Welcome to the BioMarin First Quarter 2020 Financial Results Conference Call. Hosting the conference call today from BioMarin is Traci McCarty, Vice President of Investor Relations. Please go ahead, Tracy..

Thank you, May, and thank you, everyone, for joining us today.

To remind you, this non-confidential presentation contains forward-looking statements about the business prospects of BioMarin, 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 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 report.

On the call remotely from BioMarin management today are J.J.

Bienaimé, Chairman and Chief Executive Officer; Jeff Ajer, Executive Vice President and Chief Commercial Officer; Robert Baffi, President, Global Manufacturing and Technical Operations; Hank Fuchs, President, Worldwide Research and Development; and Brian Mueller, Acting Chief Financial Officer.

We hope to keep this call to 1 hour and also give everyone the opportunity to ask questions today, so we request that you limit yourself to one during the Q&A portion of the call. Thank you for your understanding. I will now turn the call over to our Chairman and CEO, J.J. Bienaimé..

Thank you, Traci. Good afternoon, and thank you for joining us on today’s call. We hope you and your families are healthy and managing through these unusual circumstances brought about by COVID-19 virus.

So these are unprecedented times, but the essential nature of our medicines to the patients who need them has enabled BioMarin to weather the challenge of COVID-19 quite well.

Equally as important, I want to underscore the extraordinary dedication of our employees who have kept operations running smoothly in order to maintain access to our therapies around the world.

Our first quarter record results of $502 million of total revenues, or 25% growth over last year is a testament to the importance of our therapies and our diversified product base and commercial footprint.

Due in part to the sale of Firdapse, GAAP net income in the first quarter was $81.4 million, exceeding our current full-year guidance range of $20 million to $80 million..

Thank you, J.J. Innovation has always been at the core of BioMarin success. During my 20 years tenure as the Head of Technical Operations, I’ve been still in the company a few guiding principles to foster a culture of innovation.

First, let science inform and lead decision-making; second, let compliance focus our efforts on patient safety and clinical outcomes; and third, let ingenuity create adaptivity and resiliency and our approach to drug development.

These three tenants infused with the talents of the most dedicated people I’ve ever worked with have consistently enabled us to take research ideas rapidly through development, navigating the complexities of the regulatory approval process in a highly effective and differentiated manner to meet the needs of patients.

BioMarin’s leadership team has shared and supported the vision for creating a fully integrated company with technical operations, powers, clinical studies and commercial demand and is an integral component of strategic technology development paradigms for assuring the timely delivery of an uninterrupted supply of products.

Furthermore, innovative and appropriately implemented CMC strategies linked to a faster clinical design, allows for rapid development and high success rates that benefited both patients and shareholders alike. As a company, we are going through multiple transitions simultaneously, challenging in some ways, invigorating in others.

Our transition to profitability this year provides the resources to develop more innovative therapies. Our transition to gene therapy product leverages our clinical manufacturing and commercial capabilities and places us squarely at the forefront of the emerging technological advancement and precision medicine.

Our transition and technical operation leadership provides the opportunity to build on our innovative approach to drug development to fuel our growth. When I first saw Dr. Greg Guyer’s CV, I could not help, but be impressed with the scope of his responsibility and the experiential variety and diversity of his career.

In many ways, while a different journey, it shared a lot of commonality with my own and that is not to let us vote to BioMarin.

I’m confident and committed that the transition and technical operations at BioMarin from me to Greg will build on the legacy of science, compliance and ingenuity for our patients that will benefit from the products that will emerge from our efforts for our employees and their careers and for our shareholders as we become profitable..

Thank you, Robert. As we begin 2020, I’m very pleased with the team’s performance across all brands and all regions during the quarter. As J.J. mentioned, we achieved our highest quarterly revenue on record with total revenues of $502 million in the first quarter, with net product revenues marketed by BioMarin, up 24% to $433 million.

This achievement reflects the fundamental strength and growth of our business, like near-term challenges related to COVID-19, which I will address in a moment. On to results in the quarter and starting with Palynziq.

In the U.S., the trend of increasing revenue based on a steadily growing base of patients on commercial therapy, including progression from induction and titration to daily maintenance dosing, continued in Q1.

In the early part of the quarter, we did experience a seasonal slowing of new patient enrollments and patient starts, somewhat mirroring our historical experience with Kuvan in the United States. We are reporting $35 million in Palynziq revenue for the first quarter, with the majority of that revenue coming from the U.S.

In Europe, in the first quarter, multiple clinics across Germany continued to actively treat patients with Palynziq and early uptake signals are encouraging.

During the quarter, we made significant progress in Germany, adding clinics that now have some experience prescribing Palynziq and managing patients through the induction and titration phase to daily maintenance dosing..

Thanks, Jeff. I’d also like to echo J.J’s expression of deep and heartfelt appreciation for the time Robert has spent with us, and also to welcome Greg Guyer to the organization where the secret sauce is bottled.

The R&D organization is delighted that our next significant product opportunities continue to progress, particularly under the circumstances brought about by COVID-19.

The ability to come to work mostly virtually and focus on the advancement of our innovative products to date, ROCTAVIAN and Vosoritide, has been especially gratifying and a welcome distraction from the ongoing pandemic. I want to acknowledge and thank our teams for their commitment and contributions during these challenging times.

