BioMarin Pharmaceutical - Q1 2023

Transcript

Operator (participant)

Welcome to the BioMarin Pharmaceutical's first quarter investor update call. Hosting the conference call today from BioMarin is Traci McCarty, Group Vice President, Investor Relations. Please go ahead, Traci.

Traci McCarty (Group VP of Investor Relations)

Thank you, Ross, and thank you all for joining us today. To remind you, this non-confidential presentation contains forward-looking statements about the business prospects of BioMarin Pharmaceutical, including expectations regarding BioMarin's financial performance, commercial products, and potential future products in different areas of therapeutic research and development. Results may differ materially depending on the progress of BioMarin's product programs, actions of regulatory authority, availability of capital, future actions in the pharmaceutical market, and developments by competitors, and those factors detailed in BioMarin's filings with the Securities and Exchange Commission, such as 10-Q, 10-K, and 8-K reports. On the call today from BioMarin's management team are J.J. Bienaimé, Chairman and Chief Executive Officer, Jeff Ajer, Executive Vice President, Chief Commercial Officer, Hank Fuchs, President, Worldwide Research and Development, Greg Guyer, Executive Vice President, Chief Technical Officer, and Brian Mueller, Executive Vice President and Chief Financial Officer.

I will now turn the call over to our chairman and CEO, JJ Bienaimé.

J.J. Bienaimé (Chairman and CEO)

Thank you, Traci, good afternoon, everyone. Thank you for joining us today. We are very pleased with BioMarin's progress in the first quarter as more families gain access to VOXZOGO as well as our other essential medicines. Our financial performance in the quarter was strong, especially in light of ongoing macroeconomic challenges across the globe. 15% growth of the top line and 15% non-GAAP income growth on the bottom line puts BioMarin firmly on track to achieving our 2023 financial goals. These results include $88 million in VOXZOGO revenues and strong Q1 profitability of $51 million on a GAAP basis, all this from our fully owned portfolio of commercial products.

With Q1 total revenues coming in at just under $600 million, we are on a path to achieving our 2023 objectives of double-digit revenue growth and significant operating leverage, driving approximately 30% growth in bottom line profitability in 2023 as communicated in February. We are very pleased with the continued cadence of VOXZOGO uptake worldwide. VOXZOGO is now being used in around 1,500 patients in 35 different geographies, and we have seen significant growth of VOXZOGO in Japan since approval there. As a result, we are raising again our 2023 full year guidance midpoint by $50 million at the midpoint level based on increasing expectations for the brand. Based on the still very limited market penetration, we believe VOXZOGO is on its way to become a blockbuster.

Turning to ROCTAVIAN in Europe today, we have begun working directly with a single national German insurance fund or GKV on a final federal German price. We will not pursue any additional Outcomes-Based Agreements with sub-insurance, which are the German most of them regional sick funds at this time. We believe that the highly innovative profile of ROCTAVIAN offers an attractive treatment option for those people with severe immunodeficiency interested in an efficacious alternative to chronic therapy. We believe that working directly with a primary health insurance provider in Germany, which we expect will cover ROCTAVIAN treatment with a one-time payment and without an Outcomes-Based component, will facilitate access. We also believe the German healthcare system will recognize ROCTAVIAN value based on the sort of transformational efficacy observed in a majority of participants across our extensive development program with ROCTAVIAN.

Our initial interactions with the GKV have been positive, and we anticipate a final German reimbursement price that would be representative of the full value ROCTAVIAN is delivering to patients, especially based on our recent two-year update of our phase three trial. Over the long term, we don't expect today's updates to impact our expectations for ROCTAVIAN as we continue to hear feedback from German hematologists that they are ready to treat despite some of the challenges BioMarin has experienced with German regional sick funds reimbursement in the very short term. We are pleased to share that other markets in Europe and outside of Europe are actively pursuing access to ROCTAVIAN, which Jeff will review in a moment.

With the U.S. PDUFA action date only 2 months away, we are optimistic, cautiously of course, for what lies ahead in the second half of the year. The commercial team is working hard to prepare for another successful product launch. As we communicated during our Q4 conference call a couple of months ago, in the United States, roughly 300 patients from the bleeding disorders community have engaged with BioMarin directly to learn more about ROCTAVIAN, which is a very positive sign. We believe 2023 is the year of ROCTAVIAN, and we are looking forward to continued progress ahead in both Europe, the U.S., and the rest of the world. In summary, we are very pleased with BioMarin's performance in the first quarter and our outlook for the remainder of the year. The momentum behind VOXZOGO continues, driving record financial results.

We are making good progress on the European launch of ROCTAVIAN. We look forward to the outcome of the June 30th PDUFA milestone in the US. We are ready. Importantly, we have made the transition to an earnings growth story, a unique accomplishment in our industry, and we thank you for your continued support. I will now turn the call over to Jeff to discuss the commercial business update. Jeff?

Jeff Ajer (EVP and Chief Commercial Officer)

Thank you, J.J. I'm very pleased with our record-breaking performance in the first quarter, resulting in $596 million in total revenues and representing 15% growth year-over-year, including KUVAN, and 19% growth excluding KUVAN. Solid contributions from our enzyme products resulted in year-over-year growth of approximately 5%, which is in line given anticipated seasonality and ordering patterns for certain brands. Overall, the enzyme product revenue base is tracking as expected, and we anticipate it will provide meaningful contributions to BioMarin's full year total revenues this year. Turning to VOXZOGO, as underscored by our guidance increase today, we are very pleased with the continued acceleration of growth.

