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Edited Transcript of BMRN.OQ earnings conference call or presentation 5-Nov-20 9:30pm GMT

·64 min read

Q3 2020 Biomarin Pharmaceutical Inc Earnings Call NOVATO Nov 6, 2020 (Thomson StreetEvents) -- Edited Transcript of Biomarin Pharmaceutical Inc earnings conference call or presentation Thursday, November 5, 2020 at 9:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Brian R. Mueller BioMarin Pharmaceutical Inc. - Executive VP & CFO * Greg Guyer * Henry J. Fuchs BioMarin Pharmaceutical Inc. - President of Worldwide Research & Development * Jean-Jacques Bienaimé BioMarin Pharmaceutical Inc. - Chairman & CEO * Jeffrey Robert Ajer BioMarin Pharmaceutical Inc. - Executive VP & Chief Commercial Officer * Traci McCarty BioMarin Pharmaceutical Inc. - VP of IR ================================================================================ Conference Call Participants ================================================================================ * Akash Tewari Wolfe Research, LLC - Director of Equity Research & Senior Research Analyst * Bikramjot Singh RBC Capital Markets, Research Division - Senior Associate * Christopher Joseph Raymond Piper Sandler & Co., Research Division - MD & Senior Research Analyst * Cory William Kasimov JPMorgan Chase & Co, Research Division - Senior Biotechnology Analyst * Geoffrey Christopher Meacham BofA Merrill Lynch, Research Division - Research Analyst * Keith Richard Tapper Citigroup Inc., Research Division - Research Analyst * Martin Douglas Auster Crédit Suisse AG, Research Division - Research Analyst * Matthew Kelsey Harrison Morgan Stanley, Research Division - Executive Director * Paul Andrew Matteis Stifel, Nicolaus & Company, Incorporated, Research Division - Co-Head of the Biotech Team, MD & Senior Analyst * Philip M. Nadeau Cowen and Company, LLC, Research Division - MD & Senior Research Analyst * Robyn Kay Shelton Karnauskas Truist Securities, Inc., Research Division - Research Analyst * Salveen Jaswal Richter Goldman Sachs Group, Inc., Research Division - VP * Trevor Thomas Allred Oppenheimer & Co. Inc., Research Division - Associate * Xiaochuan Dai Barclays Bank PLC, Research Division - Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for standing by, and welcome to the BioMarin Third Quarter 2020 Financial Results Conference Call. Hosting the conference call today is from BioMarin Traci McCarty, Vice President of Investor Relations. Please go ahead, ma'am. -------------------------------------------------------------------------------- Traci McCarty, BioMarin Pharmaceutical Inc. - VP of IR [2] -------------------------------------------------------------------------------- Thank you, Joanna, 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 development by competitors, and those factors detailed in BioMarin's filings with the SEC, including 10-Q, 10-K and 8-K reports. On the call remotely -- well, some are remote and some are sitting here together are from BioMarin management today J.J. Bienaimé, Chairman and Chief Executive Officer; Jeff Ajer, Executive Vice President and Chief Commercial Officer; Hank Fuchs, President, Worldwide Research and Development; Greg Guyer, Executive Vice President, Chief Technical Officer; and Brian Mueller, Executive Vice President, Chief Financial Officer. We hope to keep this call to 1 hour, so we respectfully request that you limit yourself to 1 question during the Q&A portion of the call. Thank you for your understanding. I will now turn the call over to BioMarin's Chairman and CEO, J.J. Bienaimé. -------------------------------------------------------------------------------- Jean-Jacques Bienaimé, BioMarin Pharmaceutical Inc. - Chairman & CEO [3] -------------------------------------------------------------------------------- Thank you, Traci. Good afternoon, and thank you all for joining us on today's call. We hope you and your families have been well during these uncertain times. It is hard to believe that we are rounding month 9 of the global COVID-19 pandemic. So like many of you, we are ready to -- for a reset and a fresh start in 2021, but our commitment to providing innovative treatments to people with serious conditions keeps us focused day to day. Indeed, BioMarin faced some challenges in the third quarter, and the results have been strengthened conviction in our mission and renewed motivation to achieve it. The most anticipated milestone of the year, the advancement of ROCTAVIAN gene therapy for the treatment of severe hemophilia and vosoritide for the treatment of achondroplasia, each reached a key inflection point in their progression during the quarter. Vosoritide application in the U.S. and Europe were accepted for review by health authorities and are in process for potential approval in 2021, with the CHMP opinion expected in the second half of next year and the U.S. PDUFA action date planned for August 20 of next year. The community of parents with children who have achondroplasia and want a treatment option are that much closer to accessing the first potential for pharmacological therapy approved for this condition. With 6 highly innovative products developed, approved and commercialized for a variety of rare conditions over the last 2 decades, this is familiar and gratifying territory for BioMarin. Turning to ROCTAVIAN, one of the most innovative products we have developed, we have transitioned for -- to a more traditional regulatory time line than originally anticipated for the (inaudible) gene therapy infusion that helps control bleeding in people with severe hemophilia A. As is typical for BioMarin, we pursued an accelerated development strategy with ROCTAVIAN, which resulted in the significant advancement of the field and greater awareness of gene therapy as an important new therapeutic platform for the treatment of hemophilia A. And while this platform has been at the research stage for decades, the speed with which BioMarin brought ROCTAVIAN forward for regulatory review was unprecedented even for us. Our belief in the therapeutic benefit of ROCTAVIAN for our patients has not wavered. The complete 1-year Phase III data from all 134 patients are paramount to determining next steps, and we look forward to sharing those top line results with you in early 2021. Based on the bleeding control observed to date with ROCTAVIAN, we have confidence in the approvability and patient interest in this product. In a moment, Hank will provide more details on our plans over the coming months. Briefly on third quarter financial results, I have been impressed with the commitment of our commercial and manufacturing organizations in the face of the seemingly never-ending impact of COVID-19. They have not missed a beat. Our ability to execute under the limitations imposed by the global pandemic remains a testament to the importance of our therapies, also our diversified product base and far-reaching commercial footprints. Jeff will provide details of the quarter and updates on 2020 guidance in a moment. We have met the adversity of 2020 with versatility and agility in what has been the most unpredictable year we have experienced so far at BioMarin. The resilience of our business and fortitude of our employees has consistently show through. As a result, we remain well positioned for substantial growth as we focus on the execution of our global opportunities with ROCTAVIAN and vosoritide as well as other key pipeline products, and we want to thank you for your continued support. Now I would like to turn the call over to Jeff to discuss the commercial business update. Jeff? -------------------------------------------------------------------------------- Jeffrey Robert Ajer, BioMarin Pharmaceutical Inc. - Executive VP & Chief Commercial Officer [4] -------------------------------------------------------------------------------- Thank you, J.J. Globally, BioMarin commercial brands contributed $1.24 billion or 8% growth year-to-date in 2020 compared to the first 9 months of 2019. Given the challenges imposed by the COVID pandemic this year, I'm very pleased with our results and the deep commitment of our commercial and manufacturing teams to our patients around the world. Beginning first with our ERP brands for MPS, Vimizim and Naglazyme, I'll share some details. For Naglazyme, quarterly revenue of $76 million represented a decrease compared to Q3 results last year due to COVID-19 impact and order timing and slightly down year-to-date compared to the same period in 2019. Vimizim results of $148 million in the third quarter followed a similar pattern with decreased quarterly revenue, slightly down year-to-date compared to the same period in 2019. These solid results despite the impact of the global pandemic reflect the essential nature of Naglazyme and Vimizim to our patients. In addition, our mitigation efforts around missed infusions in key markets have also contributed to solid results in the quarter. Despite the global pandemic, demand and revenues have stabilized for the third quarter for these 2 flagship products. Delays in new starts have persisted broadly since the start of the pandemic. Disruption in clinic operations and disruption of patients pursuing diagnoses are the drivers behind this factor. The impact in any one quarter has been small yet the cumulative effect on the growth of patients on commercial therapy is now material and has led to the slowing of projected growth. As a result of these dynamics playing out in our global territories, we have narrowed the range for Vimizim full year guidance to between $515 million and $545 million. For Naglazyme, we have tightened the range of full year revenue to between $370 million and $400 million. The impact of COVID-19, coupled with the absence of ROCTAVIAN revenue contributions in 2020 resulted in an adjustment of total revenues for the full year 2020 to between $1.81 billion to $1.87 billion. Turning now to the PKU brands and starting with Palynziq. We recognized Q3 revenues of $46 million, a 91% jump from Q3 '19 revenues, the majority of which came from U.S. sales as expected. We are pleased to report that patient discontinuation rates remain below the clinical trial experience. New patient starts from the United States have picked up in recent months as additional clinics resume operations and are able to more actively manage patients. COVID-19 has resulted in slowed patient uptake in Germany and delayed entry into other European countries. We have established revenue in the Middle East with a small number of patients starting treatment. Given the COVID-19 situation, we are pleased with the continued trend of quarter-to-quarter growth of Palynziq revenue. On October 7, an sBLA for Palynziq was approved in the