Good morning, everyone. I'm Sean Laaman, Head of U.S. Mid-Cap Biotech Equity Research here at Morgan Stanley, and welcome to our Global Healthcare Conference. Before we begin, I'll make you aware of some important disclosures. For those disclosures, see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. I welcome here today President and CEO, Alexander Hardy, and EVP and CFO, Brian Mueller. Welcome to the both of you. Alexander, I believe you wanted to make some introductory remarks before we kick off the formal Q&A part of the session. Thank you for your time today.
Thanks very much, Sean. Thanks very much for having us. Thanks to Morgan Stanley for hosting this. I just wanted to say a few things. We mainly want to hear the questions that you have and folks in the room. I'm very happy with our execution, and how we're delivering over the last several quarters. To be able to perform strongly with the delivery of the business, at the same time integrating major acquisition simultaneously, it's really exciting and it's a testament to the organization. I think with the Amicus integration, we've added two additional significant growth drivers, further strengthening the growth profile of the business. We're showing that BioMarin is a rare disease company at scale. We've delivered, obviously, efficiency and profit and growth in profit margins. Now with Amicus, that translates to additional cash flow.
We have this capability across all of the parts of our enterprise from research development, manufacturing to commercialization when it comes to rare disease. We have the balance sheet to act on that. Even as we're integrating Amicus, we also just obviously announced and closed an additional deal to bring in Alesta, ALE1, into our pipeline. We're really excited about that. We're going to continue doing these sorts of deals of strengthening our pipeline, all positioned towards growth in the long run, leveraging our capabilities, and it's really an exciting time at BioMarin.
Sure. Thank you. A great intro. I have a few questions on the Amicus deal. Just the core strategy behind it, was it taking two assets that you think you could grow a lot more strongly? Is it synergies? Is it dilution of what exposure you think you might have on the changing competitive dynamic in VOXZOGO?
It is really all, but it is mainly the first two. I would say that the diversification of our growth was a sort of secondary benefit. That was not our primary objective. We believe in VOXZOGO's growth, with the pending hypochondroplasia approval, should the FDA approve it. We think that is in good shape and we are continuing looking at the second quarter, even with a competitor now in the market in the U.S. for a second quarter. We grew at obviously 20% in terms of patient growth. We really felt that Amicus was both value-creating on the top- line and on the bottom- line. I think you can see from our second quarter update that we are starting to realize that. Projecting a $1.2 billion peak for POMBILITI + OPFOLDA and a $1.4 billion peak for GALAFOLD in our hands, that is more than our additional geographic footprint.
It is the depth of our capabilities across those geographies. We really like what we saw as we got into the due diligence and then the integration planning. On top of it, as a rare disease company operating at scale, the synergies on the bottom- line, $200 million of non-GAAP expense savings. It does all of those three things, but I think the very cool thing is particularly on that top- line, you do not see that many deals which offer a higher peak and a faster ramp. I think you can be confident that BioMarin's capabilities, we can realize those additional revenue.
Sure. Yeah. I guess that is some of the story that might be missed so far is just what we see on the bottom- line and the compounding earnings that are going on in the background. Just your confidence around achieving those savings from the acquisition and how much of it is due to overlap, how much is just genuine better operations. How does that walk down to? You have brought forward your leverage targets, like how that translates to balance sheet leverage and maybe being able to flex again on the BD side.
Excellent. I will start off and hand over to you, Brian. With regard to the synergies, I think you can feel also very confident around those. As you know, biotech P&Ls from an expense standpoint is very much on the headcount, disproportionately headcount. We made very quickly. I was very impressed. The execution of the organization in terms of the integration planning and then implementation, we very quickly communicated to all the Amicus employees their future employment status. There were about 505 Amicus employees. We are retaining in the long run about 192 of those.
Therefore, those decisions are made, and those savings will be realized. Who of the 192 were retained? Obviously, as we talked about, a very important part of this deal thesis is synergistic on the top- line. We wanted to maintain and then add to that growth rate on the revenue line for GALAFOLD and POMBILITI + OPFOLDA. We primarily retained the commercial and the medical affairs team, so the customer-facing teams. In fact, we will be, and we are investing even more in driving the growth of GALAFOLD and POMBILITI + OPFOLDA. The bulk of the savings, on the other hand, were on the G&A side, about 70% savings in G&A. The remainder was in R&D, where there were duplicate R&D functions. Maybe hand over to Brian for the next part.