Today, we raised full year VOXZOGO revenue guidance to between $380 million and $430 million, a $50 million increase at the midpoint and representing 140% growth over 2022. At the end of the first quarter, approximately 1,500 children with achondroplasia in 35 different markets were being treated with VOXZOGO within the currently approved age ranges. Uptake to date represents 9% penetration of indicated patients in BioMarin's commercial footprint, highlighting the significant growth potential that remains. This includes Europe for children 2 years old and older, the United States for children 5 years old and older, and in Japan, where VOXZOGO is approved with no age restrictions. Japan was a key driver of growth, due in part to the availability of VOXZOGO treatment for children of all ages.

We also saw significant contributions in the quarter from Europe, the United States, and certain markets in the Latin American region. Looking ahead for the remainder of 2023, we expect growth across markets with continued uptake in existing markets and expansion into new markets. We do look forward to learning in the coming months if European and US health authorities are supportive of extending access to VOXZOGO to younger children, which would make it available to more than 1,000 additional children in those markets. Taken together, we continue to believe that VOXZOGO has the potential to be our first $1 billion brand. Turning now to ROCTAVIAN. To remind you, upon European approval of ROCTAVIAN late last year, our plan was to quickly facilitate access for patients in Germany through the use of outcomes-based agreements.

At the time of approval, the free pricing window in Germany was 12 months but was changed to 6 months in January. With a 12-month free pricing window at the time of launch, it made sense to pursue OBAs with the goal of facilitating access to ROCTAVIAN prior to final federal reimbursement. Now that we are already working with GKV on a final federal price for ROCTAVIAN, we will not pursue additional OBAs, as JJ shared. A reminder, GKV is the umbrella entity that is responsible for health insurance to approximately 90% of the German population, and we believe this path will facilitate the broadest access. While we work to finalize the German price with GKV, reimbursement for people treated with ROCTAVIAN is possible under named patient authorizations through individual insurers. Those sales would be subject to the final price once it has been established.

Patients treated under executed OBAs will benefit from the terms of that OBA, at least until the German price is finalized. As J.J. shared, we expect the GKV negotiations to yield a price for ROCTAVIAN that incorporates durability and other benefits that would be paid in a one-time upfront payment and without bespoke outcomes-based agreements. Turning to CDx testing in Germany, we are pleased to see a significant pipeline of patients building as more tests are in motion. As of the most recent data, 18 people had been screened for AAV5 seropositivity, an important eligibility criteria for treatment with ROCTAVIAN. We expect that our first treated patient in Germany will be sourced from this pool in the second quarter. While not all patients tested will be eligible and choose treatment with ROCTAVIAN, we are encouraged by the level of interest from patients in Germany.

Beyond Germany, our applications seeking price and reimbursement approvals, as well as other launch preparation activities, are making progress in both France and Italy, where we expect negotiations to conclude by Q4 of this year. In Italy, we were pleased that ROCTAVIAN was recently awarded Conditional Innovation Designation, a positive signal that should facilitate pricing and reimbursement. We are also encouraged by early interest in ROCTAVIAN in other markets, including Argentina and Saudi Arabia, where we have the potential to provide access to ROCTAVIAN through named patient authorizations. We are aware of 11 completed CDx tests in Argentina and a recent prescription for ROCTAVIAN treatment. Taken together, we are pleased with the progress we are seeing outside of the United States. Especially noting some key differences in reimbursement and launch dynamics between the U.S. and other markets.

Touching briefly on some of the differences that we believe will positively impact the ROCTAVIAN U.S. launch upon potential approval in June. First, we intend to implement a single warranty, which will allow us to offer a uniform agreement to all purchasers in the U.S., avoiding the need to negotiate bespoke contracts. Next, we plan to leverage the value-based assessment from the Institute for Clinical and Economic Review, or ICER, which noted that ROCTAVIAN was a dominant treatment with substantial cost savings, along with projected gains in quality-adjusted life years at $2.5 million per one-time treatment. ICER's conclusion of value is consistent with results from payer research conducted recently in the U.S. As in prior launches, we believe it will be possible to navigate reimbursement approvals following approval for individual patients on the basis of medical exception until coverage policies are issued.

Finally, in Europe, we are not permitted to promote ROCTAVIAN directly to patients, many people with severe hemophilia A only learn of it during their annual or semiannual check-ins with their hematologist. In the U.S., in contrast, we intend to use all channels available to raise awareness of ROCTAVIAN. That is a good segue to our update on U.S. commercial preparedness. Our teams have worked with treatment centers to ensure site readiness, conducted discussions with payers, worked through a refinement of our warranty, our promotional campaign is ready. The supply of ROCTAVIAN to meet demand has been manufactured. We stand ready to go upon potential approval. We have identified and are focused on a relatively small number of the largest and most capable Hemophilia Treatment Centers to be ready to treat with ROCTAVIAN in the U.S. at or shortly after launch.

We understand the value of and are committed to Hemophilia Treatment Centers being the site of treatment for ROCTAVIAN for the reasons of appropriate patient selection, post-treatment follow-up and monitoring, and more generally due to the complexity of hemophilia management. In conclusion, we are off to a strong start in 2023. Delivering record-breaking results in the first quarter underscores demand for our essential medicines. Based on the challenges faced securing additional OBAs in the quarter to facilitate patient access to ROCTAVIAN and the updated U.S. PDUFA action date from March to June, we have lowered full year 2023 ROCTAVIAN guidance to between $50 million and $150 million. Thank you for your attention, and I will now turn the call over to Hank to provide an R&D update. Hank?

Hank Fuchs (President of Worldwide Research and Development)

Thanks, Jeff, and thank you all for joining us today. BioMarin's worldwide R&D organization is gratified to see the enthusiasm from families interested in benefiting from VOXZOGO treatment for their children with achondroplasia. In the coming months, we look forward to learning the outcome of our request to potentially expand the label, both in Europe and in the United States, to offer the possibility of treatment to children of all ages where VOXZOGO is currently available. Also, later in 2023 with VOXZOGO, we look forward to results from the investigator-sponsored trial evaluating VOXZOGO's potential to treat other genetic forms of short stature, including, for example, hypochondroplasia, mutations in the NPR2 gene, and Noonan syndrome, just to name a few.