U.S. This sBLA allows dosing up to 60 milligrams daily and added long-term safety and efficacy data with the label. We view this as a significant positive development in the U.S. 19% of patients in the clinical trial were using the 60-milligram dose. So the sBLA is expected to impact a meaningful portion of patients in the commercial setting that will benefit from being able to access this higher dose beginning in Q4. We reaffirm full year revenue guidance previously provided for Palynziq of between $160 million to $190 million. Shifting now to Kuvan, global revenues in the third quarter totaled $124 million, representing a 3% increase year-over-year. After 13 years of exclusivity in the U.S., we are heading now into the first quarter with 2 generic competitors and have planned for material share loss as a result. We are expecting a step-down of Kuvan revenue in the United States beginning in Q4, which was built into the full year revenue guidance of between $430 million to $480 million previously provided, and which we now reaffirm. Kuvan has played a crucially important role, enabling BioMarin to be the leader in developing and marketing pharmacologic therapies for PKU. And Kuvan remains an important brand in markets outside of the United States, for which we have exclusive rights until late 2024. We are confident in the potential of Palynziq as the next-generation treatment for adults and expect that the value of the commercial PKU franchise will continue to rise overall beyond the near-term loss of Kuvan revenue. Our commitment to the PKU community, in short, has never been stronger. Finally, an update on Brineura. Net product revenues were $25 million in Q3, representing 28% growth compared to Q3 of 2019. The strong performance was driven by relatively undeterred patient uptake in all 4 regions and patient compliance has remained high and stable despite COVID-19 and reinforcing the urgency of unmet medical need for CLN2 patients and the importance of access to this treatment for improved long-term outcomes. Demand for Brineura continues to rise modestly each quarter, and we expect this trend to continue. We are tightening the range of full year Brineura revenues to between $90 million and $110 million. The filings for vosoritide in the U.S. and EU mean that this product could potentially be launching in -- late in 2021. We are excited about the size of the market opportunity, have been working steadily to prepare this program for an eventual launch. And I look forward to providing updates on launch readiness as we get closer to a potential approval next year. In conclusion, in what continues to be a challenging and dynamic global situation, I'm very pleased with the commercial team's execution and performance in the third quarter of 2020 in all 4 regions. Our ability to react with agility early in the pandemic and put in place solutions to minimize impact of missed infusions has resulted in relative stability so far, and we are confident in our ability to achieve full year revenue guidance of more than $1.8 billion. Thank you for your attention. And I will now turn the call over to Hank to provide an R&D update. Hank? -------------------------------------------------------------------------------- Henry J. Fuchs, BioMarin Pharmaceutical Inc. - President of Worldwide Research & Development [5] -------------------------------------------------------------------------------- Thanks, Jeff. J.J. conveyed, it's been an eventful third quarter for BioMarin. But many of the challenges faced by our R&D organization are part and parcel of the drug development process, augmented by the innovative nature of what we do, never a straight line. With ROCTAVIAN, we did not expect the complete response letter in August, but we have refocused on productive next steps toward approval. We remain encouraged and committed to ROCTAVIAN based on the continued support from our investigators who report the life-changing potential of ROCTAVIAN. And with the complete 1-year Phase III data from our 134 subject study, the next inflection point in the program, we, like you, excitedly await those top line results in early 2021. In the meantime, we continue to make progress in our discussions with health authorities and understanding what it takes to register ROCTAVIAN. Based on the powering of the Phase III study, we're confident in hitting the annualized bleeding rate at -- endpoint at 1 year, but we were also mindful of other critical measures such as Factor VIII levels that will be important to determine success beyond the annualized bleed rate. Assuming the Phase III data are supportive, we have a framework for potential time line subject to ongoing feedback from health authorities. As outlined in August, FDA has indicated a preference for 2 years of data, resulting in a potential late '22 launch under that scenario. It is important to note that the completion of a 1-year Phase III study later this month, in the end of November, and some Phase III study participants will have been in this study for up to 18 months and others still up to 2 years. Turning to Europe, the EMA recently requested the complete 1-year results from the full Phase III study, cohort of 134 subjects to inform their benefit risk assessment. As a result, we withdrew our application for accelerated assessment yesterday and now plan to resubmit the marketing authorization application filing with complete 1-year results in the second quarter of 2021. Assuming resubmission in 2Q '21, we would anticipate potential approval in early '22 should data be supportive. We look forward to seeing and sharing our primary ROCTAVIAN findings in the Phase III in early January and anticipate presenting those results at a scientific venue in 2021. Turning now to vosoritide for the treatment of achondroplasia. We are pleased that our new drug application and marketing authorization applications are under review in the United States and in Europe, respectively. Earlier in the week, we were encouraged to have received the Food and Drug Administration's acceptance of our NDA under standard review, with a PDUFA action date of August 20, 2021. As we stated in Monday's press release, the FDA reiterated a position raised during the 2018 Advisory Committee, recommending 2-year placebo-controlled trials in different age groups. And I'd like to share our perspective regarding that comment. Since the start of the program with vosoritide nearly 10 years ago, we took a collaborative approach with participating investigators whose shared goal was to generate maximum safety and efficacy data while balancing feasibility challenges associated with exposing (inaudible) achondroplasia for -- to placebo for a prolonged period of time, given the importance of early intervention, the limited window of opportunity and the lack of reversibility. Since then, we have built a robust dossier of data that emphasizes the role of biology, biomarkers, and longer-term clinical data, which we believe supports a strong package on all fronts. In addition, data from a Phase II study program, with now up to 5 years of long-term follow-up data as compared to the natural history study data on growth, offers a rigorous and reliable method to assess whether vosoritide has indeed had a durable impact on the rate of endochondral bone growth that ultimately increases final adult height. We've endeavored to address the concern for a potential attenuation of treatment effect. The vosoritide clinical data package is designed to evaluate the short and long-term effects of vosoritide in achondroplasia, incorporating randomized placebo-controlled trials, long-term follow-up studies and extensive real-world evidence collection with multiple analytic approaches to confirm the magnitude and durability of effect of vosoritide, including its effect on final adult height. The FDA has a long history of exercising scientific judgment and reaching its conclusions on the statutory requirement for demonstrating substantial evidence in the approval of orphan drugs. And we're cautiously, therefore, optimistic about what lies ahead as the review proceeds. Needless to say, the interest and enthusiasm from families participating in our program and seeking treatment for their children with achondroplasia has been our focus. We want to thank everyone who has participated in BioMarin's development program to date, and we look forward to keeping you apprised of our progress. We're also pleased with the progress being made to identify other serious genetic causes of skeletal dysplasia in order to explore how vosoritide may turn the lives of those who are also more severely affected. We expect in the next few days to share news of an investigator-initiated Phase II study with vosoritide in selected genetic forms of short stature, representing potential new indications. Suffice it to say, we are happy to play a role in the ongoing research to understand the role of the CNP pathway in other conditions of genetic forms of short stature. Stay tuned for more details in a few days. Briefly on BMN 307, our investigational gene therapy for phenylketonuria, we're pleased to announce that dosing has indeed begun in the third quarter, and we have now treated 2 adults having phenylketonuria in the study. With the 307 study now underway, we continue to advance the next products in our earlier-stage pipeline. Last quarter, we began IND-enabling studies with BMN 331 gene therapy for the treatment of hereditary angioedema, which should benefit from an even more efficient development program based on our increasing experience. In addition, also announced last quarter, our potential collaboration and license agreement with DiNAQOR, a gene therapy platform company, to develop novel gene therapies to treat rare genetic cardiomyopathies. These are large opportunities for BioMarin given the tremendous unmet need in both indications, where we can benefit from our growing expertise in gene therapy development and manufacturing. Before turning the call over to Brian for the financial update, I would also like to acknowledge our colleagues across the organization for their continued commitment and contributions during these challenging but no less busy times. It's been gratifying to see the focus and the flexibility put forth across BioMarin in the interest of getting our important medicines to the people who need them as expeditiously as possible during these times. I want to thank you all and congratulate you all for your progress. Now I'd like to turn the call over to Brian, our CFO. Take it away, Brian. -------------------------------------------------------------------------------- Brian R. Mueller, BioMarin Pharmaceutical Inc. - Executive VP & CFO [6] -------------------------------------------------------------------------------- Thank you, Hank. Please refer to today's press release summarizing our financial results for full details on the third quarter of 2020. As usual, our comprehensive report on the quarter will be available in our upcoming Form 10-Q, which we're planning to file tomorrow. Starting with revenues. As Jeff noted, we have updated our 2020 product line revenue guidance for the continued impact of COVID-19. Also, I want to remind you that although we did not give specific ROCTAVIAN revenue guidance for 2020, we were planning to launch the product during the third quarter. Therefore, most of the adjustment to our total 2020 revenue guidance, of which the midpoint was lowered by $60 million, was due to the ROCTAVIAN adjustment. Back to COVID-19, the prolonged pandemic and specifically slower new patient starts during 2020 may continue into 2021 and restrict revenue growth of our base business. As a result, with the other headwinds we are experiencing through the delay in ROCTAVIAN approval, and the previously anticipated impact of the U.S. Kuvan generic competition, we expect our total revenues in 2021 to be roughly flat compared to 2020 revenue. Moving on to operating expenses, one unique expense item driven by the unanticipated ROCTAVIAN approval delay is an $81 million charge to cost of sales during Q3 2020, related to ROCTAVIAN prelaunch inventory reserves. Cost of sales and gross margins beyond those reserves were in line with expectations. R&D expense for the third quarter was $147 million, representing our development of vosoritide, ROCTAVIAN and our early-stage pipeline. Q3 2020 R&D expense was lower compared to R&D expense for the third quarter of 2019, due primarily to lower preclinical manufacturing of BMN 307 and lower ROCTAVIAN R&D given its late stage of development. SG&A expense for the third quarter of 2020 was $179 million, which was slightly higher than SG&A expense for the third quarter of 2019, due primarily to the continued global launch of Palynziq and commercial preparations for the launch of ROCTAVIAN. Due in part to cost containment measures during these uncertain times, we expect that both R&D and SG&A expense for the full year 2020 to be lower than previous estimates, and we have revised guidance for both of those line items to ranges that are below prior guidance. With respect to bottom line results, the expected large tax benefit that we've discussed over the course of this year was recorded during the third quarter of 2020, totaling $835 million and drove a significant level of GAAP net income in the quarter and year-to-date 2020. As a reminder, the tax benefit relates to a transfer of certain intellectual property rights between BioMarin entities similar to transactions reported by some of our larger peer companies. We have adjusted our full year GAAP net income guidance for the tax benefit and the ROCTAVIAN inventory reserves to between $760 million and $820 million, which also reflects the tighter range than provided for in August because the specific amount of the tax benefit is not known. With respect to non-GAAP income, our lower operating expenses more than offset our lower revenue expectations and was the primary driver for updating full year 2020 non-GAAP income guidance to $280 million to $330 million, improved from a previous range of $260 million to $310 million. Although we regularly use both GAAP and non-GAAP results and expectations internally to assess our operating performance, we believe that providing non-GAAP income enhances the ability to meaningfully compare the company's results from period to period and to identify operating trends in our principal business. As we look ahead to 2021, although we will not provide specific 2021 financial guidance until our typical Q4 earnings call early next year, we do note that while we expect to continue to earn substantial non-GAAP income and positive operating cash flows in '21, 2021, we do expect that we'll revert to a GAAP net loss in 2021. Despite the impact of COVID-19 and the ROCTAVIAN delay on our near-term financial outlook, we believe that if we're able to launch ROCTAVIAN and vosoritide, revenue and profitability growth will resume during 2022 and accelerate in 2023. Lastly, with respect to cash and investment, we ended the third quarter of 2020 with $1.78 billion of total cash and investments, which reflects positive operating cash flows of $86 million and $99 million for the third quarter and 9 months of -- ended September 2020, respectively. And as expected, we repaid the $375 million of convertible notes that matured subsequent to Q3 in mid-October. In closing, despite the challenges faced in the third quarter due to the impact from COVID-19 and the delay of ROCTAVIAN approval, our base business remains solid, paving the way for substantial non-GAAP income and operating cash flows in 2021. Thank you for your support, and we'll now open the call to your questions. Operator? ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Your first question comes from the line of Salveen Richter from Goldman Sachs. -------------------------------------------------------------------------------- Salveen Jaswal Richter, Goldman Sachs Group, Inc., Research Division - VP [2] -------------------------------------------------------------------------------- On ROCTAVIAN what provides you confidence that the 1-year Phase III expression data or ABR levels will not differ much from the Phase I/II study. And also, what do regulatory agencies really want to see from the (inaudible) 1-year data and will the FDA -- or to your data? And will the FDA accept to your data from a partial group? -------------------------------------------------------------------------------- Henry J. Fuchs, BioMarin Pharmaceutical Inc. - President of Worldwide Research & Development [3] -------------------------------------------------------------------------------- Complex question. I don't know that we predict what the results of the Phase III study will be at 52 weeks or 104 weeks or thereafter, given that we started a little bit lower in the Phase III than we did in the Phase I/II, or so it seems. And I think it's that variability that makes it difficult to answer the second part of your question, which is what do they really want other than more patients followed longer? And so whether the cut that we take at the beginning of the year for the Europeans will contain enough information to get them to the place where they've seen enough duration is going to be discussed with the agency, and we're not in a position to predict the outcome of those discussions because they also -- they await the data. So I think the data is going to drive our next conversations with agencies. And we look forward to the data coming in because we think that the gene expression profile for the material that we put into the clinic is going to be very strong data. -------------------------------------------------------------------------------- Operator [4] -------------------------------------------------------------------------------- Your next question comes from the line of Cory Kasimov from JPMorgan. -------------------------------------------------------------------------------- Cory William Kasimov, JPMorgan Chase & Co, Research Division - Senior Biotechnology Analyst [5] -------------------------------------------------------------------------------- Hank, another one for you on vosoritide this time. I appreciate the explanation you had with your view in the FDA's desire for 2-year data. So I guess I'm wondering, given some of the apparent differences of opinion at least at this stage between you and the agency, do you see it as a positive or negative that they're not planning to convene an advisory panel at this point? -------------------------------------------------------------------------------- Henry J. Fuchs, BioMarin Pharmaceutical Inc. - President of Worldwide Research & Development [6] -------------------------------------------------------------------------------- Thanks, Cory. I don't know how to interpret it either way. Some had told us that they wish there's an advisory committee on ROCTAVIAN. And I think there are other forces that are causing the agency to call advisory committees and non-call advisory committees. I'd say the good news in this regard is that this division has a history of regulating products. Now we have to make sure people understand that vosoritide is not growth hormone. But they do understand stature and how it relates to things like final adult height and functionality and long-term alleviation of morbidity. And in the particular discussion topic is not a new one. It's been around for a lot of years. And so I think we're encouraged that we have a good plan to address it, and that's evidenced by the fact that they've accepted the file for review. -------------------------------------------------------------------------------- Operator [7] -------------------------------------------------------------------------------- Your next question comes from the line of Robyn Karnauskas from Truist. -------------------------------------------------------------------------------- Robyn Kay Shelton Karnauskas, Truist Securities, Inc., Research Division - Research Analyst [8] -------------------------------------------------------------------------------- Wow, well, a lot of like confusing FDA information this year has been. I just had a couple of questions there. First, so I think on the last call, you said that you would meet with the agency. Are you going to not meet with them to figure out if you can narrow the package until you get the 1-year data? That's my first question. And then on vosoritide, just why would they put the language in there? I just -- to me, it felt a little strange. Do you have a sense of why they reminded you they want to your data? Or whether or not there's a method in place, whereby you can sort of add additional -- give them additional data as it comes forth? Help me understand those 2 things if you can. -------------------------------------------------------------------------------- Henry J. Fuchs, BioMarin Pharmaceutical Inc. - President of Worldwide Research & Development [9] -------------------------------------------------------------------------------- So concretely, yes, we have met with the FDA on (inaudible) the substance of the meeting. The conversations are productive and the discussions are progressing. And I think the big picture conclusion remains the same, which is that they want more longer data. And we'll look at the data in January and see how close we come to with them to assuaging their concerns. And on vosoritide, why did they reiterate the 2-year request? Who