Good afternoon and welcome once again to TD Cowen's 44th Annual Healthcare Conference. I'm Phil Nadeau, one of the biotech analysts here at Cowen, and it's my pleasure to moderate a fireside chat with BioMarin Pharmaceutical. We have with us today Brian Mueller, the EVP and CFO, and Traci McCarty is also here, I believe, somewhere in the room. So Brian, first I'll hand it to you. Can you give a brief state-of-the-company overview, biggest strengths, biggest weaknesses? What do you think BioMarin needs to do to create shareholder value over the next 12 to 24 months?
Of course. Thank you, Phil. Appreciate you having us. Hi everyone, thanks for attending. BioMarin is truly at an inflection point. We've shown the ability to develop and commercialize innovative therapies over our 25+-year history. That has delivered a portfolio of eight internally developed products marketed globally, over $2.4 billion in revenue, and now the somewhat rare milestone for an independent biopharmaceutical company to reach profitability and sustainable profitability. The inflection point is that to advance, to be our aspirational, the leader we want to be in large biopharma over time is going to take a bit of a different strategic approach, whether it be how we manage and grow the business, how we allocate our capital and resources, and where we focus our scientific strategy. Importantly, we are under new leadership with our CEO, Alexander Hardy, that joined in early December.
So he's just a little over three months into the job. He succeeds J.J. Bienaimé, of course, who was at the helm as CEO for 18 years and built this great company. But as we look ahead to BioMarin's next chapter, Alexander, who's joining us after being the CEO at Genentech for the last several years, he was at Genentech in total more than 15 years. Alexander's priorities are squarely aligned with what we believe are the key opportunities to create shareholder value. Briefly, those are accelerating and maximizing the VOXZOGO opportunity. VOXZOGO currently approved in a achondroplasia. It's been on the market a little over two years and has had an excellent launch. We just reported $470 million of VOXZOGO global revenues for 2023. Next opportunity is to establish the Roctavian opportunity. Roctavian is a gene therapy indicated for severe hemophilia A.
It has a clinical and safety profile that has reduced bleed rates and given patients in our clinical studies freedom from their former standard of care, which is regular injections of prophylactic factor VIII. We're focused on building and accessing the marketplace for Roctavian, but establishing it is the priority. Also important to say, we're going to let Roctavian revenues do the talking going forward. We recognize that there's still uncertainty in the marketplace, and we're not going to predict how and when some of the remaining mostly logistical hurdles on reimbursement will clear. And again, watch actual revenues. Third is prioritize the R&D portfolio. We want to focus on the right assets and have a high bar for development candidates that are transformative for patients and value creating for shareholders.
We've got a lot of assets under development, and the hope is that we'll pick the right assets to move forward and even accelerate. Then, of course, the last priority, which is really important to me as CFO, is accelerating our profitability growth. I mentioned a few moments ago our transition to be at the $2 billion revenue level. We reached non-GAAP profitability a few years ago. That was the first sort of milestone GAAP profitability in 2022, and growing in 2023 was really a key milestone. Now we're focused, after reaching profitability, on maximizing the full potential of our business. There's a lot of leverage opportunities in our global business. We're planning on robust top-line growth, which is leverageable to the bottom line. But we also have an opportunity to optimize our operations and cost structure to where we can grow profitability even faster.
We're currently undergoing that review along with other strategic reviews like the R&D portfolio. But I'll share that for 2024 guidance, we're projecting between $2.7 billion-$2.8 billion of total revenues. At the midpoint, that is 14% growth over 2023. We're projecting a non-GAAP operating margin of 23%-24%. Again, a significant improvement over last year. Our focus on profitability has been both getting to the bottom line profitability result itself, but now actually growing EPS and margins. Over the last three years, we've grown our non-GAAP operating margin by about 13%. So we're committed to operating margin and EPS, which is growing at 30% at the midpoint of our 2024 guidance over 2023. But it's not the end of the story.