Yeah. Thanks.
Yeah.
Thanks, Alexander. Thanks for the question, Sean, and thanks for having us.
You are welcome.
First, it was very important, given the strong strategic rationale for the transaction, that we develop an integration plan to fully realize the potential value from the transaction, and Alexander's already touched on some of those revenue and the OpEx synergies. To be clear, as Alexander touched on, these are not high-level plans. We're executing in terms of the employees that we'll be retaining or not. Those folks have been notified. At the operational level, process by process and department by department, we've got operational cut-over plans. The integration itself will take some time through this year
even into next year because some of the relevant systems and processes that we're cutting over are qualified and regulated, and that takes some time. That's why we point to 2028
as the first full- year of realizing all of the synergies because, again, most of the synergies will be realized in 2027. In terms of 2026 here in the third quarter, it's still mostly
Sure
a full quarter of Amicus operating expenses, but we'll start to realize some of the synergies in the fourth quarter. To your point about what it means, we do believe the deal will be accretive within its first year with substantial accretion beginning next year, and then growing when we get to that first full- year of synergy realization in 2028. But the level of operating margin accretion is substantial. Cash flow generation, that's what enabled us to pull forward that deleveraging target by almost a year. When we announced the transaction in December of last year, we said we target less than 2.5x leverage within two years of the transaction. Now that's the middle of next year. That will replenish pre-Amicus deal firepower for BioMarin, which will allow us to continue our cycle of investing in innovation.
EPS cash flow margin growth from there is substantial.
Sure. By the middle of next year then, just to put a point on it, by the middle of 2027, we'll have the same level of firepower as we had prior to the Amicus acquisition.
Sure.
The ability to do up to a $5 billion acquisition. We're continuing when we have obviously the firepower, and we're doing deals right now. We will continue to do deals. We obviously just did the Alesta deal, bringing ALE1 to our pipeline. You can see us continuing to do deals even as we delever.
Sure. I guess when you get to 2028, and you look at the balance sheet position wherever it may land, and the integration is largely complete and given the scale of the business, how would you characterize the balance sheet capacity at that point versus pre-Amicus?
By the time we get to 2028? Yeah, great question. When we say by middle of next year and getting to this current deleverage target and pre-Amicus deal firepower, that's in the $4 billion-$5 billion range. I think by the time we get to 2028, with the continued growth in the EBITDA profile, I think it would be another click up from there. Could be approximately $6 billion.
Sure. Got you. Thank you. It seems that integration progressing well. Got a good handle around the cost side. Then you've put out targets for or guidance for POMBILITI + OPFOLDA and GALAFOLD over the long- term. Maybe just to take investors on or give investors a bit of granularity around your confidence levels on achieving those GALAFOLD and POMBILITI + OPFOLDA targets. We've talked a bit about patient identification. We've talked about the geographic expansion. Just some of those elements to give us confidence on the $2.6 billion, I think is your total.
That's right.
Yeah.
Total is about $2.6 billion, you're right, by the mid-2030s. So $1.4 billion for GALAFOLD, $1.2 billion for POMBILITI + OPFOLDA. GALAFOLD represents the single largest absolute opportunity, $1.4 billion. There it's primarily, we believe, geographic expansion is part of it, but the larger opportunity is increasing the diagnosis rate in Fabry disease, that there's a lot of patients who are not diagnosed, quite a few patients that are diagnosed but not treated. This is where leveraging our capabilities that we've built up over 25 years, we've done this time and time again. This is where these assets and these medicines are worth more in our hands than they. Because we have these capabilities further leveraged, by the way, by obviously AI and advanced analytics allows you to do a better and better job at finding patients. That's primarily on the GALAFOLD side.
That being said, about 40% of revenue for GALAFOLD and POMBILITI + OPFOLDA is in the United States. There's a lot of opportunity to further grow GALAFOLD in the United States. We think by the mid-2030s we can
more than double the number of patients in the United States on GALAFOLD. With POMBILITI + OPFOLDA, it is primarily more about switching. We think that the evidence and the real-world data coming through with regard to POMBILITI + OPFOLDA really shows the benefits that POMBILITI + OPFOLDA can show as efficacy wanes with the other treatments for Pompe disease. That is primarily a switch market. That is longer and slower, and that is also why the peak is a little lower than GALAFOLD. We think that these are both realistic long-term objectives that we are aiming for. There are actually scenarios where we can do better than $1.4 billion or $1.2 billion if we can start to impact, for example, the very top of the funnel. We are going to hold that and keep people updated as we go forward about our efforts there. There is nobody better than BioMarin to be able to do that because of our genetics capability.