knows, really, and we'll get into discussion with them about that. But it seems like, consistent with what they've said at the [advisory committee] -- to remind you, I think we started enrollment in the Phase III trial at the end of 2016. The advisory committee was in 2018. So we were pretty far down the road when the subject was kind of put to the advisory committee discussion. And the advisers had a lot of important information and consideration, which, for the most part, resonated with the plan of our program. And then I think that my own personal opinion is that they just reiterate it because it was a subject of discussion at the advisory committee. Now we continue to follow with the patients in the study. And to remind you, what's interesting about the study that we did is that the study has a run-in period before patients are randomized. One-to-one received vosoritide or placebo, and then they're followed on placebo for 12 months where they're followed on vosoritide for 12 months. At the end of that 12 months, they -- everybody gets put on vosoritide and continues. So in point of fact, we'll have 24 months of treatment data coming up in the next few months, and we'll have the retrospective data on height change in the run-in period, which was greater than 6 months, plus the 12 months of placebo. And it could be that the agency is simply signaling that, that is additionally important to them. And again, remember that the underlying issue, the itch to scratches is that, and that's why I said that they have experienced regulating growth products, which is to the good because they understand many of the scientific considerations. They are a little biased about the story of growth hormone, which is, as I said, growth hormone stimulates an initial growth response that then attenuate. So they're very sensitive to durability of effect. And this was discussed at the advisory committee quite substantially. And we believe we put together a great package of preclinical data, biomarker data. And as I said, the long-term Phase II data. So we think we can get there with the package that we've got, and we look forward to interacting with the agency kind of to lay their concerns to rest. -------------------------------------------------------------------------------- Robyn Kay Shelton Karnauskas, Truist Securities, Inc., Research Division - Research Analyst [10] -------------------------------------------------------------------------------- Quick follow-up. You mentioned you met with the agency. Is there a bar they want for variability? Do they give you an exact number? Or just let's wait and see and then we'll chat again for (inaudible). -------------------------------------------------------------------------------- Henry J. Fuchs, BioMarin Pharmaceutical Inc. - President of Worldwide Research & Development [11] -------------------------------------------------------------------------------- Let's wait and see and chat. Robyn, there was a part of your question when I did -- I wanted to address it you just remind me about, which is hard to understand across the board. I think what we see across the board is that the agency has gotten very conservative in the last several months. It's really -- they've had progressive leadership in the past and oftentimes when the progressive leadership disappears they just they retreat to conservative. And when stressed, they become conservative. And I think now it's a stressful time because of the pandemic and the leadership changes. And so you see that. Now the good news is that we have good studies in the books, and we have really good interventions. And ultimately, these interventions will convey the benefit that we think they do. If they do that, then these drugs will be approved. -------------------------------------------------------------------------------- Operator [12] -------------------------------------------------------------------------------- Your next question comes from the line of Chris Raymond from Piper Sandler. -------------------------------------------------------------------------------- Christopher Joseph Raymond, Piper Sandler & Co., Research Division - MD & Senior Research Analyst [13] -------------------------------------------------------------------------------- Maybe just a broader strategic question. So you guys -- and maybe for J.J. So you guys have kind of held things steady more or less on the business development front for a while now. And a few of your peers seem to be showing maybe a bit more propensity or maybe even urgency to do deals. I guess, J.J., just wondered if maybe you could talk in a broader context, how you're approaching that side of the business now versus years past? Or how you're viewing things in terms of that environment? And maybe more specific to BioMarin the need? -------------------------------------------------------------------------------- Jean-Jacques Bienaimé, BioMarin Pharmaceutical Inc. - Chairman & CEO [14] -------------------------------------------------------------------------------- Yes. Well, we have announced a few early-stage deals this year like DiNAQOR, and there is more to come, and we will continue to do that. Later stage deals are way more expensive and riskier and also we do require then more resources in terms of financial resources, which, obviously, we can gather some. But we're still pretty confident in the approval of ROCTAVIAN and vosoritide. So I would say, the need for a significant business deal, I mean, business development deal in the short term. We don't consider it to be very acute. We have seen in the past that actually -- and I was -- before we got a CRL for ROCTAVIAN is that as ROCTAVIAN and vosoritide would be launched that it will start generating some significant cash flow and would allow us then to be maybe a bit more aggressive in the space. But we already have a pretty -- we have expanding pipeline. There is more to come there. And so we don't believe that a large business development deal, in the short term, is necessary. Now obviously, if -- in 6 to 9 months from now, it becomes evident that either ROCTAVIAN won't be approved or would be even more delayed or vosoritide, let's say with the same issue, which I doubt very much, by the way, then obviously, that would be a different situation. But we know there are this time. -------------------------------------------------------------------------------- Operator [15] -------------------------------------------------------------------------------- Your next question comes from the line of Joseph Schwartz from SVB Leerink. -------------------------------------------------------------------------------- Unidentified Analyst, [16] -------------------------------------------------------------------------------- I'm (inaudible) dialing in for Joe. My question is on ROCTAVIAN. I was wondering what you have done to ensure that physicians treating the 2/3 of the remaining patients and generate -- abide to the more rigorous on-demand steroid regimen. And have you -- and do you have any insight into whether they will actually abide by it? Do you have like a medical monitoring group to give you confidence that they'll be doing it? Or are you going to find out when they unblind the data? -------------------------------------------------------------------------------- Henry J. Fuchs, BioMarin Pharmaceutical Inc. - President of Worldwide Research & Development [17] -------------------------------------------------------------------------------- Thanks for the question. Yes, our medical group is all over this issue. But I have to say that as soon as the interim analysis results were available, investigators pretty quickly realized that they were on the more, let's defer the on-demand steroids, then let's jump on on-demand steroids. And as we mind some of the additional data, and we've shared this data with you, we recognize that investigators were starting steroids later in the course of the transduction than in the Phase I -- than the earlier study. And we were also finding that there were breakthrough episodes of recurrent transaminitis and Factor VIII reductions in the interim analysis cohort. And on that basis, we met the investigators where they were already heading, which was to fortify their attention to the details of initiating steroids and the speed at which they taper the corticosteroids. And so the monitoring group has been very, very, very plugged into the investigators, reviewing with them as contemporaneously as possible, most recent ALT measurements and putting the investigators in a position to make quicker decisions about whether there was a need for corticosteroid therapy initiation or adjustment based on the evolving data. So we feel really good about the 134-patient study. The additional 100 and so patients that were included after the interim analysis from the get-go had quite a lot of oversight of the management of their case as they went through the initiation of transduction and for the months thereafter. So that's another factor that in addition to what we've observed so far in the Phase III study at the interim analysis, just to remind you, we had a great effect on the annualized bleed rate, which is the primary end clean at the 1-year mark of the study. And that's even with that more relaxed form of steroids. And if a tighter attention to the detail of steroids has a positive impact, it will make our results in the 134 even better than what we've seen so far. All the more reason why we look so much forward to the analysis in the early part of the year, because it's going to provide data to address these questions. -------------------------------------------------------------------------------- Unidentified Analyst, [18] -------------------------------------------------------------------------------- Okay. Great. And then if I could just ask one more question. When you want to blind your Phase III data that's expected in 1Q '21, how does it affect your blinding and powering assumptions for your Phase II data should you need it for the FDA? -------------------------------------------------------------------------------- Henry J. Fuchs, BioMarin Pharmaceutical Inc. - President of Worldwide Research & Development [19] -------------------------------------------------------------------------------- The study is driven by an ongoing data -- the study is governed by an ongoing data access plan and also by statistical analysis playing one for Europe and one for the United States. And it's customary to have of different statistical analysis plan in different regions. So the data is protected by the data access plan in terms of ongoing access to the data and the analyses are governed by statistical plans one each for Europe and