BioMarin Pharmaceutical Inc.

pharmaceutical first quarter 2024 conference call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time, I'd like to turn the conference over to Tracy McCarthy, Group Vice President, Investor Relations. Please go ahead.

To remind you, this non-confidential 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 10Q, 10K, and 8K reports. In addition, we will use non-GAAP financial measures as defined in Regulation G during the call today. These non-GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with U.S. GAAP, and you can find the related reconciliations to U.S. GAAP in the earnings release and earnings presentation. both of which are available in the investor relations section of our website. On the call from Biomarin Management today are Alexander Hardy, President and Chief Executive Officer, Hank Fuchs, President of Worldwide R&D, and Brian Mueller, Executive Vice President, Chief Financial Officer. Jeff Ager, Executive Vice President, Chief Commercial Officer, and Greg Geyer, Executive Vice President, Chief Technical Officer, are here with us to answer questions during the Q&A portion of the call. I will now turn the call over to Biomarin's President and CEO, Alexander Hardy.

Thank you, Tracy, and good afternoon, everyone. Thank you all for joining us today. In addition to strong financial results, we made significant progress in the quarter, developing the components of Biomarin's new corporate vision and strategy, all in the interests of positively impacting patients' lives while creating value for shareholders. and with a number of strategic initiatives ongoing to finalize these components, to be communicated and invested today, which we have now set for September the 4th. We are pleased to share the first chapter update today, the results from our strategic assessment of Biomarin's R&D portfolio. As innovation has fueled Biomarin's success to date, we undertook a prioritization of our overall portfolio from early to lifecycle stage assets. The goal of this assessment was to accelerate the delivery of those assets which add the greatest value to all of our stakeholders and align with the timelines for our strategic growth plans. We added a commercial lens early in the portfolio peer review process to ensure that return on investment, resource allocation, patient impact were all thoroughly considered. As a result, we chose to accelerate three assets that we believe offer the most transformative potential for patients and value creation for shareholders. We are also discontinuing four programs that did not meet our new higher bar for continued development. Moving briefly to progress made in the quarter on our four strategic priorities outlined in January. Beginning with our opportunity to accelerate and maximize VoxOga, we made significant progress during the quarter. With 74% revenue growth year over year and more than 500 additional children receiving therapy in the first quarter, VoxOga in achondroplasia continues towards blockbuster status. The majority of new U.S. prescriptions in the quarter were for children under the age of five, an important trend since FDA's age expansion approval last quarter, albeit we continue to see expansion in the over-five population as well. Global access to Voxergo from infancy is having a significant impact on rapid uptake as families pursue maximum therapeutic benefit by starting treatment early. In the United States, we continue to observe an increase in the breadth and depth of our prescriber base as real-world experience drives confidence in VoxOgo's extensive safety and efficacy profile. Leveraging our established leadership in achondroplasia, we also made important strides in our plans to expand the multiple other growth-related conditions. Our pivotal program with VoxOgo for the treatment of children with hypochondroplasia will begin treatment study mid-year with a target of completing enrollment by the first half of 2025. Based on ongoing discussions with global health authorities on study protocols with VoxOgo, theopathic short stature, and multiple genetic short stature pathway conditions, we expect to begin enrollment into these programs later this year. The momentum we're seeing with VoxOgo in achondroplasia supports our belief that CNP can potentially unlock clinical benefit for children across a number of growth-related conditions for many years to come. Hank will share perspective on the opportunities ahead with VoxOgo based on strong proof of concept and indications beyond achondroplasia, as well as the potential for longer-acting formulations. The second priority, establishing the Roctavian opportunity, continues to be complex. With pricing and reimbursement established in the United States, Germany, and Italy, aligning the required steps leading to patient treatment continues to pose different challenges. For example, while the Octavian national German price was established and published in December, the sub-insurers inserted new barriers to reimbursement. In the U.S., the complexity of local site reimbursement contracting continues to be an obstacle. We remain confident in the clinical profile of Roktavian, and we're pleased with the Roktavian update at the TH-SNA meeting, showing durable hemostatic efficacy, improved quality of life, and no safety signals at four years. With respect to the additional Roktavian development programs, we are proceeding with Roktavian development in Japan and in the prior inhibitor population, and have paused other programs until we observe more meaningful Roktavian commercial uptake. We recognize the importance of allocating our resources to the highest value-creating opportunities, and with the current levels of Roktavian investments and continued challenges with commercial uptake, we plan to communicate our evaluation criteria for Roktavian in terms of its place in our portfolio and related timing for potential next steps at the investor day in September. The third priority is our focus on the most productive R&D assets. And as already mentioned, I'm pleased we have completed the initial chapter of that work. Beyond our refresh pipeline, centered around three key assets to be accelerated, we're in a strong position to leverage external innovation in conjunction with our internal capabilities to fortify our mid- and longer-term pipeline. At Investor Day, we will also share more about our innovation strategy and plans and how they fit into our capital allocation and internal external portfolio innovation strategies. Lastly, our fourth priority to increase profitability faster than originally planned. As demonstrated by our first quarter results, we're tracking well towards achieving this priority. As I complete my first quarter as CEO, I hope it's evident that we're taking decisive and thoughtful action to realize our priorities, all designed to align with our broader operational and cost transformation strategies to be shared at Investor Day. Our full-year 2024 guidance reflects double-digit revenue growth, non-GAAP operating margin expansion, and non-GAAP earnings per share growing faster than revenues. These four-year guidance items allow you to track our financial progress as we transform Biomarin's operating model to produce the best outcomes for the patients we serve, our employees, and our shareholders. So, in summary, we are making tangible progress across the enterprise to reshape Biomarin's corporate vision and strategy. This is an enormous body of work that remains in process. But as you can see from our first quarter updates, we're working with a sense of urgency, purpose, and we are making definitive progress. We're excited to continue this work over the coming months with the goal of sharing our vision for a successful future with you at Investor Day on September 4 in New York. Thank you for your attention. I will now turn the call over to Hank to provide an update on key R&D highlights.

