Last year BioMarin Pharmaceutical was ranked as one of the most innovative companies in the world. But longtime employees of the ultra-rare disease drug developer know that the company’s future didn’t always look so bright. In fact, when Jean-Jacques (J.J.) Bienaimé arrived in May 2005, things looked downright bleak. “A proxy fight had been organized by some of the shareholders who were trying to put in their own slate of directors,” says the chairman and CEO. “The company had lost about $200 million the previous year, the stock (NASDAQ: BMRN) was trading in the $5 range, and employee turnover was around 25 percent.” Many of his friends thought he had lost his mind when he took the job. After all, in the week prior, Bienaimé had finalized selling Genencor (a biotechnology company focused on industrial biotherapeutics) to Danisco for $1.2 billion. Following such success, why would anyone want to take charge of a “fixer-upper” like BioMarin? Bienaimé, though, was more optimistic. “I thought they had some good assets and people, and it just needed to be refocused and remanaged,” he recalls.
BIOMARIN’S CEO — BAPTISM BY FIRE
"I left Genencor on a Friday and started at BioMarin the following Monday,” Bienaimé recalls. “I wasn’t really planning on doing it that way, but there were a variety of things, such as the proxy fight and upcoming shareholder meeting, that had to be managed pretty quickly.” The good news for Bienaimé was that the leader of the proxy fight was someone he had worked with previously — Sam Isaly, managing partner of OrbiMed Advisors. “I called Sam to figure out how to quickly get rid of the proxy fight and come to an agreement on board members,” he shares. Over the next week, Bienaimé negotiated with the investor group, and on June 1, 2005, BioMarin announced a settlement with OrbiMed and its affiliated funds.
But as is often the case when dealing with a distressed business, there is usually more than one fire that needs to be put out. “The first day I joined the company I also had discussions with Serono,” he states. Serono had been negotiating for ex-U.S. commercialization rights to BioMarin’s phenylketonuria (PKU) franchise (i.e., Kuvan [an oral treatment], Pegvaliase [an injectable therapeutic], and any other future PKU products). Upon hearing that Bienaimé would be joining BioMarin as chairman and CEO, Serono gave him an ultimatum — sign the deal today or it’s off the table. The agreement included an up-front payment of $25 million. At the time, BioMarin had about a month’s worth of cash on hand, so Bienaimé felt he had little choice but to sign. “They were right to give an ultimatum,” he admits. “Because had I been given a few weeks to think about it, I would not have done that deal.” In addition to the deal providing a quick infusion of cash and potential future milestone payments (i.e., $232 million), it also offered a more immediate financial benefit. “Once mid-stage testing would be completed, Serono would share the development costs for the two programs, essentially cutting our drug-development costs in half,” he explains.
With these two urgent matters now resolved, Bienaimé could now focus on restructuring and refocusing BioMarin. One of the first things he did was to ask his direct reports what they would do to fix the company if they were CEO. This exercise confirmed for Bienaimé that the leadership team was not only well attuned to the major issues facing the company, but had already considered ways to address those issues. He also bought his direct reports a copy of the book Good to Great. “I suggested they read it because my plan wasn’t for BioMarin to be a company that just survives, but to truly evolve into something great.”
The book lists one goal of great companies as getting “the right people on the bus, and the wrong people off.” But there is more to it. Those “right people” need to be in their correct seats (i.e., in the proper positions to best move a company forward). “For instance, the person in charge of commercialization of future products was Emil Kakkis,” Bienaimé relates. “But Emil had no commercialization experience, so I reshuffled clinical development and put him in a position where he could focus his drug development expertise.” Other moves were also made. “You can’t reorganize without a top management team,” he attests. “But to truly become great requires a willingness to move people around, identifying areas where skills are lacking, and filling those expertise gaps.”
TOUGH TIMES: CUTTING EXPENSES ... AND PARTNERSHIPS
One of the other more pressing issues Bienaimé inherited when he took over BioMarin was a negotiation with Genzyme — a company partner since 1998 — regarding the ex-U.S. commercialization rights to Naglazyme (galsulfase) an enzyme replacement therapy for the treatment of mucopolysaccharidosis VI (MPS VI). “Though we were in desperate need of money, the reality was that Naglazyme was about 90 percent of the way to becoming an approvable drug,” he says.