the United States. -------------------------------------------------------------------------------- Operator [20] -------------------------------------------------------------------------------- Your next question comes from the line of Marty Auster from Credit Suisse. -------------------------------------------------------------------------------- Martin Douglas Auster, Crédit Suisse AG, Research Division - Research Analyst [21] -------------------------------------------------------------------------------- I think most of them have been answered, but maybe a follow-up on vosoritide. Hank, could you remind us what percentage of patients from the vosoritide Phase III went into the open label? And then I guess you should be kind of getting that 2-year data from the 2 years exposure from the patients who rolled over that were on drug the first year pretty soon. Is there a specific plan or specific request to furnish that 2-year early data to FDA? And If so, is that kind of -- can you account for that within the kind of current PDUFA date time frame? -------------------------------------------------------------------------------- Henry J. Fuchs, BioMarin Pharmaceutical Inc. - President of Worldwide Research & Development [22] -------------------------------------------------------------------------------- Yes, we can accommodate that data request in the current PDUFA time frame. And we're still in the early stages of the review and gathering, both from Europe and the United States, some initial information requests, and it wouldn't surprise me if the additional data are part of the consideration. And the proportion of -- remind me the first part of your question, Marty, I forgot the first part of your question? -------------------------------------------------------------------------------- Martin Douglas Auster, Crédit Suisse AG, Research Division - Research Analyst [23] -------------------------------------------------------------------------------- Yes. Just asking what -- if you had data on kind of proportion of patients who rolled over to the OLE specifically the (inaudible) leaders on drug. -------------------------------------------------------------------------------- Henry J. Fuchs, BioMarin Pharmaceutical Inc. - President of Worldwide Research & Development [24] -------------------------------------------------------------------------------- Yes, yes, I think it was all the 2. -------------------------------------------------------------------------------- Operator [25] -------------------------------------------------------------------------------- Your next question comes from the line of Paul Matteis from Stifel. -------------------------------------------------------------------------------- Paul Andrew Matteis, Stifel, Nicolaus & Company, Incorporated, Research Division - Co-Head of the Biotech Team, MD & Senior Analyst [26] -------------------------------------------------------------------------------- Great. Sorry about that. Just one more on vosoritide to that point. How many patients of 2-year data do you think you might have by, say, the midpoint of the review? And have you taken any look at some of the long-term data and done any of your own internal analyses versus natural history to kind of just get a sense of that corroborates the Phase I/II? -------------------------------------------------------------------------------- Henry J. Fuchs, BioMarin Pharmaceutical Inc. - President of Worldwide Research & Development [27] -------------------------------------------------------------------------------- Yes. I think to how many patients is pretty straightforward because I think we unblinded, the last patient was out of the 1-year in November of 2019. So we'll have all 100 X patients. I can't remember if I had even 110 patients of data -- 110 patients will have had their 2 year assessments this month. And so it's pretty fulsome data set, and it should be available in the course of the review. And how is it going? We haven't actually -- we don't take interim looks at the data on an ongoing basis. But based on the long-term data that we've seen and just what you hear from investigators, we're encouraged that the effect of vosoritide is not only going to be sustained, but sustained in a robust manner. -------------------------------------------------------------------------------- Jean-Jacques Bienaimé, BioMarin Pharmaceutical Inc. - Chairman & CEO [28] -------------------------------------------------------------------------------- So I mean, that is based on our Phase II study, which has now 5 years of history. -------------------------------------------------------------------------------- Paul Andrew Matteis, Stifel, Nicolaus & Company, Incorporated, Research Division - Co-Head of the Biotech Team, MD & Senior Analyst [29] -------------------------------------------------------------------------------- Right. Yes. And so, it sounds like what you're saying is that the retention rate from 1 year to 2-year is very high. -------------------------------------------------------------------------------- Henry J. Fuchs, BioMarin Pharmaceutical Inc. - President of Worldwide Research & Development [30] -------------------------------------------------------------------------------- Yes, I think Marty asked a question earlier. I forget. I lost track of the question. But yes, yes, I think it was like all the 2 patients rolled over. This was 95%, 6% rollover. The compliance for vosoritide is fantastic and the interest level is fantastic. -------------------------------------------------------------------------------- Operator [31] -------------------------------------------------------------------------------- Your next question comes from the line of Phil Nadeau from Cowen and Company. -------------------------------------------------------------------------------- Philip M. Nadeau, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [32] -------------------------------------------------------------------------------- Hank, another question on vosoritide. In your prepared remarks, you mentioned that there were a number of analyses that you've done to show vosoritide is going to impact adult height. But you didn't go into much detail. Could you discuss those maybe in a bit more detail what data and analysis you have to show the FDA to possibly change their minds? And I guess a related question, in the past, in orphan disorders, the FDA did like natural history and thought differences versus natural history persuasive. Why isn't that the case here? -------------------------------------------------------------------------------- Henry J. Fuchs, BioMarin Pharmaceutical Inc. - President of Worldwide Research & Development [33] -------------------------------------------------------------------------------- I missed the [balance] of your question. The second part of your question is why would the natural history be -- I forget, which side you're asking from, unsupportive or supportive? -------------------------------------------------------------------------------- Philip M. Nadeau, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [34] -------------------------------------------------------------------------------- So in the past, it's been supportive, it seems like the FDA in requiring randomized controlled data doesn't think it's supportive here. Why is that? -------------------------------------------------------------------------------- Henry J. Fuchs, BioMarin Pharmaceutical Inc. - President of Worldwide Research & Development [35] -------------------------------------------------------------------------------- No, I -- well, I think they think that the natural history data is supportive. And I think that, that's going to be a key issue of the review is to ensure that it's sufficiently supportive to address the issue of durability. And that was actually quite a bit of focus on the pre-NDA meeting that we had with them to convey what we've done. So in reference to the first half of your question, some of the additional analyses we've done is to verify that the natural history data set is representative of the population that was recruited both into the Phase III trial and into the Phase II trial -- into the prior Phase II trial to document that the estimates of growth change over time, were similar in the 2 populations to conduct both sort of eligibility matching as well as patient level matching to look longitudinally at the data. And all of that was reviewed with the agency at the pre-NDA meeting. And I think that gave them a lot of confidence about the robustness of a long-term outcome data. Now sort of, as you point out, that the agency does -- they are finicky about studies in general and they're finicky in particular about studies that are non-randomized to draw comparative conclusions. But a, we have a lot of experience doing this and having drugs registered on the basis of natural history studies; and b, we've had a lot of interaction with the agency; and c, we think we have a really robust data set to address the questions of continued benefit. I think for all those reasons that we have a lot of confidence that the package will get there on its own and as to whether the additional data is even required remains to be seen. Did I cover everything, Phil? -------------------------------------------------------------------------------- Philip M. Nadeau, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [36] -------------------------------------------------------------------------------- Yes. That was very helpful. -------------------------------------------------------------------------------- Operator [37] -------------------------------------------------------------------------------- Our next question comes from the line of of Geoff Meacham from Bank of America. -------------------------------------------------------------------------------- Geoffrey Christopher Meacham, BofA Merrill Lynch, Research Division - Research Analyst [38] -------------------------------------------------------------------------------- Just had a few. Commercially, when you look at the COVID impact to your business, I did -- I would have thought that logistics would have been figured out by now, but is it just that cases are accelerating, and that's more of a disruption? Or are there still processes that have yet to be worked out to just ensure compliance? And then, Hank, real quick. It seems like manufacturing is in a major focus by FDA now in cell therapies. With ROCTAVIAN, can you talk about the extent of interaction so far? And has that -- the nature of those discussions change over time? Or is it just all about the Phase III study? -------------------------------------------------------------------------------- Jean-Jacques