BioMarin Pharmaceutical Inc. (BMRN) Q2 2024 Earnings Report, Transcript and Summary

Good afternoon, and welcome to the BioMarin Pharmaceuticals Second Quarter 2024 Conference Call. Please note that this call is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] I will now turn the call over to Traci McCarty, Head of Investor Relations. You may begin your conference.

Thank you, Operator, to remind you, this non-confidential presentation contains forward-looking statements about the business prospects of BioMarin Pharmaceutical Inc., including expectations regarding BioMarin's financial performance, commercial products and potential future products in different areas of therapeutic search and development. Results may differ materially depending on the progress of BioMarin's product programs, actions of regulatory authorities, 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. In addition, we will use non-GAAP financial measures as defined in Regulation G during the call today. These non-GAAP measures should not be considered in isolation from, as substitutes for or superior to financial measures prepared in accordance with U.S. GAAP, and you can find the related reconciliations to U.S. GAAP in the earnings release and earnings presentation, both of which are available in the Investor Relations section of our website. On the call from BioMarin management today are Alexander Hardy, President and Chief Executive Officer; Hank Fuchs, President of Worldwide R&D; Brian Mueller, Executive Vice President, Chief Financial Officer; and Cristin Hubbard, Executive Vice President, Chief Commercial Officer. I will now turn the call over to BioMarin's President and CEO, Alexander Hardy.

Thank you, Traci, and good afternoon, everyone. Thank you all for joining us today. We're pleased to today share our strong quarterly results and the decision on ROCTAVIAN. This quarter, we've also made significant progress towards finalizing BioMarin's evolved corporate vision and strategy. This work gives us confidence we can amplify our progress and mission to deliver more impact on patients' lives and greater value for shareholders. We look forward to sharing more about our vision and strategy, the sustainable growth, accelerated profitability next month at Investor Day. Moving briefly to specific progress made in the quarter on our four strategic priorities outlined in January. Beginning with our opportunity to accelerate and maximize VOXZOGO, we were pleased with continued strong demand and patient uptake in all geographies, resulting in nearly 900 children beginning VOXZOGO treatment in the first half of this year, the highest in VOXZOGO history. And now the third year of our commercial launch, we have seen rapid global expansion, VOXZOGO across all ages and particularly from families pursuing treatment for their infants and young children to allow for the maximum potential therapeutic benefit. Outside of the U.S., we've seen significant penetration in key strategic markets, but still with room to grow in those markets. In the United States, our largest potential market opportunity, we saw a strong uptake, children of all ages and note that new prescriptions for children under the age of five accounted for the majority. Going forward, we intend to leverage the momentum we're seeing in the United States and expand penetration rates across all other geographies. Even with this tremendous progress, we are still at the beginning of realizing the full opportunity with VOXZOGO in achondroplasia, and we intend to build on our expanding leadership to rapidly advance across multiple new indications. In the quarter, we made significant progress advancing the development programs in hypochondroplasia, idiopathic short stature, Noonan Syndrome, Turner Syndrome and SHOX deficiency and Hank will provide an update momentarily. The growing body of evidence supporting the safety profile, the proven mechanism of action and the expanding data across many attributes beyond height give us a high degree of confidence in our sustainable leadership strategy across multiple growth-related conditions. The second priority to establish the ROCTAVIAN opportunity was addressed today in a separate press release. The result of our evaluation over the last couple of quarters supported our decision to enable ROCTAVIAN ability to contribute to long-term revenue growth while balancing resource allocation consistent with BioMarin's profitability. This decision on ROCTAVIAN was based on four conclusions: One, our belief in the therapeutic profile of ROCTAVIAN and its role in hemophilia A.; second, our understanding that a launch like this takes time; third, signs of progress in the United States, Germany and Italy; and lastly, a revised expense profile that gives us confidence ROCTAVIAN will contribute to profitability. By focusing commercial, research and manufacturing efforts, we expect to reduce the annual direct ROCTAVIAN expenses to approximately $60 million. We will begin to operationalize these reductions in ROCTAVIAN expenses by the end of this year. So, the new lowered expenses are in effect beginning for the full year 2025. As a result of these changes, the Company is committed to ROCTAVIAN being profitable by the end of 2025. In addition to changes in resource allocation to allow ROCTAVIAN to realize its potential as well as to contribute to BioMarin's profitability, we will reorganize the global ROCTAVIAN support team to be a dedicated unit that will focus exclusively on ROCTAVIAN success and enable the rest of the enterprise to focus only on the rest of our portfolio. We believe that this direct accountability will enable ROCTAVIAN's maximum potential of this revised strategy. Christian will elaborate on the incremental progress we are seeing in the three prioritized markets where we have made progress in securing reimbursement and providing access to patients. The third priority is our focus on the most promising R&D assets. We made continued progress on BMN 351, BMN 349 and BMN 333, the three prioritized programs announced last quarter. All five new indications with VOXZOGO also advanced and developed. And we look forward to providing an update on all these programs as well as our internal external innovation strategy at Investor Day, including how it fits into our capital allocation strategy. Lastly, our fourth priority to increase profitability faster than originally planned. Today, we announced 20% growth in total revenues and 78% growth in non-GAAP earnings per share, proof of our ability to drive growth, realize cost efficiencies and accelerate profitability. Strength across the business resulted in today's increase in all full year guidance items. Today's results are just the beginning of the profitability expansion we are planning over the next couple of years and into the longer term. Also, at the end of July, we were very pleased to have received approval for BRINEURA that expands access to children under the age of three years with CLN2 disease. This expansion now enables treatment for children of all ages with CLNL2 disease regardless of whether they're symptomatic or pre-symptomatic. In this rapidly progressing neurodegenerative disease beginning BRINEURA treatment as early as possible has the potential to alter the natural course of the disease. I want to extend my thanks to the families in our program and BioMarin's R&D team who work diligently to gain this expanded approval on their behalf. In summary, we have made significant progress across the enterprise to reshape operations to enable greater efficiencies and focus on what we do best, create innovative and high-impact medicines for patients. We look forward to seeing you next month to share more specifics on our outlook and strategy. Thank you for your attention. And I will now turn the call over to Cristin to provide an overview on commercial highlights in the quarter.

