All right, let's go ahead and get started. Welcome, everyone, this is the Fireside Chat with BioMarin. My name is Vikram Prahlad. I'm one of the Biotech Analysts with Morgan Stanley Research. Happy to have with me on stage, Brian Mueller, CFO of BioMarin. Brian, thanks for joining us. Appreciate it. Let me read a quick disclosure statement before we start. For important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. And if you have any questions, please reach out to your Morgan Stanley sales representative. With that, Brian, let's dive right in. So obviously, BioMarin held an Investor Day yesterday here in New York City.
So maybe the best place to start is if you could just recap some of the financial guidance you provided, and then also some of the highlights you feel came out of your revised view on pipeline strategy and corporate strategy going forward.
Great. Yeah. Thank you, Vikram, for having us.
Sure.
Thanks, everyone, for joining. Pleasure to be here. Generally, and given the timing with our Investor Day, as you mentioned, exactly 24 hours ago, we were across the street at the Nasdaq site, delivering the results of many months of work to revamp BioMarin's strategy for the near term and long term. It was very exciting. Alexander Hardy, our Chief Executive Officer, started the presentation by outlining all of the progress that we've made already in 2024 against the key objectives that he set out for the company back in January, when he was just one month into his role at the time. Those include establishing the Voxzogo opportunity. We know it's a large potential growth driver with all of these indication expansions, so getting that work, you know, mobilized and accelerated. Establishing the Roctavian opportunity.
We made a decision on Roctavian's place in our portfolio earlier than anticipated. We announced this over the summer on our Q2 earnings call, where while the initial launch and mostly reimbursement processes globally are taking hold for Roctavian, we right-sized and significantly reduced the level of operating expenses for Roctavian that can afford us to wait for the launch to come more online, if you will. We prioritized our R&D pipeline. There were a number of assets that may have had promising science, but may have had more either, you know, long and expensive development time frames or, you know, didn't fit well with the competitive landscape in that particular therapeutic area. So we did, back in March and April, discontinue a number of our research programs.
And then lastly, is accelerating profitability, where we were growing both non-GAAP operating margin and earnings per share at rates higher than last year. Executing on that again, you see it already in the first two quarters of actual results. So, part of the driver for outlining the progress there is that we haven't been just developing this new strategy and looking at the future. We have been executing, and by the way, implementing parts of this strategy along the way. We'll come back to that when we talk about some of the financial guidance. And then in terms of the new strategy, there's three key pillars. Innovation, which for a high science, highly innovative company like BioMarin, eight internally developed, approved products, that's gonna continue to be a key part of our strategy going forward.
We've taken what has been a very successful research platform with what we refer to as our Core 4 criteria for developing assets. We now have added a fifth criteria, similar to my comments on the pri- pipeline prioritization. The fifth criterion is aimed to measure the commercial potential and competitive landscape for our development compounds. But maintaining our innovative culture, growth, the key drivers there are our enzyme therapy business. This is a what's known as a stable and durable business, but we actually believe we can continue to grow it over time. We spent a lot of time. Our new Chief Commercial Officer, Cristin Hubbard, outlined that strategy yesterday. Then, of course, Voxzogo. There's a significant level of growth opportunity still within its first indication, achondroplasia, which is the most common form of dwarfism.
That indication globally is still under 20% penetrated. So a lot of room to grow just in that first indication, and then there's a number of other indications that we're doing clinical studies on, that have the chance to grow Voxzogo in what is now a newly branded... We'll come back to this as well, Vikram. Growth conditions business unit within BioMarin. We believe Voxzogo has the potential to be greater than a $5 billion revenue asset across these indications. And then lastly, is value commitment in the new strategy, where we did put out, for the first time, for BioMarin, long-term financial guidance. We have a plan to significantly grow revenue over the next several years and over the rest of this decade, as well as expand operating margin.