Thank you, Alexander, and good afternoon, everyone. The R&D team is energized by the more focused approach, decisions, and clarity on the path forward to advancing the highest potential programs following our portfolio review. As a leading, innovative, and scaled biopharma company, is more important than ever that we invest R&D resources in medicines that benefit the greatest number of patients. We move forward with an evaluation framework that will provide a high bar for consistent assessment of programs to determine if they fit in our burgeoning portfolio strategy. Briefly, on the three programs that we chose to accelerate, and starting with BMN351 for the treatment of Duchenne muscular dystrophy. BMN351 is a potential best-in-class antisense oligonucleotide designed to restore full-length dystropin expression to more than 10% of normal at steady state. The next-generation skipping oligo, this next-generation skipping oligo, has the potential to convert patients' phenotypes from progressive functional loss to durably preserve strength and function if data are supportive. BMN351 is differentiated from other antisense oligos based on optimized chemistry and a unique splice enhancer target site. which together result in significantly improved potency for restoring dystrophin expression. It is also differentiated from gene therapy as BMN351 produces near full length dystrophin rather than the truncated microdystrophins produced via gene therapy. And BMN351 can be administered chronically. For this reason, we believe the potential clinical benefit of BMN351 over currently approved gene therapies and other treatments represents high value to patients and families living with this debilitating condition. The 52-week clinical proof of concept study with BMN351 is actively recruiting patients and will include 18 boys with Duchenne muscular dystrophy with the potential to expand enrollment as needed and is designed to assess both dystrophin levels and functional measures. Also accelerating, BMN349 is a potential first oral therapeutic for the treatment of alpha-1 antitrypsin deficiency liver disease with the ability to address genotypes beyond PIZZ based on preferential binding to the Z protein with potential transformative effects on reversing fibrosis and preventing end-stage liver disease. There is a large addressable market, and we aim to differentiate ourselves from the competition based on specificity for the ZAAAT allele and the ability to titrate to effect. This first-in-human study in healthy volunteers remains ongoing. BMEN 333, our long-acting formulation of CENP, is designed to optimize and expand the reach of treatment for our portfolio of growth disorders by providing treatment optionality via less frequent dosing and potentially improving the patient and caregiver experience. Leveraging our current leadership in treating achondroplasia and anticipated expansion into other growth-related conditions, including hypochondroplasia, idiopathic short stature, and multiple genetic short stature pathway conditions, we believe offering multiple treatment options will help families interested in safe and effective medicines to treat rare skeletal disorders. BMN 333 is completing IND enabling studies and is slated to enter the clinic in early 2025. Finally, for BMN 293, our gene therapy for hypertrophic cardiomyopathy, we are completing activities to advance it toward the clinic we await additional supportive information and we'll share our next update with you at investor day we look forward to accelerating our prioritized programs as they hold the highest promise for patients and align with the timing of our strategic growth plans the programs that did not meet the criteria for advancement mostly earlier stage are listed in our press release and will wind down over the coming quarters there were no safety signals observed across the discontinued programs We are working with sites now where applicable to continue monitoring patient safety per protocol as a top priority, and we would like to thank all the patients who participated in these studies, the investigators, sites, and other health care providers. Having the ability to focus on our prioritized programs in terms of resources and strategy, that will enable the highest probability and most rapid outcome for patients who may benefit. We will share more on timelines for each at Investor Day. Touching briefly on other encouraging clinical updates validating our plans to expand Voxogo's reach to address a variety of growth-related conditions, we were pleased to see Dr. Dauber's one-year update from his hypochondriplasia study demonstrating a 1.8 centimeter improvement in annualized growth velocity at the American College of Medical Genetics. Our registration study in hypochondriplasia is progressing well, with the treatment study enrollment planned for mid-year. We are targeting approval in 2027, subject to enrollment and data results. I was also pleased to preview Dr. Dauber's abstract to be shared at the Pediatric Endocrine Society's website, including very encouraging data from his study addressing both ISS and pathway conditions. This first presentation of data at 12 months treatment with Voxogo and Noonan's and ISS conditions showed positive efficacy results in all subgroups. It was well tolerated with a similar safety profile to previous reports in patients with achondroplasia. These data are supportive of our thinking around the role CMP may play in benefiting patients across a variety of growth-related conditions. We are still in discussions on study design for multiple genetic short-stature pathway conditions and expect to have a more detailed update on the second quarter call and are still expecting to begin that study in the second half of the year. On Byron's clinical program in idiopathic short stature, we held productive discussions with the US FDA on this program and have aligned on plans to support approval in this new condition, new indication. Based on this feedback, we plan to start the clinical development program in ISS in the second half of this year. We expect our first study protocol in ISS to be posted to clinicaltrials.gov in the next few weeks and will include the following agreed upon elements. The study will be placebo controlled phase two study and patients who will be naive to human growth hormone treatment and will use the primary endpoint of annualized growth velocity determined at six months to determine the therapeutic dose levels. Patients will be randomized to one of five study cohorts, one of three different doses of oxovo, including doses that are both higher and lower than the commercial dose in acontraplasia, placebo, or human growth hormone. We have made a lot of progress with the FDA in designing the development path for ISS, and intend to refine the design of our Phase II program as data emerge from the Phase II program, including the results of dose selection from the planned study. In conclusion, we are pleased with our rapid progress building out Biomarin's leadership in multiple growth-related conditions, and we look forward to updating you on our progress with these clinical programs in the coming months. Thank you for your attention, and I'll now turn the call over to Brian for our financial updates.