Thank you, Alexander. I'm pleased to join you on my first quarterly results call since joining BioMarin in May. Now I've been impressed by the breadth of commercial expertise and patient focus at BioMarin, and I'm excited about what lies ahead as we drive continued patient impact through the expansion of our innovative medicines. Turning to quarterly highlights. Strength across our brands drove 20% revenue growth year-over-year, including notable contributions from VOXZOGO, NAGLAZYME, PALYNZIQ, BRINEURA, VIMIZIM and ROCTAVIAN. Moving to specific accelerators in the quarter. VOXZOGO revenues were up 62% to $184 million compared to the second quarter of last year. By the end of the second quarter, 3,500 children were receiving VOXZOGO treatment. As we told you previously, we expect it to reach ample supply capacity by midyear, and we did. We've navigated through the supply constraint of the last few quarters, enabling high market penetration rates in several strategic markets in the quarter, including strong momentum in the United States, our largest potential market. Our successful supply chain efforts allowed customers to normalize stock events in Q2, and we expect this to meet demand going forward. Now in the U.S., confidence in VOXZOGO's safety and efficacy from treating physicians and families is solidifying our leadership in achondroplasia and is underscored by our more than 25 years of experience treating children with skeletal dysplasias. We intend to build on strong demand in Q2 to drive continued market expansion in the United States over the coming quarters. Our efforts to expand our base of prescribers for families seeking treatment with VOXZOGO, are rapidly gaining momentum. Now outside the U.S., we've achieved significant penetration rates in all strategic markets and expect to continue to grow in those markets, albeit at a more measured pace. VOXZOGO is the only approved product for achondroplasia and has an extremely strong track record of safety and efficacy with more than 6,000 patient years of evidence to support it. This experience facilitated direct entry into our pivotal study in hypochondroplasia our second indication and will set us up for continued expansion into four additional statural indications, none of which have any competitors on the horizon. In my experience, having the opportunity to build the standard of care with a brand like VOXZOGO does not happen that frequently. It's a tremendous opportunity to have an impact on the lives of thousands of children across a multitude of growth-related conditions and I look forward to helping build and sustain our leadership. Turning now to market dynamics in the quarter across our enzyme therapies. We were pleased to see combined quarter-over-quarter growth of 15% compared to Q2 last year. 47% growth of NAGLAZYME year-over-year was driven by the timing of a few large orders and 18% growth in PALYNZIQ was driven by new patient starts in the quarter, primarily in the U.S. Now turning to our ROCTAVIAN results. We were encouraged that patients were treated in both the U.S. and Italy, driving approximately $7 million of revenue in the quarter. Alexander has outlined our updated strategy to reduce the resourcing of ROCTAVIAN and the focus on three existing commercial markets, where the drug is approved and reimbursed, which are the United States, Germany and Italy. To expand on this rationale, the decision was based on signs of progress in those markets, including the successful treatment with ROCTAVIAN at multiple U.S. hemophilia treatment centers. We believe as more and more centers gain patient treatment experience in the U.S., patient flow will become more straightforward. In Germany, we're also making progress. At our last update, we shared that subinsurers had yet to green light reimbursement for ROCTAVIAN treatment despite there being an improved government price. And I'm pleased to share that we have finalized an agreement with one subinsurer, opening access for some launching treatment with ROCTAVIAN, and we continue to make good progress with a number of other subinsurers. Now in Italy, we're seeing encouraging signs of patient demand and two patients received treatment there in the second quarter, advancing access and experience. As we shared in our press release today, we are prioritizing these three commercial markets with a focus on facilitating patient access at the site level. With this encouraging progress and the strategic focus on viable commercial markets, enabling a significant reduction in operating expenses related to ROCTAVIAN, we believe there's a path forward to treat more patients with severe hemophilia A, while also contributing to the Company's profitability. We believe that adjusting ROCTAVIAN expenses to approximately $60 million beginning in 2025 is the right level to be able to make progress in our three prioritized markets. So, in conclusion, strong commercial results in the quarter and expectations for the remainder of 2024 led to today's increase of the full year guidance. I'm excited by the prospects ahead and the opportunity to drive profound patient impact with our innovative therapies. So, thank you for your attention, and I'll now turn the call over to Hank to provide an R&D update. Hank?

