Summary: One of the most anticipated PDUFA decisions of the year is BioMarin’s (NASDAQ: $BMRN) August 21, 2020 date for Roctavian (valoctocogene roxaparvovec), their AAV gene therapy for the rare and serious bleeding disorder hemophilia A caused by lack of functional Factor VIII, a key clotting factor. This program will be the leading edge for $BMRN’s investment in AAV gene therapies, representing a natural transition to potential “one-and-done” therapies from their historic focus on chronic enzyme replacement therapies for rare diseases. However, while Roctavian is the first hemophilia gene therapy to make it to BLA filing, heavyweight contenders are following behind including Pfizer / Sangamo’s P3-ready giroctocogene fitelparvovec and Roche’s (via Spark Therapeutics) SPK-8011, expected to enter P3 in 2021. Analysts widely expect Roctavian to receive FDA approval this year and launch Q420. However, concerns have been consistently expressed over the steady drop in mean Factor VIII activity levels in treated patients- a real concern for a drug $BMRN is positioning as a “one-and-done” therapy and reportedly planning to charge $2 - 3M a patient for. Here’s what you need to know:
Disease Background: Why Do We Need Roctavian and How Does It Work?
Hemophilia A is a serious life-threatening disease, with Roctavian targeting the most severe patients: Hemophilia A is a rare bleeding disorder in which patients do not produce functional Factor VIII, a critical protein for blood clotting, putting them in danger of serious bleeding episodes. Patients today require regular infusions of Factor VIII therapy in order to avoid and manage these episodes, which is expensive for payers and very burdensome for patients. A potential “one-and-done” therapy could be beneficial for patients and potentially even cost-effective, depending on pricing. Unaffected individuals have Factor VIII activity levels in the 50 - 150% range, while severe Hemophilia A patients (the population targeted by Roctavian) have baseline activity levels of <1% of normal. The P1/2 trial patients had a baseline of ~16 bleeding episodes per year prior to treatment, while the P3 population had ~10 bleeding episodes per year.
$BMRN’s gene therapy is a potential landmark and historic therapy: This is one of the first gene therapies under FDA review and is an exciting use case. Roctavian uses an AAV5 virus to deliver a copy of the Factor VIII gene into patients’ cells. The gene therapy includes a liver-specific promoter so that the delivered gene cassette is only actively expressed in infected liver cells. These liver cells are then able to produce and secrete functional Factor VIII into the bloodstream, potentially reversing the disease phenotype. In theory, a single administration of Roctavian could restore patient Factor VIII levels high enough to protect from bleeding episodes without needing regular Factor VIII infusions. That is a pretty incredible achievement.
Roctavian’s Path to BLA Filing: How Well Does it Work?
Positive interim pivotal data and long-term follow-up data presents a promising clinical profile for severe patients: $BMRN’s BLA is based on 3-year data from the P1/2 trial and an interim analysis of 16 patients in the P3 trial. These data (described in more detail shortly) indicate that, within the time frame studied, Roctavian substantially reduced the number of bleeding episodes experienced while also dramatically reducing the amount of Factor VIII therapy required. The majority of patients achieved bleed free status with limited, if any, use of exogenous Factor VIII therapy for up to 4 years.
Significant reduction in bleeding episodes experienced, the primary clinical manifestation of disease: In the P3 analysis, the mean annualized bleed rate (ABR, number of bleeding episodes / year) was reduced 85% from baseline to 1.5 episodes / year. The long-term P1/2 data supports the impact on ABR, with the 7 patients who received the high dose used in the P3 trial demonstrating a 96% reduction in mean ABR from baseline in year 3 and a 92% reduction in year 4. Moreover, 86% (6/7) were completely bleed free in year 4 versus only 1/7 patients being bleed free pre-infusion.
Data also supports impact on exogenous Factor VIII therapy utilization: Roctavian also had a robust impact on use of Factor VIII therapy, which is a critical component of any cost-offset argument used to justify the almost certainly exorbitant price. In the P3 trial, there was a 94% / 84% reduction in mean / median annualized Factor VIII usage (AFU). Turning to the long-term P1/2 data, in the high dose cohort the mean / median reduction in AFU from baseline in year 3 was 96% / 100% and 97% / 99.6% in year 4.