We're, we have a goal by. I'll come back to the guidance in a moment, but we have a goal, by twenty twenty-six, to more than double operating margin from last year. And that higher level of revenue and profitability would then translate into a significant level of cash flow generation over time. So those are the three key elements, and that would allow us to, you know, to have a capital deployment strategy that, we think will involve the ability to bring in, external assets. We have not been, very active over recent years on the business development front, but we have a new Chief Business Officer, James Sabry, joining us. And again, this increasing, capacity to do, business development transactions through this increasing cash flow. But back to the financial guidance.
Again, BioMarin's first time putting out financial guidance. We anchored to 2027 as a milestone year because we believe these next three years are both strong growth years for BioMarin, but will also provide the momentum in executing on our long-term strategy over the next decade. So by 2027, we believe we can reach $4 billion in revenue, and again, achieve an operating margin, non-GAAP operating margin of 40%, as early as starting in 2026. And then the long-term guidance on operating margin is low to mid-40% over time. And then also in 2027, back to my cash flow comments, we expect to generate more than $1.25 billion of operating cash flow in 2027.
So that's the guidance year that we anchored to. But being a long-term strategy that we spent a lot of time and energy developing to, you know, help BioMarin grow sustainably over the long term, we did give long-term revenue targets, where beyond that $4 billion revenue guidance for 2027, we believe that we can continue to grow revenue on a compound annual growth rate basis in the mid-teens through 2034. So yeah, that about summarizes the guidance.
Great. Great, now helpful recap. Thanks for that. Maybe we can dig into a couple of those items then, starting from your revenue guidance. So, $4 billion in 2027, like you just said, mid-teens CAGR through 2034.
Mm-hmm.
Help us understand kinda what are the components to bridging to both of those... Those caps, both from a Voxzogo perspective, from an earlier stage pipeline perspective-
Mm.
-and also whether there's any sort of BD contemplated, to getting to both of those levels.
Yeah. Yeah, thanks. Great question. Let's work backwards a little bit, just to be clear, since I did touch on capital allocation and business development. Our long-term guidance, whether it be the revenue growth anticipated or the profitability, is not dependent on any business development, or revenue, or profitability contributions from business development transactions. We do believe that the right transactions over time can be additive to this already substantial growth story, but to be clear, not dependent on BD. In terms of the drivers to the revenue growth, first is the enzyme therapy business. So again, BioMarin has eight internally developed products to date. Most of those are enzyme therapies.
These are, you know, in most cases, recombinant proteins designed for a genetic inborn error in the metabolism, and we then replace that enzyme in a weekly IV infusion. This business has high barriers to competition. It's a genetic. These are genetic disorders, so they follow the globe and have really driven both a, you know, large and diversified business for BioMarin. The enzyme therapies for BioMarin are known for those same reasons as a very stable and durable business. However, we believe that that business is underappreciated in terms of its ability to continue to grow. So over the last three years, it's actually grown at about 8%, and we will continue to target high single-digit growth in that business.
There's some elements of, you know, patients doing better and having a natural element of growth in that business as new patients are born, just, you know, the incidence population, if you will. Most of the enzyme therapies are in markets that are highly penetrated already, for some of these drugs have been on the market for 10 or 15, 20 years or more. However, we think that there are a number of levers available to us to continue to invest and grow in that business. We know what works in several of these countries, whether it be getting market access, patient diagnosis, helping with compliance and maintenance of staying on therapy.
We've seen and been successful in certain markets and certain tactics that we think we'll be able to deploy in some of the other markets where we believe we have an opportunity. So, we're targeting, again, high single digit growth as from the enzyme therapy business as part of that revenue guidance. And then for Voxzogo, first of all, we think this, you know, $4 billion revenue guidance has a high degree of probability associated with it. I mentioned the enzyme therapies and that proven track record of growth. For Voxzogo, while it's gonna continue to grow, we believe over time in these other indications, for the 2027 $4 billion revenue guidance, we believe we can achieve that within the achondroplasia indication alone for Voxzogo. Again, I mentioned that it's just less than 20% penetrated.
So for Voxzogo, as part of that $4 billion, we're expecting growth rates of greater than 25%. And again, that is mostly achondroplasia.
Got it.
