... Good morning, everyone, and thanks so much for joining us for our next session. I'm Steve Seedhouse with the Cantor Biotech Team. It's really a privilege to welcome our next participating company at the conference, BioCryst Pharmaceuticals. Thanks to everyone on the webcast and in the room for being here also. And I'm joined on stage by CFO Babar Ghias.
Yeah
... and President and CEO- CCO, excuse me, and I guess there's a lot of change in the titles, so we'll say emerging CEO as well, Charlie Geyer. Thanks so much for being here. Would love to pass the mic over and just ask for an intro to BioCryst, current state of affairs, outlook for the rest of the year, for some opening comments, and then we'll dive right into Q&A.
Sure. Thanks, Steve. We're really pleased to be here. Babar and I will be making some forward-looking statements. Those statements have risks. You can find those risks in our SEC filings at biocryst.com. BioCryst is in a really exciting place right now, and I'm excited to be taking over CEO in January, because we have ORLADEYO, which is going to sell $580 million-$600 million globally this year and is growing at about a 20% CAGR. We are in the process of actually selling our European business, which will close early in October, and that's gonna give us an opportunity. That's actually a business that, while commercially was going very well, was not profitable for us.
And so the $250 million we get from that deal is gonna allow us to really improve our balance sheet, and that creates more options for us. We have an emerging pipeline that we're very excited about. We expect to have patient data later this year in first of all in our BCX7725 in Netherton syndrome, a rare very serious dermatological condition, and we think that has the potential to be another market like HAE. And then we've got our Avoralstat product that we're testing for DME, and we think that there's a role for a kallikrein inhibitor in DME, and we'll have patient data as well at the end of this year. So we're set up very well, and we're excited.
Babar joined us earlier this summer as CFO and also the head of corporate development, so another part that we're adding to our strategy is the ability to go out and look for incoming BD deals to add to our portfolio. So it's a very exciting time for us.
Yeah, you... Maybe I'd ask Babar, you can follow up with some comments, 'cause my next question was just on the timing of the management change and just both of your strategic outlook now on the new BioCryst. And certainly, the company has been sort of putting out the bat signal of interest in acquiring assets and being the consolidator of rare disease assets in the U.S. So would love to get your perspective on just what the next five years of BioCryst are gonna look like, and what type of company and franchise you, you're looking to build.
Yeah, absolutely, and I mean, if you look at it, our first pillar of strategy is do no harm to ORLADEYO. ORLADEYO is on a great trajectory. Pipeline is doing great early, and we're going to balance this out with more of, like, you know, what's the in-between, and what we'd ideally like to do is launch another product because of the great infrastructure that we have built, and I think we can leverage a lot of that infrastructure, so we would be ideally looking to bring another product to the market over the next few years, so when you talk about the next five years, I think that's the perfect horizon for us before the end of the decade.
ORLADEYO will still continue to grow, and we are able to bring out another product, and then the pipeline can provide growth beyond this decade. So I think that is another strategic priority for us, bringing something late stage, orphan. We continue to be an orphan disease-focused company, and then naturally, you know, leveraging the infrastructure that we've put already on such a successful path, use that with another product.
Charlie, just maybe stylistically going forward, I mean, as you step in ultimately to the new role as CEO, anything that you would maybe guide investors to expect differently or anything that you would carry forward as, you know, what folks are familiar with with BioCryst over the years?
Yeah, I think there, from the standpoint of what carries forward, as Babar was commenting on, ORLADEYO is going great. Like, we have really shown that we can commercialize rare disease products extremely effectively, and we can figure out with products that may... You know, others may not see the same opportunity. Just like ORLADEYO, we saw something in ORLADEYO early on, and we were able to execute on that. So I think that is something that will continue, and we really want to double down on. BioCryst, for all its existence, has been built on discovery and development of our own products, and we'll continue that. But what's great is we don't have to depend on that anymore because of what we've built with ORLADEYO.
So I think it's a mix of what stays the same and continues, but then we're adding to it, because we're in a stronger position.