Thank you, Cristin, and good afternoon, everyone. The R&D team has also been working closely with our colleagues on corporate strategy and operational efficiencies, aligning a more focused approach to R&D has resulted in great efficiencies across our VOXZOGO development programs in new indications as well as the pipeline assets we prioritized for advancement during the first quarter. On our leadership expansion plans across multiple new growth-related conditions, we were very pleased to gain alignment with global health authorities on development plans for multiple new indications, including idiopathic short stature, Turner Syndrome, Noonan Syndrome and SHOX deficiency with enrollment expected to begin in clinical trials supporting these development programs in the second half of this year. Our pivotal registrational study in hypochondroplasia is also progressing well. We are targeting approval for hypochondroplasia in 2027, subject to enrollment rate and data results. Like Alexander and Cristin, I'm excited about VOXZOGO and the potential it has to treat thousands of children with a number of growth conditions as more evidence is generated. During the quarter, at the Pediatric Endocrine Society, we were pleased to see new data from Dr. Andrew Dauber’s study in idiopathic short stature and Noonan Syndrome. For the eight children who completed 12 months of treatment mean AGV increased from a baseline of 3.7 centimeter per year to 8.5 centimeters per year and a mean height standard deviation change from minus 3.6 standard deviations to minus 2.9 standard deviations. We are pleased to see continued evidence of CNP as a master regulator of bone growth in these new conditions where growth hormone has not been effective providing durable growth. Also presented at the quarter -- in this quarter at the International Conference on Children's Bone Health, we are pleased to see new data from an investigator-led analysis of the Phase II 111-205 study, which demonstrated that children who received VOXZOGO had significant increases in bone length and metacarpal cortical area after approximately five years of therapy. This is important because it is the first clinical study to demonstrate that VOXZOGO-enabled bones to remain strong as they lengthened, an important consideration for the health and safety of children being treated in their formative years for growth-related conditions. Also at ICCBH, data observed in the Phase III 111-301 and 111-302 studies demonstrated that VOXZOGO has the potential to improve health-related quality of life among children with achondroplasia, particularly in aspects associated with physical functioning and outcome of significant importance for children and their families. Phase II and Phase III data also showed consistent positive effects on linear growth and improvement in proportionality in children of all ages with growth potential with follow-up conducted up to four years after the initiation of VOXZOGO treatment. We are pleased with the consistent safety and efficacy data being generated that illustrate VOXZOGO's positive impact on bone growth, proportionality and quality of life. We are moving rapidly to advance the development programs with VOXZOGO in these five new indications and are excited to bring a demonstrated safe and effective treatment option to children with growth-related conditions. On the three programs that we've chosen to accelerate that were announced last quarter, BMN 351 for the treatment of Duchenne muscular dystrophy; BMN 349, a potential first oral therapeutic for the treatment of alpha-1 antitrypsin deficiency, liver disease; and BMN 333, our long-acting formulation of CMP, all programs continue to advance, and I'll share a more detailed update of our progress at Investor Day. Finally, for BMN 293, our gene therapy for hypertrophic cardiomyopathy, we will discontinue development based on the commercial landscape as well as the time and resources anticipated to bring it through development and to market. We are now consistently applying a focused approach to the evaluation of our development programs to ensure that we are investing in assets that have the potential to have the greatest possible impact for patients. Thank you for your attention. I'll now turn the call over to Brian for our financial update. Brian?