I have been impressed by your flexibility and your ability to keep the story going, while we are dealing with the pandemic. Starting with ROCTAVIAN and what a strong and memorable brand name, congratulations, Jeff. The FDA is committed to meet the August 21 PDUFA action date.

In Europe, our Marketing Authorization Application filing remains on accelerated assessment at this time. However, the review procedure is to be extended by at least three months due to COVID-19 delays.

Further, as is the case with most filings that initially receive accelerated assessment, we believe there is a high possibility that our MAA will revert to a standard review procedure from accelerate assessment. Based on these assumptions, we expect the CHMP opinion by late 2020 or early 2021.

We continue to plan to share our three – our four-year update of the 6e13 vector genome per kilo dose, as well as the three-year update on the 4e13 vector genome per kilo dose in the middle of the year, but the form is as yet to be defined, given the changing environment for medical meetings. We have a data analysis plan in place.

We’ll move forward with business as usual, but the venue and method for providing the update is still fluid at this point, so thanks for bearing with us. Importantly, we do not expect COVID-19 to impact the timelines for completion of the ROCTAVIAN Phase 3 trial. Enrollment was completed in November of last year.

And one of the benefits of being a one-time treatment is that, patients do not need to receive therapy on a chronic basis.

We’re also confident that the integrity of the ongoing data collection for the study – for this pivotal study is being sufficiently maintained, as home healthcare solution aligned nicely with the collection of the primary endpoint analyzed bleed rate data. Turning now to Vosoritide for the treatment of achondroplasia, as J.J.

mentioned, we plan to submit a global marketing applications in the third quarter of this year, a multipronged development program, including a long-term Phase 3 clinical results in five to eight-year-old children, comprehensive natural history data, the ongoing study of newborns to five years and the highly statistically significant placebo-controlled Phase 3 trial makes for a very comprehensive data package spanning more than five years of treatment with children with achondroplasia.

Again, with the beneficiary of fortunate timing and that our pivotal submission data read out prior to the pandemic and now much of the work can be concluded remotely. If approved, Vosoritide would be the first and only medicine designated for the treatment of achondroplasia in the U.S. and the European Union.

We continue to look forward to publishing the full data from the Phase 3 study later this year, and we’re pleased to let you know that our late breaker has been accepted in an upcoming medical Congress.

The presentation will include one-year growth velocity of height Z-score, body proportionality, safety and subgroup analyses, so stay tuned for more specifics as to when and where those data will appear. The Phase 2 study of Vosoritide in zero to five-year olds referred to as study 206 is proceeding well.

And we are very pleased that safety data from children ages six months to five years participating in that study will be available as part of our registration package. We’re grateful that the timing of key studies is aligned well with our free COVID-19 plans.

Moving to BMN 307, our investigational gene therapy for phenylketonuria, we’re continuing to prepare new sites to open in order to enroll patients when it is safe to do so, given the COVID-19 circumstances.

We’re excited about the prospect of BMN 307, as it represents a third treatment for phenylketonuria in our PKU franchise and the second gene therapy development program, leveraging our learnings and capabilities from ROCTAVIAN. Currently, we expect the study to start later – we expect to start the study later in 2020.

The R&D organization is energized by the opportunities before us in 2020, with both ROCTAVIAN for severe hemophilia A and Vosoritide of children with Achondroplasia advancing towards potential approvals. We were hopeful that these innovative treatments will be available in the very near future.

We look forward to updating you on our progress over the coming quarters, and thank you for your continued support. And I’ll now turn the call over to Brian to review the financials..

Thank you, Hank. Please refer to today’s press release summarizing our financial results for full details on the first quarter of 2020. And as usual, our comprehensive report on the quarter will be available in our upcoming Form 10-Q, which we are on track to file over the next couple of days.

As Jeff mentioned, we are experiencing some modest impacts from the COVID-19 pandemic, and as a result, we have updated full-year total revenue guidance to between $1.85 billion to $1.95 billion.

As Jeff noted, our updated revenue guidance is based on the assumption that our business will return to normalized demand patters in the second-half of the year.

Importantly, while we lowered our revenue guidance due to the impact of COVID-19 on our commercial business, we were able to analyze our 2020 spend projection and make adjustments that allowed us to maintain our prior GAAP and non-GAAP income guidance, despite the lower revenues. Moving to operating expenses.

R&D expense for the first quarter of 2020 was $142 million and lower, compared to R&D expense for the first quarter of 2019 of $184 million, mostly due to less R&D activity for ROCTAVIAN, given its late-stage of development, as well as Palynziq following its approvals in the U.S. and Europe.

SG&A expense for the first quarter of 2020 was $187 million, which was higher than SG&A expense for the first quarter of 2019 of $162 million. The year-over-year increase was expected with the single largest driver being the commercial preparation for the launch of ROCTAVIAN and the continued global launch of Palynziq.

We also incurred some unpredicted foreign currency exchange losses during the month of March, as the COVID pandemic negatively affected similar assets denominated in some of the more volatile global currencies. Turning to bottom line results.

We reported GAAP net income of $81 million in the first quarter of 2020, compared to a GAAP net loss of $56.5 million in the first quarter of 2019. The improvement in GAAP income was primarily due to higher revenue, lower R&D expenses and the gain on the sale of deferred tax assets.

With higher revenues and lower R&D expenses, the non-GAAP income of $117 million in the first quarter of 2020 grew substantially, as compared to Q1 2019 non-GAAP income of $25 million.