We are also engaged in active discussions with health authorities concerning the opportunity to leverage VOXZOGO, a natural regulator of bone growth, in these other conditions characterized by impaired bone growth. Moving to ROCTAVIAN. As we announced in March, the United States Food and Drug Administration extended their review of the biologics license application for ROCTAVIAN. As anticipated, the FDA determined that the submission of the three-year data analysis from the ongoing phase 3 GENEr8-1 study, as requested by the agency, constituted a major amendment due to the substantial amount of additional data and set a new PDUFA target action date of June 30, 2023. We continue to engage with the agency and look forward to our June 30 PDUFA action date.

Briefly, on the earlier stage pipeline, we shared a few incremental updates in our press release today on BMN 255 for hyperoxaluria in chronic liver disease, BMN 331 gene therapy for hereditary angioedema, and BMN 349 for alpha-1 antitrypsin deficiency. We look forward to providing updates across our advancing development pipeline at our R&D Day in New York on September 12th. Starting with BMN 255, we have concluded the multi-ascending dose in the healthy volunteer study. In January, we shared early data that demonstrated rapid and potent increase in plasma glycolate following treatment with BMN 255. Oral daily dosing at all tested levels for 14 days was safe and showed sustained elevations in plasma glycolate, which is predicted to have a profound reduction in oxalate excretion in patients.

Based on these early signals, we now plan to initiate and enroll an expanded study in patients with chronic liver disease and hyperoxaluria later in 2023. We believe the availability of a potent, orally bioavailable small molecule like BMN 255 may be able to significantly reduce disease and treatment burden in a patient population with significant unmet need. Turning to our next gene therapy, BMN 331 for hereditary angioedema, which is like hemophilia in the sense that it poses a chronic lifelong burden of therapy due to the risk of breakthrough attacks that are extremely burdensome and potentially life-threatening. The disease is due to genetically determined loss of a key protein regulating the inflammatory cascade responsible for these attacks. The available therapies on the market have confirmed the effectiveness of replacement, much like in the case of the replacement Factor VIII therapy in hemophilia.

We've shown in three studies with BMN 331 gene therapy that in mutant mice and in non-human primates that a similar dose to that employed in clinical studies of ROCTAVIAN can provide ample and constant expression of C1 inhibitor within the therapeutic range in patients. We expect that continuously expressed levels of protein will provide improvements in the disease course of hereditary angioedema over existing therapies. In March, the second sentinel patient was dosed safely at 6e13 vg/kg, following an encouraging response from the first participant who demonstrated an early increase in C1 esterase inhibitor that may ultimately be therapeutically relevant. This is exciting.

With BMN 349 for alpha-1 antitrypsin deficiency, preclinical studies have demonstrated oral bioavailability in a small molecule that potentially sequesters the mutant protein, preventing polymerization in the liver cells that drive progressive liver disease, the liver disease form of the illness. In preclinical studies, BMN 349 is titratable to effect with rapid onset and high potency. Preclinical results have strong implications for potential improvement of our current management, particularly for severe liver disease requiring rapid action. IND-enabling studies are underway, and BioMarin's goal is to submit an IND for BMN 349 in the second half of the year. Stay tuned for updates on these as well as 351 for Duchenne muscular dystrophy and BMN 293 for MYBPC3 hypertrophic cardiomyopathy at R&D Day in New York in September.

Thank you all for your continued support, and I will now turn the call over to Brian to update financial results in the quarter. Brian?

Brian Mueller (EVP and CFO)

Thank you, Hank. Please refer to today's press release summarizing our financial results for full detail on the 1st quarter of 2023. Since JJ and Jeff spoke to our revenue performance for the quarter and future revenue outlook, I will primarily focus on the remainder of our P&L and other key financial updates this quarter. As usual, all results will be available in our upcoming Form 10-Q, which we are on track to file by the end of this week. We referred to last year as a transformational year for BioMarin, with the growing base business of enzyme products, plus the successful launch of VOXZOGO, together with operating expense control, driving meaningful GAAP net income and a foundation for our financial growth strategy into the future.

We are pleased that the strong start of the business in the first quarter of 2023 is supportive of our 2023 and long-term objectives of substantial revenue growth, margin expansion, and increasing earnings. BioMarin's $596 million of total revenue in the first quarter of 2023 is an increase of 15% compared to the first quarter of 2022. Regarding our revenue outlook for the rest of 2023, Jeff commented on the increase to our 2023 VOXZOGO revenue guidance and decrease to our 2023 ROCTAVIAN revenue guidance, which offset each other in aggregate, resulting in no change to our total revenue guidance for 2023, which is annual growth of 16% at the midpoint.

Across the rest of the P&L, Q1 2023 gross margin was 78.8%, which is an improvement of 1.3% if compared to the first quarter of 2022. R&D expense in 2023 started at a moderate rate in the first quarter, which was expected given the planned increase in R&D investment in our early-stage pipeline and the lifecycle management development efforts for ROCTAVIAN and VOXZOGO that we expect to ramp up over the course of this year. SG&A expense in the first quarter of 2023 of $223 million increased as compared to $195 million in the first quarter of 2022, which is in line with expectations as we continue to invest in the global VOXZOGO commercialization, the EU ROCTAVIAN launch, and the commercial launch preparations for ROCTAVIAN in the U.S.