Okay, before I even get into some of the questions that I had written down, I wanted to follow up on just the EU business and the fact that that wasn't profitable. I mean, is that a dynamic in HAE that holds for other regions beyond just Europe, where it's just gonna be very difficult for a BioCryst to turn profitability? Or what drove that relative to, obviously, a business that, as we sit here today, is profitable in the U.S.?
Yeah, what drove that? Our strategy was to continue to build and launch future products in Europe. We had Neopharmed Gentili, an Italian company, come to us with a really attractive offer. They wanted our team and our product to build a rare disease consolidator strategy in Europe, and the $250 million plus another $14 million in future milestones was just an offer that was really full value for the whole future of that business. The European business was still attractive if you can add more products. It's expensive-
... to run a business, and then, you know, obviously, the pricing isn't quite the same. So it was attractive, but not as attractive as the U.S. market. Other regions will, you know, it'll vary. We still have our Japanese business, and we expect that to become profitable because we have good pricing there. But this just made sense for us right now, and it allows us to focus primarily on the U.S.
Okay, so ORLADEYO, you mentioned several times, and I agree, I mean, that, that, you know, the productivity and the growth there has been tremendous, but the market dynamics are shifting. There's a couple of new approvals in prophylaxis, in Andembry and Donidalorsen. Just remind us sort of how you're viewing the impact of that competition, expectations you'd wanna set, and really, any early impacts you might already be seeing in terms of switching or competition for new patients.
Yeah. We've a part of our success, as I said, has been the deep research that we do, and so every year since before launch, we do a big study to do our best to forecast the future of the market. So we survey a large number of patients, and physicians, and payers, and get their preference view on all current and future products, and then we run that through a big simulation model, and it's been very predictive of where ORLADEYO has grown to. What that model and the research tells us is, these new injectable products, and while it's great for patients to have new options, the going from a two-week injection every two weeks to every four weeks isn't a big market changer for patients.
Mm.
We don't think it's gonna have an impact on the trajectory of ORLADEYO, because we have the most differentiated product, with the only oral, once-a-day prophylactic therapy out there. What we expect is more of the continued growth. We actually think that competition is good, because it creates more discussion around switching, and we know that most patients would actually prefer to be on an oral prophy if they could. Competition actually creates some opportunities for us.
Interesting. So, it's almost as if, "Hey, there's these new therapeutic options for you, but by the way, have you considered ORLADEYO as well?
You should, if you haven't done this already, you should try this now. If it works for you, you should expect fantastic efficacy. If it doesn't work for you, then you have other options you can move on to. So that is an effective story for us.
I mean, the other dynamic I think it would be worth commenting on there would be the availability now of an oral on-demand therapy in sebetralstat. And for the first time now, a patient would have the option of oral ORLADEYO, oral on-demand therapy, no injections in their life, in theory. Are you expecting a positive tailwind from that? Have you seen any early indication of people moving to the oral-oral?
It's too early to comment on exactly what's happening. We've heard physicians, though, they come up with... What they say is, "Oh, again, an all-oral combination. This will be great for patients." So we do think it has the potential to be a tailwind. I think it's gonna take several quarters to see if that's the case, but it could be something that attracts more patients to ORLADEYO. And it could also be something that helps more patients stay on ORLADEYO if they are able to treat breakthrough attacks with an oral on-demand therapy.
Yeah.
We think it's, again, it's great for patients.
Do you have real-time insight into if a patient switches from ORLADEYO to Andembry or one of these new launches? Can you see that happening, and if you can, have there been any patients that have actually made that switch?
I, I'm sure there have been. So yes, we do. We get pretty good information when a patient switches, if they tell us where they go. In the past, as you can imagine, the majority of switches were to Takhzyro, the market leader.
Yeah.
So I think what will happen is some of those switches will now go to Andembry. If ORALADEO doesn't work for you, that's, that's natural. Uh, we don't expect it to change our trajectory, but I'm sure we'll lose patients from Andembry-
Just divide by the pie chart.
... to Donidalorsen. Yeah, that's, that's to be expected. Nothing to worry about. Very, very standard.