For about nine months prior to Bienaimé’s arrival, a team at BioMarin had been putting together a term sheet for Naglazyme. But when the two companies sat down to hammer out a final agreement, it didn’t feel like a win-win opportunity for BioMarin. “There were some advantages to letting Genzyme acquire the ex-U.S. rights to Naglazyme, as we had no employees outside the U.S.,” he explains. “But the terms Genzyme was offering weren’t that great, so it made the decision of telling them ‘thanks, but no thanks,’ a little easier.” The decision to break off talks and keep the worldwide rights was a bold move by Bienaimé and BioMarin. “I had been here only a few months, and we were still somewhat shaky financially,” he explains. “By not doing the deal with Genzyme we were making the decision to build a global commercial organization.” In retrospect, Bienaimé says not only was the decision a correct one, but foundational to the company’s current success. “Eighty five percent of Naglazyme’s revenue comes from outside the U.S.,” he explains. “If we had done the deal with Genzyme, it is highly likely that BioMarin would not be an independent company today.”
In June 2005 BioMarin received FDA approval for Naglazyme. Later that month, the company launched the drug in the U.S., a rather difficult task when low on money and almost no revenue coming in. Key to that launch was creating a specialized sales force for Naglazyme, but with expenses already tight, the company couldn’t afford to add staff. So, Bienaimé made the difficult decision to lay off the sales force (about 95 people) for Orapred, a corticosteroid that went generic only a few months after it had been acquired by BioMarin. That move saved the company about $9 million annually. “Layoffs are always tough, but for the launch of Naglazyme we needed salespeople with different skills from those selling Orapred, which was a very low-tech product,” he explains. In addition, Bienaimé brought in Steve Aselage as SVP of global commercial operations. “He had worked for me at three companies prior, and I told him he needed to start building an organization to not only launch Naglazyme in the U.S., but Europe soon after.”
The launch of Naglazyme in the U.S. was executed by a 10-member sales force; eight former Orapred reps that had been retained and two new hires. Though there would be additional staff added later, doing so required more cuts as well as fundraising. “Chris Starr was the head of research at the time, and he was in love with a technology that had been acquired by BioMarin that I frankly didn’t believe in,” Bienaimé shares. “So I made the decision to give Starr the technology, along with a little money, and encouraged him to start his own company, which he did — Raptor Pharmaceuticals.”
The Orapred sales force downsizing had a positive effect on BioMarin’s stock price. But to further strengthen the company’s financial position, Bienaimé took advantage of an existing shelf registration and raised nearly $60 million through the sale of 8.5 million shares of stock. BioMarin further added to its coffers by selling Naglazyme, which by the end of 2005 equated to $6.1 million, including sales outside the U.S. of $1.5 million. Things were definitely starting to look up.
With the cash crunch in the past and the company now generating money, it was time for the CEO to focus on what would drive BioMarin’s future success — a pipeline filled with products.
BUILDING A PIPELINE
Beyond Naglazyme, BioMarin had only Kuvan and Pegvaliase in its pipeline, both of which it had sold Serono the ex-U.S. commercialization rights. So the company needed new products to fill its pipeline. “That’s why we did a few small acquisitions,” Bienaimé explains.
First, there was Huxley Pharmaceuticals (2009), which produced Firdapse (amifampridine) for the rare autoimmune disease Lambert Eaton Myasthenic Syndrome (LEMS). According to Bienaimé, this acquisition “helped keep our European organization busy and gave the sales force something else to have in their bag beyond Naglazyme.” Then in 2010, BioMarin acquired LEAD Therapeutics, which added to its pipeline Talazoparib, a drug for the treatment of patients with rare, genetically defined cancers. After further developing Talazoparib, BioMarin sold it in 2015 (for a profit) to Medivation for $410 million.