Both of these first quarter 2020 bottom line results gives us a great start towards achieving our 2020 goals of GAAP net income on an annual basis for the first time in company’s history and considerable growth in non-GAAP income.

I’d also like to touch on a potential tax benefit that we mentioned last quarter that may be recognized in the second-half of this year. Our current 2020 GAAP net income guidance of between $20 million to $80 million excludes the potential impact of intra-entity intangible asset transfers between BioMarin entities.

If these intangible asset transfers occur, we estimate that the tax effect could result in a one-time non-cash income tax benefit of greater than $500 million. As I mentioned previously, you may have seen similar transactions completed by some of our larger peers in recent quarters.

Beginning with total cash and investments, we ended the first quarter of 2020 with $1.15 billion, compared to $1.17 billion at the end of December 2019. The modest decrease in total cash and investments during Q1 2020 was largely due to some timing of operating cash flows.

However, the significant improvement over the first quarter of 2019, our total cash and investments decreased by $105 million. This solid cash position, coupled with BioMarin’s business fundamentals, put us in good standing to manage through the continued uncertainty related to COVID-19.

In closing, the strong performance of the business during the first quarter of 2020, plus our positive financial outlook for the rest of the year indicate that 2020 should be a transformational year for the company. And the prospects of value to come from ROCTAVIAN and Vosoritide, if they’re approved commercially, give us enthusiasm about our future.

Thank you for your support. And we will now open the call to your questions.

Operator?.

Thank you, sir. Our first question is from the line of Robyn Karnauskas from SunTrust. Your line is now open..

Hi, everyone. Thanks for taking my question. And just first off, congratulations to Greg. But to Rob, it was lovely working with you. I think you brought breath of fresh air to working with management teams in all of my buyers at universe. . So thank you so much. I learned a lot.

I guess, let me start with some questions on ROCTAVIAN, I hope I get that correctly. So first of all, what gives you confidence that in the United States that there won’t be any more delays? People ask me this nonstop.

And then when you talk about assuming normal operations go resume in the second-half, is that in the beginning of the second-half? Do you have a timeline for that? If it goes into fourth quarter, could we see further delays? And third question is, what are you hearing as far as like people willing to have gene therapy procedures done in the COVID environment as early as fourth quarter? Are people open to it? Is it separate from the hospitals? Or what are you hearing from the ground? Thank you..

Okay.

Hank, you want to answer the question on the delays with the FDA? Hank?.

Thanks. Thanks, Robyn, for the questions. The confidence from the FDA is that, we’re tracking to our milestones, and in some cases, they’re accelerating their work. So having been through a bunch of these recently, all the signs are pointing favorably.

As far as willingness to dose, as you know, we completed our dosing in our valrox clinical trials, and we are experiencing a bit of a delay in the PKU program. So I do expect to share some hesitance in the gene therapy clinical trial world.

I don’t know if Jeff Ajer wants to make any comments about anything he has heard about what might happen in the fourth quarter when we’re approved..

Yes. Jeff, you want to give your perspective on how we will launch the product. I mean, obviously, if we had to launch today, it would be a little bit challenging. But we’re seeing news every few minutes that the business – I mean, businesses are starting to reopen in the U.S. So – and around the world, Germany, France.

France is reopening their schools in a couple of weeks. So things are changing now. It’s really hard to predict when things are really going to go back to normal or as close to normal as possible. We can’t anticipate this to happen at the beginning of the third quarter, but it’s hard to tell today.

But, Jeff, you want to give your perspective on the willingness for patients to be treated and how our commercial team is going to go about addressing this?.

Yes. It’s a great question and, of course, nobody can predict the future. So our team has been focused – and maybe I’d start with saying, fortunately, we have a team in the United States that is comprised largely of people with existing relationships in the hemophilia community.

So those people are busy making connections with clinicians with hemophilia treatment centers and with patient advocacy organizations, all with the objective of continuing to introduce BioMarin as an organization to those audiences and provide opportunities for gene therapy, education, very important and highly in demand in the community, and also working on site readiness.

I think one of the most decisive variables will be the ability and willingness or not of certain hospitals to do infusions. If we are so fortunate to have an approved ROCTAVIAN product in Q4, that will probably be somewhat dependent on the course of the COVID-19 situation.

But we would also note that, while we’ve seen a lot of disruption to our infusions of the enzyme products, the disruption hasn’t been anything close to total.

And, in fact, we’ve seen less disruption with Brineura infusions, which are indicative of the situation, where hospitals and physicians can prioritize infusions if they’re motivated and they find them to be particularly of important.

So that’s our approach for ROCTAVIAN pursuing education, site readiness, and we’ll see where we can do infusions when we get that far. I personally haven’t gotten a signal that patients are going to be reluctant to take infusions when we get that far.

And that may be reflective of the fact that our patient engagement is pretty limited in the preapproval setting. I’ll turn that back over to to you, J.J, if you want to direct on the resume the normal question..

No, I mean, I think I kind of tried to answer that.

Maybe do you want to give your perspective on the resume to normal? Jeff?.

Yes. So, Robyn, I don’t think that we’re saying that our business will be back to 100% in normal. Starting the second-half, I think, we’re using the second-half to give some flexibility in terms of the timing of that.

My own sense is that, we’re expecting to see the biggest impact to our business in Q2, we would be rebounding in Q3 and – with some luck, we would be back to normal pre-COVID levels of demand in Q4. Thank you..