Again, we believe that by our robust top-line growth, optimizing our cost structure, but yet still continuing to focus and prioritize innovation, is going to allow us to be both a scientific leader and a strong financial growth story.
You alluded to the strategic review that's being conducted. I think the first question we get from investors these days is, what are the possible outcomes of the strategic and operating committee's review? So exactly what elements are they looking into? What are some possible scenarios for how BioMarin could look after?
Yeah, thanks for the question, Phil. So the SORC, or the Strategic and Operating Review Committee, which was established late last year into this year, they are responsible for a broad review of the company's strategy and operations. That includes both across the general categories of creating shareholder value or opportunities to create shareholder value. So on one hand, there's some corporate strategy elements there, including R&D strategy. And that's why, as part of the workstreams that we're executing here ahead of Investor Day, this R&D prioritization effort is a key component. There's a number of financial strategy elements to the SORC's review. First is developing the hypotheses for what our growth targets should be to be able to generate shareholder value over the next few years. That should ultimately culminate with our expectation to give long-term financial guidance.
I'll ask you to stay tuned on the specific elements, but you can imagine a top-line and bottom-line aspiration. Then capital allocation strategy. So if we're starting to work on optimizing our portfolio and we're starting to work on optimizing our P&L, the next step is to make sure that we're deploying shareholder capital in the most value-creating ways. So again, working through all the options of investing in the business, external innovation, return of capital to shareholders, it's all part of this broad strategy. Another part of the work of the SORC is a planned Investor Day. So all the key outcomes of this strategic review will ultimately be communicated externally at an Investor Day later this year.
In terms of the four priorities you mentioned, maybe we'll walk through beginning with VOXZOGO. You note that growing VOXZOGO is a key priority. How is BioMarin approaching VOXZOGO in 2024 differently than it did in 2023 or 2022? And where are your priorities for driving growth of that franchise?
Yeah, thanks for the question. Important to note first, I think, is just the impressive growth rate for VOXZOGO itself. So again, for those of you that may not be familiar with VOXZOGO, it is a subcutaneous injectable approved for achondroplasia, which is the most common form of dwarfism. We've shown in our clinical studies that we can achieve growth rates for achondroplasia patients that start to approximate normal growth rates. I'll come back to some of the clinical data in a moment. In terms of what's different in 2023 and 2024, again, the backdrop has been this strong launch. We more than doubled the number of commercial patients in 2023 compared to 2022. As we finished last year, over 2,600 patients were on commercial VOXZOGO globally. So that's a lot of momentum to keep up with.
But one key development in something that's going to be different and positive in 2024 is the recent age label expansion. The FDA approved VOXZOGO for use down to the age of newborn back in Q4. And likewise, the European authorities approved the use of VOXZOGO in ages above four months, which is pretty close to newborn. Before that, the label started at approximately age five or around age five outside of the U.S. because that was the age group for which we ran our pivotal study. And usually in rare disease, the label matches your phase 3 study design. And so for BioMarin, developing the safety and efficacy profile of VOXZOGO in these younger children came with a second study, which was conducted and read out after the original phase 3. But we filed that, got the approval.
And not only is that important because, as you can imagine, with a growth disorder, the hypothesis is that early intervention and longer treatment is going to lead to better lifelong outcomes. But this is a massive portion of the population. If you think about just normal age stratification and the ability to now have these families of achondroplasia infants receive the benefits of VOXZOGO, it's the more likely age because of that hypothesis of receiving the most benefit. VOXZOGO is indicated for all ages where the growth plates are open. So that could be teenagers. But you could imagine the evaluation for a late teen whose growth plates might be open, whether they should start VOXZOGO versus that newborn infant where mom and dad just got the diagnosis and they're asking about available treatments and now VOXZOGO is available.
In fact, we shared as part of our Q4 reporting that in the U.S., since this age label expansion into infants, about 70% of our new patients starts in the U.S. were in this younger age group. We think that's a good signal of the demand opportunity there.
Where do you think you are in terms of penetrating the U.S. market and penetrating the worldwide market? I think one question we get all the time from investors is, will VOXZOGO plateau anytime soon? Where do you think you are in the growth curve?