We do not want to get ahead of ourselves. $1.4 billion, $1.2 billion is, I think, good estimates right now for the peak sales potential.
Great. Thank you. Maybe just moving on to the competitive dynamic in VOXZOGO. You reported really strong growth in Q2, and you upgraded guidance, which I think surprised many for the full- year, which must say that you have got a good deal of confidence around the evolving competitive dynamic and the launch of competitive products. Just to gauge your confidence around that and what you expect over the long- term, and I will leave it there and I have got more, but yeah.
I am sure you do. I am sure you do. We are really pleased. I have already mentioned it. We are really pleased with the growth rate that we are seeing with VOXZOGO. As you know, the majority of patient starts that we have already been realizing has been the zero to two population. This is where we have an indication advantage and a data advantage, which will remain BioMarin's exclusive indication for the next several years. We are seeing a lot of patient starts there. With regard to switching, that switching dialogue is very much the way that I thought it would go with caregivers and physicians. This is really a segment of the patient population where the caregiver is interested in convenience. We are still seeing just tremendous growth, 20% growth in the quarter with VOXZOGO.
Now, of course, and I'm sure you're going to touch on this, now we of course have this settlement with Ascendis with a 20% royalty rate in the United States and 18% in Europe, Brazil, and South Korea. This means that we're benefiting from TransCon from their results in potentially adding new patients. Patients that perhaps wouldn't have come on VOXZOGO will have that revenue opportunity. Then, of course, we have the pending indication approval with hypochondroplasia, which is not factoring in, obviously, into our 2026 outlook. But hopefully the beginning of next year, we'll have that additional growth lever for VOXZOGO going forward. Yeah, it's exciting to see. It's all but one of our blockbuster potential products. But this guidance will mean that we hit $1 billion this year for VOXZOGO, so it will be BioMarin's first blockbuster product.
Sure. Thank you. On the hypochondroplasia opportunity, just sort of your commercial prep and your commercial readiness. If you did see an adverse impact on the achondroplasia portion of the business, if you did see it, just your ability to offset that through the uptake in hypochondroplasia and your thoughts around that.
Well, we think the growth in the achondroplasia market that we're seeing, the 0% to 2% growth and our ability to retain patients, plus the hypochondroplasia and the growth opportunity there means that VOXZOGO is set to continue to grow through these competitive launches, which is an exciting picture. We're in 55 countries with VOXZOGO. It takes a while for a competitor to be able to match that. Obviously, five years additional head start when it comes to the infant population. So the growth continues, and we're excited about that profile.
Sure. I guess roughly three-quarters of revenue comes from outside the U.S. for VOXZOGO. So do you think differently about the competitive dynamic and how that might unfold in Europe? Do you think it's more challenging for a new entrant in terms of market access in rest-of-world markets?
Yeah. Market access in the rest of the world, I am not telling anybody here any news they do not know, is much more complicated. It is different, but it is more complicated with long lead times in the rest of the world and really require tremendous amounts of local expertise. In an 80-country footprint, as I said, we are in 55 countries with VOXZOGO. That level of local market access expertise, those are BioMarin personnel in the majority of those markets. We believe that gives us a real competitive advantage. I think there is a time lag, but there is also an outcome difference that I think BioMarin will have an advantage there.
Sure. Switching gears over to the enzyme franchise. PALYNZIQ grew, I think, 27% to $135 million. With the adolescent label approved in the U.S., how large is the 12- to 17-year-old opportunity?
Yeah. We have talked about the patient potential being about 10% additional with the adolescent indication. We are really pleased with how that launch. I was actually visiting treatment sites, PALYNZIQ clinics last
Right
or PKU clinics last week, and they are having a lot of success with the adolescent population. It is exactly what we thought it would be. These are very motivated parents with kids that are thinking about the transition to college, and into adult life. This is a great opportunity for them to have a very efficacious treatment, and to be able to go to the college cafeteria and be in line for a hamburger, and not to have medical nutrition. That is the potential you can have with PALYNZIQ, which is very, very differentiated. Very happy with the adolescent launch, and you can see that in the growth rate of PALYNZIQ.
Sure. Thank you. Just on the VIMIZIM number, the underlying market trend there and where you think that product can ultimately go.