Back to the bottom line, we delivered on our commitment to profitability with the $51 million of GAAP net income in Q1 2023 and $160 million of non-GAAP income, which sets up BioMarin well to achieve our full year 2023 profitability objective. GAAP net income decreased in Q1 year-over-year. However, it is important to note that GAAP net income in the first quarter of last year included the gain on the sale of the priority review voucher received in connection with the U.S. approval of VOXZOGO, which was approximately $89 million after income tax. Today, we reaffirmed our 2023 GAAP and non-GAAP income guidance of $155 million-$205 million and $360 million-$410 million, respectively.

Total cash and investments in the first quarter of 2023 was close to $1.5 billion, which decreased during the quarter due to some milestone payments, the timing of accounts receivable collection, and known seasonality of operating accrual net pay down. We believe these cash flow timing events were front-loaded to the beginning of the year, we expect to resume positive cash flows over the course of 2023. In closing, we are pleased to observe this solid start to 2023 and are keenly focused on maximizing the potential of the global VOXZOGO and European ROCTAVIAN commercial launches, measured operating expense investments, and the resulting leveraged profitability growth that we anticipate for the full year and beyond. Thank you all for your attention, and we'll now open up the call for your questions. Operator?

Operator (participant)

If you would like to ask a question, please press star one on your telephone keypad now, and you'll be placed in the queue in the order received. Please be prepared to ask your question when prompted. In the interest of time, we request that you limit yourself to one question so that everyone in the queue is able to ask their question. Once again, if you would like to ask a question, please press star one on your phone now.

Our first question comes from Salveen Richter from Goldman Sachs. Please go ahead, Salvie.

Salveen Richter (Biotechnology Equity Research Analyst)

Good afternoon. Thanks for taking my question. Can you provide more detail here on on how the GKV facilitates discussions on the final price and any impact on this price given that additional OBAs will not be pursued? In the interim, do you expect patients to actually be treated through either named patient authorizations or the one finalized OBE, or is it really just GKV here?

Jeff Ajer (EVP and Chief Commercial Officer)

Hi, Salveen, and I'll be happy to take that one on. The GKV process that we've described here, that takes essentially 12 months to get to a final reimbursement price and broad reimbursement access, this is normal. This is the same process that we've gone through for all of our previous brands.

J.J. Bienaimé (Chairman and CEO)

I think 12 months from approval, not 12 months from today.

Jeff Ajer (EVP and Chief Commercial Officer)

12 months from our price listing, which was September 15th of last year. We're very familiar with that process and we are pretty deep into that process by now. We submit a full price and reimbursement dossier, we did in the fall of last year. That takes a while to get processed by the GKV. We've had our first meeting to review that. There's usually a series of 4 meetings and reviews before we get to a final answer. We think that that first meeting was set up a very favorable tone, including testimony from key physicians in Germany on behalf of ROCTAVIAN. That's kind of the process.

What's different with ROCTAVIAN than our other brands is our other brands have all entered into a situation where there is no existing standard of care. In the case of hemophilia, we knew that we were launching into a situation where there was an existing, indeed an evolving standard of care. Our strategy was to contract with some national insurer umbrella organizations, what we're calling sub-insurers here, to put Outcomes-Based Agreements in place, get agreement on preliminary price, to facilitate rapid uptake of ROCTAVIAN. When we launched, we believed that the pre-pricing period in Germany, as it has been for years and years, would be 12 months. What changed? The first thing that changed is late last year, there was new legislation that changed the 12-month to 6-month pre-pricing period, and that's new.

While some people saw that coming, as we did, what's new about that is nobody really knows how the parties will behave at the end of the 6-month pre-pricing period and before we have final price and reimbursement approval from GKV. The second thing that changed according to our plan was we saw more reticence than we were expecting from the sub-insurer groups to engage in finding a path forward and defining OBAs, which are new for ROCTAVIAN. Now that we are in well into discussions on a final price and reimbursement arrangement that covers essentially all of Germany, we think it just does not make sense any longer to pursue additional Outcomes-Based Agreements with those so-called sub-national insurers.

We think we've got some patients covered under an existing Outcomes-Based Agreement, covers a part of the population, and we know that, patients can be submitted through their, health insurer for essentially a one-off or a named patient approval, while we work to get the final price and reimbursement nailed down. Sorry for all the detail, but you did ask for it.

Operator (participant)

Our next question comes from Geoff Meacham from Bank of America. Please go ahead, Jeff.

Geoff Meacham (Managing Director)

Afternoon, guys. Thanks for the question. Just had two quick ones on ROCTAVIAN. I guess to follow up on Germany, do you have to go back to square one in communication of kind of cost benefit to GKV? I guess was the six months of OBA negotiation a total waste here? Secondly, in the U.S., just commercially, you know, what's left to help streamline access and reimbursement, obviously, aside from, you know, from formal FDA approval? Thank you.

Jeff Ajer (EVP and Chief Commercial Officer)

Thanks for the question, Jeff. To reiterate, right after we submitted our price and got that listed in September 15th of last year, shortly after that, we submitted, as we always do for our brands, to the GKV, a full price and reimbursement dossier. As I noted it in the last question, it takes, you know, four, five, six months for GKV to get to the point where they're ready to enter negotiations with us because it is an intensive dossier to review. The work that we did with the so-called sub-national insurers was not a complete waste of time. Indeed, we achieved proof of principle with getting one major insurer signed up. Patients under that insurance group have the benefit of that Outcomes-Based Agreement.

I think that's, you know, as I described also in the previous question, that's where we're at. We're more than 6 months in. We're well underway with getting to a final federal reimbursement price. That price, when it's set, will be retroactive to any patients that are treated from March 15th on when the free pricing period ended.

Brian Mueller (EVP and CFO)

U.S.-

Jeff Ajer (EVP and Chief Commercial Officer)

Oh, sorry.

Brian Mueller (EVP and CFO)

U.S. reimbursement.