Thanks for the question. First of all, we're selling VOXZOGO in over 40 markets globally. By the way, it's a good example of the leverage of our commercial infrastructure. We sell most of our base business products in up to 80 markets around the globe, or approximately 80 markets. And so for VOXZOGO, whether it be actual field force or market access or supply chain, in just a couple of years that we were able to really get robust global uptake. And I bring up those markets because different markets have different levels of penetration here in year three of the launch. The level of early market penetration is largely dependent on how well characterized and developed the standard of care might be for a particular disease. So for example, in Japan, where VOXZOGO is approved for achondroplasia, there already was a pre-existing treatment model for achondroplasia.
So what that meant was when VOXZOGO was approved for Japan, you're talking about a concentrated level of physicians and therefore patients that were identified and able to start VOXZOGO treatment very quickly. In contrast, in the US, there was not a well-established medical treatment home for achondroplasia. Achondroplasia patients, before we started to build this treatment home, may have seen any number of types of physicians. It could be an orthopedist if they're managing through mobility challenges or surgeries. It could be a geneticist. Or it could be, depending on the level of challenges presented by their achondroplasia, it could be their regular pediatrician. So the key element of our US launch strategy was to establish that medical home. We believe that pediatric endocrinologists are the right prescriber base for VOXZOGO and achondroplasia. These are folks who are often seeing other growth stature impairment patients.
These are physicians that are prescribing other therapies. That's been the work of the first couple of years. It's been successful. We're starting to see more of the prescriptions come from these pediatric endocrinologists rather than geneticists, which in the past for our ultra-rare business, those are the usual prescribers. I bring this up in the context of your market penetration question, Phil, because while the U.S. is a bit behind some of those faster penetrating markets, Germany is another market where we've had really rapid uptake that's contributed to the growth the last couple of years. While the U.S. is a laggard to some of those markets, it's also the single largest market. We believe that there's 3,000 patients in the U.S. within the indicated label. At 2,600 patients that I mentioned on drug at the end of Q4, we believe there's approximately 22,000 patients globally.
So we are just 12% penetrated here, just reported $470 million in revenue. Still have a lot of room to grow in the US. So we feel like these dynamics are still good momentum for VOXZOGO's launch this year into next year and beyond. And then we have, of course, the indication expansion opportunities.
Yeah, maybe moving there next, you've identified both hypochondroplasia as well as a group of other short stature disorders as potential fertile areas for growth. Can you give us an update on your expansion strategies in both of those buckets, the hypochondroplasia versus the other indications like idiopathic short stature or Noonan syndrome?
Of course. Yeah, thanks. So again, VOXZOGO, its mechanism of action is a natural regulator of bone growth. Both for achondroplasia and for these other conditions, we believe that the pathway and the impact of VOXZOGO in the right place on the growth plate is what is shown in achondroplasia to be a safe and durable for several years profile for the product. And because of that mechanism of action, several other genetically defined short statures may be eligible to benefit from VOXZOGO. Starting with hypochondroplasia, which is a similar disorder as achondroplasia, roughly the same incidence or prevalence. Hypochondroplasia does present in a more severe and a not as severe phenotype. So we're characterizing that market. We'd be focused on the more severe type, but generally speaking, similar overall market.
As we get into other indications, there could be some small price implication as you extend the label into new indications, but roughly consistent with achondroplasia. As we continue to characterize it, we'll share more, including at Investor Day. And because of that similarity and because of the profile of VOXZOGO and achondroplasia, we've aligned with the FDA to move directly into a pivotal program. So the run-in portion of that program began late last year. We anticipate beginning the pivotal portion of this study in a placebo-controlled design with VOXZOGO and hypochondroplasia by the middle of this year. So moving that forward again, back to our top priorities, we're looking at any opportunities to accelerate this program to bring the benefits of VOXZOGO to more patients than just achondroplasia.