Thank you, Hank. Please refer to today's press release summarizing our financial results for full details on the second quarter of 2024, including reconciliations of GAAP to non-GAAP financial measures. All second quarter 2024 results will be available in our upcoming Form 10-Q, which we expect to file later today. In the second quarter of 2024, BioMarin generated record quarterly total revenue of $712 million, representing 20% year-over-year growth and 25% on a constant currency basis, driven by continued strong demand for VOXZOGO. The enzyme therapies comprised of VIMIZIM, NAGLAZYME, ALDURAZYME, BRINEURA and PALYNZIQ contributed $482 million of net product revenues during the second quarter. Looking more closely at Q2 net product revenue, VOXZOGO revenues of $184 million represents 62% year-over-year growth. We are pleased to announce as of early June, we can now satisfy all anticipated customer demand for VOXZOGO, which was a key driver of VOXZOGO's strong Q2 performance. The robust and focused efforts of our technical operations organization drove the availability of incremental global VOXZOGO supply to occur a couple of months earlier than planned, while our 2024 VOXZOGO plans always assumed that the supply constraint would be relieved by midyear, the incremental supply, earlier than anticipated, enabled certain markets to start new patients earlier and to begin to normalize customer stock levels that were running low during the supply constraint. We believe that Q2 VOXZOGO revenues benefited from this dynamic with approximately $20 million of incremental revenue. As we plan to add hundreds of new VOXZOGO commercial patients in the second half of the year, some of these order timing dynamics could result in patient growth rates exceeding revenue growth rates in the second half of 2024. Having said this, setting aside quarter-to-quarter dynamics, we expect patient growth and revenue growth from normalized and broadly track over longer time frames. Our stable and growing portfolio of enzyme therapies continued to drive strong performance with 15% year-over-year growth in the quarter, albeit benefited from approximately $20 million of large government orders for select markets that were previously expected in Q3. While Q2 revenues were positively impacted by the timing of those large orders, we continue to observe solid commercial patient growth in these brands that will drive sustainable revenue growth over time. For the full year 2024, the strong performance of VOXZOGO and the enzyme therapies are allowing us to raise full year 2024 revenue guidance to between $2.75 billion and $2.825 billion, representing approximately 15% year-over-year growth at the midpoint. From an operating expense standpoint, the R&D expenses in the second quarter were $184 million, up $7 million year-over-year, primarily due to the support of the VOXZOGO indication expansion development as we work to accelerate the full VOXZOGO opportunity. SG&A expenses in the second quarter were $263 million, up $57 million year-over-year, primarily driven mostly by $39 million of restructuring expenses incurred during Q2 as well as continued support of the global VOXZOGO market expansion. Restructuring expenses mostly included severance and wind-down costs associated with the discontinued development programs announced last quarter. BioMarin is executing very well in 2024, earning a non-GAAP operating margin of 31% for the quarter, which we believe is a high watermark for 2024. For example, normalizing Q2 operating margin for just the approximately $40 million of order timing, non-GAAP CAP operating margin in Q2 would have been approximately 28%. Q2 GAAP diluted earnings per share was $0.55, an increase of 90% over Q2 last year. And Q2 non-GAAP diluted earnings per share was $0.96, representing growth of 78% compared to Q2 2023. Our bottom-line results for Q2 benefited from the strong revenue execution driven by underlying patient demand and the order timing just discussed as well as Q2 operating expenses that are reflective of our disciplined resource allocation. While we will discuss details of our cost transformation program at Investor Day, we were able to realize some cost savings in Q2 earlier than anticipated, including lower R&D related to the discontinued programs announced in April. Our strong first half execution drove our increased profitability guidance for 2024. We are increasing 2024 non-GAAP operating margin guidance to 26% to 27%, which, at the midpoint, would represent 7% expansion versus 2023. We also raised non-GAAP diluted earnings per share guidance to between $3.10 and $3.25 consistent with our core goal to grow profitability faster than revenues. Important to note is that we observe our 2024 profitability is weighted to the first half of the year as a result of the strong quarter. We are expecting revenue growth in the second half of the year as well as overall profitability as indicated in our Q2 guidance. Q2 benefited from the previously mentioned order timing. And with respect to operating expenses, we are expecting our usual trend of operating expenses being weighted to the second half of the year. Considering some of the 2024 first and second half dynamics, we continue to point to our full year guidance and the annual results as the best measure of our performance and overall growth given the quarter-to-quarter timing differences that occur in our business. Lastly, as a reminder, our $495 million of convertible notes matured on August 1. As we discussed on our Q1 earnings call, for the settlement of these notes, we wanted to focus on a share neutral outcome and leverage the strength of our cash flow. As such, we repaid the notes in cash and have retired the underlying 4 million shares associated with the notes as an anti-dilutive measure that provides for increased earnings per share going forward. While we plan to communicate our complete capital allocation strategy at Investor Day, we determined that funding this debt maturity with our balance sheet was an important improvement to our capital structure and a valuable use of shareholder capital. In summary, we are pleased with strong execution demonstrated across the organization during the quarter. With our decision on ROCTAVIAN behind us, we have confidence in our long-term revenue and income growth and operating margin trajectory into 2025 and beyond further evidenced by this year's significant operating margin improvement and increased earnings per share. We are excited to share details of our long-term plans with you at Investor Day next month. To remind you, we plan to provide details of our new corporate strategy, including a framework for driving operational effectiveness and efficiency and cost management, we will also share updates on our pipeline and life cycle management plans long-term financial targets, including revenue and operating margins for the next several years and our capital allocation strategy. We are pleased with the work that has been done over the last few quarters and believe we have a very compelling growth story to share. Thank you for your continued support, and we will now open the call to your questions. Operator?

[Operator Instructions] Our first question comes from Phil Nadeau with TD Cowen. Please go ahead.

On the updated ROCTAVIAN strategy. Can you talk a bit more about the changes aside from eliminating a bunch of territories, are you changing the strategy or investment in the regions in where you're going to stay U.S., Germany and Italy?

Thanks very much for the question. So, our -- we're very pleased with the clarity that we're able to provide for ROCTAVIAN. If you remember, we said we would, by Investor Day, communicate the timing criteria for making a decision. We're pleased to be able to share this at the second quarter. So, the approach that we're taking allows us to focus geographically on those three geographies: United States, Germany and Italy also to focus our efforts within those geographies on what we have seen and we've learned to be the most important thing for the success of ROCTAVIAN, which is the patient pull-through activities mainly at the site level. So that's where we're going to focus geographically, but also in terms of types of activity within those geographies. We're also focusing our activities from an R&D and development perspective. We are stopping our life cycle development activities. Just to focus on the current main indication. We'll continue to generate long-term data, and we're also reducing our manufacturing expenses associated with ROCTAVIAN. All of this allows us to operate in an envelope of $60 million in 2025 and underpins our confidence that we're going to be able to achieve profitability for ROCTAVIAN in that time with this focused strategy.

And when will we hear the next update on the strategy? It sounds like this is a framework an initial strategy, but you're going to continue to identify the investment and success of ROCTAVIAN. When do you think you'd be in a position to give a further confirmation of the strategy or revision of the strategy if necessary?

No, this is a decision of going forward for ROCTAVIAN. We will continue to update you on our progress. As we've said before, the success metric we're all focused on is patients infused and treated. And so, we'll update you on our progress on those metrics, but this is our strategy. We've reached a decision. We have confidence that ROCTAVIAN can be a contributor to BioMarin's profitability going forward.