Thank you, Hank. Please refer to today's press release summarizing our financial results for full details on the first quarter of 2024, including reconciliations of GAAP to non-GAAP financial measures. All first quarter 2024 results will be available in our upcoming Form 10-Q, which we expect to file in the coming days. In the first quarter of 2024, Biomarin generated record total revenue of $649 million, representing 9% year-over-year growth 13% on a constant currency basis, driven by continued strong demand for Voxogo. Our base portfolio products, including Kuvant, contributed $484 million of net product revenues in the first quarter. Looking more closely at net product revenue in the first quarter, Voxogo revenues of $153 million represented 74% year-over-year growth. That level of growth was despite the supply constraint on Buxtogo discussed last year and expected to continue through the second quarter of this year. Our plan for supply to satisfy the forecasted commercial demand around the middle of this year remains intact. Twenty-one percent revenue growth of Palantzeek in the first quarter demonstrated continued momentum for the only biologic approved for the treatment of PKU, offset by lower KUVAN revenues as expected. Mimizem, Naglazyme, and Aldurazine contributions in the first quarter were not surprising given the usual variable global ordering patterns for those brands. Importantly, we continue to observe commercial patient growth in these brands that we expect will drive sustainable revenue growth over time despite the quarterly order timing. YAF R&D expenses in the first quarter were $205 million, an increase of $33 million year over year. primarily due to increased early-stage research activities as well as increased activity in our clinical programs. GAP SG&A expense in the first quarter was $226 million, representing a year-over-year increase of $15 million driven by the continued support of the global Voxogo market expansion as well as corporate expenses in the quarter. This financial performance in Q1 drove an operating margin of 13.6% on a GAAP basis and 23.8% on a non-GAAP basis. Moving to the bottom line, GAAP net income for the first quarter was $89 million, an increase of $38 million year over year, and representing GAAP-diluted earnings per share of 46 cents. Non-GAAP income for the first quarter was $140 million, representing non-GAAP diluted earnings per share of 71% and growth of 18% over the same period in 2023. The R&D prioritization decisions made in the first quarter will positively impact non-GAAP diluted earnings per share in 2024 due to now lower levels of expected R&D expense in the second half of 2024 versus prior guidance. We estimate that the discontinuation of the four programs announced today will result in a reduction of between $50 to $60 million in R&D expense in 2024. And as Alexander and Hank mentioned, we're prioritizing three of our pipeline assets, as well as the VoxOGO indication expansion. And we identified opportunities to accelerate the development of those assets this year. Therefore, there is a planned offsetting increase in 2024 R&D expenses of approximately $15 to $20 million, which together with the planned reductions we expect will result in lower projected R&D expense for the full year of between $35 to $40 million. Those anticipated net R&D spend reductions in 2024 are driving an expected increase to our non-GAAP operating margin guidance to 24 to 25 percent. an increase to our full-year non-GAAP diluted earnings per share guidance to between $2.75 to $2.95 per share. Noteworthy is that we are maintaining our prior projections for the full year, except for the changes in R&D, including total revenue guidance, which remains the same as communicated in February. Also, this update does not include the impact of any further potential strategic business decisions and potential future cost efficiencies to be discussed at Investor Day. As we look forward to Q2 2024, we continue to anticipate limited revenue growth in Q2 versus Q1 due to the timing of orders for the enzyme products, and similarly for Vasilgo while we manage through the supply constraint. We expect higher operating expenses in Q2 versus Q1 due to normal quarterly business dynamics, our various 2024 strategic initiatives, and the timing of expenses. With all this in mind, we expect limited total revenue growth in Q2 versus Q1, and we expect non-GAAP operating margin and EPS to be lower in Q2 than in Q1. In the second half of 24, we anticipate more meaningful revenue growth as we expect the VoxOGO supply constraints to be resolved. From an expense point of view, we expect all of the reduced R&D for the discontinued programs announced today begin to be realized in the beginning of Q3 through the end of the year. Lastly, while we plan to share our updated capital allocation strategy at Investor Day, regarding our $495 million of convertible notes maturing in August of this year, we plan to leverage our strong cash position and expected operating cash flow to repay the notes with available cash. Furthermore, given the settlement structure of the notes, we are planning for a share-neutral outcome should the notes be in the money at maturity, with the goal of returning value to shareholders by avoiding the potential dilution associated with the 4 million underlying shares. As we move into our next chapter of Biomarin, we are executing on our growth strategy with impressive performance driven by Voxelgo and Echondroplasia in our pursuit of new indications, a durable and growing enzyme product business, and an increased focus on streamlining the business through cost structure transformation and operating model efficiencies. Together, this presents an opportunity to drive meaningful improvements in our financial performance and sustainable shareholder value creation.