And then the other studies in other genetically defined pathway conditions for short stature disorders, as well as idiopathic short stature, again, because of that mechanism of action, we believe VOXZOGO has the opportunity to benefit those patients. We're working on study designs, including discussions with global regulators to align on the exact study design so that we can move forward. Again, top priority for the company. We'll be eager to share details of those study designs as we continue the work. And again, at Investor Day. But at the moment, great to see the growth of VOXZOGO and Achondroplasia and to have these other very large indications potentially available to the asset. It's a very big opportunity. And we view de-risk given VOXZOGO's clinical and regulatory success.
Moving to Roctavian, the launch has gone a little bit slower, I think, than BioMarin initially anticipated, slower than we anticipated. What have been the impediments to uptake? What can BioMarin do to remove those to speed adoption?
Thanks for the question. Again, Roctavian 's profile after getting approved in the U.S. and Europe last year, significant reductions in bleed rates compared to what was the standard of care at the time. 90% of patients in most of our studies remain off of their prior prophylactic treatment, which means they're not taking frequent injections to be able to maintain factor levels and bleeds. As we engage with the marketplace, whether it be in Europe or in the U.S., we've had solid momentum across most of the typical stakeholders. Roctavian is a single infusion gene therapy. Therefore, given the significant cost offset to the standard of care, Roctavian itself has a high single upfront payment for its single dose. Which in the early days of gene therapy conversations, that was the main topic.
But in the case of Roctavian, because the cost offset value proposition is so clear to payers, at the top level, payer interest has always been there. And that's indicated by in the U.S., we've got payer coverage policies issued covering over 200 million lives in the U.S. So that's including most of the largest payers in the U.S., with a payer coverage policy consistent with our label, by the way. So that top-level payer progress, and that would include in Germany, where over the course of last year, we were having very successful negotiations. We anticipated that the final price negotiations, contracting and publication would have happened earlier. It ended up taking the bulk of the year. But again, got to alignment there with that single national payer.
And then on the other end of the spectrum, it takes an interested patient and an interested physician to be able to generate commercial uptake and revenue. We also continue to see momentum there. Again, with the clinical trial experience, both the data package and patient experiences, we've been out there engaging with the hemophilia community, physicians, potential treatment centers, as well as patients, and continue to observe positive signals. Again, the evolution of the standard of care, perhaps from traditional prophylaxis to even Hemlibra, which was a game changer for hemophilia, it's still chronic injection. And for those hemophilia patients who identify as hemophiliacs because they're regularly measuring or monitoring their factor levels and taking chronic injections, there's still a value proposition for them to be free from chronic injections of any therapy. So the patient interest is there.
We've had a number of sites become ready and raise their hand beyond those that we were already reaching out proactively to because we thought they would be higher productive sites. The final step across that checklist, if you will, of everything that needs to be in place to be able to get commercial Roctavian infusion reimbursed, is some of the contracting that needs to happen either within the site or between the site and the ultimate payer. So I mentioned that robust payer coverage policy execution that we've had. We've also executed a significant level of warranties to protect the value of Roctavian for payers. Just that payer coverage policy alone isn't enough to get a patient through the door and reimbursed for a commercial infusion. Many HTCs are part of larger healthcare systems, perhaps in a certain geography or on a campus.
So that inherently means there's parent organizations that need to be worked through, again, in terms of contracting. This is logistics. And that until this process becomes more standardized, we're using single case agreements between sites and payers to get reimbursement. That's not unique for some of these single high-price therapies like CAR-Ts. But again, it's very novel. We're working across a complicated network of HTCs in the U.S. and payers. So it's just simply taking time. That's the key bottleneck. And we're trying to insert ourselves where we can. As you can imagine, at some level, there's some internal dynamics that we can't be in the front lines for. If there's some attorneys talking to finance folks within a particular center, that's usually happening outside our view. But we're looking at anything we can do to accelerate getting through some of these bottlenecks and move on.
Earlier, you noted the guidance for 2024 in terms of revenue. What are the pushes, impulses on that guidance? Are there ways that you can meaningfully outperform? And conversely, are there any risks to achieving the guidance?