Okay, I mean, given this franchise that you've built in ORLADEYO, I mean, what is the line extension strategy? I mean, how can you protect this potentially billion-dollar franchise?
Yeah
... as you're expecting?
We do this in a couple of ways. One is that we generate a lot of real-world evidence. Part of this has been one of our real competitive advantages in our sole source model. We are able to collect information from patients on a monthly basis about their attack rates when they start ORLADEYO, what's their ongoing attack rate, and then we're able to bring that out to the market, to physicians, to educate them about the efficacy of ORLADEYO, and that's really led to more confidence in the product amongst prescribers. So we're gonna keep doing more of that. The other thing we're very excited about is the pediatric indication with ORLADEYO granules.
We have a PDUFA date, December 12th, and that has the potential to open up the age two to under 12 market for us. We think there are a lot more of those kids that actually could benefit from a prophylaxis therapy than has been understood in the past, and an oral product clearly is an advantage. For the most part, it's a family disease, it's a genetic disease, so in a household, you're gonna have mom or dad usually on some prophylactic therapy, kid on a prophylactic therapy, so it's another way to introduce ORLADEYO to a broader audience.
I guess I was thinking about it more from the standpoint of presumably you're not just gonna ride out, you know, the market exclusivity for ORLADEYO, and then you're no longer-
Yeah
-involved in HAE. I mean, you've built this-
Yeah
expertise, you've built this leadership position. I've been surprised that there hasn't been more innovation behind ORLADEYO on the oral side in HAE.
Yeah.
I mean, there's one asset-
Yeah
That's coming up on phase three data, but beyond that, you know, it's gene editing, and it's RNAi. And so that seems like-
Yeah
An opportunity maybe to build the next generation or acquisitively just protect the franchise, right? Maybe think about combo therapy.
Yeah.
How are you thinking about that long-term?
Yeah, so no, so first of all, ORLADEYO has really strong patent protection. So we have composition of matter on the base until 2035, on the salt until 2039. So what we see happening is we'll actually reach peak of $1 billion in global sales around the end of this decade, and then we have the potential to maintain that for the better part of a decade. Developing oral drugs for HAE is difficult.
Yeah.
There are many companies that have failed, including ourselves. Our first-generation product failed. And so what we've decided is the best use of our resources is keep investing in what we're doing with ORLADEYO, but then, as Babar was talking about, bring in other products to build our portfolio from outside, and then we'll keep building from inside as well.
How has net, net pricing been evolving, and any expectation that that would change with sort of this boom of prophylaxis options?
I think we're in really good shape this year. Our gross to net is about 15% off of list price for paid patients. We think that we're in a very good spot because now we have 1,500 plus patients on ORLADEYO, so payers view us view ORLADEYO very differently from how they viewed ORLADEYO five years ago. So from a market access and pricing perspective, we feel like we're in very good shape.
Okay. Moving on to the pipeline, then would love to cover some of those exciting programs. So Netherton, first of all, you know, rare disease looks... I can hardly look at the pictures. I mean, super debilitating for these young children, and, you know, it resolves, I guess, or improves somewhat over time, but certainly for those kids, I mean, there's a huge unmet need here. So can you talk about your program? Just how many dose cohorts are you sort of studying early on, the type of patients you're enrolling, and the data that you anticipate generating this year and into next?
Yeah. So for those who aren't familiar with Netherton syndrome, it's kind of a classic rare disease where there's a genetic mutation that causes patients not to have a key regulatory protein that controls skin turnover. So basically, you know, for a normal adult, your skin will turn over every four to six weeks. For Netherton syndrome patients, it's more like every two weeks, and so there's constant body-wide skin peeling, redness, itchiness, puts patients at a greater risk of infection. Other like atopic conditions, so asthma, food allergies are common, and like you mentioned, for kids with this, kids' skin turns over even faster. So for young children, it can actually be life-threatening. For adults, it's just very debilitating over time.