Thank you for your continued support, and we will now open up the call to your questions. Operator?

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. We ask that you please limit yourselves to one question to allow everyone an opportunity to ask a question. We'll go first to Phil Nadeau at TD Cowan.

Good evening. Thanks for taking our question, and congratulations on a good quarter. We just wanted to follow up on your comments on Rocktavion. Can you give us some sense of what you need to see to support continued investment in the Rocktavion program? Or maybe ask another way, what would you have to see over the next several months in order to decide to license Rocktavion or curtail future investments there?

Thank you. Thanks very much for the question, Phil.

You know, as you heard today, You know, our focus from the R&D side is to allocate assets for the highest value. And clearly, we have a high level of current Octavian investments and continued challenges with commercial uptake. What we're saying today is that at Invest Today, we will communicate our evaluation criteria and the timing for that evaluation criteria at Invest Today on the 4th of September. The possible outcomes of that, I'll just elucidate. One would be that we see the uptake, the ramp starting to happen in a meaningful way, and that would be a stay the course approach would be the outcome. The second would be we see a lower potential for the asset and a path towards a reasonable return in investment by right-sizing the level of investment across the organization from an R&D, medical affairs, and commercial standpoint. And thirdly, the third possible outcome would be we remove it from our portfolio and we divest the asset. So we're not ready yet to share the evaluation criteria or when evaluation criteria timing would be, but we'll provide more information on this at Invest Today. I just wanted to also highlight that, you know, even as we speak right now, we've really focused our strategy and execution with Roktavian. We're focused on the site-level pull-through of the patients in the three major commercial markets where reimbursement is established, the United States, Germany, and Italy. We have focused our lifecycle management activities, so the ongoing studies, ones where we feel that there is a high potential, which is the prior inhibitor population, the registration And we will continue to drive towards an evaluation and communicate more and invest today.

Thank you, Phil.

We'll go next to Jeff Meacham at Bank of America.

Afternoon, guys. Thanks for the question. I know you've talked about, you know, label expansion for Voxogo being of the highest importance strategically. I guess the question is in the near term, what are the next steps in optimizing the current formulation for Vox Soga? I wasn't sure what the cadence of data coming up is for that.

Thank you. Yeah. Hi, Jeff. Pank here.

So big picture, absolutely. Your question started in the right direction, which is all of the activities that are underway to expand our CMP franchise into as many areas where there's potentially transformative medical benefit for children with statural impairments, not least of which is entering into a phase three registration enabling trial in hypochondriplasia. And as I delineated, we're now well underway in terms of a pathic short stature. And we're really making great progress with our long acting formulation. So in the category of additional presentations to delight patients. We have a lot of stuff that's also going on internally that, for proprietary reasons, we won't detail until we're ready to get a little further along. But suffice it to say that we have a lot of confidence in the future of the CNP franchise, number of different opportunities for treating and transforming the lives of patients, and a number of different approaches to take to give families as many good choices they can have for treating their children.

We'll move next to Salveen Richter at Goldman Sachs.

Good afternoon. Thanks for taking my question. On the strategic review here across the pipe levers for lowering effects from this line? And how are you thinking separately about the mid to late stage pipeline in this context and BD that may need to be done to, you know, to essentially add to the revenue pipeline on the board?

Thanks, Albine. This is Brian. You know, you broke up for just a second when you mentioned the line item you were asking about. Would you mind repeating which one?

Sure. The R&D line item.

Yeah, R&D, thanks. So as you noted, starting with your question, thank you, by the way, the strategic review is looking at both strategy and operations and efficiency, and we'll be eager to share details in Investor Day. But big picture, similar to the, you know, margin expansion narrative, just enhanced now that we've talked about in the past, It starts with a bit of core leverage of what we've built over the last many years, specific to R&D, you know, full end-to-end, early-stage research, clinical, regulatory to medical affairs, leveraging that engine. And then next we'll be streamlining the business and cost transformation, so doing that same work but more efficiently. And then third, as you're seeing today, is prioritizing the work on the right assets. So those three things. we believe will provide leverage. We'll share more details on what the specific levers are and the tools around cost transformation and business efficiency at Investor Day, but those are the three big levers. I'll hand it over to Hank on the pipeline question.

Yeah, Selvin, the portfolio evaluation we undertook was actually it started as a planned activity, but I think what's new this year, because we've been doing it annually every so often for the last several years, but what was new I think this year was of a higher degree of rigor and a higher bar set and a tighter commercial input as Alexander mentioned as well. And I have to comment that I'm very pleased about that tighter commercial connection starting under Jeff and looking forward to Kristin joining where we'll really be able to have the opportunity to look at assets which are both important and transformational to patients but also valuable to Biomarin as an organization. What didn't change in any of this review was this notion that we're going to do what we can to make a big difference in people's lives. We're going to leverage good biology to find those assets that we believe are highly likely to work. Increasingly, what we've been doing is tying the timing considerations of our portfolio to our emerging growth strategy, which kind of leaves then the last piece of your question over. I'll turn it over to Alexander to talk about your comments about the rest of the pipeline and potentially making room for later stage or other assets.