It's a good question. Thank you, Phil. In terms of, I'll start with the opportunity. So first of all, we feel that what's a midpoint of $2.75 billion, 14% growth over 2023, that's being driven by continued robust growth in VOXZOGO and just achondroplasia. Some continued growth in our base business. So depending on the brand across the enzyme replacement portfolio, it could be mid to high single digits within that portfolio. A headwind this year is KUVAN. KUVAN is our only small molecule product. It's our only product facing a meaningful loss of exclusivity threat. We're entering its third year of generic competition. There's a bunch of generic competitors in the U.S., more coming out in Europe. KUVAN's actually held in there from an erosion rate standpoint, a little stronger than your typical compound over the last couple of years. But we are expecting continued erosion in KUVAN.
But that's just, again, a headwind to what is otherwise strong growth. I think opportunities would include VOXZOGO really continuing the type of momentum that we've seen. We are mindful of a supply constraint that we're currently managing through with VOXZOGO. It's not a drug substance or quality constraint. It's an end-of-the-process, fill-finish supply constraint. And it's just a constraint on growth. We're still planning to grow VOXZOGO over the next couple of quarters. But it's not until middle of this year where we're expecting to have the quantity of supply available to meet our expected demand. But once we get through that, again, the question of what is the upside to VOXZOGO in 2024 through the supply constraint. Also worth noting that VOXZOGO, because it's in its third year of launch, now we're actually getting to some of those markets that are less penetrated. That work is harder.
So that's a bit of a risk. But we've seen robust uptake. Can we continue that momentum? We're still planning for substantial growth. But we recognize that it's year three. We're managing through a supply constraint. So that's a bit of a risk. Roctavian, I think it's just an extension of the conversation we were just having. I commented and shared that revenue guidance of $2.7 billion-$2.8 billion, it does include Roctavian, but at a modest level, because we don't want our overall plan, whether it be top line or bottom line, to be dependent on a significant level of Roctavian that carries still some uncertainty. So as you can imagine, if we can break through some of these final reimbursement hurdles and start to turn on that commercial patient network, that could be upside. But we view our guidance as realistic.
As you know, Phil, knowing the brand so well, there's a certain natural growth rate to that base business. Lots of opportunity with VOXZOGO. And Roctavian is wait and see. Let's let the revenues speak to its performance potential.
On the cost side, investors have often questioned why BioMarin's R&D and SG&A's percentage sales were somewhat higher than the group peers. Historically, why has that been? And as you look to rationalize costs, ultimately, do you have a sense of where the margins can go?
Yeah, thanks. So historically, our R&D spend has been a function of what was a fast-growth organic biotech strategy and story for many years. We have shown the ability to take assets all the way from fully integrated early-stage research through all aspects of global clinical and regulatory development. We've done that at a rapid pace with the eight assets we have, including two of these more recent larger market launches like VOXZOGO and Roctavian , which were therefore more expensive to develop. That plus a historical focus more recently on building out the early-stage research and discovery, seeding the early pipeline so that we can have more clinical candidates into the future. Historically, we licensed assets close to the clinic and then developed them from there. We wanted to invest more in that early-stage research and development. We've done that.
But what that results in is a large number of assets. And so going forward with this R&D prioritization exercise will consist of raising the bar for not only, as I mentioned earlier, transformative assets for patients, but the most value-creating assets for shareholders as well. Which is likely to mean doing less and stopping some programs, not with just the benefit of a more efficient R&D line, but if there's a couple of leaders that emerge from this process, we should then have the ability to accelerate those. So that's sort of the portfolio rationalization piece. The other piece is operating model, efficiency, cost transformation. These are areas where, again, as a fast-growing biotech where usually speed alone with more resource allocation was the right decision to optimize the business, to balance innovation and profitability. We need to do both.
So that's the other lever on R&D is efficiency, cost.
Perfect. With that, I think we're out of time. So thanks so much for an interesting discussion.
Thank you, Phil. Thanks, everyone.