Our drug replaces that missing protein, so we think we have the potential for an every-two-week injection that can restore normal skin turnover. So where we're at, we've done healthy volunteers, SAD and MAD. We haven't released that data yet, but we're starting into part three and then part four of our study. Part three is going to be a small number, about six patients, Netherton patients studied for four weeks. So they'll get three doses over a four-week period, and then we'll track them over time after that. And then part four will be a twelve-week study.
What we expect to have at the end of this year is probably less than a handful of patients from the part three of the study, where we'll be looking for evidence that the drug is getting where it needs to get to, which is in the epidermis, and that it is binding to the uncontrolled KLK5, that the normal SPINK5 protein would be controlling. That's what our drug will hopefully be controlling. So we'll look to see if we're getting the drug to the skin, and then we'll look for early signs of improvement in skin turnover. With the part four, we should be able to see, you know, within a few months, are patients having more normal skin turnover restored?
And my understanding is you can... Those PD readouts in terms of on-target activity, you can do that by sort of the shedding of the skin.
That's right. There's two ways. We'll be getting skin biopsies and then also skin stripping, so basically like a tape where you take off the top layer, and then you can test to see if the drug is getting in there, and importantly, is the PD effect there? Is it binding with KLK5? And so those are the data in addition to, of course, safety data and general PK data that you should expect at the end of this year.
How well understood is the regulatory path here? Would you be laying that path and-
It's. There's never been a drug approved for Netherton syndrome. There are other rare disease products that have been approved on similar types of physician and patient-reported scales of improvement, and so we will. As we get this patient data, we'll be having more conversations with the FDA about that regulatory path. What we do believe is that this has the potential to be a very small, pivotal study-
Mm
... if we have, if we show that strong effect. It's all gonna be about the effect size that we see... and so we're hopeful this is a program that can move pretty quickly.
Okay.
The patient need is certainly there.
Okay. Moving to DME, which is another very interesting program and data that would be forthcoming, what magnitude of effect? I guess retinal thickness here would be the key efficacy endpoint to look for. What are you hoping to show in terms of magnitude of effect in this study?
So for this, we're doing the SAD study in DME patients. So in this case, one dose with avoralstat delivered suprachoroidally. So avoralstat was our original HAE drug, was a terrible oral drug, but actually, we think the properties that made it bad at being an oral drug make it perfect to sit at the back of the eye, dissolve very slowly, and inhibit kallikrein that we think is an alternative path to swelling in DME. So in this first study, what we'll be looking for, in addition to safety, is are we reducing central subfield thickness? We'll be looking for an effect of probably 50-70 microns reduction, and then very importantly, what is the durability of that effect?
We'll be following patients to three, six months and beyond to see is that swelling reduced, and then is it... does it have the potential to be an every six-month injection? We'll, of course, collect visual acuity as well, but we're only talking about nine patients in this first study with three dose cohorts. We wouldn't expect a lot on the visual acuity side.
So in those three dose cohorts, how confident are you in the dose selection here and your ability to hone in on an active dose, particularly because the delivery approach here is, like, novel for the indication? It's been used elsewhere, but-
Yeah
... are you able to triangulate that device? You have experience with the molecule and HAE, the disease. How does that all fold together?
Yeah, we have a lot of safety information on the molecule, so that's good. It's been studied systemically. What we'll be looking for is again, does the drug have an effect for long enough? We saw great effect and durability of effect in animal models. We're optimistic from that standpoint.
Remind us, was that with the same injection device?
That was with the suprachoroidal, so in rabbits, we see that it's actually maintained past six months. And you can do it in rabbits because of their larger eyes. We have to prove that in patients as well. We think that the three doses could show the effect, and if not, you know, we have the opportunity to go to cohorts higher than the three doses.
Okay. Babar, just maybe to bring you back in here, and this is a conversation that I really want to have, with you both, which is the strategic outlook and just, you know, this messaging that we talked about at the start of the conversation of consolidating rare disease assets-
Mm-hmm
... and building on what you already have with ORLADEYO. I guess the first question is, what therapeutic areas are of interest to you?