Thanks very much, Hank. Thank you, Sylvie, for the question. Yes, I mean, you know, we are – we have a real commitment to innovation at Biomarin. And, you know, we're excited about what we see in our early pipeline. We're excited about the three assets that we're prioritizing to accelerate. And we're extremely excited about the VoxOgra lifecycle management, which we are really excited at this call to be able to share some really significant progress, I think, as you heard in Hank's comments. But we also see that going forward in terms of meeting our ambitions for sustained growth into the long, long term, we see a role for external innovations. In the past, that's been very successful for us from an early research standpoint. We now see that there's an opportunity by dialing in on assets that could augment our existing portfolio, that leverage our distinctiveness, i.e. what we know and we know we do well, better than others, that we should be more open to those sorts of opportunities. I would just stress that our guidance at the moment for this year does not reflect any incremental BD activity. We will share more, and you'll have to get used to us saying this. We'll share more at Investor Day about our plans in the space. But in the interim, we've got no plans right now to transact major BD, but we do see a growing role for this in the future.

Helpful. Thank you.

We'll take our next question from Chris Raymond at Piper Sandler.

Thanks. So just on the leverage you guys highlighted here, the focus today is all on the R&D line. But I guess I wanted to ask on another important line item, which is SG&A. Biomarin's historical spending as a percent of revenue has been pretty meaningfully above that of your large cap peers. Yeah, and I know, you know, the last shoe, if you will, hasn't dropped yet with respect to, you know, all the transformation you're affecting here, Alexander, but any sort of thoughts there in terms of the potential, in terms of having, you know, maybe a more in-line SG&A line item?

Hey, Chris, this is Brian Mueller. Thank you for the question.

I'll start just to give you a little more color on the line item and then maybe hand it over to Alexander as he thinks about the opportunity. So I might reference back to the comments I gave in response to Salveen's question on R&D. It does start with leverage. So importantly, as you know, in order for us to get to the $2 billion plus in revenue, mostly through the base enzyme products business where we sell in almost 80 markets, very, you know, diverse, complicated global sales and marketing supply chain and related supporting infrastructure. That's the, you know, the level of operational capability that we built over the last decade and basically over the last couple years and now going forward, we're growing into it and making that machine work. It's that same infrastructure that's launching Voxogo that's driving a lot of the margin improvement that you're seeing last year and this year. It'll be that same infrastructure that launches future products, you know, grows the business from here. So it does start with leveraging what we built, recognizing that that was a significant investment the last few years. And then next, what we're doing is streamlining it. Again, our focus over the last several years has been that organic capability growth. We're now focused on optimizing the business. And in prioritizing, you know, we're also making sure we're allocating resources not just to the right places, you know, organizationally and globally, but in the right brands. Voxogo, with this growth we've seen and its future potential, you know, deserves more resource allocation. How can we continue to sustain this robust launch? And for the mature brands, you know, is there an opportunity to be more efficient there and recognize that while they're still growing, they may not require the same level of investment that they did you know, over the years. So that's the approach. Alexander, any comments on the opportunity?

Yes, thanks very much, Brian. Thanks for the question, Chris. Yes, I mean, you know, I've been very impressed by the potential leverage we have with our footprint, 70 countries, and the capabilities we have globally. So building off the leverage, you know, just like we've done with R&D, we're considering You know, how to really leverage the capabilities we've got to have a greater impact and to be more efficient. And that's one of the work streams that we have is cost transformation. It's looking at all the line items on our P&L to say, how can we now optimize that? So you can expect to hear more from us in an investor day about our specific plans on the G&A line. on the sales and marketing line, and additional efficiency in how we do research and development. This will all be rolled up into the long-term guidance we'll be providing and our path to significantly improved margins, which, as we've said, at the start of this year was one of our priorities. So more details to come, but it's certainly one of the areas of focus for us.

Thank you.

We'll take our next question from Akash Tiwari at Jefferies.

Hey, this is Amy. I'm for Akash. Thanks so much for taking your question. So first, what's driving the difference between the reported VoxObo demand increase and the revenue increase from the numbers? It seems like the demand is up more than sales from a quarter-over-quarter basis. Would really appreciate any color on how to reconciliate this. And then also, if we can sneak in one more, is there an increased appetite to divest the gene therapy franchise? And can you outline how much spend this makes up currently on OpEx? Thanks so much.

Thanks for the question, Amy. This is Brian.

I'll start and see if Jeff has any other color to add. I think what you're starting to see on the VoxOgo line is, you know, the consequences of its robust growth globally and, you know, a number of significant markets now online whereby we've got two things going on. One, some order timing. You know, we've seen that trend over the years with the enzyme business. You know, we're seeing a bit of larger, you know, for those markets that place less frequent larger orders. We're seeing some Voxogo revenue impacted by basic order timing. Two is the timing of patient additions. Being a chronic therapy, any new patient additions for Vox Ogo, especially in, say, the second half of the quarter, are going to be less revenue generating than patients that were on drug the entire quarter. So that's another dynamic that could just draw the disconnect that you mentioned. And then perhaps to the first point, there's some unique aspects right now with the supply constraint. through the supply constraint by managing orders at the specific market and SKU level. And that's going to throw the trends off a little bit. You might recall back in Q4 where we reported revenues over our guidance, not because we overperformed on patient additions, but because some additional supply became available, and so we shifted into the market. So we'll ask you to stay tuned. We're trying to provide information. the right metrics in terms of patients and ask you to follow revenues to watch those trends. It's a great question, but it is dynamic.