Jeff Ajer (EVP and Chief Commercial Officer)

U.S. is a completely different situation. As we've disclosed, we have a warranty agreement that does not require to be negotiated one payer by one payer. It's a uniform agreement that we intend to offer to all purchasers of ROCTAVIAN. That cuts down on the time associated with doing bespoke agreements. That's the first piece. Then the second piece is similar to our other launches in the U.S. We know that it is possible to navigate individual payer approvals for patients that are submitted as a part of a medical exception process and while coverage policies are in process of being issued. You know, because you follow other launches, that coverage policies can take anywhere from one to nine or 12 months to get issued variable by payer.

That's how we plan to navigate that process immediately following launch.

Operator (participant)

Our next question comes from Chris Raymond from Piper Sandler. Please go ahead, Chris.

Chris Raymond (Managing Director and Senior Research Analyst)

Hey, thanks. If I can ask another ROCTAVIAN question. Just curious, you guys highlighted 18 patients have undergone antibody testing. I think last quarter that number was 10. It doesn't seem like you're seeing necessarily, in Germany anyway, an inflection higher or sort of an acceleration. Maybe just talk about that dynamic. Is that also subject to any reimbursement barriers that you didn't anticipate? Maybe on the guidance change, changing cutting top and bottom by 50, it's $50 million.

Yeah, I know you weren't expecting filling $50 million in Q1, and I know your original plan didn't hinge on a March U.S. approval, but maybe can you talk about how much of this reduction is driven by, you know, the sort of the resistance you're seeing in Germany versus, maybe a reassessment of the U.S. opportunity? Thanks.

Jeff Ajer (EVP and Chief Commercial Officer)

Let me start out, and I'll ask Brian or J.J. to round out anything I miss, Chris. First, with respect to the CDx test completed, you're right. It was 2 months ago actually that we reported that we had 10 patients that had been submitted for CDx testing. You could look at that and say over the past 2 months, we've seen an additional 8. And I can tell you because I review the situation with the team every week, already have additional patients in motion this week. What I'm seeing is the development of a patient pipeline. And it was slow to get started. It was for sure impacted by patient awareness or the lack of patient awareness immediately following approval, and our ability to influence patient awareness in Germany.

The cadence of when patients come in to see their hematologist for hemophilia guidance, which is anywhere from, you know, every three months to every 12 months. That cadence of patient visits to Hemophilia Treatment Centers didn't change just because ROCTAVIAN was approved. I would say that building of the patient funnel and all the things that are happening underneath the top of that funnel are really encouraging to me. I'm seeing movement literally every week now, that movement every week that I'm seeing is picking up pace. I'm pretty encouraged by that.

In terms of guidance was impacted for ROCTAVIAN by the pace of the pace and timing of getting first patient treated, which is different than we were expecting at the beginning of the year, and the change of the PDUFA date in the United States from the end of March to end of June.

Brian Mueller (EVP and CFO)

That's right. This is Brian. Thanks, Chris. Just to supplement that, you know, we noted that the high end of the previous range accounted for, you know, the current March PDUFA. Just a reminder with what was the March PDUFA at the time, just a reminder that while that's a three-month shift, with a product like ROCTAVIAN that we expect to ramp up in terms of revenue over time, that three-month shift from a revenue standpoint actually causes us to lose the what would have been the last quarter of revenue in 2023, so, and likely the largest quarter. Then on the bottom end, you're right. There is a combining effect of the challenges in Germany. We've tried to account for all scenarios in the revised guidance.

Operator (participant)

Our next question comes from Phil Nadeau from TD Cowen. Please go ahead, Phil.

Phil Nadeau (Managing Director and Senior Research Analyst)

Good afternoon. Thanks for taking our questions. One more question on Germany. I guess it's still unclear to us why those patients who have gone through CDx testing have not gone on therapy. I think you've been pretty clear about the price or the reimbursement negotiation process, but you've also suggested that there are patients who are covered through OBA, one OBA or name patient use. For those patients who have gone through CDx testing, why have they not been treated yet? What's the bottleneck there? Is it a concern about time to reimbursement? Do the physicians have some other concern? Kinda what's preventing that treatment? Secondarily, I think you said in your prepared remarks you do expect the first patient to be treated in Q2. What gives you confidence in that, given that no one was treated in Q1? Thanks.

Jeff Ajer (EVP and Chief Commercial Officer)

Hi, Phil. I'll start with that one and see if JJ wants to round out any comments. What's going on between CDx testing and treatment? The first thing is CDx testing is one of a couple of eligibility criteria. It's an important one, and it's probably the biggest piece to get done. There's also liver health testing that's an eligibility criteria. It is possible, it's likely, highly likely that anybody that's going through the process of CDx testing is interested in potential treatment with ROCTAVIAN. As has been described to me by some of the German physicians, the cadence of decision-making may not just hinge on a positive or a negative CDx test. It's possible, but as described to me, you know, patients go back, they confer with their family.

Sometimes they have additional questions for their treating physician. Sometimes they come back for additional appointments to discuss and be counseled on ROCTAVIAN as a treatment option. I think it's an important, but not the only part in the process of what I might term the purchase decision of a patient for ROCTAVIAN. The second question, what gives us confidence in a first patient tested in Q2? In the previous questions, I was describing that we've got a patient funnel now that is 18 and growing.

If you said, well, emergence of a patient at the top of the funnel is defined by, sending sample in for CDx testing, and then I just described maybe some of the other steps along the way, additional liver testing, conferring with family, thinking a big decision over, maybe coming back into the clinic for further counseling. Those patients are working down the funnel that leads to the purchase decision. As I said in the previous question, every week I see updates and movement in Germany, and the pace of those movement is picking up all the time. That's what gives me confidence that we'll have shortly a first or more than one patient coming out of the bottom of that funnel for treatment.