Yeah. We think that VIMIZIM has the potential to also exceed $1 billion in revenue. This is what we think the potential of this product is. You look at it quarter- by- quarter and ordering patterns can mean, especially with our ex-U.S. footprint, you have a lot of government purchases. It can be lumpy quarter to quarter. I would say that we're very happy with the growth rate we're seeing with VIMIZIM. If you look on an annual basis, 2025 annual growth was 7% for VIMIZIM. Historically, it's been clicking along at around that rate. So, it's growing extremely well, and we see no reason why that's going to slow down.
Sure. Thank you.
I would just add, we encourage everyone to look at our full- year performance and full- year guidance as the best performance indicator for the company because of those quarter to quarter, mostly international order timing dynamics.
Cool. Got you. Thanks, Brian. Couple of pipeline questions. BMN 333 produced more than 13-fold higher free CNP exposure than another long-acting agent. Why should that translate into better efficacy, and what growth velocity do you think is needed to establish it as best- in- class?
Yeah. We believe that higher free CNP levels will translate to higher efficacy. Clearly, we need to do the experiment, and that is what we're aiming to do. What we showed in the phase I with healthy volunteers is we showed, as you mentioned, that we can achieve high free CNP levels, 13 x the level of the currently approved long-acting CNP. Now the experiment needs to be done, and that's what we're doing in the phase II, phase III operationally seamless study. We'll find out in the middle of the year whether that translates to clinical efficacy, to both higher levels of annualized growth velocity together, most importantly, with other health benefits. We'll be aiming to study that in the phase III.
Sure.
Why do we believe that's the case? Well, we think that our preclinical experiments have shown that high free CNP translates to higher growth. We think you can also see it in the real world with people with naturally high levels of free CNP are much taller. We think there's a good reason to believe, but the experiment needs to be done. There's a great opportunity here. Whilst cross-trial comparisons are problematic,
I think everybody would pretty much say that so far nobody has shown better efficacy than VOXZOGO. That opportunity now remains, and we're going head to head against our own drug. I like that. I like that BioMarin is pushing the envelope and challenging ourselves to do more for these patients.
Sure. Thank you. Another kind of pipeline question, but on the ALE1 acquisition.
Just the strategic rationale and the clinical opportunity, how do you see both of those?
I am really excited about this asset. ALE1 is for hypophosphatasia or HPP. It is already a large validated market. You have STRENSIQ, which I think last year sold $1.7 billion, with AstraZeneca saying that this market size potential is $3 billion-$5 billion. This is a really differentiated molecule. It is much more than a first- in- class oral treatment. Right now, HPP is very much focused. The treatment is very much focused on the bone manifestations of the disease. By having an oral therapy that reduces pyrophosphate at its source, we potentially can have a systemic effect dealing with more of the things like muscle pain and fatigue, which is associated with the disease, particularly in the adult population. So pediatric onset, but diagnosed in adulthood. There is a tremendous opportunity. This is a lot more exciting than an oral therapy competing against both subcutaneous and intravenous therapies.
This could potentially be transformative. We have also the opportunity here. There is about 6,000 patients diagnosed in the U.S., only about 10%-30% of them actually treated. We think an oral treatment with this sort of profile, we should be able to not only increase that treatment rate, but then have the opportunity to significantly increase the diagnosis rate as well.
Sure. Thank you.
Which is exactly what we do in other disease areas.
Thank you. Given the rise in China innovation, does that influence your BD or R&D strategy at all?
Yeah. It's a topic in the leadership team and in the board. We have not yet seen China be particularly present when it comes to rare diseases. As you know, the main focus hitherto has been oncology, I&I, and cardiometabolism. We're starting to see the Chinese healthcare system focus more and more on rare diseases, from both a reimbursement and from a diagnostic capability. Obviously, the numbers of patients and their ability to diagnose at scale is really intriguing, as well as the source of innovation in the market. So we're paying more of a closer attention on the BD side. We also think it's an exciting market for us to meet the needs of patients. In the future, also from an R&D standpoint, although hitherto, we haven't done that much from an R&D standpoint there.
Wonderful. Thank you. We are right at time. Is there anything that I didn't ask that I should have?
I don't think so. I think that was-
No, I think we covered it.
I think we covered it all.
Okay. Well, thank you for your time, gentlemen. That was great. Thank you.
Thank you.
All right. Thanks a lot.
Thanks, everyone.