And Jeff's giving me a thumbs up, so we're covered. There was a gene therapy question whether divestiture is an option.

Yes, thanks for the question on Roktavian divestment. As I mentioned before, our focus right now now is making sure that we really establish what the Octavian opportunity is. And we've already focused our strategy around that. I talked already about the possible outcomes of our assessment. And one of them could be that we remove it from the portfolio and divest. That is not our focus right now. We are not engaging with people around the divestment of Octavia. Our focus is really on establishing the opportunity right now. But should we remove it from the portfolio, we will absolutely look at the options around divesting it.

We'll go next to Jessica Fye at JPMorgan.

Hey, guys. Good afternoon. On the pipeline, can you talk a little more about the long-acting CNP product you're prioritizing? What's the half-life there and the dosing frequency you're contemplating? And then just a quick one on BMN293, the gene therapy for hypertrophic cardiomyopathy. Is that one staying or going? I don't know if I caught it in the list. Thank you.

Hi, Jess. Long-acting, we have every reason to believe that the dosing interval there could be as long as weekly. But obviously, that's going to be informed by early human clinical trials to actually measure what that dosing frequency is going to be. On 293, that's a program we want to gather a little bit more information. We recently learned that there is a population of patients with a C3 deficiency in hypertrophic cardiomyopathy who are very severely affected with really poor outcomes as measured, for example, by short time to left ventricular assist devices or mortality. And we are actively working with investigators to understand better how findable those patients are and how interested and motivated those patients are. And finally, whether there's a regulatory pathway to a faster approval by virtue of the severity of their condition. As we've learned, the more significant the medical, the unmet need is, the more motivation there can be for the uptake of these novel disruptive types of therapies. So that's the additional information we're gathering, and we'll keep you informed as to decisions that we make about further advancement of 293.

Thank you.

We'll go next to Joseph Schwartz at Learing Partners.

Great, thanks very much. I was wondering, can we infer anything from the amount of savings that you expect to realize as a result of the strategic portfolio assessment of RMD programs, which you announced today about the amount of operating expense savings, which might be realized as a result of the remainder of the strategic and operating assessment, which is ongoing? Can you give us any insight into the relative degree of operating expense savings, which might remain to be realized relative to what you announced today, even if it's just a general order of magnitude?

Yeah, thanks a lot, Joe. It's a really good question given we talked today about the financial impact of what was a discreet, clear-eyed view on the portfolio itself. repercussions in the net reduced R&D were a consequence of that portfolio review, not the purpose. And from there, I would not make an inference on what the future potential savings are, you know, for two reasons. This was a review, top to bottom, of the current portfolio, and again, the consequence, but also the strategic review and the remaining, you know, optimization of the business is work in process. We'll have to put that latter part in the category of stay tuned for Investor Day to hear both the strategy, you know, both top-level business strategy, operational excellence strategy, long-term guidance, and we'll give color on all the line items, how we'll plan to be more efficient on costs. But to the heart of your question, I would not make that inference today.

Okay. Thank you.

Our next question comes from Gina Wang at Barclays.

Thank you for taking my question. I have one regarding Roctavian revenue of $0.8 million in the quarter. We also together with, I believe, many investors did a due diligence regarding exactly how many patients got treated in the first quarter. So based on our due diligence, we understand that Germany actually there's no patient got treated. and some investors did their due diligence. I believe a few patients got treated in the U.S. So the question here is 0.8 million. Can you remind us, you know, where that revenue is from? And also, at what point, the timing for you to recognize revenue, as well as pay for performance, the warrant, at what point you booked this? My understanding previously was gross to net, but just wanted to make sure.

Hi, Gina. Jeff here.

Yes, we are aware and have heard of some survey or due diligence work by yourself and others, but without knowing the methodology and so forth of the survey results, we can't really speak to them specifically. We can speak to our revenue. So, in the press release, it was noted that first patient was treated in Italy. and the revenue that you see in Q1 is tied to that first patient in Italy. Revenue recognition varies a little bit by market, but essentially, Gina, we can tell when product is shipped to patients. We're scoring revenue right around that treatment of patients, and so it If your question is, is it likely that there has been a bunch of patients treated and we're not seeing that in our prepared remarks or revenue, I think the answer is no. And maybe Brian could make some further remarks about revenue recognition.

Yeah, I think you've got it right, Jeff. Thank you. Maybe just noting the nuance in Italy is that Italy happens to be a market where title transfer and revenue recognition occurs before the actual dosing of the patient, hence the March revenue and the first week of April treatment. I'll share that in other key markets, like the US and Germany, that revenue recognition and title transfer is much closer, if not at the point of infusion.

Next.

We'll go next to Ellie Merle at UBS.

Hey guys, thanks for taking the question. Can you help us understand how you're thinking about the relative size of the opportunities between ISS and genetics short stature pathways and also as well as the level of clinical risk or clinical validation from the data that you've seen from the date between the two of these planned studies and just help us understand how you're thinking about the biology and confidence and activity and ISF as well as the genetic short stature pathways.