We have our next question from the line of Salveen Richter from Goldman Sachs. Your line is now open..

Good afternoon, and thanks for taking my questions. And, Robert, good luck with everything.

So as you look towards the valrox launch, can you comment on patient screening, such as the website that stood at about 400 individuals, I believe, back in February, and an update on the companion diagnostic? And then secondly, how should we think about the full-year Phase 1/2 two upcoming data? And do you anticipate it’ll impact payer discussions?.

Hank, do you want to answer the companion diagnostic we’re seeing that are moving along here and then the other question on the Phase 2 update?.

Does he also had a question – yes, and the opt ins. I can start with companion diagnostic and a full-year update and then turn it back to you guys for the impact on payers or the opt ins. Companion diagnostic, Salveen, doing great.

Everything is on track, fully expect to have an approvable companion diagnostic at time valrox approval in the United States, fully expect to have a CE Mark for Europe for use in Europe when ROCTAVIAN, excuse me, is approved. For your update on ROCTAVIAN, the expectation is the main focus is going to be obviously on bleed control.

And secondary emphasis is going to be on the evolving pattern of factor expression and whether there are anything in individual patients that Mark who is more vulnerable to losing factor expression if that’s occurring or not.

So, as you know, the site has been overseen by a data monitoring committee and they have not reported anything particularly one way or the other to us about Study 201. So we continue to follow the patients as the protocol described and look forward to presenting the data in the middle of year..

So Jeff, do you want to talk about the payers and impact, I mean the Phase 2 update impact or like thereof on the payers?.

Yes. Thank you, J.J., and thanks, Salveen, for the question. The full-year data point is an important part of the emerging clinical data picture. I think, I had mentioned on the previous call that our payer launch was begun in Q4 of 2019. So we’ve got a full payer management team on the ground.

They’ve been conducting calls for the last four months and we’ve been using the data that we have. We’ve been using the three-year data from last spring and we’ve been using the data from the Generate 1 interim data cut. That’s the data that we have. Payers are interested in the question of durability, that’s a key question for them.

I haven’t gotten any signals from payers that they think that the the answer to that question is a binary one based on what we see midyear from the four-year data cut. But obviously, that’ll be an important part of the picture and payers care about the question of your ability..

We have our next question from the line of Josh Schimmer from Evercore ISI. Your line is now open..

Thanks for taking the questions.

Have you started to see any change in the days receivable in the start of the second quarter, and how do you expect that to evolve over the course of the year? And can you comment a little bit on the insurance coverage shifts you may be seeing in the U.S., and how you think that may impact the business if at all? Thanks..

Hey, Brian, do you want to answer the day receivable questions?.

Yes..

And then, Jeff, the insurance mix..

Of course. Yes. Thanks, Josh. We’re watching that closely, including throughout March and April here. We’ve not yet seen actual disruption into our payments. We’ve got a stable base of customers, stable supply chain and relationship from a cash flow standpoint with those customers. So we’re hopeful that, that will continue.

But recognize that there’s going to be some uncertainty with the pandemic and its impact on healthcare systems. So we’re watching it, but no impact to date..

And, Josh….

Jeff, do you want to talk about the payer mix?.

Yes. Like other companies, we’re very watchful for signals that look like patients are losing access to private insurance because of being laid off and what happens to those families and patients. I would say, we don’t have anything that constitutes a signal on that to this point.

There have been a couple of anecdotal reports that we’ve collected and we’re deliberately collecting any signals that we can from our RareConnections hub program. So we’ve gotten anecdotes of patients calling and saying that they’re anxious about the potential loss of insurance.

We’ve seen one patient family shift from a private to a government plan due to loss of a job. And so I would call those anecdotes and not a signal, but we’ll keep watching and keep you posted. Good question. Thank you..

We have our next question from the line of Cory Kasimov from JPMorgan. Your line is now open..

Hey, good afternoon, guys. Thanks for taking the question, and congrats to Robert on your retirement. So my question is for Hank.

I’m just curious, is there a reason other than COVID why the EMA may revert ROCTAVIAN MAA to standard review from accelerated assessment, especially since you’ve already successfully completed the preapproval inspection? And was there any new data or new analyses that were requested by the agency? Anything else you can say there?.

I think the key thing about accelerated assessment is that most products fall off accelerated this test assessment. And I think that this is also further compounded by the fact that this is an advanced medicinal agent.

So I don’t think today’s comment about accelerated assessment should be interpreted meaningfully differently than when we initially filed the application..

Okay. Thank you..

Your next question is from the line of Geoff Meacham from eBay. Your line is now open..

Okay. Hey, guys, thanks for the question. I just want to ask a little bit more about the dynamics in the base business. I guess, when you think about the diagnostic path for new patients on a number of different products, be it Vimizim, Brineura, Palynziq, et cetera, obviously, it’s a pretty long cycle.

I just wanted to ask you if you’ve seen any of these physician interactions coming to converting to virtual. I’m just trying to assess the – maybe the long-term disruptions into new starts beyond, say, three quarter – a third quarter of this year? Thank you,.

Jeff, do you want to take that one?.

Yes. I’d happy happy to. So relative to the base business and the dynamics, I would say, we anticipate the near-term impact from missed infusions to be higher than the impacts from delayed patient identification and patient starts.

Probably the disruption to patient starts would be larger for Palynziq at this point, because Vimizim – all of Vimizim, Naglazyme and Brineura have a larger starting base of patients. So the incremental new patients coming on will have a smaller impact.