However, durability of therapy is a key question: P3 results also included that 7/16 patients reached 40% Factor VIII activity levels at 23 - 26 weeks post-infusion and that the mean / median Factor VIII activity levels were 36% / 33%. This was concerning as at a similar point in the P1/2 trial, the 7 high-dose patients had mean / median Factor VIII levels at 68% / 57% (putting them in “normal” range), which fell to 33% / 20% at end of year 3 and 24% / 16% in year 4. $BMRN had previously argued that the ~33% level in year 3 represented a likely “plateau” of expression, so the continued decline in year 4 was highly problematic. While keeping Factor VIII activity levels >5% is still significant in moving severe patients to levels associated with a mild disease phenotype, it is a far cry from a permanent functional cure. The steady slide in Factor VIII expression is extremely concerning and suggests the protective effects of Roctavian may be transient.
Commercial and Competitive Considerations
As a whole, we believe $BMRN’s Roctavian opportunity offers about ~$2.4B in true present value, which could rise to ~$2.9B upon approval: We model that Roctavian could achieve peak sales of ~$2.2B (~$2.0B POS-adjusted based on a ~90% probability of approval) in 2025 accounting for potential competitor launches (assuming clinical comparability). Of note, this valuation is based on a $2.5M per patient cost and does not account for any deferred payment models, which would decrease the valuation if implemented. We model an approval to add an immediate additional $0.5B in true value. However, this represents only ~2% of $BMRN’s current market cap of $22.5B. Of course, the actual price movement could still be substantial in either direction: the broad interest due to the historic nature of the review or factors like pricing and contracting could introduce unpredictability, but the largely baked-in expected approval and $BMRN’s large-cap status will likely preclude any dramatic and lasting positive price swings. An unexpected rejection, on the other hand, could be quite catastrophic.
Regulatory approval considered likely: $BMRN received Priority Review and is expecting an FDA decision by August 21, 2020. Qualitatively, news and analyst coverage of the company and decision has largely been assuming a positive result. Not only is Roctavian an FDA-designated Breakthrough Therapy and Orphan Drug, $BMRN also reported that the FDA decided not to require an advisory committee review: these advisory reviews are typically used for applications the FDA has concerns about interpreting, so the lack of a review is a positive indicator of potential approval. Historically, NDAs / BLAs filed for non-oncology rare diseases have been eventually approved at a ~90% clip, which bodes well for $BMRN, though of course nothing is a sure thing.
If approved, $BMRN is widely expected to price Roctavian at $2 - 3M, making it the most expensive therapy on the market: The $BMRN executive team has consistently messaged that the pricing potential of Roctavian should be $2 - 3M. For comparison, Novartis’ gene therapy Zolgensma for SMA is the current most expensive therapy, priced at $2.1M (though paid for in installments of $425K over 5 years via outcomes-based agreements). Despite the sticker shock, Zolgensma’s price is not too far off from traditional cost-effective measures. A hemophilia patient’s lifetime costs today can run up into the tens of millions, so there is some room here for Roctavian to price aggressively. However, that line of reasoning is seriously complicated by the concerns over durability. We would not be surprised to see $BMRN engage in a risk-based or outcomes-based payment model where payers do not pay the full price upfront but rather make payments staggered over years based on continued response to therapy via some predefined criteria. In a political climate where drug pricing is very much in the crosshairs, $BMRN will have to walk a delicate line justifying what is likely to be a record breaking price, a task complicated by the precipitously dropping Factor VIII levels over time.
While $BMRN will likely get the first shot at the prevalent pool of patients, patients may delay gene therapy if competitors demonstrate superior durability: The durability of therapy issue will not only impact the pricing discussions (and public reaction to them), but also might sway some patients to delay treatment if one of the other late-stage players can show superior durability. For instance, Pfizer / Sangamo announced updated P1/2 data this year showing that the 5 patients receiving the highest dose had median Factor VIII activity levels of 64.2%, including some measurements out to 61 weeks. Of course, this is pretty preliminary and it remains to be seen where the levels are 3 or 4 years into treatment, but this stacks up very nicely with $BMRN’s data. Pfizer / Sangamo are advancing to P3 this year, and if they can hold onto >40% levels in the long-term data package a couple years down the line that could be highly compelling for patients. However, whether patients will wait to find out or seize the opportunity to try Roctavian, warts and all, next year is difficult to project.
We do not own shares of BioMarin. This article expresses our own opinions, not BioMarin’s or any other party’s opinion. We are not receiving compensation for this report. We do not have a business relationship with the company mentioned in this report.