Bienaimé, BioMarin Pharmaceutical Inc. - Chairman & CEO [39] -------------------------------------------------------------------------------- So maybe the, let's start with the second question. Greg Guyer, who is our new Head of Tops can answer the question. -------------------------------------------------------------------------------- Greg Guyer, [40] -------------------------------------------------------------------------------- Yes. Thank you. So we have obviously a lot of discussion during the initial filing of the Valrox filing. And we've had a lot of experience with questions, many, many questions during the inspection or during the review process. I think what's been good is we've got a good dialogue. We've had a bunch of discussion on comparability. And at the end of the day, the agency accepted that, and we've gotten no further CMC questions related to those. So right now, we're pretty confident in the CMC package that supports ROCTAVIAN. And as Hank was saying earlier, the focus has primarily been on the clinical side. -------------------------------------------------------------------------------- Jean-Jacques Bienaimé, BioMarin Pharmaceutical Inc. - Chairman & CEO [41] -------------------------------------------------------------------------------- And also, as a reminder, our ROCTAVIAN manufacturing facility in California has been approved by the European Medical Agency. So that's also kind of reassuring. Obviously, the FDA could have different questions. But so far, the question we got from the FDA, I mean, or on CMC ROCTAVIAN are pretty straightforward. And before we move to the lab, yes, (inaudible) answer your question on the COVID-19 impact on our base business. Just one thing we'd like to mention also is that actually, vosoritide, you haven't asked but vosoritide manufacturing, it doesn't (inaudible) we're going to need an inspection. Do you want to talk about it, Greg? -------------------------------------------------------------------------------- Greg Guyer, [42] -------------------------------------------------------------------------------- In the response that we get back from the EMA, they asked some specific questions. But what they did say on the inspection side is due to the great outcome of the ROCTAVIAN inspection, the same-facility that we're going to be making vosoritide in, they have waived the inspectional need for the European vosoritide application. So just some good news that we received yesterday. -------------------------------------------------------------------------------- Jean-Jacques Bienaimé, BioMarin Pharmaceutical Inc. - Chairman & CEO [43] -------------------------------------------------------------------------------- Jeff? -------------------------------------------------------------------------------- Jeffrey Robert Ajer, BioMarin Pharmaceutical Inc. - Executive VP & Chief Commercial Officer [44] -------------------------------------------------------------------------------- Yes. With respect to COVID-19 impact on our base business, there's really 3 different factors, and I'll address each one very briefly. The first is the impact of missed infusions. So the early shock of the COVID-19 situation close down clinics, had patients concerned about going into hospitals to take infusions. And we've used a number of mitigating tactics since the beginning of the pandemic, including facilitating more patients to get home infusion, patients-defined infusion sites that are more comfortable for them and closer to their home. And in many cases, it's just hospital operations getting back to enough of a normal that they can handle doing weekly infusions. And I would say that, by the third quarter, we're not back to baseline where we started the year in terms of compliance, but we've essentially stabilized that part of the business. And I think that's a sustained stabilization, and we'll probably withstand further waves of the virus. The second piece has been the identification and also start of new patients. So patients are not as diligently, I would say, pursuing diagnosis and identification. For the same reasons, right? They're reluctant to go to hospitals. In some cases, the hospitals are closed. They're operating with limited capacity. They have other priorities. So the rate of new patient identification and patient start for our enzyme products has slowed down. And even for PKU, where clinics have identified patients in their clinic. And so patient identification isn't really the issue. Their limited capacity for operations has slowed down the rate of new patient starts for Palynziq. And then the third piece of it is, particularly in Europe, where the health systems have been really focused on addressing the pandemic, our ability to gain market access in new countries has been slowed. It hasn't stopped, but it's been slowed. And I expect that, that trend will continue going forward for a little while. So those 3 separate pieces. -------------------------------------------------------------------------------- Operator [45] -------------------------------------------------------------------------------- Your next question comes from the line of Kennen MacKay from RBC Capital Markets. -------------------------------------------------------------------------------- Bikramjot Singh, RBC Capital Markets, Research Division - Senior Associate [46] -------------------------------------------------------------------------------- This is Bikram on for Kennen. I had one on Q1. Going into Q4, what are your expectations given the 2 generics that are going to enter the market? And what -- could you talk about your broader strategy? How you're going to protect the franchise? And maybe broadly on PKU, are you thinking about maybe defending the franchise by pricing discounts or any other strategies that internally you have been discussing moving into 2021 and 2022? -------------------------------------------------------------------------------- Jean-Jacques Bienaimé, BioMarin Pharmaceutical Inc. - Chairman & CEO [47] -------------------------------------------------------------------------------- Jeff? -------------------------------------------------------------------------------- Jeffrey Robert Ajer, BioMarin Pharmaceutical Inc. - Executive VP & Chief Commercial Officer [48] -------------------------------------------------------------------------------- Thank you. I'll handle that one. So in a general sense, and as I mentioned in the prepared remarks, we have been planning for and expecting a step-down in revenues for Kuvan in the United States, but not other markets. So our focus on Kuvan as a part of the overall PKU franchise in other markets continues. Inside of the United States, as you know, there are limited tools to work with to blunt the impact of generic competitors. Now we are fortunate that there are only 2 generic entries and that we are not -- Kuvan is not a retail pharmacy subject to easy and rapid substitution. So we've been planning for a step down in revenues. It's been difficult, frankly, to model exactly what to expect because there is so few good analogs to look at to guide our expectations. And we do have some mitigation tactics in place in the United States that we are working on. And you'll forgive me if, on this call, I don't go into the details as that could be a competitive intelligence issue for others that might be on the line listening. Beyond trying to manage that step-down in revenues for Kuvan, our biggest strategy, frankly, with PKU is one of offense. So we have a fabulous drug in Palynziq that is approved, and we've been promoting very actively in the United States. Promoting Palynziq since its launch essentially at the expense of promoting Kuvan in the United States. Fully 35% of our new patient starts on Palynziq have come from Kuvan transitions. So these would be adult patients that are looking for a bigger effect size in the treatment of their PKU. So we expect that trend to continue of Kuvan transitions to Palynziq. But it's really about penetrating the adult market with Palynziq and looking forward to potentially a gene therapy in the portfolio over a period of several years. -------------------------------------------------------------------------------- Operator [49] -------------------------------------------------------------------------------- Your next question comes from the line of Akash Tewari from Wolfe Research. -------------------------------------------------------------------------------- Akash Tewari, Wolfe Research, LLC - Director of Equity Research & Senior Research Analyst [50] -------------------------------------------------------------------------------- This one is a bit on the nose, but can you walk us through the options that the FDA has at this point on vosoritide? And kind of what percent of [data] occur in your mind. The first one is the drug gets approved in August as expected. Number two, the FDA needs 2 years of follow-up and maybe you submit that nonrandomized data from your Phase III at the end of this year and you could still have an approval maybe by 2021? Or the third option where the FDA makes you run an entirely new Phase III study that's randomized for 2 years, that could delay the approval by 3 plus years. Like how likely is that kind of worst-case scenario here? And is there another option here that maybe we're not appreciating? And then maybe on the financials, can you talk about in a scenario where, let's just say, Valrox doesn't get approved, how much of an EPS (inaudible) BioMarin is really over the next few years? How much can your margins inflect on your ERP franchise? And then how -- what do you think margins will be for vosoritide as it starts to get commercial sales? -------------------------------------------------------------------------------- Henry J. Fuchs, BioMarin Pharmaceutical Inc. - President of Worldwide Research & Development [51] -------------------------------------------------------------------------------- Jean, do you want me to start the first part of... -------------------------------------------------------------------------------- Jean-Jacques Bienaimé, BioMarin Pharmaceutical Inc. - Chairman & CEO [52] -------------------------------------------------------------------------------- Yes. Yes. Comment on the 3 options outlined, yes. -------------------------------------------------------------------------------- Henry J. Fuchs, BioMarin Pharmaceutical Inc. - President of Worldwide Research & Development [53] -------------------------------------------------------------------------------- Yes. It's hard to -- everybody's got a little different calibration around percentages. So I'm always a little reluctant to assign percentages. But I don't think we would