Our next question come Salveen Richter with Goldman Sachs. Please go ahead.

I just want to dig in further into ROCTAVIAN. With regard to the breakeven situation by year-end '25, could you just speak to the metrics that are giving you confidence at this time point? Is it the demand aspect? Is it 340B dynamics improving in the U.S.? And just maybe help us understand where all these moving parts are coming from to give you that conclusion.

Yes. Thank you so much for the question. This is Cristin Hubbard. I think that really the progress that we're seeing, and I'll be specific in the three geographies is that in the United States, we really are encouraged with the three patients that were treated in the quarter. And really, what this is around is ensuring that the sites are operationally ready to infuse product, and we've seen a fourfold increase in this. Our commercial team is very focused here, and we've seen a fourfold increase in this just since January. But then also, as Alexander alluded to, the patient pull-through. And it's really about building comfort around working through the single case agreements that we know will be true to ensure that patients are being treated. So with that type of experience, we recognize that, that will create more progress moving forward and a comfort with doing so, and we're seeing a lot of that in the U.S. today. In Italy, in particular, we are really pleased with the rapid progress that we've made in ROCTAVIAN since only receiving pricing and reimbursement since January. So we've treated a couple of patients there, and we're seeing large amounts of strong advocacy from KOLs as well as experience in the sites. And then lastly, with Germany, as I said a little bit earlier, we have reached a negotiated agreement with the sub-insurer, and we are happy to report that we now have approximately 25% of patient lives covered in Germany, and we will continue to push forward with progress with the subinsurers there. We know there's demand. We do have KOL advocacy in Germany, and we want to continue on that front. So, these are the types of metrics that we're looking at, and I'll pass it to Brian for more.

This is Brian. Just to add to Cristin's comments, in addition to those signs of progress and our continued execution across those three markets with this focused strategy that plus this $60 million cost envelope is what gives us confidence that we can manage the asset to be profitable next year.

Our next question comes from Ellie Merle with UBS. Please go ahead.

Just in terms of 333, how are you thinking about the development of 333 relative to VOXZOGO across different indications? Are there any indication where you would move forward with 333 instead of VOXZOGO? And then just a second question on idiopathic short stature. Given the much larger prevalence, what are your plans to potentially focus on a subset of patients with ISS within that 600,000 prevalence that you've cited?

Ellie, this is Hank. As far as the development plans for 333, our initial thinking is, first of all, to get it into the clinic, which will start shortly. And thereafter to proceed with the most expedited path to approval, leveraging potential for superior efficacy, superior convenience or both. As regards to the program of idiopathic short stature, the opportunity there is in patients with the greatest unmet need, potentially more specifically patients who have severe stature deficiency or patients who have been unsatisfied with available current therapy. So, I hope that addresses your question.

Our next question...

Ellie, we'll share more information on the development plans for VOXZOGO at Investor Day, we'll be sharing the specifics around the design of our studies and also the TAMs we're expecting to be able to achieve with those development programs.

Our next question comes from Cory Kasimov with Evercore. Please go ahead.

Great. I have a two-part question on VOXZOGO. First kind of big picture. So, assuming you're successful in adding additional indications here, what are your current expectations out of Washington on the potential impact of the IRA when it comes to multi-indication products for orphan diseases? And then the second one is, we're thinking about the hypochondroplasia opportunity. Curious how this indication relates to -- how it's similar, different to achondroplasia in terms of the level of market awareness and maybe the motivation on the part of the patients to get treatment as we think about kind of as you proceed through your Phase III trial?

Thanks very much for your questions. I'll handle the first one and then hand over to Cristin for the second one. So, the first one with regard to the potential impact of IRA. We actually think there'll be minimal impact of IRA on VOXZOGO life cycle development plans, whilst the IRA overall from a legislation standpoint is a very significant factor for the industry in terms of impacting innovation in many important areas. We don't think it's going to have a significant impact on VOXZOGO, and that's because of the payer mix that we have for VOXZOGO with these indications where we see minimal exposure to Medicare. And I'll hand over now to Hank thank for the second question.

Right. And your second question, Cory, just remind me real fast?

Yes. And the difference or the similarities or differences between achondroplasia and hypochon in terms of level of market awareness of these patients and desire to seek treatment?

Yes, hypochondroplasia doesn't occur as early in life for diagnostic purposes. So, it's underdiagnosed, and we're undertaking a lot of effort to increase its diagnosis. Having said that, we're really quite pleased with the rate of progress of the feeder study, and I'll give you more of an update about that. But as with a lot of genetic conditions, once a diagnosis -- once the therapy is in place, then there's more diagnostic effort undertaken once there's more diagnostic efforts undertaken, there's more ambition to try during the development program, we're hoping to try to begin the process of increasing awareness and ultimately uptake in the hypochondroplasia population.

Next question comes from Jessica Fye with JPMorgan. Please go ahead.

How are you thinking about the evolution of the competitive landscape in achondroplasia when we think about TransCon CNP and infigratinib potentially on the horizon? And maybe as a follow-up, would you ever consider evaluating VOXZOGO in combination with growth hormone in achondroplasia?