J.J. Bienaimé (Chairman and CEO)

Maybe just to add to what Jeff said. I mean, first of all, taking about a year to get reimbursement in Germany in competitive markets is the norm. There is nothing that surprising here. Again, we thought with an OBA we would be able to, you know, get usage a little faster, but obviously it's been difficult. We did sign an OBA agreement mainly with one payer that only represent about 10% of the German lives, covered lives. 10% of, you know, 18 patients would be like 1.8 patients. It's not that surprising because the other patients basically are not covered by an existing OBA. For the other patients who are dependent about a different insurance company...

You know, in Germany, physicians are personally liable financially for prescribing a treatment or a procedure that is not where they don't have coverage from their sick funds. Obviously here we're talking about $1 million or so cost of therapy. Obviously you understand why physicians wanna double and triple-check that their health insurance company of the patients will cover the procedure before they move forward. I think all this is being debugged and it's gonna be happening pretty soon. This is why now based on the growing pipeline of patients that we believe that we're gonna get a patient treated at least in the Q2 of this year in Germany. There are patients potentially we can talk about in the rest of the world.

The other thing that, you know, Jeff Ajer forgot to mention is regarding what happened in the past 2 months since we gave the previous update about 10 patients that have been screened for AAV5. In Germany, we take, you know, I understand they take Easter holidays very seriously. For 2 weeks in early April, there wasn't much activity going on anywhere in the medical field in Germany. That also explains, you know. It looks like since we passed Easter, now it looks like things are picking up again in terms of AAV test screening, which is very positive.

Operator (participant)

Our next question comes from Jessica Fye from JPMorgan. Please go ahead, Jessica.

Jessica Fye (Managing Director and Equity Research Analyst)

Hey, guys. Good afternoon. Thanks for taking my questions. I have one more on ROCTAVIAN, and then another on VOXZOGO. I think you mentioned you expect the first German patient to get ROCTAVIAN in the second quarter. Maybe more broadly, can you just help us understand your expectations for ROCTAVIAN uptake in Germany between now and September when you get that final reimbursement? I guess, like apart from a patient here and there, does this update about not pursuing OBAs mean that we should expect very modest uptake in Germany until the fall? Separately on VOXZOGO, can you share your latest thinking about the most likely path to approval for settings like hypochondroplasia? Thank you.

Jeff Ajer (EVP and Chief Commercial Officer)

I'll take the first part of that, Jessica. You know, relative to the subject of uptake, you know, I started out by saying our plan was to facilitate early and more rapid uptake for ROCTAVIAN with these Outcomes-Based Agreements. You know, we tried that, and I think it was a good plan, but things didn't work out according to that plan. I think we're resetting expectations about the pace of uptake, certainly the timing of first uptake, which I think is likely in Q2 of this year.

As J.J. noted in the script, you know, the fact that we're, you know, we're de-emphasizing or deprioritizing those Outcomes-Based Agreements in favor of the full federal process, you know, probably means that we'll have slower uptake until we get that price finalized. Doesn't mean that we won't have any uptake, 'cause we've got one agreement in place, and there is a process for physicians to submit patients that they wanna treat to their insurer for individual review. That's kind of our qualitative expectation there. I'll turn it over to Hank for the VOXZOGO question.

Hank Fuchs (President of Worldwide Research and Development)

Path to hypochondroplasia, other new indications for VOXZOGO, pretty exciting question time because of VOXZOGO's tremendous activities in natural regulator bone growth and because of the unmet need of individuals who have severe impairments in bone growth and resulting health outcomes, poor health outcomes. The path includes both generating some additional pilot data, which we've shared a little bit of, but we're generating more of that data to increase our and your confidence in the potential for VOXZOGO to add value to patients with skeletal impairments, and also dialogue with health authorities around requirements for registration.

As far as our next steps with the stakeholders, probably the next, you know, real meaningful update you'll get from us about the back and forth that we're having with health authorities is gonna be when we finalize our plans, and we can, you know, tell you what the trial is going to look like, when it's gonna start, how many patients are gonna be involved, what the endpoints are gonna be, what, if any, are comparators, or concomitant medications in the trial. Pretty exciting time, and stay tuned. We're well underway.

Operator (participant)

Our next question comes from Akash Tewari from Jefferies. Please go ahead, Aakash.

Akash Tewari (Global Head of Biopharmaceutical Research)

Yeah. just on the upcoming readout, is there a potential the FDA may require you to run a trial head-to-head versus growth hormone? kind of what's your confidence that vosoritide's efficacy won't drop off, as we go to one year and beyond? obviously, that didn't occur with achondroplasia, but with these new growth height disorders, that's a question that does come up. I also noticed you had 11 patients in Argentina screened for, AAV5 antibodies. Can you walk us through a reasonable launch timeframe and price expectations for markets outside of the U.S. and EU5? Thanks.

Hank Fuchs (President of Worldwide Research and Development)

I'll start, Akash. Yeah, your 1 question about VOXZOGO has about 5 subparts, so I may not get them all. 1 is, what, you know, what will be expected of us in regard to durability demonstration for non-achondroplasia indications? Another part of your question is, will the agency require comparators, for example, with growth hormone? I think the answers to both of those questions are, you know, a little bit TBD in the sense that we are in discussions with the agency. As I said, we'll tell you what sort of the resolution of all that is in regard to more specifically the answers to your question by specific type of indication.

I think you also put your, you know, finger on the head of the, you know, finger on the, on the actual pulse of what the issues to address are. I think one of the really exciting things about VOXZOGO as a natural regulator of bone growth is that even in a severe skeletal dysplasia like achondroplasia, we were actually able to demonstrate sufficient durability to satisfy the FDA that at least the changes that we saw in AAV were in fact reasonably likely to predict a long-term accumulation of a clinically meaningful height benefit. I think that is a good platform. You referenced it. I also think the issue about growth hormone is that outside of growth hormone deficiencies, there isn't great evidence about accumulated benefit of growth hormone as regard. Well, there is actually.