And there are anecdotal reports that clinics are shifting their interactions with patients to virtual visits. That’s something that is obviously outside of BioMarin’s purview. So we only have incidental reports on that, and that’s not something that we would seek to get involved in.

However, I think for certain aspects of the identification and patient start pathway, we do see patients moving forward. So that process has not ground to a halt exactly, but it has been disrupted. And thanks, Jeff, for that question. I hope I’ve addressed your concerns..

Next question is from the line of Akash Tewari from Wolfe Research. Your line is now open..

Hey, thanks so much.

Can you give some color on how the FDA may use that new prophy trial on valrox you recently announced? Would it be possible to have that data pooled with your Phase 1/2 data as a part of a separate efficacy analysis in your label? And how long will that structure happen? And I just wanted to clarify something, your 2020 guidance included the impact of valrox sales only in Europe.

I just wanted to make sure I heard that correctly? Thanks..

So, Hank, do you want to start on the FDA prophy?.

Yes, yes. I would say, hi, Akash. That study start is going to be delayed because of pandemic. And in any case, it was ancillary to the initial application and registration. The way I think about it is in the initial reviews that the agencies are looking at. They have some data and patients treated with on-demand steroids.

They have some patients that are treated with prophylactic steroids. Doctors are kind of split some like prophy, some like on-demand. We’ve just dosed 130 patients clinical trial with on-demand steroid use. And so therefore, we’re thinking about increasing the sample size of the experience that we have with prophy steroid use.

When those study data are available, we’d certainly make them available medically in medical communications. And then we think about also how that might be tied together with the Phase 1/2 prophy study to support a label supplement, that’s pretty far down the road from where we are.

And I think we have a real strong data package at launch in regard to steroids and how to use them..

So regarding the guidance, Akash. So to make it clear, our original 2020 guidance, which we gave when we reported Q4 included some anticipated revenues in valrox, in Europe.

The revised guidance, which is giving today assumes no valrox revenues in Europe, because now we anticipate that actually the approval in Europe, we very – at the very end of this year, early next year. So that’s supply.

We haven’t – although we haven’t given where the valrox number was, I just want to let you know that the new guidance assumes no revenues for valrox in Europe, sorry, ROCTAVIAN, right..

We have our next question from the line of Chris Raymond from Piper Sandler. Your line is now open..

Thanks. I just wanted to drill down a little bit on Palynziq. So, Jeff, I think I heard your commentary on the slowdown in new starts happening at the beginning of the quarter. As memory serves, I think, there was a bit of a slowdown that started also in Q4.

And just noting that, when you look at the product specific guidance changes, this kind of stands out as, I think, by my math, it’s midpoint to midpoint is down 10%, whereas the others that you changed were down less. Just – I wonder if you could just maybe give a little bit more color.

Is this – is there something more endemic, I guess, going on with Palynziq? Thanks..

Thanks for the question, Chris. So in the Q1 earnings call, we’ve pointed to a little bit of a seasonal slowdown in Q4 for Palynziq in terms of patient starts and patient enrollments, and we have historically seen that also with Kuvan. That – that’s basically a seasonal of the holiday.

So from Thanksgiving in late November through Christmas and New Year, we see disruption to clinic activity and slowed patient enrollments. So we saw a little bit of that in Q4 for both Kuvan and Palynziq. And obviously, our focus now is on promoting Palynziq, that’s why we addressed it.

And similarly, in Q1, recall, we’ve historically seen slowdowns in our business for Kuvan, and we’re seeing kind of a similar pattern in the early part of Q1.

That’s not related to the holidays in Q4, that’s related to the reset of insurance policies of co-pays, accumulators and in some cases, patients switching to new policies and a lot of cases the need for a new prior authorization for patients. That was really an early Q1 phenomenon.

By February, we were seeing new patient enrollments and starts picking up, that was really an encouraging sign for Palynziq in February and March. And then as the clinics in the United States and Germany began to be shutdown in march from the COVID situation. We’re experiencing now a real slowdown in patient enrollments and patient starts.

And I expect that will continue largely until the clinics are back up and able to continue their operations. Again, recalling that with Palynziq, patient starts are directed to be under the supervision of a healthcare professional that can manage potential adverse events, at least, for the first injection. I hope that answers your question, Chris..

Yes. And also for Palynziq, both the patients and the clinicians have to be certified that they can – that the patient can receive the product and know how to self inject and then the physician can know about how managing the potential side effects.

That’s why there is definitely has been in late March and in April a slowdown in the new patients, but we believe it’s temporary. And when the PKU clinic reopened, hopefully, you will see an acceleration of new patients here..

We have our next question from the line of Philip Nadeau from Cowen & Company. Your line is now open..

Good afternoon. Thanks for taking my questions and congrats on the progress. I also want to ask the question on the guidance. It looks like the Vimizim guidance was cut by about $30 million and Naglazyme by $20 million.

I’m just curious one, what have you been seeing in April? How far apart can those infusions be pushed before patient see some impact on their symptoms? And two, like what proportion of patients worldwide are able to get these infusions at home? And so therefore, maybe won’t have much of a disruption to use..

So, Jeff?.

Phil, thank you for the question. So – and the reduction in guidance on Vimizim and Naglazyme is proportional to the base of sales that we’re talking about. So what we’re seeing is a relatively uniform impact so far relative to the size of the business for each of Naglazyme and Vimizim.