Thanks very much for your question, Jessica. So overall, we feel very confident about our competitive profile in achondroplasia and in the subsequent indication. As you know, CNP pathway is amenable to all the five different indications that we're now pursuing after achondroplasia. And even with achondroplasia, we think with the movement in achondroplasia to treat the youngest infants zero to five population, which is very, very part of the growth, but also very important in terms of optimal patient outcomes. The early start treatment, the greatest possible impact on the child's health outcomes as well as growth. So, we think that's a really compelling position in achondroplasia. The lead we have the safety profile of the durable efficacy, we feel very, very good about achondroplasia. And then obviously, in the subsequent find indications where we think we're going to be very competitive. With regard to your second question, I will hand it over to Hank to answer the possibility of the combination approach.

VOXZOGO restores growth to about 90% of the average stature population. And if we have a strategy to even further optimize efficacy, it would be more focused on 333 by virtue of offering the three advantages would be potentially for superior efficacy, potentially for superior convenience. And as part of that superior convenience the ability to use one drug, not two drugs. So, we think that CMP franchise ultimately can do it all.

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

Great. As you think about the next leg of growth for VOXZOGO, I was curious, in the untreated population, what percent are treated by a specialist today. And I say this because anecdotally, we've been hearing from some of the key opinion leaders that the incremental patient adds are coming from primary care referrals and that the next leg of growth here might be driven by diagnosis. So maybe you can give some context there and just speak to from a marketing effort perspective. What's the kind of incremental effort for the next leg -- of the next 500 patients versus the last 500?

Yes. Thanks, such for the question, Paul. I will say, I don't know the exact numbers the actual treaters per say that you're referring to, but I will say where our efforts are focused. So in the United States, for instance, where we believe there's going to be a large growth opportunity for us. This is really an area where we do see more decentralized care. And so what I mean by that is you certainly have it treated by some geneticists in some offices and in fact, some pediatric endocrinologists as well. But what we're finding is a lot of these patients are also sitting with general pediatricians. And so what we're really focused on is ensuring that we have awareness around VOXZOGO in that general peed population and making sure that they know we're a local treater, namely in your pediatric endocrinology offices may be. So we're really trying to build those connection points between where we know those patients might be to those who are going to be treated. Now in ex-U.S., we do see much more of a centralized care system there where they are treated in centers that specialize in this area and so in skeletal dysplasias. So of course, we've seen faster uptake in those areas where they -- you know where those patients are and how to get them. And importantly, while we've seen really good penetration in those countries. There's still room to grow, and that's where we're focused as well. So, I'd say that our focus areas are really going to be around that referral pattern in the U.S. continuing our growth in those kind of highly penetrated strategic markets and importantly, opening up in new markets where we might have lower penetration or we -- we've not yet opened up the market. So, focus on all those areas.

Our next question comes from Joseph Schwartz with Leerink Partners. Please go ahead.

I'll ask about a couple of your priority pipeline programs. First, on BMN 333, I was hoping you could give us some insight into the long-acting technology that's used there. And also help us envision the expected time to market for BMN 333. And then, what are you hoping to see for BMN 351 at the target dose or doses since it's moving behind several other next-gen next gen Exon skippers, it would be helpful to hear what you hope to see efficacy wise at different dose levels?

As far as the specifics about 333 in terms of design, we really tried to leverage a lot of safety and information that's already available on linking chemistry. I'll get into that in a little bit more detail at Investor Day. Obviously, one of the other critical aspects of the program is to ensure sustained exposure without a lot of thoroughly high exposure or dumping is sometimes is referred to in drive delivery circles. So, I'll get into a little bit more details, but really a big orientation around safety and consistency of exposure. On 351, acknowledging that there are a lot of competitors, it doesn't seem like anybody is really able to get to high levels of dystrophin either by conjugating polymorphelino with CAGS or with transferrin receptor antibodies. And so what our strategy has been all along, is to try to develop a more potent molecule by virtue of targeting a different regulatory site in pre-mRNA processing. The advantage of that approach has been twofold: One in preclinical miles. We can get dystrophin expression up to 40% in not just skeletal muscle, but also in high levels and diaphragm, high levels in heart. And the second is that we can do that at levels where we have confidence about the safety profile, given our experience with [indiscernible]. I'll give more detailed updates on status of the program and expectations to when you're going to see data at Investor Day, but we're very encouraged by the progress that we're making in 351.

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

This is PV on for Akash. So, on BioMarin 351 for DMD, how should we think about the translation from animal to human models when it comes to dystrophin expression. In mice models, you showed normal dystrophin levels as high as 98%. I guess, how well does that data translate to humans perfect normal dystrophin? And also for borrower success, what would you need in order to move forward.

Yes. Well, I think one of the challenges of translation is that there hasn't been a lot in humans that's really moved the needle in terms of dystrophin inspection. So, a little bit of that question is TBD. What we talked about at last year's R&D Day was based on our animal model where if we can achieve the tissue concentrations of 351 that we achieve [indiscernible], we should be in a very much higher level of dystrophin expression and partly we based it on a relatively unique animal model, which carries the human equivalent of the gene that is to be skipped. And so, we have a very fulsome assessment in vivo skipping potential. And we've got a lot of safety data, both from rodents on human primates and humans on our class of compounds. And so, we're optimistic based on that, that we'll be able to see much more meaningful levels of dystrophin expression. And of course, it's really the near full-length dystrophin that motorizes the muscle, if you will, that will enable much greater function of the muscle. And so far, that hasn't been achieved. And that's what we're looking to achieve with 351.

