in the U.S., given that the data you have in under 5 years of age patients. You saw positive trends. What's your level of confidence that these data will support label expansion into younger patients in the U.S., especially in the context of upcoming competitor data where the trials are being run in 2 years and above? What's your strategy to ensure that VOXZOGO gets to the younger patients as well? And then on the other end of the range, I was wondering what's the age of the oldest kids that are getting VOXZOGO, whether it's in U.S. or EU.

Yes. So I mean I think our confidence about engaging in a successful application review with the agency is driven by a bunch of things like the fact that we actually have data. We're not talking about when we're going to get data. The fact that it has a pretty safe profile in children, the fact that we have a huge -- an accumulating safety database, both in clinical problem and now accumulating in the real world, experience treating children with VOXZOGO.

And as we said before, the consideration here is also rooted in a genetic consideration, which is children who are born with this mutation. So starting treatment from -- as early as you can identify the patient is something that's very much on geneticists' mind all the time. Whether you're a geneticist at the -- at a university or you're a geneticist with the FDA, you can recognize the sort of contribution of genetics to the condition. That's a pretty significant motivator.

And maybe the last thing to say is that with the approval, the first approval -- with the initial approval of VOXZOGO in older children, I think it gives agency a little bit more latitude around things like trends because the biology is so consistent across the age range.

If I may add before I let maybe Jeff answer the question on the oldest patient treated. Actually, we just communicated that our youngest patient ever treated was 3 weeks old, and we don't believe that any of our competitors are collecting data on patients under 2 years of age. So we have significant data in patients under 2 years of age and now we're going to gather commercial data in little kids as young as 2, 3 months years of age so -- 2 to 3 months of age. So with that, Jeff, do you want to answer?

Yes, happy to. So we know that -- or we think we know that in some ways, the value proposition for treating as early as possible, treating for a long time is very powerful. Also noted that where we have the data, I've been surprised that the diversity of ages of kids that have started therapy, including kids that are in the 8 to 10-year-old range, adolescents and even kind of late adolescents. So there's a lot of diversity. We've got diversity of kids that are starting treatment -- being treated.

That said, where we've been able to measure age, and now that we've got an accumulation of material numbers of patients, it is true that there is a gradient. We've got more kids treated in the younger age segments than we've got treated in the older age segments. And so I wouldn't say there's a hard cutoff anywhere. But as they get into those older groups, the numbers are less robust than the younger groups, which is probably not a surprise to anybody.

But it allows us to treat until closure of the growth plate, which generally occurs between age of, what, 13?

16, 18.

16, 18.

Earlier on boys than girls.

So the product is approved for reimbursement until 16 to 18 years of age.

Yes, one of our clinical trial patients that is featured in our promotional materials was 14 at the time that she was photographed for those promotional materials. She's probably 15 now and illustrating that kind of adolescent age group that can benefit from treatment.

Our next question comes from Joel Beatty from Baird.

For ROCTAVIAN, will the AdCom be in person? And also for ROCTAVIAN, how is preparation going for the launch with regards to establishing centers to administer drug commercially?

Your question -- the first part of your question was whether the AdCom will be in person?

Yes.

Yes, for AdCom.

Yes, sorry. The FDA has been convening AdComs by video teleconference, and our expectation would be not because they've only told us once that you're going to have an AdCom. But based on recent practice, the expectation is that it will be by video.

So sorry, what's -- I'm not sure I got the second part of the question.

The second question was what about launch prep and site readiness in the U.S. And the answer there is we have a sales team. Obviously, they can't promote ROCTAVIAN, but they can be doing things like site readiness supported by MSLs in the United States. So we've been targeting the largest treatment centers in the United States to educate about gene therapy, to do site readiness types of activities. And we think that we're going to be ready to go on that front like we are today in Germany should we be getting an approval on March 31 of next year. Not an issue.

And our last question comes from Luca Issi from RBC Capital.

Great. Maybe apologies circling back on the question. But what would be your best guess -- at this point, your best guess for the timing of the AdCom? I think the 3 years data is coming in November. The steroid data is coming in February. Is it fair to assume that the FDA will want to wait for both data sets before the AdCom? Or do you think that you will have an AdCom ahead of either of those data sets? Any color there would be helpful.

And then maybe on VOXZOGO, can you just remind us the timing of conversion to full approval based on full adult height and maybe bigger picture implications for your competitors?

I'm going to leave you a little bit unhappy because on the -- what my best guess is, is like, who cares? My family doesn't want to hear what my best guess is. It's just too speculative at this point to talk about the types of questions that they're going to -- there are a variety of recent (inaudible) Advisory Committee and exactly what reasons the agency has decided or even what they're going to bring to the committee is -- you don't know it until you know it and so not useful to speculate about that. And a little bit of the same answer on VOXZOGO. A little bit of uncertainty here that we can't really comment too much on.

Could you just maybe on VOXZOGO talk about implication should you get full approval for your competitors?

Well, I mean, that's -- I think there's sort of 2 conversations. One is there is time and events that have to happen to convert to full approval, and we're playing that a little bit close to our chest for potentially competitive reasons in terms of what's required. But what is required is fairly well stalled out in our agreement with the agency that's summarized in the publicly communicated closed marketing requirement for the application.

So that's one subject.

The other subject is as a general matter, if there is an indication for a product that is fully approved, then there isn't an accelerated approval option available. So for example, VOXZOGO -- product x was indicated to improve (inaudible) fully approved, it wouldn't be possible to get an approval from -- on the basis of annualized growth velocity, for example.

At this time, there are no further questions. I would like to turn the call back over to Chairman and CEO, JJ Bienaime, for closing remarks.

Well, thank you, operator, and thank you all for joining us today. So our record year-to-date results underscore the strength of our brands and execution across the organization. As anticipated, the addition of VOXZOGO to our commercial portfolio is an important component of our growth story and paves the way for our transition to sustainable GAAP profitability for this year and beyond. So we look forward to the European launch of ROCTAVIAN this quarter and the potential approval in 2023. So combined, we believe VOXZOGO and ROCTAVIAN will drive substantial value for our patients, our employees, and our shareholders.

So thank you all for your continued support. We look forward to seeing you soon.

This concludes today's conference call. Thank you for attending.