We’re seeing more disruption in home – sorry, more disruption in loss infusions in markets, where home infusion is not a well established practice. So we know normally that home infusion, where home infusion is an established practice that compliance rates are higher, and we’ve seen less disruption in those markets where patients are home infused.

Now we’ve got a very diverse global business for both Naglazyme and Vimizim. So I don’t want to try to report high-level numbers of what percent of patients are home infused or not. But our tactics have been in markets, where tactics to intervene and try to keep our business on track.

In markets where we’ve got home infusion as an established practice, we’re trying to push more patients into that channel and that channel is relatively open in markets, where home infusion is not an established practice. We see this as an opportunity in some places to try to get it established.

And so we’ve had some success in places like Brazil, in Argentina, in Colombia and Spain, for example, in pushing patients into home infusion, where it’s not an established practice, or alternate infusion sites, those being maybe a smaller hospital that’s closer to home, less impacted by COVID-19 situation or in some cases, something like a retail in infusion clinic, where patients can go.

And we’re seeing some positive effect of that already on our business. Naglazyme and Vimizim are our products, where we know patients have not always been completely compliant. So probably missing one or several infusions is – may not be noticeable to the patient or the physician.

For Brineura, on the other hand, every infusion can be critical, and we’re fortunately seeing a much higher level of compliance and less disruption with that part of the business. I hope I’ve addressed your question, Nadeau. Thank you..

And actually, if I may add, actually, the virus situation is probably eventually is going to be helpful to actually move a lot of the treatments from the – in those countries that are behind U.S.

and Western Europe, move the treatment and infusions from the hospitals into either the homes or places are closer to the patients, which actually overall is good news and might actually improve compliance in the long-term..

We have our next question from the line of Matthew Harrison from Morgan Stanley. Your line is now open..

Great. Good afternoon. Thanks for taking the question. Just two quickly from me, I guess, for Hank. Hank, I didn’t see a comment on the press release and I’m sorry if I missed this, maybe you commented during your remarks.

But any impact to enrollment in the last group of patients that you need for the full pivotal study for valrox? And then on PKU gene therapy, is there anything you can do by adding some more sites or anything to maybe speed up or reduce the delay that you’re going to face here before you start, or is this basically just a delay until you – until you’re able to start? Thanks..

Hi, Matt. 270 – I’m sorry, ROCTAVIAN Phase 3 enrollment, I think, you’re asking about, we completed in November. And so we’re not presently enrolling anyone further as regards to our initial approval. So good news on ROCTAVIAN, the confirmatory trial fully enrolled.

And as far as the sort of the generalized restart, we can – we have a lot of conversations with investigators and there’s reopening happening at different ways – in different ways and in different places at different times.

And we’re really trying to get a handle on where a site is going to be able to dose the first patient on the resumption of clinical trials. I don’t exactly have clarity on when that’s going to be or where that’s going to be..

Next question is from the line of Paul Matteis from Stifel. Your line is now open..

Okay. So this is Alex on for Paul. Thanks for taking the questions. Just wanted to see how your thinking has evolved on pay-for-performance for gene therapy as a model in the U.S.?Thanks..

Jeff, do you want to address that one?.

Yes. Thanks, Alex. It’s a great question. We’re really going into a new model for reimbursement with ROCTAVIAN. And the payers are very interested in keeping up with gene therapies that are coming to the market, ROCTAVIAN being perhaps one of the first meaningful gene therapy brands to hit.

They want to make sure that they’re not falling behind and it’s really the shift from how do you create a reimbursement environment that for a one-time durable treatment in a model that is accustomed to paying for chronic therapies over time.

And what the payers have told us is that one, they understand that there’s limitations so far in companies abilities to create pay-for-performance agreements that don’t create problems with government price reporting. And I’m sure you understand the issue there.

Medicaid best prices and AMPs that would trigger a cascade of lowering price to government paid patients, that’s a problem. They understand that. They’ve also advised us, BioMarin, that outcomes-based agreements are important to them.

It’s a way of shifting the risk from their shoulders back to the manufacturer for both response and durability over the time. They’ve told us that it’s important. And they’ve told us that agreements that are limited to 23% or less of the purchase price don’t particularly excite them. They don’t consider that to be a solution.

So we’ve been working on strategies for outcomes-based agreements for ROCTAVIAN. We think that we’ve potentially got some things that will work for payers. We’re out there talking to payers right right now. And probably for competitive purposes, I won’t go into the details of what that all looks like.

But I think we have a potential path forward that would address outcomes-based agreements, desires from payers. Thank you..

Next question is from the line of Mohit Bansal from Citigroup. Your line is now open..

Great. Thanks for taking my questions and congrats and thank you very much for Rob as well from my side. Good luck with your next part of your adventures. Now I think just wanted to get a little bit more color on the shape of recovery you are thinking in your base case.

I – if I heard correctly, you’re assuming normalcy in fourth quarter, your assumptions, is that fair? Or you are assuming that it could be like two – second quarter will be down, third quarter starting to recover and fourth quarter could be completely normal, or how are you thinking about that would be very helpful? Thank you..

Jeff, you want to – I’ll say a few words on that too earlier, but why don’t you get started?.

Yes. So thank you, Mohit. Everybody is busy predicting the future here, which is difficult to do in normal circumstances and probably fraught with even more difficult – difficulties to do precisely given the current situation.