... And then long term, again, we believe that we can continue to grow the enzyme therapies, so similar growth rates over time. And then the Voxzogo indication expansion then becomes a larger growth driver in that long-term revenue guidance, in that mid-teen CAGR, because we are expecting multiple indications. And again, you know, even modest penetration. If you look at our slides yesterday, we started to show specifics behind the other indications and the total addressable patient population. These are very large indications. Achondroplasia, where Voxzogo is approved today, is just twenty-two thousand patients. So we're talking about patient populations in these other growth conditions that are multiples of that. So what that translates to is, even if we only modestly penetrate those other indications, it translates to a very large base of revenue.
We said greater than $5 billion yesterday, again, with just modest penetration.
And that's $5 billion is for Voxzogo pipeline expansion?
That's right. No, that would be all of Voxzogo.
All of Voxzogo.
Includes. Includes-
Contributing to that long-term target of mid-teen.
Yeah, that's right. And then the last piece, which is also a contributor to the long-term revenue guidance, is the early-stage pipeline assets that we have now. So we've a number of early-stage clinical assets over the next decade. We do expect that we will launch several of those assets, and they will be contributors to revenue. However, at a smaller level, because they don't come until later in the process, and because most of the growth is coming from those enzyme therapies in Voxzogo. So small contributor from the pipeline assets.
Got it. Got it. That's helpful. When thinking about the twenty thirty-four target, help us get a sense of what types of risk adjustments and, I guess the general flavor of uptake assumptions that are kind of being built into Voxzogo pipeline indications, and then also some of the earlier stage programs, like 351 , that are contributing to that long-term financial picture.
Yep. Yeah. So we didn't share great details yesterday on some of the uptake and launch assumptions. Again, you know, these are large markets, especially the Voxzogo new indications. And just, you know, for the early-stage assets, it's a bit early to talk about, you know, launch penetration rates and some of the new disease areas for BioMarin. However, from a risk adjustment standpoint, when we talk about the mid-teen CAGRs through 2034, to be clear, that is non-risk adjusted.
Mm-hmm.
You know, we do believe, and I should have noted this earlier, with respect to the Voxzogo indication expansion, we do believe that Voxzogo indication expansion, again, driving the most of that revenue growth over the next several years, is heavily de-risked. The mechanism of action for Voxzogo and its interaction and impact on the growth plates, stimulating healthy bone growth, is the same for achondroplasia as it is in these other indications. It's a, you know, CNP is a natural regulator of bone growth. So the mechanism of action principle is there. We actually have what we also believe to be proof of concept data from a number of a couple of investigator-sponsored studies that were done by Dr. Dauber at Children's National Hospital in Washington, D.C.
He used Voxzogo in his study, to treat a number of patients in these other conditions, so hypochondroplasia, where we're running a phase III study, Noonan syndrome, SHOX, Turner, a number of these other disorders, idiopathic short stature, that helped form, you know, both the scientific rationale for BioMarin's development program into these other indications, but also the regulatory pathway. Again, because of that consistent mechanism of action, because in the case of hypochondroplasia, it's a similar disease as achondroplasia, the FDA agreed that we could proceed directly into a phase III study, so for these reasons, we believe that, you know, there's a higher level of probability associated with this Voxzogo indication and expansion strategy, different from, you know, new molecular entities that would be being developed.
But with that being said, the revenue guidance that we did give was non-risk adjusted. If you look at our slides from yesterday, there is a note at the bottom of the one page that gives the revenue guidance. We said on a risk-adjusted basis, which again is mostly for the pipeline assets, because they still have to go through their clinical trials and regulatory pathways, so they've got a higher probability adjustment, if you will, but a smaller- they're smaller contributors to the overall revenue. We said on a risk-adjusted basis, our long-term revenue growth rates would still be approximately 10%, which is still very significant.
Got it. Got it. Okay, great. Outside of BD, what could it surprise to the upside then for the long-term revenue target? Let's talk about it on a non-risk-adjusted basis.