The purchase of ZyStor Therapeutics gave BioMarin the proprietary Glycosylation independent lysosomal targeting technology. Though ZyStor’s lead product (ZC-701) for Pompe’s disease never panned out, the targeting technology has proven very valuable. “That is the technology we are currently using in the development of our BMN 250 product for Sanfilippo MPS III B Syndrome.”
But the biggest acquisition — which could be described as an expensive lesson learned — was Prosena Holding NV. “In late 2014 we acquired Prosena for Kyndrisa [drisapersen], a drug in development for Duchenne muscular dystrophy,” he says. “We learned a lot from that $680 million ‘adventure.’ Namely, we learned that it’s very hard to overturn a negative Phase 3 clinical trial result with regulatory authorities.” Though many view the purchase of Prosena as one of Bienaimé’s biggest mistakes (i.e., Kyndrisa did not gain approval in either the U.S. or the EU), he remains optimistic. “We got a great R&D team based in the Netherlands,” he reminds. “They are trying to develop a second- or third-generation molecule that is striving for a several- fold improvement in protein expression, and it looks like they might get there.”
THE ADVANTAGES & CHALLENGES OF FOCUSING ON ULTRA-RARE DISEASES
Through these acquisitions, BioMarin strengthened its reputation as a developer of medicines for ultra-rare diseases. “Pursuing ultra-rare diseases allows us to move a little faster, because we are able to conduct very small trials,” he explains. “We often execute Phase 1 and Phase 2 trials at the same time.” For the recent Batten disease clinical trial, a pivotal study of 24 children taking cerliponase alfa (BMN 190), BioMarin did only one study — a combined trial of Phases 1, 2, and 3. “That’s really the most aggressive a company can be,” he attests. “By having a clear understanding of the biology of the disease, we avoid developing thousands of molecules just to see which one will ‘stick to the wall.’” Instead, BioMarin attempts to design a molecule to address a disorder’s fundamental problem. For example, though there are at least 20 genes associated with Batten disease, cerliponase alfa targets patients with a CLN2 mutation. BioMarin estimates there to be somewhere between 1,200 and 1,600 patients in the world with this particular mutation.
Though Bienaimé believes the FDA provides ultra-rare disease companies like BioMarin a little more flexibility when it comes to conducting smaller and simultaneous trials, he says it’s still not easy. “You still need to have pure evidence of efficacy and safety to get your drug approved,” he states. “We are always trying to be first-in-class or best-in-class, and we only go after diseases where there is a huge unmet medical need, where the biology is well understood, where there are existing biomarkers or where we believe we can develop the necessary biomarkers to guide early development, and where there is an existing natural history of the disorder.” If the natural history isn’t well documented for an area of interest for BioMarin, the company starts a registry. This is done to collect information and document how the disease progresses without treatment. In this way, the company has data for comparison when it’s able to execute a clinical trial.
BioMarin works closely with patient advocates to design trials that have meaningful endpoints. “This is never easy because regulatory and real-life endpoints often differ dramatically,” he continues. “When you are striving to be first-in-class, there is no established regulatory pathway.” As a result, BioMarin has to work collaboratively with regulatory authorities to help get these two sides (i.e., patients and regulatory) on the same “endpoint” page, as well as define a developmental pathway. “The gold standard for approval of a molecule by the FDA is two randomized, adequate, and well-controlled testing trials,” he states. “We are far from this with our products.” So far, BioMarin has only done one randomized testing trial for most of its drugs, the biggest being Vimizim (elosulfase alfa), which involved 176 patients with MPS IVA (also known as Morquio A syndrome). “We are always negotiating with the FDA as to what is needed to get an approval,” he relates. “We try to help regulators understand the size of the patient population that is available for trials, along with ethical considerations when dealing with lethal or rapidly progressing disorders. Unfortunately, sometimes conducting a two-year randomized, double- blind, placebo-controlled trial simply isn’t possible when working with ultra-rare diseases.”
For Bienaimé, this focus on ultra-rare diseases was a big adjustment. He had come from a world where executing clinical trials involved thousands of patients to one where trials were much smaller and patients were enrolled quickly — which also meant BioMarin could go to market faster.