have filed if they thought there was a substantial likelihood that we wouldn't be approved on the PDUFA date, either with the data all by itself or with the supplemental data sets of the ongoing cuts. And I think the agency is pretty careful about the timing of those sorts of things. A key difference here between ROCTAVIAN, just to put it in some perspective, is it's that when we had the pre-BLA meeting on ROCTAVIAN, we didn't know what the enrollment rate for the rest of the Phase III trial was. And actually, it happened pretty quickly. So that means that the data are right around the corner. In this particular case, the agency knows the timing of the availability of the Phase III data for vosoritide and they accepted the application. And I think that, that conveys that the package of data that we do have is a pretty strong package of data. The thing I think you left off in the description list of what if they're having trouble getting there on the basis of the 1-year data and the 2-year longer-term follow-up in the randomized population. The 206 study is a different age population randomized study, definitive endpoint. And I think that will definitely factor into consideration about what's next. Because if you see a fair amount of benefit in the patients who are under 5 years old, I think that will carry a lot of weight as to informing a regulatory decision well before further data in the older population would be required. I think that's the backstop, the big definite backstop. -------------------------------------------------------------------------------- Jean-Jacques Bienaimé, BioMarin Pharmaceutical Inc. - Chairman & CEO [54] -------------------------------------------------------------------------------- I mean -- so Brian, do you want to answer the question on the -- I guess you had a question on the gross margin for vosoritide. -------------------------------------------------------------------------------- Brian R. Mueller, BioMarin Pharmaceutical Inc. - Executive VP & CFO [55] -------------------------------------------------------------------------------- I think on the margin prospect if there was no ROCTAVIAN approval based on the current base business. So first of all, we do -- thanks for the question. We do plan to continue to have growth from the base business, which is supported by the infrastructure that we have in place today. And just a reminder that on the operations side, we believe that ROCTAVIAN approval is a delay, and we were prepared to launch with an SG&A and medical infrastructure here in Q3. And since we believe it's a delay, it's important to retain that capability for when we do hope to get an approval so that we can have the same successful launch trajectory that we were prepared for just a few weeks ago. So that's the ROCTAVIAN story. And then you had asked if there was not a ROCTAVIAN approval, I point you then to vosoritide, which, with the acceptance of the filings in both the U.S. and Europe and in August PDUFA date, we'll be hoping to launch vosoritide in the second half of next year. So again, that same infrastructure will support margin growth with revenue growth, both from both the base business and then either or both ROCTAVIAN and vosoritide. And the other thing I'd say with respect to your question on vosoritide margins, what we've said is we do believe that because ROCTAVIAN and vosoritide are different compounds from our legacy-based business of these ultra-rare orphan disease products and the recombinant enzymes that make up our ERT franchise that base cost of goods sold will be lower. And so we've got 20% to 22% COGS on the base business today, and we'd expect to as both ROCTAVIAN and vosoritide revenues start to get in the mix that we'd see our gross margins improve from there down into the teens. -------------------------------------------------------------------------------- Jean-Jacques Bienaimé, BioMarin Pharmaceutical Inc. - Chairman & CEO [56] -------------------------------------------------------------------------------- Although even on our base business, I mean, maybe Greg can talk about it, there are a lot of initiatives out going to actually reduce our cost of goods sold, too. -------------------------------------------------------------------------------- Greg Guyer, [57] -------------------------------------------------------------------------------- Yes. There's tremendous work underway to try to improve our cost of goods sold for all of the ERT brands as well as even optimize some of our hopefully soon launch brands in terms of next-generation processes. So a lot of work is going on to continue to improve our margins in spite of the dynamic nature of our business. -------------------------------------------------------------------------------- Operator [58] -------------------------------------------------------------------------------- Your next question comes from the line of Matthew Harrison from Morgan Stanley. -------------------------------------------------------------------------------- Matthew Kelsey Harrison, Morgan Stanley, Research Division - Executive Director [59] -------------------------------------------------------------------------------- Greg, look, Hank, I guess I want to follow up on one of the things you've already discussed, which is vosoritide and sort of the comments around to your data. I mean I want to follow up on one of the comments that you made, which was that it sounds like you think you'll have at least OLE follow-up for 2 years. I mean, I guess my question is, if the FDA asks you for 2-year data, let's just say that's how they come out. What are the pieces of information that you would provide to them? And how close would that be to sort of fulfilling what they may ask for? -------------------------------------------------------------------------------- Henry J. Fuchs, BioMarin Pharmaceutical Inc. - President of Worldwide Research & Development [60] -------------------------------------------------------------------------------- Yes. So let me just again remind you of the structure of 301. Patients were run in on a baseline observational study for at least 6 months. And it's that at least 6 months number that makes things a little fuzzy in terms of describing things. Some patients will have 9 months of run-in data, some patients will have 12 months of run-in data, some patient will have 18 months. So at least 6 months of run-in data. And then at that point, patients are randomized to placebo or drug. Now the placebo effect in the trial is pretty small. I think, it was like 0.16 or something like that. So for practical purposes, the run-in data and the placebo data, we believe, can be pooled because they're not meaningfully different from each other. And right there, that creates 18 months of prospective, clinical trial grade, definitive measurement of height data. So at the time the patients cross over to drug from their 12-month journey through placebo, they will have been observed for 18 or more months. And the patients who are on vosoritide will have been on vosoritide for at least 24 months at that time point. So you'll have 18-plus months of an untreated arm, all perspective, and 24 months on vosoritide arm, all randomized between those 2 groups to inform the durability of impact. So you can imagine that what we can do is we can look at the first month height gain, I'm sorry, the first 6 months of height gain. The second 6 months of height gain, the third 6 months of height gain, and the fourth 6 month of height gain. And we can compare that to the first 6 months of height gain, untreated, second 6 months, third 6 months and potentially even longer of height gain not stimulated by vosoritide. Given the -- how well the natural history data that we collected represents what we've observed in our placebo group and how well it reflects the expectation that there's declining growth velocity, we think that, that combination of package that says, here's our natural history data that we prospectively observed for more than 18 months that fits with this very large natural history data set that's contemporaneous United States-based population, multi-center and it can be used as a reasonable supportive compared -- now remember, we're not pitching this as pivotal. This is supportive. It's unequivocal that vosoritide improves growth velocity in children with a P-value (inaudible) it's not really a question about that. The question that we're scratching at is how much evidence do we have that the effect is durable. And as I said, the pretest likelihood that was extraordinarily high, and I think the supplemental data, if it's even in part of the story, is going to be extremely strong. And I don't think that there's -- I don't think there's very much risk that all of a sudden vosoritide starts slowing down year 2, year 3, year 4, based on what we've seen so far. Hopefully, that gives you good details on what we can think about looking at if it even comes up? -------------------------------------------------------------------------------- Operator [61] -------------------------------------------------------------------------------- Your next question comes from the line of Gena Wang of Barclays. -------------------------------------------------------------------------------- Xiaochuan Dai, Barclays Bank PLC, Research Division - Research Analyst [62] -------------------------------------------------------------------------------- This is David on Gena. One question on the ROCTAVIAN again. So we're wondering how likely you can overturn FDA to your follow-up requirement and submit 1 year since 50% of the patients will likely reach 2-year follow-up when your data release first quarter next year. And then it seems like other competitive programs like Pfizer's gene therapies also requiring one-year year follow-up. So I was just wondering if you could provide some color on the likelihood of overturning FDA decision? And how confident you are that you can do that? -------------------------------------------------------------------------------- Henry J. Fuchs, BioMarin Pharmaceutical Inc. - President of Worldwide Research & Development [63] -------------------------------------------------------------------------------- Well, I don't know that I would use Pfizer's strategy as an evidence of what's going to be required for the simple reason that we were putting out similar kinds of discussion points prior to our complete response letter. And obviously, that didn't turn out to be an accurate -- the agreement that the FDA had with us changed. And so I don't know how one could know that any future agreements wouldn't change, in particular, given the sample size that they're talking about. So I won't put that to the side. It's difficult