Yeah, thanks. Great, great question. BD aside, so we think on the. You know, let's just take it asset by asset. On the enzyme therapies again, stable, durable track record, proven track record of growth. We think there's an opportunity to maintain that growth, but that, you know, that does carry some, you know, the need to execute. I mentioned some of those tactics and some of the new levers we think we can deploy on that business. But additional surprise to the upside from there on that business is, I'd say, is less likely because these are mature assets, and we're already trying to be more ambitious with the growth tactics. On Voxzogo, we are expecting to continue to more deeply penetrate the achondroplasia markets.
A large part of Voxzogo's very significant growth story to date has been rapid uptake in markets that already have some level of standard of care and treatment home for achondroplasia. Japan is a good example. Japan was the only country in the world that had a therapy approved for achondroplasia at all. It's human growth hormone, which the data show that isn't a very durable therapy for achondroplasia. But that is. Japan was the only place it was approved. So what that means is, the Japanese market was prepared and ready and willing to treat achondroplasia with a therapy, which meant when Voxzogo became available, a therapy with, you know, very strong efficacy, uptake was very rapid because their treatment home was established.
Again, they were comfortable prescribing, and we penetrated the Japanese market with Voxzogo very quickly. And not to the same extent, but similar circumstances existed in some of the other key strategic markets in Europe, such as Germany and Italy. That's really what fueled those first several quarters of Voxzogo that were exceeding internal and external expectations. That's part of what drove the supply constraint that we had to talk about for a few quarters, which we resolved over the summer. But I say that because the US market, where there was no approved therapy, where there was no treatment home for achondroplasia, took more time.
Mm-hmm.
That, that's been, you know... We're in our third year of launch now, in the U.S. That's been the key mission over time, is establishing that prescriber base, which is pediatric endocrinologists. Again, this treatment home where referrals can come from geneticists, they can come from pediatricians. Diagnosis of achondroplasia is usually done, you know, at or near birth. So, number of tactics are available to us that we've been designing and implementing over the last three years to really build that treatment home that will drive longer term U.S. uptake. The U.S. has been behind some of the other global markets for the reasons that I mentioned, but it's also the single largest market, so that means it has the most opportunity. So back to your question, I described that because that is a key lever.
You know, it's very important. We are assuming that we deeply penetrate the U.S. market. But the faster that happens or the higher we could go, you know, there could be some upside there, as well as some of the other international markets. BioMarin has a commercial footprint in about 80 countries globally. Our last report for Voxzogo was that we're launched in, I believe it's 34 markets. We have a plan to take Voxzogo into another 20 markets. Some of those are difficult to access from a reimbursement standpoint, but can be large patient populations.
Mm-hmm.
So if we're successful, again, because achondroplasia is a very serious condition, and because Voxzogo is safe and effective, that's part of how we've been able to secure, you know, reimbursement and have a successful launch that we've had. We do think that there's opportunities in a number of other markets, so that could be some upside. But it's a lot of execution. I should say, you know, I commented on kind of overall probability, but we're very confident in this guidance. Part of why it took us this nine months of this year to develop and deliver yesterday, you know, wasn't just developing the high-level strategy and the framework for the guidance. We actually designed and implemented the foundations that are required for execution.
We have a list of tactics and mobilized already a significant portion of our workforce to not just design the strategy, but begin to implement it. So we are, we're confident that we're gonna be able to execute on this.
Got it. Got it. Great. Staying on your long-term revenue targets, how much competition to Voxzogo is implied in kind of your base case thinking for achondroplasia, both from the weekly in development and then also from the oral?
Mm-hmm. Yeah. A couple things there. First, we did share, and we're clear. I'm glad this came up in Q&A yesterday because it is important. Our long-term guidance does include a competition assumption. We didn't quantify it. However, the important takeaway, as you can see in the guidance, is that we believe that Voxzogo will be able to retain its share and actually grow through competition. This was another driver for, you know, beyond just the underlying success of Voxzogo thus far, but why we established the business units for the therapeutic areas that Alexander announced yesterday. Voxzogo is now part of this skeletal conditions business unit. Part of the driver there is we are and will continue to be the leader in treating these skeletal conditions.