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

Just maybe two questions. VOXZOGO in hypochondroplasia, just Hank, just listening to your comments on how hypochondroplasia is diagnosed maybe later in life. Just noticing that the pivotal study includes patients aged 3 to 18, should we expect maybe that you won't have to go back for earlier age in the label once approved? Or are -- is the diagnostic journey be different among hypo and achondroplasia? And then also maybe another sort of pipeline question of 349, just noting that you had a competitor discontinue their oral AAT corrector program. I'm just wondering if you could call at any points of differentiation between 349 in that molecule. And just walk us through what gives you confidence here comparatively?

Sure thing, Chris. The challenge oftentimes in genetic diseases is the diagnostic odyssey and the delay. And we hope that during our development program, we can overcome some of those barriers and start to teach our colleagues that early diagnosis is really the path to improve overall outcomes in genetic conditions. As to regulatory requirements for the under three population, that's a TBD. The one thing I'd say about that is, we've got a lot of wind at our back with health authorities around the world who recognize the safety and the efficacy of VOXZOGO in children under three years of age essentially approved from infancy ran on the world in achondroplasia, that's a very good platform to develop even further confidence of VOXZOGO in very young children. So, stay tuned for how the diagnostic Odyssey is going to unfold, how the clinical program will unfold and how the regulatory proceedings might unfold. As Alexander said earlier, we got -- we just got BRINEURA approved for the very young population. So, I think the agencies are now quite familiar with BioMarin and the strategy of obtaining earlier and earlier approvals and the rising confidence in the safety VOXZOGO efficacy can only help us. As regards to 349 and Vertex's most recently announced decision, I would just contrast two very different approaches that have been undertaken. Vertex, I think, was kind of shooting for the stars to do two very difficult things simultaneously. One was to restore antitryptic activity and the other was to prevent polymerization, which causes the liver disease. And they've had now a couple of bites at that apple. And have not so far succeeded and maybe they'll gain further traction, preclinically, don't know. What we on is a much more single-minded focus which is to stop one of the two big, big problems. And actually, it's the currently untreated problem than alpha-1 antitrypsin. As you know, there's replacement therapy for the lung disease, the loss of function mutations. The problem that we're addressing is a different molecular problem, which is the gain of function mutation, which causes the alpha-1 mutant proteins to polymerize in the liver, and that is currently unaddressed medically. Doing so has the advantage of -- and what we've shown preclinically is that we can solubilize these polymers, increase their exclusions in the liver and then restore liver health as a consequence. The related result of that is that in patients who have only one genome copy of the mutant protein that we can -- but we can reduce the Z polymerization and leave the M protein unaffected and therefore, preserve its antitryptic activity. result of all of that in the competitive landscape is having an oral and therefore, better titratable product and also a product that's potentially much more broadly deliverable. So, we're very excited about the 349 program. And again, I'll update you further on progress that we're making at Investor Day.

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

I will have a few questions regarding ROCTAVIAN. Given your comments on 2025, is it fair to assume that you actually your assumption is about 30, 40 patients that will be treated in 2025 in order to make breakeven? And then I have one question regarding the Germany. That 75% of the insurance, why -- what's the reason they didn't cover now? And when do you expect to cover will be in place. In the U.S., the three patients that treated were these from three different sites? How many is now past contracting phase and in the process of payer discussion?

This is Brian. I'll start with your first question. We're not giving specific ROCTAVIAN patient or rent revenue guidance today. It was important to talk about the progress we're seeing in the launch that Cristin covered earlier. And then this cost envelope for next year and the goal of getting to profitability. So, framing it up in that way as demonstration and articulation of the strategy, so you can view that as, again, minimum level of revenues, if you will, but not getting into further specifics at this time.

Yes. And I'll take the second two questions. So, with regard to the sub-insurers, I mean, it's impossible to give you an exact time of it, but I can say that we're making progress in these discussions that we're having. And really, we're just pushing through insurer by insurer and making sure that we are addressing the needs, which, of course, are going to be about risk carrying. On the U.S. side, you asked about the HTCs that have been treated. We've had those three patients treated. They were all in separate HTCs and we're actually geographically dispersed across the U.S.

Our next question comes from Kostas Biliouris with BMO Capital Markets. Please go ahead.

Congrats on the strong quarter. One question from us on ROCTAVIAN acknowledging that HEMGENIX in hemophilia B was approved six months before ROCTAVIAN in the U.S. and that the hemophilia depopulation is 4x to 5x smaller than the hemophilia A. How are you benchmarking ROCTAVIAN revenues versus HEMGENIX, which generated about $15 million to $30 million in the first half of 2024 based on our estimations.

Yes. Thanks for the question, Kostas. I'll jump in on that one, Brian, since I've been tracking the HEMGENIX launch along the way. There's different circumstances there between the two launches. Of course, there's differences as well, but we're not getting into launch comparisons or benchmarking HEMGENIX, more of a qualitative estimate. Again, we are going through similar contracting in access challenges. So, there is a comparison to be made, but we don't do that quantitative level.

Our next question comes from Mohit Bansal with Wells Fargo. Please go ahead.

Just want to reconcile some of the VOXZOGO numbers. So, Brian, if I understand correctly, the $20 million number for inventory is all inventory, right? That was one time. And if I assume that to be inventory, you added quite a lot of patients in this first half. I mean, I think the number was about 2,600 patients by the end of the year. Now you are at 3,500, that is 35% increase that is not reflecting in the revenue growth since the last year. So just wanted to understand if there is a pricing dynamic that is in play or geographical mix dynamic that we should know about?