to answer these questions about how likely. I think that there are not as many patients at the 1-year data analysis that will have 2 years of follow-up data. Remember, the interim analysis was recorded in May of '19. And so it's that population, that's really the leading edge of the study at the 2-plus years mark. So that, I think, is what's underlying the agency's request for more information. Now I don't know. I mean we could put up the numbers of patients that we have at 24 months of follow-up, 18 months of follow-up in front of the agency, and it's all going to depend on the strength of evidence. And as I said before, they're reluctant and we -- to identify an explicit specific endpoint because it really is a combination of consideration of the ABR. The agency is really hooked on ABR as a primary endpoint. Of course, we think we're going to be strong in that regard. But also their concerns for projecting the durability are pretty significant. And I think it bears reminding that they don't have a lot of experience in this space. The two prior gene edition programs that they've approved, you don't measure the gene product directly. And so this is the first experience they're having with this. And I think it's, unfortunately, decided to ask for more sample size and longer well after the BLA had been submitted and without any warning, but it is what it is. And as I said before, even during these conservative times, the recipe is always more data and more time. And if you have a good drug, more data and more time, things work out. We think we have a good drug. -------------------------------------------------------------------------------- Operator [64] -------------------------------------------------------------------------------- Your next question comes from the line of Mohit Bansal of Citi. -------------------------------------------------------------------------------- Keith Richard Tapper, Citigroup Inc., Research Division - Research Analyst [65] -------------------------------------------------------------------------------- This is Keith on for Mohit. Just had a quick question, a lot of them have been answered, but how should we think about your disclosures regarding the upcoming meeting with the FDA regarding Valrox. Would you be sharing with us when you meet with them and what was asked and sort of the topics that were discussed? And then, I guess, separately, to what extent do you think the availability of alternative therapies impacted the decision to go with the CRL? -------------------------------------------------------------------------------- Henry J. Fuchs, BioMarin Pharmaceutical Inc. - President of Worldwide Research & Development [66] -------------------------------------------------------------------------------- Well, as I said, we've had our [type in] with the FDA, and we believe that we're making progress. The meeting was well attended by the [AMC], and they were quite engaged in verbal. And they provided additional information, which really boils down, again, to wanting to directly observe the durability of the product used in the Phase III trial rather than rely on the Phase I/II material. It's really more of a different interpretation of the same set of facts than anything else, and it's a new interpretation of the same set of facts. Disappointing and surprising, but as I said, We have the definitive study ongoing. And as far as the impact of available alternative therapies, I think there's been a lot of discussion about that. But one has to remember always that you're measuring the potential for benefit above the current available standard of care. Now if the current condition is completely untreated then we think about placebos or natural history comparisons. In our case, our comparison is the best available standard of care. Number one on the WFH, the World Federation for Hemophilia is standard of care recommendation option of this recombinant Factor VIII replacement therapy delivered prophylactically and that's the control in our study. And to remind you, we demonstrated that compared to patients who have quite substantial breakthrough bleeding on recombinant Factor VIII replacement therapy, patients who have received the transgene and now in 2 separate studies have quite substantial reductions in their bleeding post-gene transfer. And I think it's that kind of observation that will ultimately animate the uptake of a treatment like ROCTAVIAN into the community. As I said before, once the agency feels more comfortable with the higher end and the longer duration of follow-up. And exactly where that point is, as we've talked about, is not yet known. But the advantages over current therapy are improved bleeding without the requirement for interventions on an ongoing basis, being prophylactic therapy. And from the patients and clinicians that we've talked to, this is transformative. -------------------------------------------------------------------------------- Jean-Jacques Bienaimé, BioMarin Pharmaceutical Inc. - Chairman & CEO [67] -------------------------------------------------------------------------------- And one last point again, will remind the audience here that the Phase III trial for the 1-year endpoint ABR Phase III trial is designed as a superiority trial as compared to (inaudible), not a noninferiority, it's a superiority trial, and this is what we anticipate demonstrating in January. -------------------------------------------------------------------------------- Operator [68] -------------------------------------------------------------------------------- Your next question comes from the line of Trevor Allred from Oppenheimer. -------------------------------------------------------------------------------- Trevor Thomas Allred, Oppenheimer & Co. Inc., Research Division - Associate [69] -------------------------------------------------------------------------------- Just 2 quick ones. One, you've been talking about Valrox. Do you get the sense that there's any readthrough for this for any gene therapies in the future? Or is this Valrox specific? And then two, you talked a little bit about Kuvan. I was wondering if you anticipate that the generics might have any difficulty entering the market during this time. -------------------------------------------------------------------------------- Henry J. Fuchs, BioMarin Pharmaceutical Inc. - President of Worldwide Research & Development [70] -------------------------------------------------------------------------------- On the read-through, there certainly is a lot of stuff not going on at the Center for Biologics. I guess you can read into that whatever you want to read into that. As my read of all of that is that things are pretty conservative right now at the agency. And I think Dr. Mark, who does a great job and is very serious guy and a very high-caliber person, has talked about some of the communication challenges they've experienced and some of the leadership challenges that they experienced as they're trying to handle an enormous workload on the cell and gene therapy side, not to mention the centers handling the COVID vaccine pandemic considerations. So they're massively overworked and they're massively challenged and they're trying to make sure that they're perceived to be trustworthy and conservative in their decisions on behalf of people's health. So I think that's the read-through to be had. You can get into some more scientific details about ROCTAVIAN as a product, as I mentioned. It's the first product where you can measure the transgene effect by itself. And I think whenever that happens, that causes agencies to ask different new questions. And when that's done in a conservative and stressed environment, it just takes a while for the agency to get themselves comfortable with the issues of consideration. And that's why we maintain confidence that we're going to get there. It's just going to require patience. -------------------------------------------------------------------------------- Jean-Jacques Bienaimé, BioMarin Pharmaceutical Inc. - Chairman & CEO [71] -------------------------------------------------------------------------------- Jeff, you want to answer the impact of COVID-19 on generic, if any. -------------------------------------------------------------------------------- Jeffrey Robert Ajer, BioMarin Pharmaceutical Inc. - Executive VP & Chief Commercial Officer [72] -------------------------------------------------------------------------------- So we're early in this and we will be watching very closely. But we believe that the likely strategy of the generics is one of a traditional substitution at a pharmacy level with the caveat that we're talking about specialty pharmacies here and not retail pharmacies. So if the strategy is one of substitution at specialty pharmacy, I don't see much of an impact one way or another of the COVID-19 pandemic. If, in fact, the strategy of the generics is something different, perhaps like a branded generic, where they're seeking to get new patients diagnosed with their product, then I -- they could be impacted substantially by the pandemic. And we don't know for sure, which strategy the generic are pursuing. But I think it's likely that they would be pursuing the first option of a classic substitution at the pharmacy. -------------------------------------------------------------------------------- Operator [73] -------------------------------------------------------------------------------- I am showing no further questions at this time. I would like to turn the conference back to Mr. J.J. Bienaimé , Chairman and CEO. Sir, please go ahead. -------------------------------------------------------------------------------- Jean-Jacques Bienaimé, BioMarin Pharmaceutical Inc. - Chairman & CEO [74] -------------------------------------------------------------------------------- Thank you, operator. So conclusion on with 2020 now coming to a close, it is important to have a perspective on what has been accomplished to this point as well as the tremendous opportunities that lie ahead for BioMarin. It's been an unpredictable year, but the underlying fundamentals of our business are strong, and we are resolute in our mission. BioMarin employees have demonstrated extraordinary resilience in the face of uncertainty for almost 9 months here and counting, and we have confidence in our ability to navigate any new challenges that may arise as we forge ahead. So thank you for your continued support, and stay safe. Goodbye. -------------------------------------------------------------------------------- Operator [75] -------------------------------------------------------------------------------- Thank you, speakers. Ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.