We've got Voxzogo in achondroplasia. We've got the ability to expand Voxzogo in these other indications, some of which, for some of the competitors, we don't believe that there's actual biological pathway where they can get into some of those competitions. For example, the FGFR inhibitors in idiopathic short stature, you know, the mechanism of action just isn't there. As well as follow-on compounds, which include, you know, our own long-acting CNP, which is the other competitor that's out there. So whether it be the continued lead that we'll have in the market, where BioMarin and Voxzogo are the standard of care, the largest and always increasingly growing over the competition safety database. We've got six thousand patient years of safety data on Voxzogo, and we're talking about a pediatric rare disease.
You can't overstate the importance of safety in pediatric rare disease. You know, the hierarchy of decisions and evaluations made by physicians and parents start with safety. That's a big one, and then there's efficacy, and then convenience, so you know, Voxzogo and our leadership there is not gonna change over time. It will only get stronger. Age label is another key driver for our competition assumption. Voxzogo is available for achondroplasia patients from infancy. Achondroplasia, being a bone health disorder, the importance of treating early to get both the most and longest benefit from the therapy usually means starting from infancy. Again, diagnosis is very robust, so if you're a parent or a physician and you've started your baby on Voxzogo, again, in...
We're approved in Europe and the U.S. for ages down to infancy, and the others- some of the competitors aren't even running development programs in infants yet. So if you're a parent, patient, or a healthcare provider, and you started your baby on Voxzogo from infancy, and you're seeing the benefits of Voxzogo, both the efficacy benefits as well as its clean safety profile, even if another therapy becomes available as that child gets older, we think it's unlikely that those patients would, you know, switch over easily. And so that means you're talking about a switch marker and, you know, and competing for new patient starts, of which, again, we do assume some competitive share. But we for those reasons, we think Voxzogo can continue to grow.
And then another important part of the presentation and commentary yesterday that I would encourage you to take a look at with respect to the long-acting CNP were some recent European patent court proceedings that upheld our long-acting CNP portfolio. So we think that's an important factor in terms of what level of competition could be coming for long-acting CNP.
Understood. I did want to touch on that program a little bit, so I'm glad you brought it up. I think you mentioned yesterday in your presentation that for the long-acting CNP, you're looking for POC data from your program in 2026. So given that we know that the mechanism is viable in skeletal disorders, what would POC look like? Are you just looking to establish what the dosing interval is going to be for your longer-acting program? That's what the guidepost is?
Yeah. Thanks. Great, great question. Really excited to be talking about our BMN 333 and long-acting CNP, especially with, you know, Voxzogo's success, already. So importantly, our long-acting program, the CNP peptide is actually the same underlying science. So while from a development and regulatory standpoint, BMN 333 is a new molecular entity, the foundation of the actual, you know, active ingredient, if you will, is the same. And then, you know, there's a link to some chemistry that then provides the long-acting, longer half-life aspect. So as you touched on, for that reason, we do have high expectations, and the target product profile for BMN 333 is to be same as or better than Voxzogo in terms of safety and efficacy.
Because then, you know, back to the convenience, as a long-acting factor, it could be a weekly injection instead of the daily injection for Voxzogo, which does offer convenience to families. So proof of concept, you know, I think looking at a similar set of safety and efficacy data points that we looked at in the Voxzogo program, but we'd be looking to do, you know, same as or better.
... Got it. So similar efficacy, similar safety, potentially weekly dosing.
Mm-hmm.
I guess you mentioned IP, so let's talk a little bit about that. How is your longer-acting CNP program distinct from the program in development from Ascendis? And how could the IP you just talked about create complications in the space for potentially two longer-acting CNP agents that could be trying to come to market in the coming years?
Yeah. So I, if the ... That would've been good to come up a little more yesterday when we had our full management team there, 'cause I, I'm not an expert in, in-
Sure
Inner workings of the specific patents. But just to paraphrase again, the comments that were made yesterday, that we think that the patents that were upheld in Europe are broad enough to capture long-acting CNP as a, you know, therapeutic. And again, those were upheld and we think really important, you know, not just for BioMarin's long-acting CNP, but, you know, for competition, even against regular, you know, the current Voxzogo formulation and their place in the market.