Let me qualify that. There is a lot of evidence about the accumulated height benefit of growth hormone in non-growth hormone deficiency syndromes. It's not very compelling evidence. That is to say that there isn't much of a height gain in regard to what growth hormone can do for children who don't have growth hormone deficiency. I think you take all that together, and these are gonna be the kinds of discussions that we have with the agency to chart the path forward for new indications for VOXZOGO. It's not without complications, but I think the settler for all of this is a medication like VOXZOGO that has, you know, that has the property of being a natural regulator of bone growth.

Jeff Ajer (EVP and Chief Commercial Officer)

To your second question, Akash, about what's the significance or what do we read into those 11 CDx tests in Argentina, I would say, in the general sense, named patient sales in the absence of or even prior, just prior to a registration is an important part of our commercial picture overall. you know, witness, for example, the rapid uptake across our commercial footprint with VOXZOGO. Some of which, but not all of which, is in markets where we have registrations. We don't tend to talk about those markets a lot in detail because they tend to be smaller and come at a slower pace than, for example, the major markets in Europe, Japan, or the United States. They're important overall.

I think Argentina with early signals of patient movement, a first prescription is a good representation of what we might expect also in other markets, where we get going, you know, one patient at a time on a named patient basis. We also mentioned that Saudi Arabia, which is also usually an early mover like Argentina on the named patient sales basis, is underway, and there's interest in ROCTAVIAN in that market. What we're trying to do here is highlight the fact that beyond where we have, you know, very specific plans like in Germany, France and Italy that I've mentioned, there is movement in those other important named patient sales markets.

Operator (participant)

Our next question comes from Joseph Schwartz from SVB Securities. Please go ahead, Joseph.

Speaker 16

Yeah, hi. I have a question on ROCTAVIAN. I'm Julie Delene for Joe. How is the process with the single public insurance funds in France and Italy going? Can you provide any more color around your expectations to secure reimbursement and access to ROCTAVIAN later in 2023?

Jeff Ajer (EVP and Chief Commercial Officer)

Hi, Julie. The process in each of France and Italy, which in our commercial footprint with our kind of capabilities, is always a close follower to Germany in terms of timing and prioritization. Those markets essentially take a year, sometimes longer, to get price and reimbursement approval. You know, I mentioned as soon as we got our price listed in Germany, we submitted the full price and reimbursement dossier there and got the process going last fall. Right after we did that with Germany, we were submitting in the fall of last year, for France and Italy. Both of those processes are ongoing. There's no guarantee, as there is in Germany that you'll conclude in 12 months.

We're on track in both of those markets, and we think it's likely that we'll be at the end of that process by the fall of next year. Next fall, this year. Sorry. We mentioned in the script that in Italy, and this is breaking news, it just happened last week, that we were granted conditionally innovative status for ROCTAVIAN, which doesn't confer anything specific, but is in the general sense a positive signal to how AIFA is looking at ROCTAVIAN in Italy as an example.

Operator (participant)

Our next question comes from Gena Wang from Barclays. Please go ahead, Gina.

Gena Wang (Managing Director of Biotech Equity Research)

Thank you. Wanted to ask about ROCTAVIAN again. For the 18 patients that completed antibody testing, how many of these were eligible? Also in Europe, since now you are pursuing directly with GKV, without pursuing Outcomes-Based Agreement with the sub-insurance, does that mean your price will be much lower than the EUR 1.5 million that you previously discussed? Lastly, very quickly regarding the U.S., can you discuss on hemophilia A patient under 340B program, and how does that mechanism impact the ROCTAVIAN initial launch?

Jeff Ajer (EVP and Chief Commercial Officer)

Thank you, Gena, for those questions. Let me start with the 18 CDx tested and percentage that are eligible. First thing to note is CDx testing is one eligibility test. Liver health is the second. Relative to the AAV5 seropositive or negative status, the best thing that we can do to guide our expectations on that is the publication from our seroprevalence study in hemophilia A. And in that study, which was published, the overall seropositivity rate for AAV5 in Germany was 35%. That's guiding our expectations of the percent of patients that would be eligible based on AAV5 seronegativity.

Relative to the GKV price negotiations and what we had guided to as net price of about EUR 1.5 million, which was last fall, we think it is likely based on what the GKV is statutorily allowed to do, we think it's likely that they will not be putting into the agreement an outcomes-based component or a pay over time component. Nothing is certain until we get done with that process. You're right. In that particular case, we think that the price negotiations with GKV would incorporate all of the aspects of value of ROCTAVIAN, including durability, for example. We think that the final price would model in how GKV is looking at durability of ROCTAVIAN over time.

Relative to the 340B question in the United States, in our script remarks, we mentioned that we're committed to this HTC model of treatment and follow-up. Hemophilia Treatment Centers or HTCs in the United States are granted 340B eligibility. That's a way of kind of funding the work, the important work that they do to care for hemophilia patients. We think all or substantially all of our revenue in the United States would be subject to the 340B discount.

J.J. Bienaimé (Chairman and CEO)

What's your opinion as to what that's gonna do to the launch? In some respects, it's positive for us.

Jeff Ajer (EVP and Chief Commercial Officer)

Yeah. We think that's very positive. As I mentioned, the reason for being, for HTCs to have access to the 340B discount is to have a source of revenue to fund their important operations. As ROCTAVIAN would likely be eligible for those 340B discounts for all or essentially all of their patients, that's revenue that would accrue to those HTCs to fund their operation. That revenue would happen at the time of treatment versus, for example, revenue that they might be getting from supplying factor replacement products, which they would see over time. By the way, important point to note is the HTCs see a revenue component from factor replacement therapy only for a small proportion of their patients on average.