“I believe Big Pharma continues to struggle in the rare disease space,” he says. “When you tell them they should be excited about a 3,000-patient global commercial market, they simply can’t comprehend that.” But there is a significant benefit to those companies that can do it successfully — lack of competition. Of the five products BioMarin presently markets, not one has any competition. Considering that BioMarin is operating in 60 countries with little or no competition, is it really any surprise that its stock is trading above $80 a share and its market cap has eclipsed $15 billion?
In 2014, CenterWatch reviewed 307 therapies approved between 2000 and 2013 and concluded that BioMarin was one of the fastest developers of medicines. One year later, EY named Bienaimé as entrepreneur of the year, and from 2014 to 2016 Forbes ranked BioMarin as a top 10 world’s most-innovative company. That’s a far cry from the fixer-upper he had taken the helm of 12 years ago.
CHOOSING MARKETS FOR RARE DISEASE DRUGS
For BioMarin, the priority markets for its products are North America and the EU 5 (i.e., France, Germany, Italy, Spain, and the UK). “We also went to South America,” explains Jean-Jacques (J.J.) Bienaimé, the company’s chairman and CEO. “This decision was mainly driven by the geographic demand for Naglazyme.” According to Bienaimé, mucopolysaccharidosis type VI (MPS VI) has a higher hereditary incidence in South America. “We started by first establishing a presence in Brazil, and then we went to other South American countries looking for patients. If we find just one patient in a country, it pays for us to put a country manager there.”
He describes the country-to-country process as a very gradual approach that has led to the company doing business in other areas as well (e.g., Hong Kong, Japan, Russia, and Taiwan). Yet there are still some larger countries where the company is not selling its products (i.e., China and India). “It’s an affordability issue, ” he explains. “The products we have on the market today are very expensive. Though we are starting to sell Kuvan in China, and we have a couple of patients in India, neither of these countries has been a priority thus far.” While intellectual property protection has been a major issue for why some biopharmaceutical companies have avoided entering China and India, Bienaimé sees this as a nonissue for BioMarin. “Our products are so complex to manufacture and difficult to copy that we aren’t concerned with companies in these countries attempting to copy, at least not doing so successfully.”
GAINING PRIORITY REGULATORY REVIEWS
In January 2006, the U.S. FDA granted BioMarin a Fast Track designation for Phenoptin (sapropterin dihydrochloride), which is used to treat phenylketonuria, a birth defect that causes an amino acid to build up in the body. This was BioMarin’s first product to receive such a designation. Since then, BioMarin has received numerous other priority regulatory reviews (e.g., Kuvan, Vimizim).
The latter was approved by the FDA in February 2015 for patients with MPS IVA (also known as Morquio A syndrome). But in addition to its drug getting approved, BioMarin also snagged a Rare Pediatric Disease Priority Review Voucher (PRV). The voucher allows its recipient to expedite the review of any one of its new drug products with the FDA by a period of six months. “We were the first ones to get a Pediatric Priority Review Voucher,” explains BioMarin CEO Jean- Jacques (J.J.) Bienaimé. “But as we are mainly developing drugs that wouldn’t have benefited by the use of this voucher, we decided to see if anyone was interested in buying it.”
Before BioMarin started making a bunch of phone calls, the company first created a short list of all the companies with products either in advanced development or already under review at the FDA. “We wanted to narrow the process down to those who might be highly interested in saving six months of research/review time,” he relates. One of the challenges faced by BioMarin was this was the first time a company had ever tried to sell a voucher. As such, there was no established market value as to what it could be worth.
The BioMarin business development team began making calls to see if anyone would be interested in purchasing a voucher. One of the companies the team contacted was Regeneron. “They were developing PCSK9 inhibitor, and were a little behind Amgen,” Bienaimé recalls. “I remember I was mountain biking when I got a call from Regeneron’s CEO, Leonard Schleifer. So I got off my bike, and we quickly came to agreeable terms.” In retrospect, Bienaimé wonders if selling the voucher for $67.5 million was the right amount. Because the next voucher sold for $125 million, and the one after that went for $350 million! “But prior to us, nobody had done it,” he reminds. “At the time, it seemed like a very good price.”