Yeah, maybe I'll start on the R&D science piece and then I'll look for help from Alexander on the market sizing kinds of pieces, although I can say a little bit about things like epidemiology. But, you know, from an R&D perspective, our confidence that CNP is going to work in conditions beyond hypochondriplasia is driven by genetics, and we've talked about where humans who have gain-of-function mutations in the CNP pathway are taller than their predicted final adult height would be, and patients who have negative mutations are shorter. So these are human, if you will, proof of concepts about exposure. There are also individuals who are extremely tall who have gain-of-function mutations in NPR2 or in or in its receptor. So a lot of biological data, but what's new now is we're days away from Dr. Dauber presenting his first 12-month cohort of using Voxogo to treat patients with either pathway conditions, in his case, Noonan syndrome, or with things that were formerly known as idiopathic short stature, because that term got coined before sequencing helped us to understand that specific mutations could be accountable for what was formerly known as idiopathic short stature. And had an opportunity, as has the Food and Drug Administration, to review those emerging data, which led them and us to conclude that there is a great prospect for benefit with the psoriatide in the treatment of these relatively more common conditions. So you've heard me talk about idiopathic short stature in terms of the volume of people. who are available. You know, it's something like two standard deviations below average stature encompasses, you know, two and a half percent of the, basically, the human population. So, we're talking about something that's a fairly large potential indication. I don't know if, Alexander, you want to add anything more about that?

You know, in terms of the size of these future indications, J.P. Morgan, we talked about how the indications beyond hypochondriplasia, so hypochondriplasia, ISS, Nunes, Turner's, shocks, in total represent about 600,000 patients compared to the total global addressable population for achondroplasia of 21,000. We're obviously going to be, and I just want to highlight this, that we're going to be going for a more severe patient population in, for example, idiopathic short-stature And you'll see if you go on clinicaltrials.gov, it's actually posted today. You'll see the design of our phase two study in ISS. So we'll share more at Invest Today about the TAMs for all the different indications. They represent significant multi-year growth potentials for FOXOGO. And it's really exciting to see and being able to share today, not just the R&D prioritization, but the progress we're making with VoxOga, not just the uptake, which is really exciting to see in a contraplasia globally with growth accelerating, but we've had really productive conversations with regulatory authorities. We have definite plans now, solidified, heard from... Hang on, can you... feedback from the FDA on ISS. We have clarity now of the duration of the study, endpoints, comparator. We have a very clear path forward in multiple of these indications and an opportunity to bring Vox Ergo to so many more patients around the world.

Great. We'll go next to Paul Mateos at Stifel.

Thanks so much. I was curious what the management team's current thinking is on the various competitors are in a contraplasia, you know, given that we're going to get data from a couple this year. And as you think about, you know, potentially, and I don't know if it's exactly, potentially giving margin guidance or commentary aspirations at the investor day, it feels like whether or not there is competition in the contraplasia is a key variable. So would love your perspective on that. Thank you.

Yeah, thanks very much for the question, Paul.

I really do appreciate it. You know, overall, we're feeling very good about where we are in achondroplasia, and now with the path forward in all these other indications starting to become really quite clear for us. Demand and the feedback from families is excellent. We see really good assistance and adherence to VoxOgo. And, you know, we're really, every day that we're on the market, clearly we now have over 3,000 patients now on Voxergo. We're really establishing a safety and efficacy profile that gives a lot of confidence to physicians to prescribe the product and also family members and parents of children, now infants, beginning treatment. I think, you know, from our perspective, You know, we've done extensive market research. We really understand these disease states. And it's really very clear that the most important thing for patients and caregivers, unequivocally, is safety and efficacy. And they will not sacrifice that for convenience. You know, I was reviewing with the team some of the market research, and I'll just give you a couple of examples. A caregiver said, a weekly or an oral would need to be within 5% or less the efficacy of VoxOgo, or I wouldn't consider it. Safety is an absolute. And a physician said, my number one priority for novel therapy is safety and efficacy. That won't be sacrificed for something more convenient. So whilst we believe with BMN 333, we're excited about it, The TPP for that is for it to be at least as effective and safe as VoxOgo with the potential for, as Hank mentioned, more convenient dosing. But we believe that VoxOgo is well set up to be a very robust competitor to any potential new entrants.

Thank you.

Our next question comes from Mohit Bansal at Wells Fargo.

Great. Thanks for taking my question. And staying on the competitor team, I think one of your competitor is also testing a longer-acting CNP in combination with growth hormones in Echondroplasia. How do you think about the rational there? And do you think you could do something like something similar for Voxogo? And then the related question is, in the ISS, trial that has been posted, it seems like you are testing against growth hormones. Is there rational to test it in combination with growth hormones as well in that indication? Thank you.