But we started seeing disruptions to our business at the end of the first quarter, which did not impact our financial performance in the first quarter.

But as we began the second quarter, we knew that the disruptions that we’re seeing would flow through to our our business, as described, would quickly got in gear to start taking mitigating actions, mainly on missed infusions, as I’ve described, and we think that those mitigating actions are having an impact.

So, yes, we’re anticipating that we’ll see the biggest impact to our business in the second quarter, and that the conditions relative to our business would be improving as we go through the end of the second quarter through the third quarter.

And our target is to have something that looks like pre-COVID-19 levels of demand that we’re able to address and facilitate in the fourth quarter. You can tell from the level of our guidance reductions, the magnitude of the anticipated impact to each of our different brands.

So that’s a way of kind of quantifying our expectations for each of the different brands relative to the dynamics that I’ve been describing. So hopefully, it’s possible for you to connect the dots a little bit between the qualitative and the quantitative piece. Maybe I’d pause there and see if J.J. has other thoughts..

No, I mean, I just want to highlight that, again, it is indeed very difficult for us to forecast where things are going to go. It looks like things are getting better in most parts of the world, but we’re not out of this complex situation that the virus is created.

So again, we assume here the main impact being Q2, some recovery in Q3 and hopefully Q4 potentially back to normal. But it will depend a lot on how quickly the economies are reopening in different parts of the world.

And also, as some of you know, there are talks that there could be a second wave of the virus like there was in for the 1918 Spanish Flu. Hopefully, if there is one, it will be minor and there will be more therapies available by them, but all this is very hard to predict.

So here we don’t assume a significant set of second wave of the coronavirus seating the world in Q4. So if that doesn’t happen, then we’re creatively confident in our guidance here..

We have our next question from the line of Tim Lugo William Blair. Your line is now open..

Thanks for talking my questions. We’re almost two years into the approval of Palynziq here in the U.S., and we obviously have generic Kuvan approaching.

Can you give us your updated thoughts of how many of the Kuvan patients will be transitioned on the Palynziq by the time the generic comes to market here in the U.S., given that we obviously have larger healthcare disruptions, given COVID?.

Jeff?.

Yes. So, great question. We have seen so far with the uptake of Palynziq in adult patients. We’ve seen almost 40% of Palynziq patients coming from patients that are on commercial therapy with Kuvan.

And essentially, that – what that is indicating are PKU patients that were being treated with Kuvan that we’re having a response, but not seeing the magnitude of a response that they’ve desired and seeking Palynziq as a more powerful alternative. So 40% is a pretty large proportion of our new Palynziq patients coming over from Kuvan.

Obviously, in the United States, we’re starting with a pretty big pool of adult patients on Kuvan. So while we’re seeing a material shift of that adult patient base over to Palynziq, for reasons that I’ve described, I wouldn’t say that represents anything near a majority of those patients.

As we go into a loss of exclusivity period later this year, one of the things that we’re encouraged by is, even if we have a Kuvan patient that goes on to a generic form of the product, we really haven’t lost them forever. We’re connected to them through the clinics. We’re connected to them from our hub services with their opt ins and information.

Our clinical coordinators are connected with them. And Palynziq remains a viable option going forward for any patient – any adult patient that is not seeing the kind of response they’re looking for on Kuvan or a generic version of Kuvan. So I think we’re optimistic about our market potential and opportunity in the U.S.

for Palynziq kind of in the medium and longer-term. Thank you..

Next question is from the line of Kennen MacKay from RBC Capital Markets. Your line is now open..

All right. Thanks for taking the questions, and I want to say congrats to the entire team for the Q1 results, that really show that BioMarin is operationally and clinically and commercially navigating these really unprecedented times ahead of really any of our expectations..

Thank you..

So I also had another housekeeping question on guidance here. The full-year 2020 guidance for negative 5% headwind sort of implies the $100 million hit here at midpoint.

Again, it sounds like expectations – the vast majority of that is going to come in Q2 with the exception of maybe a little bit sort of dragging on through the rest of the year and pertaining to the sort of early removal of ROCTAVIAN in Q4 in Germany. I’m just trying to sort of manage my Q2 expectations.

Should I really be thinking about the vast majority of that $100 million hit coming in Q2? And then lastly, I just feel compelled to give a final congrats to Jeff and anyone else on the team who helped come up with the ROCTAVIAN name. I think that’s an awesome brand name and it sounds like a metal song, I really like it..

Thanks. So I think, Jeff, kind of addressed that the question again that we do think indeed the majority of the hit on our revenues is Q2. There will be a hit in Q3, as compared to what we were expecting because, for instance, of the – some Palynziq patients that are supposed to be started and are – have been delayed.

And then everything gets delayed with that, some missed infusion that will still be probably happening in late Q2 and maybe early Q3, although it’s hard to predict. But – and maybe Brian can give his own perspective on this, if you want to chip in Brian on this..

Yes, of course, J.J. Thanks. And I think what we’ve commented on Canada is that the disruption will be worst in Q2. I don’t think we can predict with certainty what – how that will actually translate into ordering patterns.

We already point to our annual revenue guidance as the primary indicator for the commercial brand and less so quarter-to-quarter, because we know that country-by-country specific ordering patterns shift greatly due to timing.

So depending on whatever level of supply was on hands in these certain territories where we’re experiencing some disruption in infusion and whether and when they will order next, as well as how that spills into Q3, I don’t think we can put our finger on the exact ordering patterns. So we would point you to the annual guidance.