Yeah, no, and I think, as we mentioned earlier as well, that, the priority number one is to make sure that we stay in rare diseases and leverage the infrastructure that we've built. So we're not trying to fill up a bag, let's say, for our current sales force team. So naturally speaking, allergy, immunology, call point is of great strategic interest to us. But beyond that, when we think about rare diseases, we have a program in Netherton syndrome, so that opens up to rare derm indication and derm specialty.
But as you go along the sort of broader rare diseases, we are not going to be a solution for every rare disease, but something that has the characteristics of more like HAE, where there's a patient population of, let's say, 10,000 addressable patients, where you can approach it with a single source pharmacy, leverage a lot of the infrastructure. And when I say infrastructure, building a sales force team, we have 40 sales reps. It's not a large encumbrance, right? It's the infrastructure that we've built, the patient services, the market access, the HEOR, all the systems that we've built, that's the investment. That is plug and play for any new opportunity we bring in. So the incremental investment for any therapeutic area is very minimal compared to, you know, what, let's say, starting to build a new team altogether.
Okay.
So I think like some of these allergy, immunology areas of great interest, rare derm, metabolic diseases, anything where we can actually create, use that infrastructure and create a lot of leverage.
Indeed, and stage of development, I think you've said that you're leaning towards late stage, but maybe just characterize that for us?
Yeah.
What are you thinking now and...?
Yeah, and again, to your point, in terms of the defensive strategy, you know, we'd like to bring a product in the next two, three years, and certainly in this decade, to basically continue to grow our business. So that puts us in more of a later stage spectrum. Our pipeline is early, and that will continue to bring sort of points on the board if it progresses well, like on the later part or early into the next decade. But you know, there's a convergence at some point of doing deals and bringing your internal pipeline that they're basically... So the first deal has to be very strategic for us-
Mm-hmm
... and has to, you know, tick a lot of boxes, in terms of, you know, are there synergies with our system? Are we able to commercialize it? Can we make an impact over there? So naturally speaking, our focus in the nearer term will be on later stage, and then that opens up the risk appetite for follow-on deals where we can take a little bit more risk.
Okay. Yeah, and in terms of, you know, where the rubber meets the road here, ultimately, I mean, what-- how large of a deal can BioCryst do, and what structures-
Yeah
... of a deal are you open to? And has that changed?... from six months ago, 12 months ago? I mean, where are you at today? And just help us understand where you've come from, because I think you may- you've been in the market, I think, and interested in this-
Yeah
... strategically for some time, but certainly now at a different scale, and the company's profitable, and you're at a different place, so.
Yeah. Let me address the sort of scale perspective question first. And the affordability and the scale question is along two parameters, right? A, it's what are the business fundamentals for us? And now, as we've shared with you, when the European transaction closes, we haven't actually guided to for next year yet, but you know, that allows us the ability to clean up the balance sheet, but also we will have significantly improved margins. We are losing $50 million, but we're losing more than that. So I think our profitability over the coming years is going to continue to grow, and then because of that, the cash flow generation will be significantly stronger compared to prior years. The second thing is in terms of like what's the asset profile that we're going after?
If it's a later stage asset and has a higher addressable market, naturally it'll come with a price tag that has to be, you know, sort of taken into consideration. Now, that being said, we will continue to be very capital disciplined. Just because we're, you know, generating cash, it doesn't mean we're going to bet the farm and, you know, basically recklessly going to spend. I think it has to be very strategic.
Mm-hmm.
So, you know, we will work with our board in terms of making sure what it does for the business. Now, naturally speaking, something that is truly transformative, that's in a totally different, you know, zip code. So I think our first deal has to make a lot of sense-
Sure
... so that investors can also understand that like, yes, this is a natural extension of the strategy. To your point, in terms of structures, I think at this point it's a great environment. There's a lot of opportunities out there and you can structure it in various different ways, whether it's staged asset deals or, you know, licenses or company acquisitions. I think all of those options are on the table at the moment, and it is a market where there's a lot of willing sellers as well because of the dislocation of capital, whether it's public or private.
Sure
... you know, for these biotech companies.