Yeah, you know, the efficacy of Doxogo and acondroplasia restores growth to a fairly physiologic level, over 90% of average stature growth, so it's hard to beat that in terms of efficacy. And so a little tough to rationalize combination therapy to do better than basically normal. I think the most important thing to be doing with VoxOgo as regards to improving long-term outcomes is to start therapy earlier, which was why we were so keen to have label extension into almost every market in the world where VoxOgo is available to almost from infancy. Because that's where you can make a big difference in the overall outcome. And again, probably doesn't necessarily warrant the addition of another therapy. It warrants starting therapy as soon as the condition is understood. And I think same story for ISS. We need to look at the data that comes out next month from Dr. Dauber to gauge how much of a stature of improvement we get and whether there is any room for improvement. But I wouldn't anticipate that being a key consideration. Finally, in the phase two study you mentioned, the inclusion of the growth hormone arm is really purely for internal reference so that we have a sense of, through randomization, what the sort of apples to apples comparison might be. As Alexander just mentioned, and I believe I steered us in the direction of, we do have agreement from the Food and Drug Administration on some really cardinal important points of the design of the Phase 3 program. Just to recapitulate them, we've agreed on the target patient population that is growth hormone naive. We've agreed on the endpoint, 52 weeks annualized growth velocity as improvement. And most importantly, we've agreed with the agency that placebo can be an appropriate comparator for the registration. We're well underway. Don't believe that we need to add other therapies into the armamentarium to augment the effect of Vasortide because it's doing just fine by itself.

Excellent. Thank you.

We'll go next to Vikram Pirohit at Morgan Stanley.

Hi. Good afternoon. Thanks for taking our question. So we had a follow-up on Roctavian. So you obviously discussed some of the reimbursement and market access challenges. the product is seen here to date, but looking forward, could you speak about some of the strategies you're putting in place now to help with the, I guess, the operational lift of the franchise, and how many months or quarters would you expect it to take for some of the challenges to be a bit less of a variable in the product trajectory, assuming the franchise stays in-house with Biomarin?

Thank you for the questions, Jeff. I'll field that one. As Alexander mentioned earlier, we're really focused on patient pull-through in the markets where we have reimbursement approvals. So a reminder, that's the U.S., Germany, and Italy. Patient pull-through is really the last mile that we've experienced the challenges with. So we think that establishing proof of concept and pulling those patients through that last mile and getting them treated is what we need to do on a going forward basis. How long that will take, undetermined. Alexander already mentioned that at investor day, early September, criteria will be laid out for what that looks like. And the other thing I would comment on is, in Europe, in most cases, The commercialization starts with the price and reimbursement approval. We got the GBA approval listed in December of last year, four months ago. In Italy, that was three months ago. So one way of looking at the situation, at least in Europe, is to say perhaps the clock started ticking three to four months ago in those two target markets. So, thinking about how long that might take during the course of this year could be instructive.

Thank you. Thank you.

We'll move next to Tim Lugo at William Blair.

Hey, guys. This is Lachlan on for Tim. Thanks for taking the question. So, you've identified VocLogo as a strategic priority and have obviously made a lot of progress on the development front and new indications. Is there anything you're doing on the commercial front there too? Because I noticed you obviously added a much larger number of patients this quarter than last quarter. So I was curious if that's sort of a result of any direct initiatives or actions you've taken or just the maturing markets and increasing supply.

Yeah, well, We're very, thanks very much for the question. We're really happy with the progress on Voxergo. I mean, it is one of the priorities as we set out. This drug has tremendous potential in achondroplasia, as we talked about extensively in other diseases. So right now it's in achondroplasia, and that REM is accelerating. We added 500 patients in the first quarter compared to adding 300 patients in the fourth quarter of last year. So we're seeing that growth actually accelerating. This is driven very much by the zero to five ability to use the product from birth, which is now in many, many geographies around the world. And it's good to see that that growth is actually consistent across the major markets, with the U.S. actually driving the most growth which is great to see because this was where we didn't have the same route. We're now seeing that. And I think the zero to five and the team is really focused on that, as well as the other things that we've been doing, the same bearing fruit, which is really focusing on the pediatric immunologists, making sure we've got referral pathways, setting up the skeletal dysplasia clinics, which are going to be very important, not just for achondroplasia, but also for the subsequent applications. So the team is really driving on all cylinders in all geographies. There's one thing that actually I do want to say, which is with regard to supply, we mentioned in our prepared remarks that we will be hitting supply levels, which we'll be able to meet demand in the middle of this year. But we have really good news to share with regard to the maximum supply available this year. So in January, at the JP Morgan conference, we shared our supply plan for FOXOGA, which is obviously very, very critical, especially as we accelerate our lifecycle plans and ambitions for this product. We are now going to be able to supply, by the end of this year, 8,000 patients, supplies worth of FOXOGA. If you remember from January, that's what we said we would achieve by the end of 2025. So the team here in manufacturing has moved this up by one year. And this continues to give us confidence that even as we ramp up demand for VoxNogo, by the end of this year, we're going to be able to meet that demand.

And that is all the time we have for Q&A today. I will turn it back to Alexander Hardy.

Well, thank you all for joining us today. I hope you've heard and it came across that how hard this team and all the teams across Biomarin are working right now to shape the future corporate and R&D strategy for Biomarin. And we're setting very ambitious long-term financial targets and we're starting to deliver them. we've got a real sense of urgency. I think that comes across. And we're really looking forward to sharing our vision with you and our full plans with you all in New York Investor Day on September 4th. Meantime, thank you very much for your attention. I wish you all a wonderful evening. Take care.

And that does conclude today's conference call. Again, thank you for your participation. You may now disconnect.