And in terms of the, you know, the landscape and what an environment for competitors would look like, I'd just refer back to my comments about, you know, our ability to treat from infancy, our lead in terms of time and experience, that safety and efficacy database, and our belief that the competitive market would be more of a switch market.
Got it. Got it. Okay, great. I guess this next question, I understand that, the full response to this may be data-driven, but if the POC data were to hit the threshold that you're looking for for three three three, would there be an aspiration of the company to pursue, like, a life- a broad kind of lifecycle management program, where everything that Voxzogo may be approved for at that point is slowly switched over to a potentially longer-acting agent? Or are you okay with a daily and a weekly, assuming it's weekly, coexisting together for different sets of indications?
Yeah, thanks. Great, great question, Vikram. That, that will be part of the lifecycle and is part of the lifecycle management strategy. What I can share now is that, you know, we are developing... Because of the proof of concept that I mentioned, that we think is available through the investigator-sponsored study for Voxzogo indication expansion, and because Voxzogo is already approved and safe and, effective, we're taking Voxzogo, the base compound, as the development candidate into all those other, other indications. While at the same time, we're advancing long-acting CNP, BMN 333, into the clinic. So that program, at least at this early stage, is mostly mirroring the Voxzogo development program, meaning that we're starting with achondroplasia and hypochondroplasia for BMN 333.
But by all means, back to my comments on kind of the, you know, the mechanism of action, the underlying chemistry being very similar, it would be eligible for many of those other indications as well.
Got it. Got it. We have less than a minute left, so I'll just leave you with maybe one final question on the cost side of-
Yeah, please
... your guidance yesterday. So I think you mentioned about $500 million in cost savings phased in over, I think, the next two years through 2026. Where do you expect the bulk of that cost discipline to come from in the company? And from a cadence perspective, how lumpy or not do you expect that cost savings to be when it's fully phased in?
Yeah, thanks. Great question. Appreciate you bringing that up, 'cause it was a really important part of not just the long-term guidance we talked about yesterday, but really how this new strategy at BioMarin has been designed and implemented. Because we announced, for those of you that may not be aware, we announced, as part of our long-term operating margin targets, again, a more than doubling over last year from a little under 20% to 40% in 2026, and growing into the low- to mid-40% from there. It's not outright cost cutting. We shared some details behind a $500 million cost transformation program. It was very strategically designed by reviewing our entire spend portfolio within BioMarin, both internal labor, our organization. We did a, you know, strategic review of the enterprise.
Did you know, almost a kind of blank sheet of paper org design that was aimed at fitting the capabilities that we need in the future, not the way we grew up to date. So very innovative, org design, focusing on external spend. Again, we had some basic sourcing and procurement capabilities over time. You know, we do, you know, requests for proposals on important projects, those sort of things. But a robust, mature sourcing and procurement function that's focused on, optimizing most of our external spend is a new element. We've identified cost of goods sold efficiencies. We've prioritized our spend. Roctavian's an example of that. Some of those discontinued programs I mentioned at the beginning are examples of that. We're implementing a shared service center.
That one, it's not the largest piece of the cost transformation, but it will take the most time. We're in the early stages of that, that program, and so that, that won't be implemented till later next year or early 2026. In terms of pacing, you know, I'll point you to, you know, each of our quarterly reports. I think that's the best way to keep track of how we're progressing. Part of why we gave all of that detail yesterday, whether it be the elements of the cost transformation program or our expectations for operating expense line item as, as a percentage of revenue in the future, is, you know, we want to be transparent. We want investors to understand this strategy, not just at a big picture level, but the, you know, the way we're gonna execute upon it.
We want to be able to be held accountable in terms of how it's happening. Part of why we shared the detail we did yesterday is so that that can now become the lexicon for conversations going forward. We can report our progress against these initiatives. We can talk about what's falling and translating through to margins now, in the near future, and then over time. I'd also point you to, you know, our annual guidance and how we update guidance over the course of a year. Those would be the best ways to track us.
Sure, sure. We're unfortunately out of time, so we'll close it out there. But Brian, thanks so much for joining.
Thanks so much, Vikram. Thanks, everyone.