Does that helpful?.

We have our next question from the line of Gena Wang from Barclays. Your line is now open..

Hi. This is Peter Kim for Gena Wang. Thanks for taking our questions. I guess, on – question on valrox. I just switch it to a standard review, EMA wants to see the full the Phase 3 data to make their decision? Thank you very much..

Hank? Hank, there?.

Yes. I’m not sure I heard the full question.

Is it possible to repeat it?.

Sure..

Yes..

The question was in a case where EMA review switches to standardized process, standardized review.

Would EMA would like to see the full Phase 3 data make their decisions?.

Certainly an imaginable possibility, I think, it’s a little premature to talk about where – what sort of turns might happen in a review As you know, we – well, historically, we don’t give very detailed comments about where we are in review, because it’s very difficult – it can be very difficult to interpret and matters can get settled.

So I think the message of today is because of COVID, while we’re on accelerated assessment to review has been delayed. And because accelerated assessment is complicated to stay on, complicated also by the advanced nature of the therapeutic, there may be a further delay.

We feel comfortable guiding you to an expectation of opinions in Q4 this year, Q1 of next year. But the review is certainly not complete and things may change further..

Thank you very much..

The good news, I would say that, I mean, and then – I only flip that around. So the good news is were that to happen it we’re fully enrolled with a pivotal trial. So it’s not like we’re not like the company that put the accelerated approval study into the regulators and then have not even started the confirmatory study.

We finished the enrollment in the confirmatory study..

Next question is from the line of Eliana Merle from Cantor Fitzgerald. Your line is now open..

Hey, guys, thanks so much for squeezing me in and congrats on all the progress. Just a question on Vosoritide.

From your recent discussions with the regulators around the filing, I guess, what was their latest perspective on how much efficacy data you need to have a label that covers ages under five, or whether sort of the safety data from the ongoing studies, coupled with the Phase 3 and ages over five would be enough for a broad label? Thanks..

Yes. These – hi, Eliana, thanks for the question. These conversations are at a much earlier stage than where those kinds of questions get answered.

The negotiation is going to be what was – is – what’s in the package and what will be in the packets will be the safety data on patients who are older than six months of age and up to five years of age, in addition to the pivotal study. They’re very well aware of that.

And they’re also very well aware that their Advisory Committee advised them that they should anticipate that use will commence in very young children at the time of the initial licensure. But beyond that, we haven’t had concrete conversations about labeling..

And let me, by the way, the first two cohorts of the under five studies are fully enrolled through the enrollment of the third cohort, which is issues from age of – from birth to six months of age. Couple of patients have been enrolled, it has been slowed a little bit, of course, by the virus, but the first two cohorts are fully enrolled..

Next question is from the line of Vincent Chen from Bernstein. Your line is now open..

Thank you very much for squeezing me in and congrats on all the progress. To follow-up on Josh’s earlier question on insurance coverage shift.

If patients were to shift from commercial to government insurance, roughly, what net price impact do you expect to see to your portfolio? And which product might be more effective, if any? Are there reasons to think that your portfolio might actually be somewhat more insulated than the – I guess, the biopharma sector as a whole?.

Jeff, do you want to try that one?.

Yes. That’s a great question, Vincent. Yes, we have government prices. We have 340B discounts, depending on where patients are getting their care and we’ve got commercial patients. And for our portfolio in the United States, we don’t contract for or discount our commercial portfolio.

So if we had a substantial shift in patients moving from commercial plans to like Medicaid, for example, you could see an individual patient generating less net revenue.

Based on the number of patients that we’ve got in the United States, we’d have to see a pretty big shift in patients over to the government plans before we’d see a material impact on our kind of gross to net for revenues in the United States.

And then thinking about the United States as a part of the diversified global business, the – probably the bigger part of our business in the U.S. while undoubtedly, the bigger part is our PKU franchise relative to our enzyme patients. So I’m sorry for musing while I’m answering, I think, it’s a great question.

We haven’t seen anything that even comes close to a signal of more than anecdotal reports of a patient here or there losing their private insurance and moving over to a safety net insurance. So yes, I think it’s a theoretical thing, but we haven’t seen anything close to that yet happening. Thank you..

There are no further questions at the time. I turn the call back over to our Chairman and CEO, J.J. Bienaimé for closing statements..

All right. Thank you, operator. And I just wonder, in conclusion say that in those unprecedented times and the necessity of innovative treatments that have been developed by BioMarin, and others that have never been more relevant to the people who need them, it is the healthcare industry that will change the course of the ongoing COVID-19 pandemic.

One of the nice side effects of the virus is that the pricing of drugs is not making the headlines anymore, for obvious reasons, which is a good news for us. And – but in the face of this very real near-term crisis, I remain very confident that in BioMarin’s ability to deliver on the tremendous opportunity for value creation that we have before us.

So our underlying fundamentals remain strong. And we’re well positioned to successfully manage through this uncertain economic environment. The critical growth drivers are in place.

Having built a successful base business, transition our pipeline to address larger rare indications and lay the foundation for significant profitability with ROCTAVIAN and Vosoritide approvals. All of those positions BioMarin for substantial success in both the near-term and the long-term. So thank you, again, for your continued support and stay safe.

Goodbye..

Thank you, presenters. Ladies and gentlemen, this concludes today’s conference call. Thank you all for participating. You may now disconnect. Presenters, please stay for the post conference..