We think that this is actually maybe a motivating factor for treatment with ROCTAVIAN in the U.S.

Operator (participant)

Our next question comes from Tim Lugo, from William Blair. Please go ahead, Tim.

Tim Lugo (Partner and Group Head)

Thanks for taking my question. You mentioned VOXZOGO is on its way to becoming the first blockbuster for the company. Will these other non-achondroplasia indications add to the market, and kind of how much? Can you also update us, maybe I missed this, on converting the accelerated approval to a full approval?

J.J. Bienaimé (Chairman and CEO)

If you start, and then Jeff can provide more info. I mean, as I think as we made in the prepared remarks, I think Jeff's remarks, we only have penetrated about, you know, less than 10% of the market right now for VOXZOGO achondroplasia worldwide. Obviously, we can get past it, and we are on a run rate, you know, already of, you know, $450 million or so. Obviously, in the achon market alone, there's a lot of room to grow, and we can easily pass $1 billion in revenue in achon alone. Obviously, other indications are gonna make it, you know, the product even larger. But that's kind of, you know, my first comment to your questions. Jeff?

Jeff Ajer (EVP and Chief Commercial Officer)

Nothing to add to that. Thanks, J.J. Then there was a question of accelerated approval for you, Hank.

Hank Fuchs (President of Worldwide Research and Development)

Nothing new to report there. It's, you know, a published post-marketing requirement and the specifics of the timing for that we've kept as relatively proprietary. Stay tuned.

Operator (participant)

Our next question comes from Paul Matteis from Stifel. Please go ahead, Paul.

Paul Matteis (Managing Director and Head of Therapeutic Research)

Great. Thanks so much. Surprised it took a long time to get a question on the FDA with ROCTAVIAN. I thought I'd just throw one in there. You should be only a handful of weeks away from labeling discussions. Just curious if you could update us on the cadence of your discussions and how everything's going. If you do get approval in June, do you think these reimbursement warranties could be agreed upon and in place quickly enough to generate meaningful revenues for ROCTAVIAN in the U.S. in 3Q? Thanks so much.

Hank Fuchs (President of Worldwide Research and Development)

Thanks, Paul, for the question. I won't get into the specifics of the back and forths, I would say that as a general matter, the things that we expect to be happening at this stage of the review appear to be happening. I think that gives us optimism. I think we've also expressed some caution there because we don't have perfect visibility into everything going on in the agency and exactly where senior management and the people who sign the letters are. We're optimistic.

Jeff Ajer (EVP and Chief Commercial Officer)

Relative to the warranty, Paul, the nature of the warranty is that it is uniform, it is non-negotiable, it is available to all purchasers, essentially, we don't have to negotiate. The purchaser essentially gets that warranty with purchase. The timing, the timing is relatively trivial.

J.J. Bienaimé (Chairman and CEO)

There is no timing.

Jeff Ajer (EVP and Chief Commercial Officer)

No timing. Yeah.

J.J. Bienaimé (Chairman and CEO)

No delays. We know that.

Operator (participant)

Our next question comes from Robyn Karnauskas from Truist Securities. Please go ahead, Robyn.

Robyn Karnauskas (Managing Director and Senior Biotech Analyst)

Great. Thanks for taking my question. Just to clarify, for ROCTAVIAN, since you're not doing the OBAs anymore, can you give us some sense of what price we should be using since that's been the fixation of a lot of us, for Europe, and how to think about that? Second, for VOXZOGO, you're averaging now like 400 patients a quarter. You mentioned a lot of expansion, new indications, geographic. Should we think of it more consistent or choppy? Thanks.

Jeff Ajer (EVP and Chief Commercial Officer)

Okay. Let me start off with the price component. We've guided roughly last fall to net price expectations in Europe. How we get there from a gross to net process is different whether there's an Outcomes-Based Agreement or no Outcomes-Based Agreement. That's figured into the value of the... The durability of which is figured into the value of the upfront price. The over... Where we wind up should not be materially different from either path.

J.J. Bienaimé (Chairman and CEO)

Yes. I mean, that's also. Basically, that's one of the reasons why we, you know, we decided to focus on the GKV and national price because we assume that it's very likely there would not be an OBA with a federal German federal government. The base price might be a little lower than what we would potentially have had with an OBA, but the net price will be about the same, based on the fact that there is no, that we don't have to reimburse the payers based on recurring patients going back to pro-coag therapy after three, four or five years. Net-net, we don't anticipate.

Based on our interaction with the GKV so far, it looks very promising and we actually don't anticipate any substantial, as Jeff said, a substantial difference with this approach.

Jeff Ajer (EVP and Chief Commercial Officer)

Relative to your question about the cadence of VOXZOGO patient uptake, it's within kind of a band. It's actually been pretty steady, these last few quarters. Underneath that steady uptake, there's a lot of individual market dynamics, going on, but it comes on pretty smooth. I would suggest, when modeling forward that you work from our revenue guidance that we've updated, most recently and, you know, acknowledging that we've had a lot of updates to those, revenue guidance recently in a positive direction. Yeah, I'd fall back to that.

Operator (participant)

That is all the time we have for questions today. I would like to turn the call back to BioMarin's CEO, J.J. Bienaimé, for closing remarks.

J.J. Bienaimé (Chairman and CEO)

In conclusion, we are very pleased with BioMarin progress in the first quarter and the continued successful launch of VOXZOGO around the world. The importance of our medicines to the people who rely on them is clear. While sometimes the development path forward is not always clear-cut, we will continue to push ahead in the interest of our patients. Thank you for your support and have a good rest of the day.

Operator (participant)

The host has ended this call. Goodbye.