What are-
I was just gonna emphasize one thing that Babar said, like in the commercial infrastructure, it goes beyond just straight commercial, too. I mean, you need more finance people when you're a commercial company than you do when you're just a R&D company.
Yeah.
You need a lot of other functions, and BioCryst has built that. I think the current environment for R&D companies who have their first lead asset maybe getting in that commercialization zone, they have to decide, are they really gonna invest in everything that it takes, or does it make more sense with a company like BioCryst? We think there are a lot more opportunities out there than perhaps are sometimes realized, both in public and in private companies right now.
Maybe I'll just ask directly to the extent you can answer. I mean, sort of, how advanced are sort of ongoing conversations, and how willing are sellers in this market, either on the public or the private side, and just what are you seeing in the market right now?
So on the willingness, very high willingness. You know, naturally there are companies and again, this goes back to the point, even if you're a. Let me just address, even if you're a public company in phase three, but you are sort of, let's say, a year or so away from an inflection point, you need to be spending that capital right now. And I don't think many companies in the market right now are willing to, or the boards are saying, like, "Go spend capital or go raise another equity round to be able to spend on commercials." I think that creates a natural opportunity. And launching a drug, getting a drug approved is great, and launching a drug is also very challenging, you know, aspect in terms of the investment that requires.
So I think we find ourselves in that point where a lot of these public companies as well are willing to talk, where historically they weren't, because that inflection point is, you know, at least 12-18 months away, and they still need that capital. So I think that creates one opportunity. The second thing is also private companies. And private markets are even more dislocated in that sense that venture funds are not necessarily doing that aggressively, the top-up rounds, because the step-ups have not been there and the public markets are not there. So that kind of creates that sort of, you know, that cycle of like, you know, hey, seek partnerships, seek M&A, seek other alternatives to capital, where ventures dollars do not have to go in, and you can get a mark on that investment.
Yeah.
So I think that sort of appetite we're seeing has increased both from the public and the private side. The other thing that is like, you know, because of confidentiality, we naturally cannot say how advanced or whatnot, but I think suffice it to say that it is really a buyer's market if you have that infrastructure-
Sure
... and you are not dependent on just like, you know, raising capital to do a BD deal.
I mean, this, it's consistent with what I think all of our in-the-room intuitions are in this market right now. But it's good to hear, you know, somebody who's out there, you know, having these conversations, that that is in fact what, you know, the reality is on the ground. Maybe I just wanted to also ask, and again, if this- if you can't comment, it's okay, but I'll try anyway. I think you said publicly, I mean, with the money from the EU asset sale, you, you'll clear off the debt from the balance sheet and... But presumably, you know, you could use leverage, that there would be debt available on better terms than maybe that.
Yes.
Synthetic royalty on ORLADEYO maybe is something that you could think about in terms of financing a deal, or just cash on the balance sheet, right? Given the profitability. And then, of course, some stock transactions.
Sure.
Like, would you exclude any of those ways of financing a deal, or is everything on the table?
I think I would say anything and everything is on the table for the right type of deal.
Okay.
You know, naturally, every CEO, every CFO says, "My stock is undervalued," so there's a natural inclination that, what am I using my stock for?
Yeah.
But to your point on debt, historically, there were certain avenues of capital, like bank debt or term loan markets, because we did not have EBITDA.
Yeah.
You know, we're getting to that point-
Yeah
... where basically we'll have last twelve months, you know, look on like EBITDA. So I think that opens up plenty more avenues of capital. And the fact that I mentioned that, you know, we will have significantly improved business fundamentals because of the divestiture and the ramp of ORLADEYO, that it gives us a big margin in terms of absorbing new opportunities and still maintain our profitability and cash flow generation.
Okay, well, it's obviously an exciting time for the company. We're looking forward to seeing anything that manifests there and, of course, your pipeline readouts and the continued progress of ORLADEYO. And just wanna thank Babar and Charlie for joining me on stage here. Thanks to everyone for listening on the webcast and in the room, and hopefully everyone has a great rest of the day at the conference.
Thanks, Steve.
Thank you for having us.