Yes. Thanks for the question, Mohit. And there are going to be different dynamics from quarter-to-quarter in terms of the patient growth rates and revenue growth rates. I tried to address that a bit in the prepared remarks, but I might even point you to the last quarter where there was a significant amount of functions adds, but you didn't see that necessarily a revenue growth. And this time around in the second quarter here because of that order timing that you noted, thanks to increased supply becoming available earlier, that dynamic flipped the other way around. And this time, revenues were ahead of patients a bit and recognized also that in the second half, we could see patient growth rates exceed revenue growth rates in either Q3 or Q4. But I mean, big picture, we're in the third year of this launch. We're still less than 20% penetrated with a long way to go globally. We're on track for VOXZOGO to exceed $1 billion in revenue. Yes, there's going to be differences in quarter-to-quarter timing of patients and orders we think those two will correlate over time. But we're just -- we're out there executing quarter-to-quarter. There's going to be timing differences.

Your next question comes from Olivia Brayer with Cantor Fitzgerald. Please go ahead.

As you consider profitability next year and just broader uptake of ROCTAVIAN, how are you thinking about sales contribution and breakdown across the three geographies that you're focused on? I'm just trying to get a sense for whether you expect the U.S. to really make up the majority of ROCTAVIAN sales going forward.

It's a good question. Noteworthy there just in terms of the U.S. versus ex-U.S. dynamic. The price of ROCTAVIAN revenue per patient on average in the U.S. is going to be higher. So, as they continue to make progress in the U.S. market, those patients are going to contribute more revenue. Again, we're focused on these three markets, both with the restructured cost envelope as well as the tactics in this dedicated and focused business unit that will be working exclusively on ROCTAVIAN. It's going to allow the rest of the business to focus on the remainder of the portfolio. So, we're viewing this as the three markets together, not getting into further details of each of those individual markets at this time. But important to know that those three markets are the focus area and that will be the contributors to revenue in 2025.

This will be our last question. Our last question comes from Luca Issi with RBC Capital.

Congrats on the progress. Maybe two quick ones [indiscernible]. You obviously prioritize in Italy, Germany and the U.S., but what's the plan for the other geographies where you still have rights? Is there any plan there to find a partner or try to monetize that in any capacity? Any color there, much appreciated. And maybe sticking to [indiscernible]. Can you maybe just talk about net pricing in Italy versus the U.S. I believe last quarter, you reported $800,000 for the only patients treated in Italy versus today $7.4 million from three patients in the U.S. and two in Italy, that would imply net pricing of $1.9 million in the U.S. and $800,000 in Italy. Is that right? And you still how should we think about pricing in Germany?

It's Brian. I'll take that one. So first of all, in terms of the focus, it's an important question because the key element behind the driver of the $60 million cost structure for next year is focusing entirely on supporting patients in those three markets as well as the long-term overall clinical and regulatory commitments that come with ROCTAVIAN that means that we are not investing in additional markets at this time. As we prove out and continue to gain traction and get confidence in ROCTAVIAN's overall progress over time, we will retain the right to make select investments that are value accretive to the assets over time. But important to note that it is just those three markets commercially at this time. And on pricing, I'll share, again, it's going to be dynamic over time with variations in the global pricing. I will share that the net revenue that we recognized for those five patients across the two regions where we had sales in Q2 was consistent with our expectations and prior communications. The largest gross to net item in the U.S. is 340 rebates at 23% and then traditional planned discounting in Italy. So, I'll stand by prior comments on that.

I will now turn the call back to CEO, Alexander Hardy, for closing remarks.

Thank you very much, everybody, and thank you for joining our call for all your questions. We're very proud of the quarter and the strong growth, both in revenue and profitability that BioMarin has achieved this quarter and very excited about the outlook and raising our guidance. on both the top and the bottom line. And we're also very excited about the progress we've made so far this year with the priority prices we set out in January. A reminder of those priorities: One was to accelerate and maximize the VOXZOGO opportunities. You can see with these strong results. VOXZOGO is growing very, very well. In just its first indication and we're less than 20% penetrated in that, and we have a path forward with five additional indications, and we made progress so far this year in those, both in terms of regulatory feedback and progress in the development programs. Secondly, to establish the ROCTAVIAN opportunity. And today, with this decision, we have clarity on a path forward in addition of ROCTAVIAN within the portfolio. We're excited by the signs we're seeing of progress, but we're also confident in our strategy, reducing the expenditure down to $60 million in 2025 and confident in our ability for this product to be profitable in that time frame. Thirdly, as you can see so far this year, we prioritized our R&D efforts. We focus on three programs that we're most excited about, and we've made consequential decisions around stopping programs that don't meet the high bar for innovation and value creation for shareholders that we have at BioMarin. And fourthly, we're really excited and proud of the progress we made on increasing profitability faster than revenue. You can see that with our results this quarter and our increase in guidance. So, we're looking forward to seeing you all at Investor Day to share our outlook for the future BioMarin. It's a very, very exciting perspective we're going to share. We have a lot of confidence in that corporate strategy. And we're looking forward to seeing you all in New York, either live or online and seeing our plans for BioMarin. And with that, thank you very much for joining us, and wish you a good rest of your day.

This concludes today's conference. You may now disconnect.